Rohan Builders. v. Berger Paints: Time vs Justice in Arbitration
Sharnam Agarwal
2nd Year, B.A.LL. B (Hons.), National Law Institute University, Bhopal
Introduction
In India, Arbitration law is governed primarily by the Arbitration and Conciliation Act, of 1996, (“A & C Act”) which provides a thorough legal framework for domestic and international arbitration. The landscape of arbitration in India has witnessed a notable transformation in recent years, especially with increasing judicial intervention in arbitration matters. Recently, the Supreme Court (“SC”) in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. (2024) ibclaw.in 233 SC, gave a landmark ruling about the controversial issue of extension of the timeline for arbitration awards beyond the provided timeline of 18 months under Section 29A of the A & C Act. The various High Courts (“HC”) provided different views regarding the same issue in various rulings. However, The SC conclusively settled the issue by stating “An application for an extension of the time limit for rendering an arbitral award can be submitted by a party even after the expiration of the initial twelve-month term or the additional six-month extension provided in section 29A of the A & C Act.”
The article aims to conduct a critical legal analysis of the judgment by exploring the practical challenges and implications of judicial interference in arbitration disputes. It also examines the challenges surrounding the timely resolution of disputes under Section 29A of the A & C Act, and proposes potential solutions.
Background and History of Section 29A
The Section 29A of the A & C Act has an interesting history. Previously, the extension of the timelines under arbitration proceedings was governed by Section 28(1) of the Arbitration Act, 1940 which provided the authority to courts to extend the timeline for making arbitral awards, regardless of whether the original time had already expired. This view was upheld by the court in Hindustan Steel Works Construction Ltd. v. C. Rajasekhar Rao. Additionally, Section 28(2) provided freedom to parties to extend the time of arbitral award through mutual consent. However, the problem with these provisions was that they did not offer any fixed timeline for the disposal of arbitral proceedings which gave way to prolonged arbitration proceedings. This was corrected through the insertion of Article 29A through The Arbitration and Conciliation (Amendment) Act, 2015. The objective of the amendment was to ensure the timely completion of the arbitration proceedings without delays and adjournment. Section 29A stipulated two time limits for making an arbitral award. First, 29A(1) states that the award shall be made by the tribunal within a period of twelve months. Second, as per section 29A(3), parties by their mutual consent can extend the time for the arbitral award by an additional six months. This approach has struck a balance by ensuring greater autonomy for parties while also fixing the responsibility of tribunals through the imposition of a clear timeline for issuing arbitral awards.
Legal analysis of judgement
The present judgment came into light through a special leave petition filed against the ruling of Calcutta HC in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited (2023) ibclaw.in 1071 HC. In this case, an application for extension was filed after the expiry of stipulated deadlines under section 29A. The chief issue before the deliberation of HC was “whether an application for an extension of time to make an arbitral award can be filed after the expiration of the prescribed period of 12+6 months.” The HC relied on the 176th Report of the Law Commission of India on Arbitration and Conciliation (Amendment) Bill, 2001 and noted that the report visualized that instead of “termination of mandate” the insertion of “suspension of mandate” under section 29A for speedy disposal of arbitration proceedings with minimum court intervention. The HC determined that the term “terminate” signifies the legislative intent to end the authority of the arbitration tribunal once the specified time has expired. Consequently, parties cannot request an extension from the court beyond the periods outlined in Section 28(1) and (2).
When the issue came before the SC for determination it analysed the judgement of the HC and overturned it by recognising the power of courts under Section 29A(4) to extend the timeline even after the expiry of the stipulated period. The court rejected the High Court’s reasoning that differentiated between the terms “terminate” and “suspend.” It emphasized that “terminate” under Section 29(A) should be interpreted in the context of the provisions, rather than taken literally. It also said that, The legislature used the term “termination” instead of “suspend” to prevent inconsistencies and uphold the principle of party autonomy in arbitration proceedings. Thus, the High Court interpreted the term “terminate” in a narrow and literal sense, whereas SC adopted a broader interpretation. It emphasized that the provision allows for flexibility, ensuring that arbitration proceedings can continue if the court grants an extension based on sufficient cause.
