The Hon’ble Supreme Court, in Mohan Lal Fatehpuria v. M/s Bharat Textiles & Ors.,¹ has clarified that upon expiry of an arbitrator’s mandate under Section 29A(4) of the Arbitration and Conciliation Act, 1996 (“A&C Act”), a court cannot merely extend the time for completion of arbitral proceedings and is empowered and obligated to substitute the arbitrator under Section 29A(6). Any continuation of arbitral proceedings after expiry of the arbitrator’s mandate, without substitution, would be impermissible in law.

Brief Facts
The appellants and Respondent Nos. 2 to 4 executed a partnership deed containing an arbitration clause. Upon certain disputes arising between the parties, the Hon’ble High Court of Delhi vide order dated 13th March 2020, appointed a sole arbitrator and directed that his fee would be governed by the Fourth Schedule to the A&C Act.

The sole arbitrator entered reference on 20th May 2020, and thereafter issued multiple directions requiring the parties to deposit certain amounts towards “administrative expenses”. Respondent Nos. 2 and 3 challenged these demands by filing applications under Sections 14 and 15 of the A&C Act, seeking termination of the arbitrator’s mandate. However, the High Court dismissed these applications vide order dated 28th January 2022, observing that the arbitrator was neither de jure nor de facto ineligible and that the expenses were payable on actuals.

Subsequently, the arbitrator continued to demand administrative expenses and on 31st August 2023, when the appellants sought time to move the High Court under Section 29A of the A&C Act on account of the arbitrator’s failure to pass an award within the statutory timeline, he adjourned the proceedings sine die.

Thereafter, the appellants filed petitions under Section 29A(6) of the A&C Act, seeking substitution of the sole arbitrator and extension of tenure for the substitute arbitrator. However, the High Court vide order dated 22nd April 2025, declined the substitution of the sole arbitrator and merely extended the time for arbitral proceedings by four months before the same arbitrator. Consequentially, the appellants filed an appeal before the Hon’ble Supreme Court.

Decision
At the outset, the Hon’ble Supreme Court examined the scheme and object of Section 29A, emphasising that it was introduced to remedy chronic delays in arbitration and to ensure time-bound adjudication, which lies at the core of the A&C Act’s purpose. The Court also reiterated that Section 29A is remedial in nature and applies to pending arbitrations.²

The Court observed that the sole arbitrator entered reference on 20th May 2020, pleadings were completed by 19th November 2020, and even after exclusion of the Covid-19 period (15th March 2020 to 28th February 2022),³ the arbitrator was obligated to render the award on or before 28th February 2023. Further, as no extension was sought by the parties, the arbitrator’s mandate automatically terminated under Section 29A(4), rendering him functus officio.

The Court acknowledged that the termination of arbitral mandate is not absolute and rather conditional upon the filing of an application for extension, and thus cannot be treated termination stricto sensu,⁴ however, that does not change the fact that on expiry of the initial period or extended period, the arbitrator cannot proceed with the arbitration proceeding and his mandate terminates, subject to a court’s order under Section 29A(4) of the A&C Act.

The Court clarified that Section 29A(6) is not discretionary in such circumstances and that where the mandate of the arbitrator has ceased to exist, the Court is empowered and obligated to substitute the arbitrator to further the object of speedy dispute resolution. The Court also observed that the High Court erred in merely extending time of the proceedings when the arbitrator’s mandate had already lapsed by operation of law. The Court further rejected the respondents’ argument that dismissal of earlier applications under Sections 14 and 15 barred substitution under Section 29A, simply holding that Sections 14, 15, and 29A of the A&C Act provide for separate remedies in the circumstances mentioned therein.

Accordingly, the Hon’ble Supreme Court set aside the High Court’s order dated 22nd April 2025, and allowed the appeals, terminating the mandate of the original arbitrator and appointing a substitute sole arbitrator, directing the proceedings to resume from the stage already reached and be concluded within six months.

Conclusion
The Supreme Court’s ruling in Mohan Lal has clarified that once an arbitrator’s mandate stands terminated under Section 29A(4), the Court cannot merely extend time but ought to substitute the arbitrator under Section 29A(6). The judgment reinforces the legislative intent behind Section 29A in preventing indefinite arbitrations and ensuring effective, time-bound dispute resolution.

By - Gurdev Singh Tung and Niyati Sharma