Section 29A Revisited: A Critique of Velusamy v. Indhera and the Need for Reform

Khushbu Turki*

This article critiques the Supreme Court’s decision in C. Velusamy v. K Indhera, arguing that permitting extensions of arbitral mandates after an award has been rendered may conflict with the legislative intent underlying Section 29A of the Arbitration and Conciliation Act, 1996. It identifies unresolved tensions between post-award extensions, the limitation period for challenging awards under Section 34, and the enforceability of awards rendered without a valid mandate. It proposes prescribing a statutory limitation period for extension applications and argues that legislative amendment is necessary to prevent judicial overreach and preserve the efficacy of arbitral timelines.

Introduction

Section 29A of the Arbitration and Conciliation Act, 1996 (“1996 Act”) provides a broad timeline for completion of the arbitral proceedings. The very reason for the incorporation of this section with retrospective effect vide the Arbitration and Conciliation (Amendment) Act, 2015 was to ensure the completion of arbitral proceedings without unnecessary delay. Section 29A(4) stipulates that if an award is not made within the specified time period, the mandate of the arbitral tribunal shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the same. Over the years, Courts have interpreted the authority to grant such an extension in various ways. However, the Supreme Court’s judgment in C. Velusamy v. K Indhera (“Velusamy”), which expressly allows for an extension of the mandate of the arbitral tribunal even after an award has been rendered, raises several intriguing questions. In this regard, this article analyses whether Section 29A permits extension of an arbitral tribunal’s mandate after an award has been rendered without a valid mandate, and whether such an extension aligns with legislative intent; and how post-award extension applications interact with the limitation period for challenging awards under Section 34, including the enforceability of the award and the losing party’s right to challenge it while an extension application is pending.

Extension of Arbitral Timelines: Interpretation over the Years

Section 29A provides that an arbitral award shall be made within a period of twelve months from the date of completion of pleadings (“time period”). The parties to the contract may extend this time period by six months. It is further specified that the mandate of the arbitral tribunal shall be terminated unless the Court has, either prior to or after the expiry of the time period, extended the same. In Tata Sons Private Limited v. Siva Industries and Holdings Limited and Ors., the Supreme Court emphasized the mandatory nature of the provisions of Section 29A, and the relevance of a termination of the mandate of the tribunal unless the mandate is extended by the Court.

While various High Courts had adopted divergent views regarding the possibility of an extension of the time period post the expiry of the same, in Rohan Builders (India) (P) Ltd. v. Berger Paints India Ltd. (“Rohan Builders”), the Supreme Court clarified that since the 1996 Act itself provides that the Court may extend this time period either prior to or after the expiry of the period so specified, the applications for extension of time may very well be filed after the expiry of the said time period. The Court’s reasoning was premised on the fact that in the absence of a specific limitation period mentioned in Section 29A for filing an extension application, reading limitation into the 1996 Act would amount to a modification of the 1996 Act. In view of the above, it is also important to note that the Supreme Court’s observations in Rohan Builders were confined to an interpretation of the scope of granting an extension prior to or post the expiry of the time period when the arbitral proceedings were continuing, and not after the conclusion of the proceedings and rendering of an award.

In this regard, in Powergrid Corporation of India Ltd. v. SPML Infra Ltd., the Delhi High Court had observed that the question of extending the mandate of the tribunal arises only in situations wherein the arbitral proceedings are pending at the time of the filing of the extension application i.e., before the rendering of the award. Similarly, in National Skill Development Corpn. v. Best First Step Education (P) Ltd., the Delhi High Court expressly noted that while extension applications filed prior to the rendering of the award would be maintainable even if the award is delivered during the pendency of such an application, an extension application filed post the delivery of the award when proceedings for setting aside may have also been initiated, shall not be maintainable. This reasoning stemmed from the principle that there is no basis for the parties to choose whether an extension application should be filed after becoming aware of the fate of their proceedings.

Interestingly, in Velusamy, the Supreme Court adopted an extremely liberal interpretation of Section 29A of the 1996 Act to hold that an application under Section 29A may be entertained even after an award has been rendered post the termination of the mandate of the arbitral tribunal. The Court noted that the power and jurisdiction of the Court shall not be impaired by the “indiscretion of the arbitrator” in rendering an award without a mandate, particularly when such an award “does not partake the character of a decree and is unenforceable under Section 36” of the 1996 Act. The Court highlighted its authority to intervene and ensure that the resolution of the dispute between the parties to an arbitration is taken to its logical end, and the award so rendered without a mandate is regularized.

Reassessing the Velusamy Framework

While it is apparent that the essence of the judgment is to safeguard the fluidity of the arbitral timeline and facilitate a satisfactory conclusion of the arbitration, the observations made in the judgment also have the potential to adversely affect the possibility of completion of the arbitral proceedings in the timeline mandated by the 1996 Act.

In this regard, it is crucial to note that Section 28 of the Arbitration and Conciliation Act, 1940 (“1940 Act”) provided for an extension of the time period as follows: “…(1) The Court may, if thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time the time for making the award.” It was only to ensure that the arbitral proceedings are completed without delay, and within a specified timeline that Section 29A was incorporated in the 1996 Act and states, “…(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period…” The difference in the language incorporated in Section 29A of the 1996 Act seems to suggest that while the arbitral mandate could be extended even after the award had been made under the 1940 Act, the legislature specifically refrained from allowing for an extension post the rendering of an award under the 1996 Act. A possible reason for this could be that since an award rendered post the expiry of the time period would clearly be unenforceable (as recognised in the Velusamy), the legislature did not intend to provide for a regularization of such an award rendered post the expiry of such time period.

