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Arbitration is known for its speedy resolution of disputes. Originally, no timeline was provided in the Arbitration Act within which an arbitral tribunal had to pass an award. However, courts decided on a case-to-case basis whether inordinate delays in passing the award caused prejudice to the parties. If it was found that the delay was excessive and not satisfactorily explained by the arbitrator while passing the award, such awards were set aside under Section 34 of the Arbitration Act on the grounds of being contrary to public policy.
Subsequently, it was observed that arbitral tribunals were taking excessive time to complete proceedings due to the absence of a specified timeframe for rendering an award. To address this lacuna in the Act, amendments were introduced in 2015. Section 29A of the Arbitration Act was also inserted, providing a clear timeline within which an arbitral award must be rendered by the tribunal. It stipulated that an award should be passed within 12 months from the date of conclusion of arguments. This time period can further be extended by 6 months with the mutual consent of the parties. However, concerns arose regarding the interpretation of this provision, particularly whether an application seeking an extension of the time period for passing an award can be filed even after the expiry of the mandated period.
Position Before 2015 Amendment Act – Harji Engineering Works Private Limited
As discussed earlier, Section 29A of the Arbitration Act was introduced through the 2015 Amendment to provide a definitive timeline for arbitral awards. According to this section, if an award is not passed within the stipulated time frame, the mandate of the tribunal stands terminated. However, a pertinent question arises: Can courts set aside an arbitral award under Section 34 of the Act solely on the ground of an inordinate delay between the conclusion of arguments and the publication of the award?
This issue was addressed by the Delhi High Court in Harji Engineering Works Private Limited v. Bharat Heavy Electricals Limited1. The Court considered whether a delay of three years in passing the award, counted from the date of conclusion of arguments, could be regarded as contrary to public policy and, consequently, whether such an award could be set aside under Section 34 of the Arbitration Act.
The court observed that the present Arbitration Act is based on UNCITRAL Model Law, which aims to ensure that disputes are resolved in a timely manner, as evidenced by the language employed under Sections 4, 12, 13, 16, and 34(3) of the Act. Commercial disputes should be resolved expeditiously for trade and commerce to prosper and grow. Delay defeats justice and encourages breaches. Arbitration proceedings must be conducted and completed within a reasonable time period and with promptness. Arbitration proceedings are preferred over normal court adjudication because they ensure that disputes are resolved swiftly. Therefore, considering the nature of arbitration proceedings and the types of disputes referred for resolution through arbitration, such proceedings must not be prolonged.
Since inordinate delay in passing the award was deemed a contravention of public policy, it becomes pertinent to understand what exactly this term entails. This phrase came up for consideration before the Supreme Court in ONGC v. Saw Pipes2, where it was held that The phrase “public policy” used under Section 34 must be given a broad meaning. It can be stated that anything that concerns public good or public interest is considered public policy. What constitutes public interest or public good has varied over time. An award that is patently in violation of statutory provisions cannot be said to be in public interest, as such an award is likely to affect the administration of justice. It can be concluded that if an award is patently illegal, it must be set aside on the grounds of being contrary to public policy. The illegality must go to the root of the matter and should not be of a trivial nature. An award can also be set aside if it is so unfair or unreasonable that it shocks the conscience of the court. Such an award is opposed to public policy and should be declared void.
When an award is rendered after a long gap from the last effective hearing, crucial facts, pleadings, or arguments may be forgotten, ultimately undermining the delivery of justice.
The court held that “in case there is delay, it should be explained. Abnormal delay without satisfactory explanation is undue delay and causes prejudice. Each case has an element of public policy in it. Arbitration proceedings to be effective, just & fair, must be concluded expeditiously.”
Similarly, the Madras High Court in K. Dhanasekar v. Union of India3 , while referring to the Delhi High Court judgment in Harji Engineering works Private Limited (supra) , held that a delay of more than three years in passing the award, especially without any explanation for such an inordinate delay, contravenes the public policy of India based on which an award is liable to be set aside.
The Delhi High Court further in Department of Transport, GNCTD v. Star Bus Services Private Limited4 held that a delay of 1.5 years in passing the award from the date of conclusion of arguments can be set aside on the ground of being contrary to public policy.
It is clear from the above discussion that commercial disputes referred to arbitration must be resolved expeditiously. There should not be a significant gap between the last date of hearing and the publication of the award. If the delay in the publication of the award is not accompanied by a satisfactory explanation, such an award is liable to be set aside under Section 34 of the Arbitration Act on the grounds of being contrary to the public policy of India.
