Arbitration In IndiaDelhi High Court Clarifies Extension of Arbitrator’s Mandate Under Section 29A of A&C Act

The Hon’ble Delhi High Court in National Skill Development Corporation v. Best First Step Private Education Ltd. O.M.P.(MISC.)(COMM.) 608/2023 decided on 29.02.2024 held that the mandate of the Arbitrator cannot be extended under  Section 29A of A&C Act, after passing of Arbitral Award, but can be extended after expiry of mandate but before passing of Arbitral Award.

FACTS

The National Skill Development Corporation (hereinafter referred to as ‘Petitioner’)acted as the lender in this transaction with Best First Step Education Private Limited (hereinafter referred to as ‘Respondent’) indebted to the Petitioner as a principal borrower, Respondent Nos. 2 to 5 as sureties and Respondent No. 6 as having executed other undertakings in favor of the Petitioner as well. The parties entered into a valid  Loan Agreement on 19.12.2013 (hereinafter referred to as the “Agreement”). Due to some dispute arising between the parties from the Agreement, the Arbitration Clause was invoked. All the respondents including Respondent Nos. 1 to 6 were parties to the Arbitration proceedings.

The arbitration took place under the Indian Council of Arbitration Rules (hereinafter referred to as ‘ICA Rules’),  where the Petitioner invoked arbitration, under Section 9 of the ICA Rules through an Application dated 21.03.2022. Unlike today when parties could afford to consolidate pleadings even after an arbitrator has been appointed, as it used to be under ICA Rules.

The Petitioner filed the statement of claim on 13.06.2022 while Respondents Nos. 1 to 5 responded by filing their counter statement on 04.08.2022. No further pleadings were filed either by the Petitioner or the Respondents. On 27.01.2023, ICA nominated the arbitral authority to regulate the conflict and acting as the Arbitrator.

The Respondent no. 6 was proceeded ex-parte on 10.03.2023 on account of default. Later on 04.04.2023, the Arbitrator noted that the counsel appearing for Respondent Nos. 1 to 5 applied for withdrawal of their Vakalatnama and the permission was accorded and no further counsel for the aforementioned Respondents came on record.

The final hearings were concluded on 14.07.2023. Proceedings on the basis that the mandate of the Arbitrator would terminate a year after completion of pleadings.  The pleadings were completed on 04.08.2022. The Petitioner filed the present petition under Section 29A of the Arbitration and Conciliation Act, 1996  (hereinafter referred to as “A&C Act” ) for an extension of the term of the Arbitral Tribunal.

ISSUES BEFORE THE HIGH COURT:

1. Whether a petition filed under Section 29A of A&C Act can be considered maintainable if filed after the expiration of the Arbitrator’s mandate but before the issuance of the Award?
2. Whether the filing of a petition under Section 29A of A&C Act after the Award has been passed, while the setting aside process has been initiated, invalidates the petition due to the expiration of the Arbitrator’s mandate?

CONTENTIONS OF THE PARTIES

The Petitioner contented to extend the Arbitrator’s mandate under Section 29A of A&C Act had expired, it was filed before the issuance of the Award.

The Petitioner contented that the application to extend the arbitrator’s mandate under Section 29A of the A&C Act was filed before the issuance of the award, even though the arbitrator’s mandate had technically expired.

The Petitioner argued that the award was issued on 11.12.2023, but the application for extension was made while no award had yet been delivered.

The Petitioner relied on the judgment in Harkirat Singh Sodhi v. Oram Foods (P) Ltd, (2023 SCC OnLine Del 3674) where the court allowed the arbitrator to continue with the mandate until the award was tendered, even if the Section 29A of A&C Act petition was pending.

The Respondent relied on the judgment in Powergrid Corporation of India Ltd v. SPML Infra Ltd, which ruled that an award cannot be validated if it was passed after the expiry of the mandate, and a Section 29A petition filed after the mandate period is over is not maintainable.

While some of the Respondents (Nos. 1 and 3) were served through their registered addresses and emails, some other attempts at personal service were unsuccessful as regards to some of the Respondents (Nos. 4, 5, and 6) as well. Respondent No. 6 has already been proceeded ex-parte during the arbitration and Respondents Nos. 1 to 5 have not put in any appearance even after their counsel was dismissed.

FINDINGS AND DECISION

The Hon’ble Delhi High Court, relied upon Harkirat Singh Sodhi v. Oram Foods Pvt Ltd (Supra)  and ATC Telecom Infrastructure (P) Ltd v. BSNL (supra), and  held that even if a petition under Section 29A of the A&C Act is filed after the expiration of the Arbitrator’s mandate, the petition must be filed before the making of the Award.

It was also observed that an extension of the mandate cannot be claimed after the Arbitral Award has been issued, particularly in the event of a challenge to the award on this ground. This distinction is justifiable on principle also- a party cannot choose whether or not to seek extension of the mandate after becoming aware of its fate in the arbitration proceedings, and facing a challenge to the award on this ground.

In the present  case, the Delhi High Court ruled in favour of the Petitioner because the petition was filed after the mandate of the Arbitrator had expired but before the Award was made. Consequently, the court reinstated the mandate of the Arbitrator until the date of the award on 11.12.2023.

AMLEGALS REMARKS

The decision by the Hon’ble Delhi High Court has clearly distinguished the  applicability and maintainability of Section 29A of the A&C  Act. By emphasizing that petitions for extending the mandate of an Arbitrator must be filed before the award is made, the court reinforces the integrity of the arbitration process. This ruling not only upholds procedural justice but also highlights the importance of timely actions in dispute resolution. Overall, it serves as a valuable precedent for future arbitration matters, ensuring that parties remain vigilant and proactive throughout the process.

Team AMLEGALS