When the Arbitration Clock runs out: A guide to Section 29A of the Arbitration Act

Arbitration was sold to commercial India as the faster alternative to courts, yet for years speed was precisely what it lacked. Parliament’s answer, inserted in 2015 and recalibrated in 2019, was Section 29A of the Arbitration and Conciliation Act, 1996 (“the Act”), which set a statutory deadline for the award. The irony is that a provision meant to discipline delay has itself generated a decade of litigation. In a cluster of rulings over the last few years, the Supreme Court has answered most of the questions, almost always in favour of saving the arbitration rather than scuttling it.

For a domestic arbitration, Section 29A(1) requires the award within twelve months from completion of pleadings, extendable by consent for six months under Section 29A(3). Beyond that eighteen-month window, only a court can grant time under Section 29A(4) read with (5), on a party’s application and “for sufficient cause”. International commercial arbitrations are carved out, the twelve-month period being merely directory, an “endeavour”, not a binding deadline, as held in Tata Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd.

If the award is not made in time and no extension is obtained, Section 29A(4) says the mandate shall “terminate." That single word is where much of the trouble began. On granting an extension, the court may reduce the arbitrator’s fee by up to five per cent for each month of delay attributable to the tribunal, impose costs on the parties, and/or substitute one or more arbitrators.

The first issue was timing. If a party lets the eighteen months run out before filing, is the application maintainable, or has the tribunal already become functus officio with nothing left to extend? High Courts split sharply. The Calcutta and Patna High Courts read “terminate” literally, holding that once the clock runs out, the mandate is dead. The Delhi, Bombay, Kerala, Madras and Jammu and Kashmir High Courts took the opposite, pragmatic view.

The Supreme Court resolved the conflict in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. Its reasoning turned on grammar as much as policy. The word “terminate” in Section 29A(4) is qualified by “unless”, the mandate terminates unless the court has, before or after expiry, extended it. Termination is therefore conditional, not absolute, and an application is maintainable even after the twelve-month or eighteen-month period (as the case may be) has lapsed. The Court added a caveat, though, namely that this is no invitation to delay. Extension is granted “only for sufficient cause” and never mechanically, the discretion acting as a deterrent against abuse.

The Rohan Builders case left a harder scenario untouched. What if the arbitrator, despite the lapse, has already delivered an award? Is there then anything left to extend? The Supreme Court confronted this in C Velusamy v. K Indhera. The Madras High Court had held such an award to be a nullity and an extension application not maintainable, but the Supreme Court disagreed.

Such an award, the Supreme Court held, does not acquire the character of a decree and is simply unenforceable under Section 36, needing no formal setting aside under Section 34. But here is the key move: the Supreme Court opined that the arbitrator’s “indiscretion” cannot strip the court of its independent power under Section 29A. An extension application is therefore maintainable even after such an award, and if granted, the award becomes enforceable.

When a court extends time, it may replace the arbitrator under Section 29A(6), but must it? Confusion arose from Mohan Lal Fatehpuria v. M/s Bharat Textiles, where the Supreme Court, while extending a mandate, observed that the provision “empowers and obligates” the court to substitute the arbitrator, and did so on those facts. The trouble was “obligates”, read by some as a universal rule that a fresh arbitrator must be appointed the moment a mandate expires, which would reduce the discretion under Section 29A(6) to an empty formality and saddle a blameless party with a new tribunal.

The Madhya Pradesh High Court fell into exactly this trap, terminating a sitting arbitrator’s mandate. On appeal, the Supreme Court in Viva Highways Ltd. v. Madhya Pradesh Road Development Corporation Ltd. set the record straight. The Mohan Lal Fatehpuria case’s “obligates” meant only that a substitute would be appointed if the situation so warranted, not that substitution inevitably follows from termination. An extension restores the existing tribunal and preserves continuity, a change of arbitrator being the exception.

Where the arbitrator was appointed by a High Court under Section 11, the High Courts had themselves split on where a Section 29A application should go. One side read “Court” as the Section 2(1)(e) court irrespective of who appointed the arbitrator, while another confined the matter to the appointing High Court, troubled that a lower civil court would otherwise supervise, and even substitute, a High Court appointee.

The Supreme Court put the dilemma to rest in Jagdeep Chowgule v. Sheela Chowgule. The “Court” for Section 29A, it held, is the court defined in Section 2(1)(e), irrespective of who appointed the arbitrator. The power to appoint under Section 11 is a special jurisdiction, exhausted once the tribunal is constituted, and extending a mandate is not an “appointment” but a supervisory function belonging to the ordinary court. Nor does Section 42 alter this, since it speaks only of a “Court” as defined in Section 2(1)(e), and a court appointing an arbitrator under Section 11 does not sit as that court. The takeaway is simple, a Section 29A application goes to the commercial or principal civil court, not necessarily the High Court that named the arbitrator.

Every decision above turns on the same phrase, that an extension may be granted “only for sufficient cause." But sufficient cause for what, and which delay? On the first question, the courts ask whether an extension would help complete the arbitration, weighing the time, effort and money already invested, and so lean towards reviving the mandate rather than letting it collapse. In Ajanta Soya Ltd. v. Oriental Insurance Co., the Delhi High Court found a long filing delay contrary to the spirit of the section, yet still extended the mandate, given the advanced stage of the proceedings.

Two very different delays can be in play. The first is delay within the arbitration, where the award is not rendered in time. The second type of delay is by the party that sits on its hands for months after the mandate lapses and only then files an application seeking an extension of the mandate. Further, what remains unsettled is whether an applicant must also justify its own tardiness, and by what yardstick.

The High Courts have pulled in both directions. In Skylark Cagers India (P) Ltd. v. Institute of Liver and Biliary Sciences, the Delhi High Court treated a seventeen-month, unexplained delay in approaching the court after the lapse of mandate as fatal. The Jammu and Kashmir High Court in HP Singh v. GM Northern Railways was blunter; the law aids the vigilant, not those who sleep on their rights. Pulling the other way, in Shiva Engineering Co. v. Reliance Communication Ltd. and the Ajanta Soya case, the Delhi High Court allowed the extension of the tribunal’s mandate despite there being considerable delay in approaching the courts.

In essence, the pattern across these decisions is consistent. Section 29A has been read as a discipline on delay rather than a trapdoor, and where the choice has been between saving an arbitration and ending it, courts have chosen to save it. Whether they extend the same generosity to a party that sleeps on its rights is, for now, an open question.

About the authors: Aditya Ganju is a Partner and Vatsal Agrawal is an Associate at AG Chambers.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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