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Himachal Pradesh High Court · body

2025 DAILYLAW 3578 (HP)

S. D. Trading Company v. State of H. P.

2025-09-05

Ranjan Sharma

body2025
JUDGMENT : RANJAN SHARMA, J. 1. Instant petition has been filed under Section 29-A (4) (5) and (6) of the Arbitration and Conciliation Act, 1996, seeking the following relief(s):- “It is, therefore, prayed that the present application may kindly be allowed and the time period for completing the Arbitration proceeding and passing the award in the Arbitration proceeding in respect of work C/o Providing LIS Horticulture Land from Changawati Khad to G.P. Kalbog Nagan and Ram Nagar, Tehsil Kotkhai, Distt Shimla may kindly be ordered to be extended for further period of 6 months, in the interest of law and justice.” 2. Instant petition has been filed under Section 29-A (4) (5) and (6) of the Arbitration and Conciliation Act, 1996, seeking extension of the mandate of Learned Sole Arbitrator, for concluding the arbitral proceedings and passing of the Award, in respect of the contract work “C/o Providing LIS Horticulture Land from Changawati Khad to G.P. Kalbog Nagan and Ram Nagar, Tehsil Kotkhai, District Shimla” awarded by Jal Shakti Vibhag, Himachal Pradesh, vide Award letter dated 07.03.2019 for an amount of Rs. 6,78,53,553/-. Clause 25 of the Agreement provided for referring the disputes to a Sole Arbitrator to be appointed by Engineer-in-Chief/Chief Engineer, Jal Shakti Vibhag. 3. Since some dispute arose, therefore, in order to resolve the same through alternative disputes resolution the petitioner issued notice to the State Authorities on 18.01.2022. Since no action was taken, the petitioner approached this Court, by way of Arb. Case No.112 of 2022, under Section 11(6) of the Act and in terms of the judgment dated 28.10.2022 passed by this Court Shri J.S. Mahantan, District & Sessions Judge (Retd.) was appointed as the Sole Arbitrator. Pursuant thereto, Learned Arbitrator commenced the arbitral proceedings on 23.12.2022 after the completion of pleadings, an application was filed for additional documents and for leading further evidence. The testimony of one of the claimants was recorded and claimant’s evidence was closed on 22.04.2025. As many as 17 hearings were conducted and on 22.04.2025 [Annexure P-2, at page 21] Learned Arbitrator directed the parties to seek extension of time, so as to enable the Arbitrator to conclude the proceedings expeditiously. 4. Upon issuance of notice on 29.08.2025, Mr. The testimony of one of the claimants was recorded and claimant’s evidence was closed on 22.04.2025. As many as 17 hearings were conducted and on 22.04.2025 [Annexure P-2, at page 21] Learned Arbitrator directed the parties to seek extension of time, so as to enable the Arbitrator to conclude the proceedings expeditiously. 4. Upon issuance of notice on 29.08.2025, Mr. Pranay Pratap Singh, Learned Additional Advocate General, appeared for the State Authorities- respondents and placed on record a communication dated 05.09.2025 [Taken on Record], conveying no objection to the prayer for extending the time for concluding the arbitral proceedings. 5. Heard, Mr. Santosh Kumar, Counsel appearing on behalf of petitioner and Mr. Pranay Pratap Singh, Learned Additional Advocate General, for the respondents. 6. Perusal of Section 29A (1) mandates the arbitral tribunal to complete the arbitral proceedings within 12 months from the date of completion of pleadings and this time-line was further extendable by six months with consent of parties. Beyond the period of 18 months, the mandate of the Arbitrator was extendable only by this Court, on an application revealing sufficient cause under Section 29A(4) and (5) of the Act. 7. In terms of the judgment in TATA Sons Pvt. Ltd. (Formerly TATA Sons Ltd.) vs. Siva Industries and Holdings Ltd. and others, 2023 (1) SCALE 793 , the mandate of an Arbitrator is liable to be extended by the Court on sufficient cause, being made out, under Section 29A(4) and 29A(5) of the Act, in the following terms:- “24 The provisions of Section 29A, as originally introduced into the statute, mandated that all awards shall be made within a period of twelve months from the date on which the arbitral tribunal enters upon the reference. The explanation clarified when the arbitral tribunal would be deemed to have entered upon the reference, namely, the date on which the arbitrator has received written notice of the appointment. The mandatory nature of the provisions of Section 29A(1) and their application to all arbitrations conducted under the Act, domestic or international commercial, was evident from the use of the word “shall”. The mandatory nature of the provisions of Section 29A(1) and their application to all arbitrations conducted under the Act, domestic or international commercial, was evident from the use of the word “shall”. In terms of Section 29A(4), in case the arbitral award was not rendered within the twelve or eighteen month period as the case may be, the mandate of the arbitrator(s) would stand terminated, unless on an application made by any of the parties, the court extended time on sufficient cause being shown. xxxx. xxx… xxx.. 26. Sub-Section (3) of Section 29A empowers