On September 12, The Supreme Court on limited question of whether an application for extension of time under Section 29A of the Arbitration and Conciliation Act, 1996 can be filed even after the expiry of the period for making of the arbitral award has held that an application for extension of the time period for passing an arbitral award under Section 29A(4) read with Section 29A(5) is maintainable even after the expiry of the twelve-month or the extended six-month period, as the case may be. The court while adjudicating such extension applications will be guided by the principle of sufficient cause.
The court found the word “terminate” in Section 29A(4) to be read in the context of the said provision. It should not be read as an isolated word with a strict dictionary meaning, but rather in conjunction with the surrounding words and expressions which warrant recognition and consideration.
Adding that the word “terminate” in Section 29A(4) makes the arbitral tribunal functus officio, but not in absolute terms. The word “terminate” is followed by the connecting word “unless”, which qualifies the first part with the subsequent limb of the section, i.e. “unless the court has, either prior to or after the expiry of the period so specified, extended the period.” The expression “prior to or after the expiry of the period so specified” has to be understood with reference to the power of the court to grant an extension of time.
Thus, the termination of the arbitral mandate is conditional upon the non-filing of an extension application and cannot be treated as termination stricto sensu. The word “terminate” in the contextual form does not reflect termination as if the proceedings have come to a legal and final end and cannot continue even on filing of an application for extension of time.
Therefore, termination under Section 29A(4) is not set in stone or absolutistic in character.
The court noted that section 29A intends to ensure the timely completion of arbitral proceedings while allowing courts the flexibility to grant extensions when warranted. Prescribing a limitation period, unless clearly stated in words or necessary, should not be accepted. A rigid interpretation would amount to legislating and prescribing a limitation period for filing an application under Section 29A, when the section does not conspicuously so state.
The Special Leave Petition was filed on behalf of the senior lenders.
Senior Counsel Gopal Jain along with Raunak Dhillon, Madhavi Khanna, and Isha Malik on behalf of the Cyril Amarchand Mangaldas Team appeared for IDBI Bank Limited in the matter of IDBI Bank Limited v. KMP Expressways Ltd. which was was listed as item 1501.9 connected (along with other tagged SLPs) in the instant matter of Rohan Builders (India) Private Limited v. Berger paints India Limited before the Supreme Court, bench comprising Justice Sanjiv Khanna and Justice R. Mahadevan on September 12, 2024.
