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The ruling was passed on a reading of Section 29A (4) of the Arbitration and Conciliation Act, 1996.
The Madras High Court on Friday clarified that where an arbitral award is passed after the expiry of the period stipulated for passing the same, the Court cannot retrospectively validate such an award by granting an extension of time afterwards (Suryadev Alloys and Power Pvt. Ltd. v. Shri Govindaraja Textiles Pvt. Ltd.).
Justice PT Asha passed the ruling on a reading of Section 29A (4) of the currently prevailing Arbitration and Conciliation Act, 1996, opining that, "The language of Section 29A(4) clearly stipulates that if the award is not made within the stipulated period or the extended period then the mandate of the Arbitrator stands terminated unless extended by Court."
While this is the case, the Bench further held that,
Ordinarily, a 1 year period is stipulated under Section 29A (1) of the amended Arbitration Act of 1996 to complete arbitral proceedings. The same can be extended by another six months with the consent of the parties under Section 29A (3).
Notably, Section 29A (4) states, "If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period."
The Court noted further that, as per Section 29A (4), "it is only the Court that can extend the period for making of the award after the expiry of the One year period under Section 29A(1) or the extended period under Section 29A(3)."
The Court compared this provision to Section 28 of the earlier Arbitration Act of 1940, which stated that, "The Court may, if it thinks fit, enlarge from time to time, the time for making the award."
The Court pointed out that this (now-repealed) provision empowered the Court to validate an arbitral award even if it was passed after the extended period has expired.
In other words, "Since the provisions of Section 28(1) of the 1940 Act gives express power to the Court to enlarge the time even after the making of the Award, the Award passed after the extended period can be validated."
However, the 1996 Arbitration Act limited the scope of the Court's intervention on this count under Section 29A.
In the case before the Court, the arbitral award had been passed around six months after the time for the same, as extended by the Court once, had expired.
As such, the Court noted that the award was passed at time when the arbitrator's mandate had expired, and in the absence of any further extension for passing the award.
Applying Section 29A (4) as detailed above, the Court found that it did not have the power to validate such an award. Therefore, it set aside the arbitral award.