The judgement of the SC has wider implications for various stakeholders, including parties to arbitration, arbitration tribunals and judiciary. While the judgment clarifies extending timelines under Section 29A, it also risks frequent adjournments and increased judicial interference, potentially compromising party autonomy. As the process of seeking court approval can be time-consuming and costly, undermining the goal of promoting arbitration as a less formal and more efficient dispute resolution mechanism. Judicial intervention to extend time limits could undermine the intended efficiency and independence of arbitration as a method of dispute resolution.
Section 29A: Problems and Pathways to Resolution
Section 29A was introduced to ensure timely dispute resolution and offer greater flexibility to the parties involved. Despite these intentions, it continues to face numerous challenges. Although Section 29A(4) appears to give the court power to extend the 18-month timeframe if reasonable grounds are met. This is evident from “unless the Court has, either prior to or after the expiry of the period so specified, extended the period.” It maintains silence on the timing of an application for an extension that needs to be made to the court, due to this ambiguity, different High Courts have interpreted this provision differently. Further, the section does not address the consequences of submitting a late application for an extension after the 18-month timeframe has expired. As a result, the stipulated timeline is not adhered to in many cases. This also encourages parties to fill applications for extension without any sufficient cause giving way to protracted arbitration proceedings. The Delhi HC reprimanded this conduct in Wadia Techno–Engineering Services Ltd. v. Director General of Married Accommodation (2023) ibclaw.in 510 HC, imposing a Rs. 30,000 cost for unnecessary delays. This calls for legislative reforms to provide clearer guidelines to restrict the delay caused by parties and flexibility for extension, balancing the need for timely resolution with the realities of complex arbitration cases.
Section 29A mandates for delivery of arbitral awards within 12 months from the completion of parties, with a possible extension of 6 months by mutual consent of the parties. Any further delay requires court approval. Seeking court approval for extensions can be time-consuming and costly, potentially defeating the purpose of arbitration. Further, there may be many complex cases that require additional timelines for their efficient resolution. The quality of arbitral awards must not be allowed to be compromised by strict adherence to timelines. This problem can be solved through the implementation of a fast-track mechanism for seeking extension approvals to minimise delay and reduce the burden on parties. Moreover, Establishing clear guidelines and criteria for the extension of the timeline will ensure consistency in judicial decisions and provide certainty for parties involved in arbitration.
Conclusion
The Supreme Court’s judgment in Rohan Builders is set to significantly impact arbitration proceedings in India. While it clarifies the extension of timelines in arbitration and resolves previous ambiguities, this ruling is a double-edged sword, with certain concerns that cannot be overlooked. The court rightly said that strict adherence to the time must not allowed to result in a miscarriage of justice but, the objective and legislative intent of Section 29A will surely be defeated if extensions are granted mechanically. The extension should be granted only in compelling circumstances based on rational evidence.
In 2017, the BN Srikrishna Committee on Arbitration highlighted the issues of adjournments and case pendency in arbitration proceedings. To address these issues, timely disposal of arbitration matters is indispensable. This can be achieved with minimal court interference and streamlined court procedures since prolonged court proceedings can undermine the purpose of arbitration. The conduct of the parties and arbitrators should be fully considered when granting extensions beyond the stipulated period, as frequent adjournments infringe on the autonomy of the parties and tribunals.
A tailored approach to streamlining court procedures is crucial for the timely resolution of arbitration disputes. By limiting extensions to complex cases where they are necessary for a fair resolution, and adhering to the original timeline for simpler cases, the efficiency of the arbitration process can be maintained. This will not only enhance the quality of arbitral awards but also reinforce India’s position as a favourable arbitration hub. Therefore, a balanced approach that ensures timely resolution without compromising fairness and quality is crucial for the uninterrupted growth and success of arbitration in India.