parties, by consent, to extend the period specified in sub- section (1) for making the award by a further period not exceeding six months. Thereafter, if the award is not made within the period which is specified in sub-section (1) or the extended period specified in sub-section (3), the mandate of the arbitrator shall terminate unless the court has extended the period either prior to or after the expiry of the period so specified. In other words, the timeline of twelve months for making the award (in matters other than international commercial arbitration), is qualified by the consensual entrustment to the parties under sub-section (3) to extend the period by six months after which the court is empowered in terms of sub- section (4) to extend the period for making the award. The submission of the second respondent is that the provisions of sub-section (3) and sub- section (4) must also apply to an international commercial arbitration. This would merit close scrutiny. The legislature has not expressly excluded the applicability of sub-sections (3) and (4) of Section 29A to an international commercial arbitration. But, at the same time, it must be noticed that the rationale underlying sub-section (3) is to ensure that despite the stipulation of twelve months for the making of an arbitral award in the domestic context, parties may by consent agree to an extension of time by a further period of six months. Such an extension of six months is envisaged in the case of a domestic arbitration since there is a mandate that the award shall be made within a period of twelve months. A further extension has, however, been entrusted to the court in terms of sub-section (4) of Section 29A. Such an extension of six months is envisaged in the case of a domestic arbitration since there is a mandate that the award shall be made within a period of twelve months. A further extension has, however, been entrusted to the court in terms of sub-section (4) of Section 29A. However, insofar as an international commercial arbitration is concerned, the statutory regime is clear by the substantive part of sub-section 1 of Section 29A in terms of which the timeline of twelve months for making an arbitral award is not applicable to it. In an international commercial arbitration, the legislature has only indicated that the award should be made as expeditiously as possible and that an endeavour may be made to dispose of the matter within a period of twelve months from the completion of pleadings.” (Emphasis supplied) (i) While dealing with a similar situation, the Hon’ble Supreme Court, in Civil Appeal No. 10620 of 2024 [Arising out of Special Leave Petition (Civil) No.23320 of 2023] titled as Rohan Builders (India) Private Limited versus Berger Paints India Limited, decided on 12.09.2024, has reiterated that mandate of an Arbitrator is liable to be extended, in view of the sufficient cause to the satisfaction of this Court, in the following terms:- “15. Rohan Builders (India) Pvt. Ltd. (supra) highlights that an interpretation allowing an extension application post the expiry period would encourage rogue litigants and render the timeline for making the award inconsequential. However, it is apposite to note that under Section 29A(5), the power of the court to extend the time is to be exercised only in cases where there is sufficient cause for such extension. Such extension is not granted mechanically on filing of the application. The judicial discretion of the court in terms of the enactment acts as a deterrent against any party abusing the process of law or espousing a frivolous or vexatious application. Further, the court can impose terms and conditions while granting an extension. Delay, even on the part of the arbitral tribunal, is not countenanced. The first proviso to Section 29A(4) permits a fee reduction of up to five percent for each month of delay attributable to the arbitral tribunal. 16. Lastly, Section 29A(6) does not support the narrow interpretation of the expression “terminate”. Delay, even on the part of the arbitral tribunal, is not countenanced. The first proviso to Section 29A(4) permits a fee reduction of up to five percent for each month of delay attributable to the arbitral tribunal. 16. Lastly, Section 29A(6) does not support the narrow interpretation of the expression “terminate”. It states that the court – while deciding an extension application under Section 29A(4) – may substitute one or all the arbitrators. Section 29A(7) states that if a new arbitrator(s) is appointed, the reconstituted arbitral tribunal shall be deemed to be in continuation of the previously appointed arbitral tribunal. This obliterates the need to file a fresh application under Section 11 of the A & C Act for the appointment of an arbitrator. In the event of substitution of arbitrator(s), the arbitral proceedings will commence from the stage already reached. Evidence or material already on record is deemed to be received by the newly constituted tribunal. The aforesaid deeming provisions underscore the legislative intent to effectuate efficiency and expediency in the arbitral process. This intent is also demonstrated in Sections 29A(8) and 29A(9). The court in terms of Section 29A(8) has the power to impose actual or exemplary costs upon the parties. Lastly, Section 29A(9) stipulates that an application for extension under sub- section (5) must be disposed of expeditiously, with the endeavour of doing so within sixty days from the date of filing. 