An Analysis of Implied Consent in Arbitration Proceedings Continuing Beyond 12 Months: A Brief Examination in Light of the Madras High Court’s Recent 2024 Judgment.

As we know, Section 29A of the Arbitration and Conciliation Act sets specific time frames for the completion of arbitration proceedings. (Before the 2019 amendment, the term “reference” was used to determine the start date.) Simply put, arbitration proceedings must be concluded within 12 months from either the completion of pleadings or the date of reference (for cases before the amendment). This period can be extended by up to six months through mutual agreement between the parties. Failure to comply with this provision will result in the arbitrator’s mandate terminating and the arbitration award becoming null and void.

The text of Section 29A is as follows:

[29A. Time limit for arbitral award:

(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of 12 months from the date of completion of pleadings under sub-section (4) of section 23:

Provided that the award in international commercial arbitration may be made as expeditiously as possible, with an effort to resolve the matter within 12 months from the completion of pleadings under sub-section (4) of section 23.

(2) If the award is made within six months from the date the arbitral tribunal enters upon the reference, the tribunal shall be entitled to additional fees as agreed by the parties.

(3) By mutual consent, the parties may extend the period specified in sub-section (1) for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period under sub-section (3), the arbitrator’s mandate shall terminate unless the Court, either before or after the expiry of the specified period, extends the time:

Provided that if the Court finds the delay attributable to the arbitral tribunal, it may order a reduction of the arbitrator(s)’ fees by up to five percent for each month of delay. The arbitrator(s) shall also be given an opportunity to be heard before any such reduction.

(5) The extension referred to in sub-section (4) may be on application by any party, granted for sufficient cause and on terms set by the Court.

(6) The Court may substitute one or more arbitrators while extending the time under sub-section (4), and the proceedings shall continue from the stage already reached, with the new arbitrators deemed to have received the existing evidence.

(7) The arbitral tribunal thus reconstituted under sub-section (6) shall be considered a continuation of the original tribunal.

(8) The Court may impose actual or exemplary costs on any party under this section.

(9) An application under sub-section (5) shall be resolved expeditiously, with an effort to conclude it within 60 days from the service of notice to the opposite party.]**

Analysis of above provision:

Sub-section (3) of Section 29A allows for the extension of the arbitration period by mutual consent of the parties. The 12 + 6-month timeframe can be further extended at the Court’s discretion, as outlined in Section 29A. However, the extent of the Court’s discretion in granting further extensions remains a separate topic for future exploration.

The question now arises: what are the obligations placed on the parties when extending the arbitration period from 12 to an additional 6 months? One key requirement is that any party wishing not to extend the time must explicitly object to the arbitrator or another appropriate forum. Failure to object will be seen as implied consent to extend the arbitration proceedings.

This concept of implied consent is discussed in the recent judgment of the Hon’ble Madras High Court in Ayyasamy vs. Shanmugavel & Others (C.M.A(MD).No.108 of 2020), presided over by Justice R. Vijayakumar. The case focused on Section 29A of the Arbitration and Conciliation Act, 1996.

This judgment is relevant in situations where:

1. The validity of arbitration awards passed beyond the 12-month limit is disputed.
2. There is implied consent for extending arbitration proceedings.
3. The right to object to delays in arbitration awards is questioned.

Case Facts:

The dispute centered around the administration of Hotel Arunagiri, where the respondents sought a declaration regarding their right to participate in its management. The case was initially in court, and at the appellant’s request, it was referred to arbitration. The Supreme Court appointed Hon’ble Mrs. Justice Prabha Sridevan as the Sole Arbitrator, but the award was passed after the 12-month statutory limit. This delay led to the award being challenged and set aside by the Principal District Court of Tirunelveli, solely because the award was passed beyond 12 months without a formal extension.

This order was then challenged by the appellant, who filed two petitions:

1. To extend the arbitration proceedings beyond 18 months with the Court’s power under Section 29A(4).
2. To set aside the District Court’s order, arguing that the parties had impliedly consented to the delayed award.

Appellant’s Contentions:

1. The appellant argued that the parties impliedly consented to extending the arbitration period by not objecting during the proceedings.
2. They cited the Balak Ram vs. NHAI case, which supported the view that consent could be implied.
3. They contended that Section 29A is procedural and should not invalidate the arbitration process.

Respondents’ Contentions:

1. The respondents argued that the arbitrator’s mandate expired after 12 months, as per Section 29A(4).
2. They emphasized that no written consent was given for the extension.
3. They maintained that the award passed beyond the time limit was null and void.

High Court’s Analysis

The court considered two main issues:

1. Whether the arbitration award was passed within the statutory period as per Section 29A.
2. Whether the parties’ conduct implied consent to continue beyond the 12-month limit.

The court found that while the award was passed after the statutory 12-month period, the respondents’ failure to object during arbitration demonstrated implied consent. The court relied on Section 4 of the Arbitration Act, which states that a party’s failure to object to a procedural non-compliance amounts to a waiver of the right to object.

The court further clarified that procedural provisions like Section 29A are not meant to invalidate legitimate arbitration proceedings. Thus, the court overturned the lower court’s decision and upheld the arbitration award.

Judgment:

The court concluded that:

1. The award, though delayed, was within the extended 6-month period allowed by Section 29A.
2. The respondents’ participation in the arbitration proceedings beyond the statutory time limit amounted to implied consent.
3. The respondents waived their right to object by not raising timely objections.

This judgment emphasizes the importance of substance over form in arbitration proceedings and warns against using procedural technicalities to challenge awards.

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