NLA Arbitration Newsletter
Key rulings from the Supreme Court and Delhi, Karnataka, Calcutta, and Bombay High Courts on Section 29A mandate extensions, the limits of Section 9 petitions, costs for dilatory tactics, and the permissible scope of judicial scrutiny at the referral stage.
Delhi High Court — Section 29A does not bar extension applications filed after the arbitrator’s mandate has expired
The Delhi High Court held that Section 29A of the Arbitration and Conciliation Act, 1996, does not preclude consideration of applications for extension of the Arbitrator’s mandate filed after the expiration of that mandate. The Court emphasised that the legislative intent behind Section 29A is to permit extensions even where the specified period has already expired, and that no specific outer boundary is set by the provision curtailing the Court’s discretion.
The High Court distinguished its ruling from the Calcutta High Court’s decision in Rohan Builders (India) (P) Ltd. v. Berger Paints India Ltd., 2023 SCC OnLine Cal 2645, which had held that a mandate terminates automatically upon expiry and cannot be revived by a post-expiry extension petition. The Delhi High Court declined to follow this restrictive interpretation.
The Court noted that the arbitration proceedings had been ongoing for approximately two and a half years, with the delay attributed to the Petitioner. Cautioning against any further delay, the High Court encouraged the Arbitrator to expedite the proceedings and extended the mandate of the Arbitral Tribunal until 31 December 2024.
Key Takeaway
Section 29A does not impose a hard bar on extension petitions filed after the mandate has lapsed. Courts retain the discretion to extend the Arbitral Tribunal’s mandate even where the application is made post-expiry, provided sufficient cause is shown. Parties should nonetheless file extension petitions promptly to avoid disputes over the Tribunal’s continuing authority.
Delhi High Court — Costs of ₹50,000 imposed for tactical challenges to arbitrator’s mandate designed to create a deadlock
The Delhi High Court imposed costs of ₹50,000 on a party for unnecessarily challenging and questioning the mandate of the Arbitrator. The Bench found that the Respondent’s conduct was intended to create a stalemate and that repeated court interventions in arbitral proceedings must be avoided. Parties cannot coerce arbitrators into recusal or withdrawal through obstructive conduct.
The Court observed that the Arbitrator’s dissatisfaction was evident from numerous orders and communications arising out of the Respondent’s persistent challenges. The Respondent’s actions had caused the originally appointed Arbitrator to withdraw and then continued with challenges against the newly appointed Arbitrator (appointed on 8 July 2022). The Arbitrator, on 16 September 2023, had noted the Respondent’s agreement to extend the mandate by six months until 7 October 2023; nonetheless, the Respondent’s subsequent email challenging the Arbitrator’s authority was therefore held to be unjustified.
The High Court ruled that such attempts to sabotage and disrupt arbitration procedures should be met with severe consequences. Finding that the current Arbitrator had already made substantial progress in the case, the Court declined to appoint a replacement and instead directed the same Arbitrator to resume the proceedings from where she had left off. The Arbitrator’s mandate was extended until 31 December 2024, and costs of ₹50,000 were imposed on the Respondent.
Key Takeaway
Tactical challenges to an arbitrator’s mandate designed to delay proceedings or force a recusal constitute an abuse of process and will attract costs. Courts will not countenance repeated, unjustified interventions that disrupt arbitral proceedings, and an arbitrator who has made substantial progress in a matter should not be displaced merely because a party applies pressure for withdrawal.
Delhi High Court — Section 9 petition cannot be used to challenge procedural orders of the Arbitrator; costs imposed for bypassing Section 37
The Delhi High Court held that Section 9 of the Arbitration and Conciliation Act, 1996, does not permit objections to procedural orders issued by an Arbitrator. Section 9 is designed for seeking interim measures of protection, not for challenging the Arbitrator’s procedural decisions. The Court ruled that the Petitioner’s attempt to challenge a procedural order through a Section 9 petition was in reality an attempt to bypass the appellate process under Section 37, which provides an exhaustive list of appealable orders that does not include procedural orders.
