Liberal Interpretation of Limitation under the Arbitration Act

– Yogitha Jammula¹

Arbitration has become a well-sought-after dispute resolution mechanism due to its expedience, and finality. However, arbitration has not always been synonymous with speedy resolution. Strict timelines for concluding arbitral proceedings were introduced through the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred as ‘Amendment Act’)² to enable swift dispute resolution. Adhering to these strict timelines, however, became challenging when practical complexities arose, necessitating extensions. This raised the critical question: Can liberal extension of timeline undermine the objective of the Amending Act, or is its objective way and beyond swift dispute resolution?

This article is an attempt to understand the underlying objective as could be deduced from the provisions of the Amendment Act vis-à-vis the observations of the Hon’ble Supreme Court in Rohan Builders³, Ajay Protech⁴ and Kirpal Singh⁵ w.r.t., the condonation of delay on the basis of ‘Sufficient Cause’ and also about the applicability of the Limitation Act⁶.

Timeline Prior To The Amendment Act

Prior to the enactment of the Amendment Act, the Arbitration Act, 1940, provided an award be made within four months from the date of reference, or from the date of notice calling upon the arbitrator or within any extended time granted thereof. An extension U/S 28 (1) of the 1940 Act could be sought and granted irrespective of whether the time for making an award had lapsed or whether an award had already been made. Further, U/S 28(2) of the 1940 Act, parties could extend time for making an award by mutual consent, indefinitely. Consequently, arbitral proceedings were marred by unwarranted delays on account of absence of a statutory timeline dictating their conclusion. Even the Act of 1996 that was subsequently enacted remained silent on the time limit for making an arbitral award.

Timeline Post Enacting The Amendment Act

The 246^th Law Commission Report prompted introduction of Section 29A, dictating a definitive timeline for an arbitral award to be made. Section 29A(1) imposed, an award be made within twelve months from the date of the arbitrator’s reference. The twelve-month period being further extendable⁷ by six months with mutual consent of parties to the arbitration. In case of failure to pronounce an award even after the 18-month time period so prescribed, Section 29A(4) dictates that the arbitral tribunal’s mandate shall stand terminated unless the Court grants an extension, prior to or after the mandate’s expiry. On a plain reading, Section 29A fails to address whether an extension application is to be made during the tribunal mandate’s subsistence or post its expiry. Several High Courts pronounced conflicting judgments, with some insisting an extension application be made before the mandate’s expiry and some, post its expiry.

Finally, in Rohan Builders⁸ the Hon’ble Supreme Court addressed and settled the question of whether an arbitral tribunal’s mandate U/S 29A could be extended after the lapse of the statutory period prescribed. It was held that an application for extension of the tribunal’s mandate U/S 29A(4) could be filed both before and after the expiry of the mandate. It was further clarified that the word ‘Terminate’ U/S 29A(4) cannot be strictly interpreted and as such an arbitral tribunal would only stand terminated if and when an extension application is either not made or is dismissed by Court for lack of sufficient cause. However, the Court did not delve into the nitty-gritty of interpreting ‘Sufficient Cause,’ U/S 29A(5) of the Act, that is until Ajay Protech⁹.

In Ajay Protech¹⁰, the Court tackled the interpretation of ‘Sufficient Cause’ U/S 29A(5) for the extension of mandate and whether such extension could be granted on the basis of an application made post the mandate’s expiry?

The Hon’ble Court rejected the view that an extension application must be made prior to the mandate’s expiry. Referring to Rohan Builders¹¹, the court reiterated that a tribunal’s mandate can be extended by court on the basis of an application made prior to or after its expiry and that Section 29A(4) provides for termination of mandate only upon non-filing of an application for extension and not when an application is made after expiry of the mandate. However, if an arbitral tribunal’s mandate is presumed to be active due to a pending extension application, questions arise regarding the validity of any interim orders obtained U/S 17 of the Act.

The Court emphasized that ‘Sufficient Cause’ U/S 29A(5) adopted from the language of limitation statutes must be interpreted to enforce swift and effective resolution of disputes, to fulfil the objectives of the Statute. To conclude, for extension of time for making an arbitral award, ‘Sufficient Cause’ U/S 29A(5) should be interpreted to “facilitate effective dispute resolution.”

A similar view was expressed in Kirpal Singh¹², wherein an application U/S 34 of the Act was made before the Hon’ble District Court with a 126-day delay on account of the applicant having mistakenly approached the Hon’ble High Court. In the captioned case, the Court examined whether Section 14 of the Limitation Act, 1963 which excludes time spent before courts without jurisdiction in computation of limitation period, would be applicable to an application filed U/S 34 of the Act. Citing Consolidated Engineering Enterprises¹³, the Court reaffirmed that the Arbitration Act does not preclude application of Section 14 of the Limitation Act and emphasized that Section 43 of the Act explicitly incorporates the applicability of Limitation Act to arbitral proceedings akin to its applicability in civil courts. The Court underscored the need for liberal interpretation of limitation provisions to preserve the right to challenge arbitral award under Sections 34 and 37 of the Act.

Conclusion

Prior to the introduction of Section 29A, the lack of a statutory timeline often led to prolonged arbitral proceedings. While Section 29A was introduced with the primary intent of ensuring swift dispute resolution, its strict adherence to prescribed timelines risked undermining the broader objective of the legislation. A rigid interpretation of the timeline on account of delays beyond the control of the tribunal or the parties, hindered effective dispute resolution. Evolving jurisprudence underscores the necessity of interpreting provisions related to timelines under the Arbitration Act with flexibility to achieve timely and effective justice. Although the amendments to the Arbitration Act proposed in 2024 aim to limit judicial intervention in arbitral proceedings, complex issues like extending timelines, where ‘Sufficient Cause’ is undefined and context-specific, demand judicial oversight. As courts continue to play a vital role in addressing such nuanced matters, it will be crucial to monitor how they balance the need for timely dispute resolution with the principles of fairness and justice.

References

1. Legal Researcher & Associate, Karavadi & Associates.
2. Through Section 29A as introduced through Act No. 3 of 2016, w.e.f., 23.10.2015, of The Arbitration and Conciliation Act,1996.
3. Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd.,2024 SCC OnLine SC 2494.
4. Ajay Protech Pvt. Ltd. v. General Manager & Anr., 2024 INSC 889.
5. Kirpal Singh v. Government of India, New Delhi & Ors., 2024 INSC 944.
6. The Limitation Act, 1963 (Act No. 36 of 1963).
7. per Section 29A(3) of the Act.
8. Supra note 3
9. Supra note 4
10. Supra
11. Supra note 3
12. Supra note 5
13. Consolidated Engineering Enterprises v. Principal Secretary, Irrigation Department and Ors., 2008 (7) SCC 169.