Court holds that successive extensions under Section 29A Arbitration Act must be grounded in sufficient cause; imposes fee reductions and procedural directives to ensure expeditious, cost-effective arbitration
In a landmark judgment dated May 27, 2026, the Rajasthan High Court (Jaipur Bench) delivered a comprehensive ruling on arbitration proceedings between HCL Infosystems Limited and Jaipur Vidyut Vitran Nigam Limited (JVVNL) and others, underscoring the imperative for strict adherence to statutory timelines and procedural discipline under the Arbitration and Conciliation Act, 1996.
The dispute stemmed from an extensive infrastructure and IT project under the Government of India’s RAPDRP program, valued at over Rs. 528 crores, involving multiple work orders across Rajasthan. Arbitration was initiated in 2019 due to alleged execution irregularities and delays. The three-member arbitral tribunal, including retired judges, conducted 162 hearings, but the proceedings extended far beyond the statutory 12-month period prescribed by Section 29A of the Act.
Initially, the arbitral mandate was extended by mutual consent to August 31, 2023. Subsequently, the respondent (HCL) moved applications under Section 29A seeking further extensions. The Commercial Court granted an extension till April 30, 2025, imposing conditions including exemplary costs and restrictions on interest accrual due to delays mainly attributed to the claimant. However, the conditions were stayed by the High Court pending adjudication.
Before the expiry of the extended mandate, a second application for further extension was filed. The Commercial Court again extended the mandate till September 30, 2026, but without detailed reasons or conditions. Aggrieved, the petitioner DISCOMs challenged this order invoking Article 227 of the Constitution, contending that successive extensions should not be routine and must demonstrate compelling reasons, and that the arbitral tribunal’s conduct was casual, causing undue delay and financial burden.
The Rajasthan High Court, after detailed scrutiny, held:
1. Maintainability of Petitions: The Court affirmed that supervisory jurisdiction under Article 227 is maintainable in exceptional cases where arbitral extension orders suffer from patent jurisdictional errors or cause grave prejudice, especially since no statutory appeal lies against Section 29A extension orders.
2. Successive Extensions under Section 29A: While successive extension applications are not expressly prohibited, they cannot be granted mechanically or routinely. Extensions must be predicated on demonstrable, bona fide sufficient cause, balancing expedition with substantive justice, especially in complex arbitrations.
3. Assessment of ‘Sufficient Cause’: The Court found the first extension (till April 30, 2025) was granted with appropriate judicial scrutiny and conditions. However, the second extension order lacked cogent reasons, failed to account for prior delays attributed to the claimant, did not enforce compliance with earlier directions, and diluted the rigor required under Section 29A.
4. Conduct of Arbitral Tribunal and Parties: The tribunal’s approach was described as casual and convenience-driven, with frequent adjournments and hearings spaced over months, contravening the statutory mandate for expeditious and preferably day-to-day hearings under Section 24. Such procedural laxity and acquiescence by parties led to prolonged proceedings and increased costs.
5. Financial and Procedural Concerns: The Court criticized the session-wise fee model, which incentivized delay, noting that each hearing cost approximately Rs. 7.5 lakhs excluding additional fees and expenses. The shift of venue from Rajasthan to New Delhi without compelling justification added to the financial and logistical burden, defeating arbitration’s cost-effective objective. The Court referenced Supreme Court precedents emphasizing reasonable, transparent fee structures and the need to curb exorbitant arbitration costs.
6. Judicial Intervention and Directions: The Court modified the impugned orders, affirming the first extension with conditions and modifying the second. It directed the arbitral tribunal to resume proceedings promptly at the Jaipur Arbitration and Mediation Centre, mandating day-to-day hearings and completion by June 30, 2026, with the award to be passed within 15 days thereafter.
7. Fee Reduction and Accountability: Recognizing delay attributable to the tribunal, the Court ordered a reduction of arbitral fees at 5% per month of delay from April 30, 2025, until the award’s pronouncement, with refunds to be proportionally made to parties. It also restricted payment of additional fees and directed strict adherence to statutory guidelines regarding costs.
8. Objections to Arbitrators: The petitioners were granted liberty to raise any objections concerning arbitrators’ independence or impartiality under Sections 12, 13, and 14 within one week, to be treated as a preliminary issue.
9. Preservation of Arbitration Integrity: The Court emphasized that procedural rules are a means to justice, not an end. Arbitration must remain an efficient, litigant-friendly alternative dispute resolution method, free from “luxury litigation” practices that result in delay and exorbitant costs.
This judgment reiterates the legislative intent behind Sections 24 and 29A to ensure arbitration is conducted expeditiously, with judicial oversight as a corrective mechanism rather than a tool for routine extension. It highlights the necessity for arbitral tribunals to exercise procedural discipline and for courts to impose terms and conditions ensuring cost-effectiveness and timely disposal of arbitral disputes.
The ruling serves as a precedent for courts and arbitral tribunals across India, balancing party autonomy with statutory mandates, and safeguarding the efficacy of arbitration as a swift dispute resolution mechanism.
Bottom line:-
Arbitration and Conciliation Act, 1996 - Extension of arbitral mandate under Section 29A must strictly adhere to the statutory discipline, demonstrate sufficient cause, and ensure time-bound and cost-effective dispute resolution.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 2, 4, 5, 8, 11(14), 12, 13, 14, 18, 19, 20, 23, 24, 29A, 29B, 31, 31A, Fourth Schedule