The Petitioner contended that it had been unfairly denied the right to file an updated statement of defence and that its amended statement and bank statements, submitted later, had not been received by the Arbitrator due to a technical issue. The Respondent countered that the Petitioner had been inconsistent in attending arbitration proceedings and questioned whether the amended statement had actually been sent. The High Court examined an email provided by the Petitioner and found discrepancies between the submitted email and the actual reply sent, indicating a lack of sufficient diligence on the Petitioner’s part before the Arbitrator.
The High Court cited the Supreme Court’s decision in Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706, which established that appeals are limited to specific orders and courts cannot interfere in procedural matters through alternative petitions. The Court ordered the Petitioner to pay costs of ₹10,000.
Key Takeaway
Section 9 of the Arbitration Act is limited to seeking interim measures of protection and cannot be repurposed as a vehicle to challenge the Arbitrator’s procedural orders. The exhaustive list of appealable orders in Section 37 does not include procedural rulings, and attempts to circumvent that regime through Section 9 petitions will be dismissed with costs.
Supreme Court — Power to extend time under Section 29A(4) vests in the principal Civil Court of original jurisdiction, not a High Court lacking ordinary original civil jurisdiction
The Supreme Court held that the power under Section 29A(4) of the Arbitration and Conciliation Act, 1996, to extend the time limit for passing an Arbitral Award vests in the “Court” as defined in Section 2(1)(e)—i.e., the principal Civil Court of original jurisdiction in the district—or the High Court only where the High Court exercises ordinary original civil jurisdiction. A High Court that does not have ordinary original civil jurisdiction is not empowered to grant such an extension.
The case arose from a decision of the Meghalaya High Court, which had declined to extend the time limit for passing an Arbitral Award on the ground that it lacked original civil jurisdiction. The Supreme Court found no merit in the appeal and upheld the High Court’s reasoning, confirming that where the High Court does not possess ordinary original civil jurisdiction, the application under Section 29A(4) must be filed before the principal Civil Court of original jurisdiction in the relevant district.
Key Takeaway
Applications for extension of the Arbitral Tribunal’s mandate under Section 29A(4) must be filed before the correct court: the principal Civil Court of original jurisdiction in the district (or the High Court, only if it exercises ordinary original civil jurisdiction). Filing before a High Court that lacks such jurisdiction will result in rejection and potential loss of time—a critical consideration given the strict timelines under Section 29A.
Delhi High Court — Non-disclosure of a Section 9 petition in a separate matter does not constitute “egregious fraud” disentitling a party from relief
The Delhi High Court held that the non-disclosure of a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, in an earlier, separate matter does not amount to egregious fraud, and cannot disentitle a party from pursuing its current Section 9 petition.
The Appellant had filed a Section 9 petition before the Commercial Court seeking interim measures of protection. The Commercial Court dismissed the petition on the ground that the Appellant had approached the Court with “unclean hands,” because the Appellant had earlier filed a similar petition before the District Judge, Commercial Court, Saket, and subsequently withdrew it on 1 May 2024 without disclosing this in the current petition. The Appellant’s explanation was that the earlier petition had been filed in the wrong court by mistake.
The High Court observed that the Appellant’s explanation for withdrawal on grounds of jurisdictional misunderstanding was not entirely convincing, since Section 2(1)(e) of the Arbitration Act and the seat of arbitration (New Delhi) together determine the courts with jurisdiction under Section 9. Nonetheless, the Court held that the non-disclosure of a withdrawn petition in a separate matter did not rise to the level of egregious fraud sufficient to bar pursuit of the Section 9 petition. The Commercial Court had failed to examine the substance of the case and dismissed the petition without adequate reasons. The High Court accordingly set aside the Commercial Court’s order and remanded the petition for fresh consideration on the merits.
Key Takeaway
The “clean hands” doctrine in arbitration proceedings requires genuine fraud or misrepresentation that goes to the heart of the relief sought. The mere non-disclosure of a previously withdrawn petition filed in a separate, parallel matter does not constitute egregious fraud. Courts must examine the substantive merits of a Section 9 petition rather than dismissing it on procedural technicalities without engaging with the underlying claims.