17. As per the second proviso to Section 29A(4), the mandate of the arbitral tribunal continues where an application under sub-section (5) is pending. However, an application for extension of period of the arbitral tribunal is to be decided by the court in terms of sub-section (5), and sub- sections (6) to (8) may be invoked. The power to extend time period for making of the award vests with the court, and not with the arbitral tribunal. Therefore, the arbitral tribunal may not pronounce the award till an application under Section 29A(5) of the A & C Act is sub-judice before the court. The power to extend time period for making of the award vests with the court, and not with the arbitral tribunal. Therefore, the arbitral tribunal may not pronounce the award till an application under Section 29A(5) of the A & C Act is sub-judice before the court. In a given case, where an award is pronounced during the pendency of an application for extension of period of the arbitral tribunal, the court must still decide the application under sub-section (5), and may even, where an award has been pronounced, invoke, when required and justified, sub-sections (6) to (8), or the first and third proviso to Section 29A(4) of the A & C Act. 18. While interpreting a statute, we must strive to give meaningful life to an enactment or rule and avoid cadaveric consequences that result in unworkable or impracticable scenarios. An interpretation which produces an unreasonable result is not to be imputed to a statute if there is some other equally possible construction which is acceptable, practical and pragmatic.” 8. Perusal of the Statute prescribes that arbitral proceedings are to be completed within 12 months and thereafter, with the consent of parties within 6 months of extendable period. Accordingly, the proceedings were to be completed within 18 months after completion of pleadings. The Arbitrator passed an order deferring the arbitral proceedings till the same were revived or extension was sought for by either of the parties in accordance with law as per the statute. Perusal of impugned order 22.04.2025 [Annexure P-2] suggests that even after expiry of 18 months period, arbitral proceedings were delayed primarily at the instance of respondent and due to procedural delays for which the parties cannot be made to suffer. The parties have not objected to the continuance of arbitral proceedings before the Arbitrator and have also not objected to the grant of extension in arbitral proceedings even before this Court. Be that as it may, the intent and object of arbitral proceedings cannot be defeated by mere technicalities, when, the parties have participated in arbitral proceedings, without any demur or objection even after a lapse of 18 months period. Moreover, the object and intent of the parties, opting for settlement of disputes by alternative resolution in terms of the enactment [i.e. Arbitration and Conciliation Act, 1996] has to be taken to the logical end. Moreover, the object and intent of the parties, opting for settlement of disputes by alternative resolution in terms of the enactment [i.e. Arbitration and Conciliation Act, 1996] has to be taken to the logical end. The proceedings cannot be scuttled so as to cause prejudice to either of the parties to arbitral proceedings. Moreover, parties cannot be put to disadvantageous position, due to non-conclusion of arbitral proceedings since 23.12.2022 till the passing of Impugned Order on 22.04.2025 [Annexure P-2]. In these circumstances, the sufficient cause for seeking enlargement of time in concluding the arbitral proceedings is made out, in facts of instant case. 9. Parties are ad idem that based on the mandate of the Hon’ble Supreme Court in Tata Sons Pvt. Ltd. and Rohan Builders (India) Private Limited (supra) the matter is squarely covered by the judgment of this Court in Arbitration Case No. 811 of 2024, titled as Hari Ram vs. Collector Land Acquisition National Highways Authority of India & Others, decided on 20.06.2025. Likewise, Learned Counsel for the petitioner places reliance on the judgment in Arbitration Case No. 22 of 2025, titled as Ghanshyam Mahajan vs. Land Acquisition Officer-cum-Competent Authority & Ors., decided on 07.03.2025, whereby, the mandate of arbitrator was extended by this Court with directions to conclude the arbitral proceedings within a reasonable time. 10. In view of the above discussion and the reasons recorded hereinabove, the present petition is allowed, in the following terms: (i) Impugned order dated 22.04.2025 [Annexure P-2, Colly at page 21] passed by Learned Arbitrator in Case No.122/2022, is quashed and set aside. (ii) Learned Arbitrator is mandated to complete the arbitral proceedings and to pass the Award, in accordance with law, within six months from the receipt of copy of this judgment; (iii) Costs made easy for respective parties. In aforesaid terms, the instant petition and all pending miscellaneous application(s), if any, shall also, stand disposed of, accordingly.