Arbitrator's Mandate Not Automatically Terminated By Expiry Of Indicative Timeline: Delhi High Court
On 30 September, the Delhi High Court held that an arbitrator's mandate does not end merely because an indicative time period fixed by the Court for completing proceedings has expired, unless the direction imposed a mandatory deadline.
A Division Bench comprising Justices Avneesh Jhingan and Shail Jain dismissed M.K. Construction's appeal against an arbitral award in its residential construction dispute with Maj. Gen. Hoshiar Singh (Retd). It observed:
“The direction of this Court did not prescribe an inflexible or peremptory time limit for concluding the arbitral proceedings, the expiry of which by itself would terminate the mandate of the arbitrator.”
The dispute arose from an 8 April 2008 agreement under which M.K. Construction undertook to construct Hoshiar Singh's residential house at Greater Noida, Uttar Pradesh. The work was divided into two phases and was to be completed within 11 months.
Work commenced on 18 April 2008 and both phases were completed on 10 October 2008. A completion certificate was issued on 22 May 2009. Against M.K. Construction's final bill of Rs. 64.90 lakh, Hoshiar Singh paid Rs. 56.31 lakh.
On 23 July 2009, Hoshiar Singh issued a notice alleging defects, deficiencies and delay and subsequently invoked arbitration. The High Court appointed a sole arbitrator on 23 February 2012. Hoshiar Singh claimed Rs. 16.55 lakh, while M.K. Construction raised a counterclaim of Rs. 14.59 lakh.
The arbitrator's first award, passed on 6 February 2014, rejected Hoshiar Singh's claims and allowed M.K. Construction's counterclaim to the extent of Rs. 8.59 lakh with 9% interest, besides professional charges and arbitration costs.
On 5 October 2016, however, the High Court set aside the award and remitted the dispute for fresh adjudication, directing the arbitrator to conclude the proceedings within an indicative period of six months. It also directed inspection and measurement of the property by a government-approved architect appointed as Local Commissioner. Following the Local Commissioner's report dated 9 March 2017, the arbitrator passed a fresh award on 6 September 2018.
After adjusting M.K. Construction's counterclaims, the arbitrator held that Rs. 3.50 lakh with interest up to August 2018 was recoverable by Hoshiar Singh. Amounts were also awarded towards mental agony, architect's fee, arbitration expenses and legal expenses.
M.K. Construction challenged the award under Section 34 of the Arbitration and Conciliation Act. The Commercial Court dismissed the challenge on 7 December 2022, while reducing future interest from 18% to 10% simple interest. It then filed the present appeal under Section 37.
It contended that the arbitrator's mandate had expired because the fresh award was not passed within six months of the Local Commissioner's report. Hoshiar Singh argued that the proceedings had commenced before the 2015 amendment to the Arbitration Act and that Section 29A was therefore inapplicable.
The Court rejected M.K. Construction's contention, holding that the earlier direction had not imposed a mandatory deadline whose expiry would terminate the arbitrator's authority. It also noted that the objection had not been raised in the Section 34 proceedings. It held:
“Section 29A of the Act stipulating the time period of the mandate of the arbitrator was introduced by the 2015 Amendment Act and is not applicable in the present case as the arbitrator was appointed in the year 2012. The earlier award dated 06.02.2014 was set aside by this Court and the matter was remitted to the arbitrator for fresh adjudication meaning thereby it was the continuation of the original proceedings.”
Thus, the Bench held that the remand for fresh adjudication continued the original arbitration proceedings and did not result in a fresh arbitration to which Section 29A would apply. It also rejected M.K. Construction's other challenges, reiterating the limited scope of interference with arbitral awards in a Section 37 appeal.
Accordingly, the High Court dismissed the appeal along with the pending application.
Appearances for appellant (M. K. Construction): Advocates L.B. Rai, Kartk Rai, Satvik Rai and Vinesh Tyagi.
Appearances for respondents (Maj. Gen. Hoshiar Singh (Retd.) and Anr.): Advocates Arunav Patnaik, Pragya, Shailaditya Gopal Krishna and Viay Misra.