Delhi High Court — Scope of inquiry at Section 9 stage is limited to interim relief; contract interpretation and factual disputes belong to the Arbitral Tribunal
The Delhi High Court ruled that matters of fact or law should not be conclusively decided at the Section 9 stage, as they fall within the exclusive jurisdiction of the Arbitral Tribunal. The Arbitral Tribunal alone has the authority to interpret the terms of a contract or MoU and to determine its scope. The standard applicable to Section 9 applications mirrors that under Order XXXIX Rules 1 and 2 of the Civil Procedure Code.
In the underlying dispute, the Petitioner sought interim relief in relation to an unsigned MoU, claiming assured returns on a property investment. The Respondents argued that the MoU had not been signed or finalised. The High Court observed that a sum of ₹20,00,000 had been credited to the Petitioner’s account, followed by a further ₹10,00,000, though the Petitioner continued to seek a full refund of her investment. Communications between the parties indicated that the Petitioner’s focus had been on monetary returns rather than on the completion of property transactions.
The Court found that the Respondents had already sold two of the units and had entered into an agreement to sell the third, which undermined any claim of clear right, title, or interest in the units by the Petitioner. Given that the principal amount had already been returned, there was no balance of convenience in the Petitioner’s favour, and no significant loss or injury was established. As arbitration had already been commenced by the Petitioner to address these grievances, no interim relief under Section 9 was warranted.
Key Takeaway
A Section 9 petition is a vehicle for temporary protection, not a forum for conclusive determination of factual or legal disputes. The court at the Section 9 stage applies the three-pronged injunction test (prima facie case, balance of convenience, irreparable harm) and must leave questions of contract interpretation, scope, and merits to the Arbitral Tribunal. Where the principal sum has been restored and arbitration is already underway, claims for further interim relief will face a high threshold.
Delhi High Court — Court is fully empowered to extend Arbitral Tribunal’s mandate under Section 29A(4) even after the mandate has expired
The Delhi High Court held that it is fully empowered under Section 29A(4) of the Arbitration and Conciliation Act, 1996, to extend the mandate of an Arbitral Tribunal even after the expiry of the mandated period, provided sufficient cause is shown. The Court expressly declined to follow the Calcutta High Court’s restrictive ruling in Rohan Builders (India) (P) Ltd. v. Berger Paints India Ltd., 2023 SCC OnLine Cal 2645, which had held that a Tribunal’s mandate terminates automatically on expiry and that there is no power of “revival” or “renewal” post-expiry.
The High Court noted that High Courts in Jammu & Kashmir and Kerala had taken a more liberal view. In H.P. Singh v. G.M. Northern Railways, 2023 SCC OnLine J&K 1255, the Jammu & Kashmir High Court held that Courts could extend the Tribunal’s term beyond the originally specified period. Similarly, in Hiran Valiiyakkil Lal v. Vineeth M.V., 2023 SCC OnLine Ker 5151, the Kerala High Court granted extensions requested either before or after the specified time period. The Bombay High Court in Nikhil H. Malkan v. Standard Chartered Investment and Loans (India) Ltd. adopted the Delhi High Court’s own liberal construction of Section 29A(4).
In the present case, the mandate of the Arbitral Tribunal had expired on 4 February 2024, and the extension petition was filed on 23 February 2024. Proceedings were still at the cross-examination stage. The Court held that Section 29A(4), by using the language “before or after the specified period has ended,” expressly empowers the Court to extend the mandate regardless of whether the period has already lapsed, and granted the extension accordingly.
Key Takeaway
Section 29A(4) of the Arbitration Act expressly contemplates extension applications filed “before or after” the specified period, and the majority of High Courts have interpreted this to mean that Courts retain full power to extend the mandate even after expiry. Parties and practitioners should nevertheless seek extensions proactively before expiry to avoid uncertainty, particularly given the conflicting position of the Calcutta High Court, which the Supreme Court has yet to resolve definitively.
© Nirka Law Advisory. All rights reserved. For queries, connect with us.