Interestingly, while the Supreme Court’s reasoning in Rohan Builders was hinged on the fact that Courts should refrain from reading into what has not been provided in a statute, the Court in Velusamy appears to have done the same thing. If the regularization of such unenforceable awards had been intended, Section 29A would have provided accordingly. However, by reading this possibility of an extension of the time period after the rendering of an unenforceable award into the intention of the legislature, the Supreme Court appears to be venturing into modifying the statute in a manner against which the Court itself had cautioned in Rohan Builders.

While the Velusamy judgment answers the question of whether an extension of the arbitral mandate may be granted by the Courts after the rendering of the award post the expiry of the time period, the judgment raises another question regarding setting aside proceedings which has not been answered by the Court. Section 34 of the 1996 Act mandates that an application for setting aside of the award may be made 3 months from the date of receipt of the award, or within a further period of 30 days, but not thereafter. Since an award rendered after the expiry of the time period is unenforceable per se, it is unclear as to how such an award is to be treated before an application seeking an extension of time is made before the Court.

In Velusamy, the arbitral award had been rendered in June 2024. The extension application had been filed before the court five months after the award had been rendered. The Section 34 petition filed challenging the award had been allowed by the Delhi High Court, which had also refused to provide an extension that had been filed post the rendering of the award. While concluding, the Supreme Court simply directed the High Court to consider the extension application afresh in light of the principles enunciated in the judgment. However, the Court has not considered the issues that may arise for the party wishing to challenge the award if an extension application post the rendering of the award is filed more than four months after the date of receipt of the award.

Given that the award rendered post the expiry of the time period is unenforceable, the losing party has no reason to immediately challenge the award. In these circumstances, if an application for extension of the arbitral mandate is filed later, the losing party effectively loses out on its right to challenge the award. There may be two possible solutions to this situation. Firstly, the losing party is mandated to file for an extension immediately after the rendering of an unenforceable award, simply to avoid the possibility of an extension granted sometime in the future. Secondly, any applications for an extension of the arbitral mandate filed after the rendering of an unenforceable award are not allowed if they are filed after the expiry of four months from the date of receipt of the award.

However, if the winning party files for an extension after the expiry of four months and succeeds in establishing sufficient cause, the Courts would be bound to grant such extension, even if doing so forecloses the right of the losing party to challenge the award. This must also be seen in light of the fact that Courts have historically adopted a liberal approach when dealing with extension applications. Even orders directing substitution of arbitrators are usually given only when specifically prayed for by one of the parties to the arbitration.

Another question that arises here is in relation to the enforceability of the award and the possibility of a challenge while an application for extension is pending before the court. Section 29A(4) provides that the mandate of the arbitral tribunal is deemed to continue till the disposal of an extension application. If the application for extension is filed within a reasonable time after the expiry of the mandate of the tribunal, it can be understood as to how the mandate of the tribunal continues during the pendency of such an application. However, since the arbitral tribunal becomes functus officio post rendering the award, it is unclear whether such arbitral mandate shall also be deemed to continue during the pendency of an extension application, and whether the arbitral award rendered post the expiry of the time period shall also be regularised during the pendency of such an application, and may be challenged during such time.

Conclusion

Over the years, the judiciary has liberally exercised its discretion in extending the time period under Section 29A(4) of the 1996 Act. While the leniency may be justified keeping in mind the principle of minimal interference with arbitral proceedings, the same has also tended to result in less regard for the timelines stipulated under the 1996 Act, reducing them to aspirational standards rather than stipulations that must necessarily be adhered to.

While Velusamy aims to ensure that considering the time and costs expended in the arbitral process, the same is not rendered fruitless because of the belated filing of an extension application, it is also necessary to consider the fact that allowing parties to file extension applications at any point of time itself runs contrary to the intent behind the incorporation of Section 29A in the 1996 Act. Where parties to an arbitration are bound to challenge the award within a certain time period, prescribing a limitation period for filing of extension applications appears to be the most pragmatic solution to the dilemma regarding the appropriate time period for filing of such applications, when seen in context of the limitation period for challenging awards.

As mentioned hereinabove, the difference in the provisions for the extension of the arbitral mandate in the 1940 Act and the 1996 Act makes it apparent that the legislature perhaps never intended to regularize unenforceable awards, which is why Section 29A(4) only provides for an extension of the arbitral mandate “if the award is not made within the period specified” and not for a blanket extension regardless of whether the award has been rendered or not. Just like limitation cannot be read into the 1996 Act (as stipulated in Rohan Builders), reading the possibility of extending the time period post the rendering of the award into the 1996 Act when the language suggests otherwise, appears to be a form of judicial legislation. However, since the ambiguity is giving rise to considerable debate, an amendment to the 1996 Act expressly providing for the timeline for an extension of the time period is the need of the hour.

*The author is an Associate at Shardul Amarchand Mangaldas & Co and specialises in Dispute Resolution.