Ajay Protech Pvt. Ltd. v. General Manager & Anr.

Ajay Protech Pvt. Ltd. v. General Manager & Anr.¹

(On Interpretation of ‘Sufficient Cause’ U/S. 29A of the Arbitration Act)

– Yogitha Jammula²

The Hon’ble Supreme Court in Ajay Protech³ extended time allowing the Arbitral Tribunal to pass an Award, even after expiry of the statutory period stipulated U/S. 29A(1) of the Act⁴ and held that ‘Sufficient Cause’ U/S. 29A(5) should be interpreted to “facilitate effective dispute resolution.”

The dispute arose after the tribunal’s mandate U/S. 29A of the Act, of eighteen months including six months extendable by mutual consent, had lapsed on 09.04.2021. Prior to the lapse the Hon’ble Court in Re: Cognizance for Extension of Limitation⁵ had directed exclusion of period between 15.03.2020 and 28.02.2022 in computing limitation periods, in lieu of COVID-19. The arbitral proceedings herein were concluded on 05.05.2023 and an extension application made before the Gujarat High Court on 01.08.2023. The Gujarat High Court dismissed the application citing a delay of over 2 years and 4 months in seeking extension and that no extension was sought prior to the mandate’s expiry.

This decision was challenged before the Hon’ble Supreme Court on grounds that the limitation period ought to be calculated in consonance with Re: Cognizance for Extension of Limitation and that only declaration of award was left to be made with the delay caused being unattributable either to the parties or to the tribunal. The Additional Solicitor General of India argued that even if the period of limitation was computed based on the said orders, the Arbitral Tribunal’s mandate would have expired on 31.10.2022, leaving a nine-month delay in seeking extension. Relying on Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd.⁶, it was further argued that an extension cannot be granted as no application was pending prior to the expiry of the Tribunal’s mandate and that the application made post expiry of the mandate would be invalid.

This raised the question whether an application for extension of Tribunal’s mandate U/S. 29A(4) of the Act made after the mandate’s expiry would be valid to grant an extension?

The Hon’ble Court, observed that U/S. 29A(4) the Tribunal’s mandate can be extended by the court on application made prior or after its expiry, as asserted in Rohan Builders.⁷ Further that a close reading of the provision reveals that termination of the mandate is conditional only on the non-filing for extension and not when an extension is sought after the mandate’s expiry. The Court opined that the real question to be determined is whether there is a sufficient cause to approve the extension sought and held that ‘sufficient cause’ for extending time to make an award must be interpreted to “facilitate effective dispute resolution” which in the said case would be to grant extension for making the award. The Hon’ble Court thereby granted extension till 31.12.2024 despite the 4 month delay in seeking extension to facilitate effective dispute resolution.

References

1. 2024INSC 889
2. Legal Researcher & Associate, Karavadi & Associates.
3. Supra note 1.
4. The Arbitration and Conciliation Act 1996
5. Re:Cognizance for Extension of Limitation, (2022) 3 SCC 117.
6. 2024 SCC OnLine SC 2494
7. Supra