The Rajasthan High Court has held that while successive extensions of an arbitral tribunal’s mandate under Section 29A of the Arbitration and Conciliation Act, 1996 are legally maintainable, they cannot be granted mechanically and must be supported by ‘sufficient cause’ assessed on the facts of each case.
Justice Sameer Jain was dealing with cross petitions arising from an arbitration between Rajasthan DISCOMs and HCL Infosystems Ltd. concerning contracts awarded under the Restructured Accelerated Power Development and Reforms Programme (R-APDRP), involving projects worth approximately ₹528 crore across Rajasthan. The arbitration commenced in 2020 and had continued through multiple extensions, resulting in challenges both to the extension orders passed by the Commercial Court and to the manner in which the arbitral proceedings were being conducted.
The DISCOMs contended that repeated extensions had frustrated the legislative intent behind Section 29A, that delays were largely attributable to HCL and the arbitral tribunal, and that more than ₹13 crore had already been spent on arbitral fees and related expenses, a substantial portion of which came from public funds.
After examining the arbitral record, hearing schedules and the conduct of proceedings, the High Court observed that the arbitral process had strayed from the objectives of speed, efficiency and cost-effectiveness that underpin arbitration. The Court remarked that the proceedings reflected features of what could aptly be described as ‘luxury litigation’, noting excessive costs, fragmented hearings and prolonged delays.
While declining to terminate the arbitral proceedings, the Court held that the expression ‘sufficient cause‘ under Section 29A must be construed strictly and cannot be stretched to accommodate procedural inefficiency or indolence. It emphasized that repeated extensions should not transform arbitration into a process indistinguishable from ordinary civil litigation.
The Court also subjected the arbitral fee structure to close scrutiny. Taking note of the fact that nearly ₹13 crore had already been incurred towards arbitral costs and expenses, it held that delays attributable to the arbitral tribunal warranted proportionate reduction of arbitral fees. The Court further observed that arbitration, particularly where public sector entities are involved, cannot become disproportionately expensive.
Issuing a series of directions aimed at ensuring expeditious completion of the dispute, the High Court shifted the venue of arbitration to the Jaipur Arbitration and Mediation Centre, directed that hearings be conducted on a day-to-day basis, and ordered that proceedings be concluded by 30 June 2026, with the award to be delivered within fifteen days thereafter. The Court also regulated future arbitral fees and expenses, limiting recoverable amounts to those permissible under the statutory framework and actual pocket expenses.
The Court additionally granted liberty to the DISCOMs to raise objections regarding the independence or impartiality of the arbitral tribunal under Sections 12, 13 and 14 of the Arbitration Act, directing that such objections, if raised, be treated as preliminary issues.
