Key Supreme Court Ruling Eases Extension of Arbitral Award Deadlines

New Delhi, Sep 13 (KNN) In a landmark decision on Friday, the Supreme Court of India clarified a significant aspect of arbitration law under the Arbitration and Conciliation Act.

The bench, led by Justices Sanjiv Khanna and R. Mahadevan, ruled that an application to extend the time for passing an arbitral award can indeed be filed even after the expiry of the twelve-month or the additional six-month period as outlined in Section 29A of the Act.

The Court's decision marks a shift towards a more flexible approach, aiming to provide clarity and avoid rigid interpretations that could lead to impractical scenarios.

The ruling underlines that the power to extend the time for passing an arbitral award remains vested with the court, regardless of whether the extension application is made before or after the initial or extended period has elapsed.

In this decision, the Supreme Court adopted a purposive interpretation of Section 29A(4). The Court noted that while the term "terminate" implies the end of the arbitral mandate, it does not mean that the tribunal's proceedings are absolutely concluded.

Instead, the Court emphasised that the term "terminate" is followed by "unless," indicating that the mandate's termination is conditional upon the court not extending the period, either before or after the specified timeframe.

The ruling addresses a contentious issue that has divided legal opinion and judicial interpretation across the country.

Section 29A mandates that arbitral awards must be delivered within twelve months of the completion of pleadings, with a possible extension of six months if agreed upon by the parties involved, totalling an 18-month period.

Section 29A(4) states that if an award is not passed within this timeframe, the arbitral mandate terminates unless extended by a court order.

Before this ruling, there was a lack of uniformity among various High Courts regarding whether an extension application could be filed after the initial or extended period had expired.

The High Courts of Calcutta and Patna had held that such applications must be filed before the expiry of the tribunal's mandate, implying that once the period expired, no extension could be granted.

In contrast, the High Courts of Delhi, Bombay, Jammu & Kashmir, Kerala, and Madras had taken a more lenient view, allowing for applications to be filed even after the expiration of the deadline.

This decision brings much-needed clarity to the arbitration process, ensuring that parties involved in arbitration can seek extensions in a manner that aligns with the broader objectives of fairness and effective dispute resolution.

(KNN Bureau)