S.29A | Time Limit Under Arbitration Act Not A Rigid Mechanism To Invalidate Proceedings: Delhi High Court

The Delhi High Court has observed that the time limit for arbitrators to pass awards cannot be treated as a rigid ground to invalidate arbitral proceedings and dismissed a challenge to an arbitral award on the ground that the arbitrator's mandate had expired.

“The statutory architecture of Section 29A of the A&C Act must therefore be understood not as a rigid mechanism intended to invalidate arbitral proceedings upon a mere lapse of time, but as a supervisory framework designed to ensure timely completion of arbitration while preserving the continuity of the adjudicatory process. The scheme of the provision itself makes this position clear,” the court observed.

Section 29A of the Arbitration law requires an arbitral award to be made within 12 months from the date pleadings are completed, extendable by another 6 months with the parties' consent, after which further extension can be granted only by a court.

A bench comprising Justice Harish Vaidyanathan Shankar held that the arbitral award dated August 27, 2023, passed in disputes between the Union of India and Varindera Constructions Ltd., did not suffer from any patent illegality or jurisdictional error warranting interference under Section 34.

The dispute arose from a works contract dated 03.11.2014 for construction of dwelling units under the Married Accommodation Project at Jodhpur. The project was completed in March 2017, following which the respondent submitted its final bill. Disputes arose inter alia with respect to delayed payment of the final bill, prolonged bank guarantees, delayed and underpayment of RARs, and claims for additional and deviation works, which were referred to arbitration.

The Sole Arbitrator partly allowed the claims and awarded approximately Rs 6 crores in favour of the respondent along with interest at 12% per annum from 18.03.2020 till payment. Aggrieved, the Union of India filed a petition under Section 34 contending that the award was rendered after expiry of the mandate under Section 29A and that the grant of interest was excessive and contrary to law.

Rejecting the challenge, the Court held that the computation of timelines under Section 29A must account for the exclusion of the period between 15.03.2020 and 28.02.2022 in terms of the Supreme Court's suo motu orders on limitation during COVID-19. Upon such exclusion, the award dated 27.08.2023 was within the permissible time.

The Court also noted that the petitioner had raised the objection regarding the expiry of the mandate only in April 2023, nearly one year after the alleged date of expiry, and had continued to participate in the arbitral proceedings, including arguments on merits. Such conduct, the Court held, clearly indicated acquiescence and disentitled the petitioner from raising a belated jurisdictional objection.

The court further reiterated that Section 34 does not confer appellate jurisdiction and that an arbitral award can be set aside only on limited grounds such as patent illegality or conflict with public policy. Mere erroneous application of law or reappreciation of evidence is impermissible.

On the issue of interest, the Court held that the grant of interest at 12% per annum falls within the domain of the arbitral tribunal and cannot be interfered with unless it is shown to be patently illegal, which was not the case here.

Accordingly, the Court dismissed the petition and upheld the arbitral award.

For Petitioner:  Senior Central Government Counsel Vikas Kumar Sharma, 

For Respondent: Advocates Risha Mittal and Md. Adil Alam