The Supreme Court has clarified that termination of an arbitral tribunal’s mandate under Section 29A(4) of the Arbitration and Conciliation Act, 1996 does not automatically require substitution of the arbitrator. The Court held that Section 29A(6) gives discretion to the court and does not impose a mandatory obligation.
A Bench of Justice Sanjay Kumar and Justice Alok Aradhe set aside the judgment of the Madhya Pradesh High Court. The High Court had directed substitution of the arbitrator after termination of the mandate.
High Court’s Interpretation of Mohan Lal Fatehpuria
The dispute arose from the High Court’s reliance on Mohan Lal Fatehpuria v. Bharat Textiles. In that case, the Supreme Court observed that Section 29A(6) “empowers and obligates” the court to substitute an arbitrator.
However, the High Court treated this observation as a universal rule. It concluded that once the mandate terminates under Section 29A(4), substitution becomes inevitable.
Supreme Court Clarifies the Law
The Supreme Court disagreed with this reasoning. It clarified that termination of mandate does not compel substitution in every case.
The Bench explained that the word “obligates” in Mohan Lal Fatehpuria applied to the specific facts of that case. There, the sole arbitrator had failed to conduct hearings for nearly two years. The arbitrator did not deliver the award within time. No consensual extension was obtained. As a result, the proceedings came to a complete standstill.
In that factual background, the Court held that the arbitrator had become functus officio. Therefore, substitution was justified in that case. Importantly, the Court did not lay down a rigid rule applicable to all cases.
Scheme of Section 29A Explained
The Court examined the structure of Section 29A.
An arbitral award must be delivered within 12 months. The parties may extend this period by six months through consent. Thus, the maximum period without court intervention is 18 months.
If the tribunal fails to deliver the award within this period, its mandate terminates under Section 29A(4). However, a party may approach the competent civil court under Section 29A(5) to seek extension.
At this stage, Section 29A(6) allows the court to substitute one or all arbitrators. However, the provision applies only when delay is attributable to the arbitrator.
Therefore, the power to substitute remains discretionary. The court must assess the facts of each case. It may either extend the mandate or appoint a substitute arbitrator.
Error in the Present Case
The Supreme Court found that the Madhya Pradesh High Court had substituted the arbitrator without any material showing undue delay attributable to the arbitrator.
The Bench also relied on C. Velusamy v. K. Indhera [2026 INSC 112]. In that decision, a coordinate Bench clarified that substitution does not automatically follow expiry of mandate.
Accordingly, the Court reiterated that termination under Section 29A(4) does not make substitution inevitable.
Final Directions
The Supreme Court allowed the appeal. It revived the application seeking extension of the arbitral tribunal’s mandate. It also directed the competent court to decide the extension application expeditiously.
The case is titled Viva Highways Ltd v. Madhya Pradesh Road Development Corporation Ltd & Anr.
