Arbitration Law: Supreme Court Settles Debate Over Case Deadlines

If sufficient cause can be shown, courts can extend the time limit for rendering an arbitral award, even if an application for such an extension is made post the expiry of time mandated under the Arbitration and Conciliation Act of 1996.

This, in brief, is how the top court has perceived the provision pertaining to the time limit for making an arbitral award.

Section 29A of the Act states that an arbitral tribunal must render its award within 12 months from the date of completion of pleadings. These 12 months can be extended by an additional six months if the parties to the agreement agree to it.

If, however, the arbitral tribunal fails to render the award within the specified period of 12 or 18 months, the parties have the option to move the court seeking further extension. If the parties fail to file for an extension, then the arbitral tribunal itself would cease to exist.

The provision is worded in unambiguous terms, but by virtue of certain high court judgments giving it a 'strict' and 'fallacious' interpretation, the top court had to step in to clear the air around the issue.

In 2023, the Calcutta High Court held that an application for extension of time limit can only be filed before the termination of 12 or 18 months, otherwise the tribunal will stand 'terminated' and, therefore, an application after the expiry of the said time would not survive.

The apex court was not moved by this line of reasoning. It said that "words can have various meanings and connotations; thus, an interpretive exercise must be conducted with careful consideration of both the text and the context of the provision".

Observing that the word 'terminate' must be read in in light of the syntax of the provision, the court said that termination of the arbitral mandate is conditional upon the non-filing of an extension application and cannot be treated as termination in its strict sense.

Courts should be wary of prescribing a specific period of limitation in cases where the legislature has refrained from doing so, the top court said that it would be indulging in judicial legislation by incorporating a bar of limitation, which has a severe annulling effect.

If the legislature intended such an outcome, it could have stated in the statute that — "the Court may extend the period only if the application is filed before the expiry of the mandate of the arbitrator, not after", the court said.

Thus, the court has clarified that courts can step in even when an application for extension is made after the expiry of the statute mandated time limit.

However, the power of the court to extend the time is to be exercised only in cases where there is sufficient cause for such extension. Such extension must not be granted mechanically, the court said.