In a recent ruling by the Delhi High Court, the case of M/s. Power Mech Projects Ltd. v. Respondent delves into the extension of the Arbitral Tribunal’s mandate. The Court’s decision holds significance for the ongoing arbitration proceedings, shedding light on the pivotal role of Section 29A of the Arbitration and Conciliation Act, 1996.
Facts
- Notice was issued in the present petition on 4 March, 2024.
- The Respondent was directed to reply to the notice.
- The Works Contract dated 12 May, 2016 was titled ‘Subcontract for Boiler Works of Unit 1,2,3 of BARH STPP-1 (3×660 MW) Balance Work of Main Plant Package (SG &AUX.)’
- The scope of the Works Contract included erection, testing & commissioning of balance work of main plant package.
- The mandate of the Works Contract was stipulated to be February, 2024.
- The present petition was filed by M/s. Power Mech Projects Ltd. under Sections 29A(4) & (5) of the Arbitration and Conciliation Act, 1996.
- The petition seeks extension of the mandate of the three-member Arbitral Tribunal.
Arguments
- The ld. Counsel for the Respondent argues that the mandate of the Arbitral Tribunal itself expired on 4 February, 2024.
- The Arbitral Tribunal noted that the Petitioner was not diligent in concluding evidence leading to repeated delays in the arbitral proceedings.
- The extension of the mandate of the Arbitral Tribunal is being questioned in the Supreme Court in specific cases.
- The present petition is seen as a revival of the mandate of the Arbitral Tribunal rather than an extension.
Analysis
- Several court decisions have established the possibility of extending the mandate of an arbitrator either before or after the specified period has expired.
- The decisions of various courts including Bombay High Court, Delhi High Court, and Calcutta High Court have upheld the extension of an arbitrator’s mandate.
- The Court in Wadia Techno-Engineering Services Limited v. Director General of Married Accommodation Project emphasized the importance of upholding the purpose of Section 29A of the Arbitration and Conciliation Act, 1996.
- There is a disagreement with the views expressed in certain judgments by the Calcutta High Court and Patna High Court, with the Kerala High Court siding with the Delhi High Court’s decision.
- The Bombay High Court in the case of Shapoorji Pallonji Company Pvt. Ltd. v. Elena Power and Infrastructure Limited clarified the sequence in which Sections 29A(3) and 29A(4) of the Act can be utilized.
- The use of ‘terminate’ in Section 29A(5) of the Act has been highlighted as significant in the context of arbitrator mandates.
- A Supreme Court challenge was seen in SLP No. 23320/2023 between Rohan Builders (India) Pvt. Ltd. and Berger Paints India Ltd. regarding the interpretation of the Act.
- The validity of extending an arbitrator’s mandate before or after the expiry of the specified period, with sufficient cause and conditions, has been reiterated in various judgments.
- Section 29A(4) of the 1996 Act allows for extension of the Arbitral Tribunal mandate in specific situations.
- The Court can extend the mandate when the mandate is not extended after 12 months or when extended for a further 6 months by consent of parties.
- The purpose is to prevent indefinite delays in arbitrations.
- If the verdict in Rohan Builders case is overturned by the Supreme Court, the petitioner may have an alternative recourse under section 29A.
- The arbitration has been on hold since 29th August, 2023, indicating the need for a proactive approach.
- Significant delays can be addressed by the Court extending the Arbitrator’s mandate only when sufficient grounds are presented.
- Parties must file a petition under Section 29A(4) of the Act before the mandate expires as no extension post-expiry is allowed.
- The respondent’s actions to prevent resuming arbitration show an attempt to frustrate the process and delay settlement.
- The Court must ensure a remedy for the claimant, and Section 29A(2) does not apply in this case.
- A proactive stance to resume arbitration without further delay is necessary within legal bounds.
- Recourse can be sought through section 15 for substitution of the arbitrator on specified grounds including inability to perform.
- The Court should not entertain delay tactics and must ensure prompt resolution within legal boundaries.
- The Court has the power to extend the mandate of the Arbitral Tribunal under certain circumstances.
- Parties may sometimes be unable to give consent for extension of the mandate, such as when one party is under liquidation or in insolvency proceedings.
- The Arbitral Tribunal’s decision to continue proceedings against the party in liquidation or insolvency has not been challenged.
Decision
- The proceedings against Respondent No.2/RPL were ongoing when the mandate expired, so lack of consent from Liquidator or IRP/RP does not nullify the proceedings.
- The decision of the Calcutta High Court in Rohan Builders case cannot be followed in this matter.
- The mandate of the Arbitral Tribunal expired on 4th February, 2024, but the petition was filed on 23rd February, 2024, with the matter at the cross-examination stage.
- Section 29A(4) of the 1996 Act allows for extension of the mandate even after expiry, empowering the Court to do so.
- The mandate of the Arbitral Tribunal is thus extended till 31st December, 2024.
- All pending applications are disposed of.
Case Title: M/S POWER MECH PROJECTS LTD Vs. M/S DOOSAN POWER SYSTEMS INDIA PVT. LTD. (2024:DHC:3769)
Case Number: O.M.P. (MISC.)-6/2024