Position After 2015 Amendment- Section 29A and Rohan Builders
Section 29A of the Arbitration Act mandates that an arbitral award must be passed within 12 months from the date of completion of pleadings under Section 23(4) of the Act. This period can be extended by an additional 6 months with the mutual consent of the parties. If the award is not rendered within these 12 months or the 6-month extension, the mandate of the tribunal will terminate, unless the court extends the time period for making the award, either prior to or after the expiration of the specified time period. The phrase “prior or after the expiry of the time period” makes it clear that the time period can be extended even after it has expired.
The Delhi High Court in Wadia Techno-Engineering Services Limited v. Director General of Married Accommodation Project5 , while interpreting the language of Section 29A of the Arbitration Act, held that the phrase “prior or after the expiry of the time period” as specified under subsections (1) and (3) makes it clear that an application seeking the extension of the tribunal’s mandate can be filed even after the expiry of the stipulated period. The Court noted that such an extension could be granted if sufficient cause is shown.
It was contended before the Court that mutual consent of the parties is a prerequisite for filing an application under subsections (4) and (5). However, the Court rejected this argument, holding that importing a consensual requirement from subsection (3) into subsections (4) and (5) would distort the plain language and legislative intent of the provision.
The Court observed that the time period beyond the initial 12 months stipulated under Section 29A can be extended in two ways: firstly, by mutual consent of the parties for an additional six months, and secondly, by the Court, upon the filing of an application. This application can be submitted either before or after the expiry of the initial 12-month period or the mutually extendable six-month period, provided sufficient cause is demonstrated.
The controversy arose when the Calcutta High Court, in Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Limited6, took a contrary position by holding that an application seeking the extension of the mandate of the tribunal could only be filed before the expiry of the initial 12-month period or the further 6-month extendable period as mutually consented to by the parties, and not thereafter.
This controversy was put to an end by the Supreme Court in Rohan Builders (India) Private Limited Versus Berger Paints India Limited7 where the issue was whether the time period under Section 29A(4) of the Arbitration Act could be extended by the court when an application for extension was filed after the expiry of the time period specified in subsections (1) and (3). The Court held that the mandate of the tribunal would only terminate if no application seeking an extension was filed and the time period under Section 29A had expired. However, the Court further observed that there is no bar to filing such an application after the expiration of the time period. Since the arbitration process is based on party autonomy, if the parties wish to continue the tribunal’s mandate after the expiry of the time period, and seek an extension by filing an application, their choice must be respected.
The Calcutta High Court placed significant emphasis on the word “terminate,” noting that the Law Commission had suggested incorporating the word “suspend,” which was not accepted; instead, “terminate” was included in the final text. Based on this reasoning, the High Court concluded that the legislature intended for the mandate of the arbitrator to be terminated if no application was filed within the initial 12-month period or the additional 6-month period mutually agreed upon by the parties. Consequently, the court held that no application could be allowed after these periods.
The Supreme Court rejected this interpretation, emphasizing that the word “terminate” was consciously chosen to signify the conclusion of the arbitrator’s mandate if no application seeking an extension of time was filed. The Court explained that if the word “suspend” had been used, it could have resulted in the indefinite suspension of proceedings in cases where neither party sought an extension, leading to incongruous consequences. Instead, the word “terminate” clarified the legislative intent by providing a definitive conclusion to the tribunal’s mandate when no application was made.
The Supreme Court further observed that “terminate” aligns with the arbitration’s objective of respecting party autonomy. It allows parties to either seek an extension of the tribunal’s mandate—even after the expiry of the stipulated period—or let the mandate lapse by choosing not to file any application.
The Supreme Court held that “accordingly, the termination of the arbitral mandate is conditional upon the non-filing of an extension application and cannot be treated as termination stricto sensu.”
The court further clarified that the mandate of the Arbitral Tribunal will continue until the application seeking an extension is disposed of. During the pendency of the application, the award cannot be pronounced by the tribunal. In case the award is pronounced, the court must still decide the application under subsection 5 and may also invoke subsections 6 and 8, as the case may be.
This is clear from the above discussion that an application seeking extension of the mandate of the tribunal for passing the award can be filed even after the expiry of the time period specified under subsections 1 and 3 of section 29A.
Conclusion
It can be concluded that the Arbitration Act of 1996 initially did not specify a timeline within which an arbitral award had to be passed. Therefore, the court determined on the facts of each case whether inordinate delay coupled with lack of explanation had been caused by the Arbitrator in passing the award. Based on this, an award could be set aside on the ground that such an award is contrary to public policy. Later, Section 29A was added into the Arbitration Act in 2015, which provides a clear timeline within which an arbitral award has to be rendered by the arbitrator. If the award is not passed within the time period stipulated under this section, the mandate of the arbitrator will stand terminated. Lastly, the confusion as to the interpretation of this provision was resolved by the Supreme Court in Rohan Builders (supra).
