1. Petition under Section 34 of the Arbitration Act challenging an arbitral award on grounds of mandate expiry and interest grant. (Para 1 , 2 )
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2026 Supreme(Online)(Del) 5925
IN THE HIGH COURT OF DELHI AT NEW DELHI
Harish Vaidyanathan Shankar, J
UNION OF INDIA – Appellant
Versus
M/S VARINDERA CONSTRUCTIONS LTD – Respondent
O.M.P. (COMM)-73/2024
Important Points
Termination of an arbitrator's mandate under Section 29A is conditional, not absolute. Timelines must exclude the COVID-19 pandemic period. Active participation in proceedings and seeking corrections under Section 33 imply consent to the mandate, barring subsequent jurisdictional challenges under Section 34.
Subject
Arbitration Law - Challenge to Arbitral Award
Act Referred
Headnote
(A) Arbitration and Conciliation Act, 1996 - Sections 34, 29A, 31(7), and 33 - Expiry of mandate of arbitral tribunal - Exclusion of COVID-19 period - Implied consent by conduct - Grant of interest - Scope of interference under Section 34 - The termination of the mandate of an arbitrator under Section 29A is not absolutistic but conditional and transitory, subject to the power of the Court to extend the period. The period between 15.03.2020 and 28.02.2022, as directed by the Hon’ble Supreme Court in Suo Motu proceedings, must be excluded while computing the statutory timeline for rendering an award. (Paras 41, 44, 53)
(B) Party Autonomy and Conduct - Active participation in arbitral proceedings after the alleged expiry of a mandate, including advancing arguments on merits and subsequently filing applications for correction of the award under Section 33 of the Act, constitutes implied consent to the continuation of the mandate. A party cannot participate in the process and later challenge the jurisdiction only after an unfavorable outcome. (Paras 49, 50, 52)
(C) Section 31(7) - Arbitral tribunals possess wide discretion to grant interest as compensation for the deprivation of monies lawfully due. A rate of 12% per annum in a commercial transaction is not exorbitant or unconscionable and does not warrant interference under Section 34 unless it is perverse, arbitrary, or shocks the conscience of the Court. (Paras 63, 64, 69)
(D) Section 34 - The jurisdiction is supervisory and not appellate. The Court cannot re-appreciate evidence or substitute its own view for that of the arbitrator merely because another interpretation is possible, provided the arbitrator's view is plausible and based on the material on record. (Paras 33, 70)
Facts of the case:
Disputes arose from a construction contract for dwelling units. An arbitral tribunal rendered an award on 27.08.2023 granting approximately ₹6 crores and interest at 12% per annum. The petitioner challenged the award under Section 34, contending that the arbitrator's mandate had expired 12 months after the completion of pleadings and that the interest rate was excessive.
Findings of Court:
The court found that upon excluding the COVID-19 pandemic period, the award was delivered within the permissible statutory timeframe. Additionally, the petitioner's continued participation in the proceedings and the filing of a Section 33 application indicated an acceptance of the arbitrator's mandate. The 12% interest rate was deemed a reasonable and discretionary exercise of power under Section 31(7) of the Act.
Issues: Whether the mandate of the Sole Arbitrator had lapsed under Section 29A of the Act prior to the pronouncement of the award, rendering it without jurisdiction, and whether the grant of interest at the rate of 12% per annum was legally unsustainable.
Ratio Decidendi: The court ruled that Section 29A timelines are subject to the pandemic exclusion period and can be extended via implied consent shown through active participation. Further, interest awarded by an arbitrator is compensatory and subject to a high threshold of interference, requiring evidence of perversity or patent illegality.
Result: Petition dismissed.
(B) Party Autonomy and Conduct - Active participation in arbitral proceedings after the alleged expiry of a mandate, including advancing arguments on merits and subsequently filing applications for correction of the award under Section 33 of the Act, constitutes implied consent to the continuation of the mandate. A party cannot participate in the process and later challenge the jurisdiction only after an unfavorable outcome. (Paras 49, 50, 52)
(C) Section 31(7) - Arbitral tribunals possess wide discretion to grant interest as compensation for the deprivation of monies lawfully due. A rate of 12% per annum in a commercial transaction is not exorbitant or unconscionable and does not warrant interference under Section 34 unless it is perverse, arbitrary, or shocks the conscience of the Court. (Paras 63, 64, 69)
(D) Section 34 - The jurisdiction is supervisory and not appellate. The Court cannot re-appreciate evidence or substitute its own view for that of the arbitrator merely because another interpretation is possible, provided the arbitrator's view is plausible and based on the material on record. (Paras 33, 70)
Facts of the case:
Disputes arose from a construction contract for dwelling units. An arbitral tribunal rendered an award on 27.08.2023 granting approximately ₹6 crores and interest at 12% per annum. The petitioner challenged the award under Section 34, contending that the arbitrator's mandate had expired 12 months after the completion of pleadings and that the interest rate was excessive.
Findings of Court:
The court found that upon excluding the COVID-19 pandemic period, the award was delivered within the permissible statutory timeframe. Additionally, the petitioner's continued participation in the proceedings and the filing of a Section 33 application indicated an acceptance of the arbitrator's mandate. The 12% interest rate was deemed a reasonable and discretionary exercise of power under Section 31(7) of the Act.
Issues: Whether the mandate of the Sole Arbitrator had lapsed under Section 29A of the Act prior to the pronouncement of the award, rendering it without jurisdiction, and whether the grant of interest at the rate of 12% per annum was legally unsustainable.
Ratio Decidendi: The court ruled that Section 29A timelines are subject to the pandemic exclusion period and can be extended via implied consent shown through active participation. Further, interest awarded by an arbitrator is compensatory and subject to a high threshold of interference, requiring evidence of perversity or patent illegality.
Result: Petition dismissed.
Legal Category Hierarchy
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arbitration law
-
award
- challenge to award
- time limit for award
- interest
- practice and procedure
-
award
Advocates:
For the Appellants/Petitioners: Vikas Kumar Sharma
For the Respondents: Risha Mittal, Md. Adil Alam
For the Appellants/Petitioners: Vikas Kumar Sharma
For the Respondents: Risha Mittal, Md. Adil Alam
Table of Contents
2. Petitioner argued mandate expired under Section 29A; award barred. Respondent argued pandemic exclusion applied; interest rate was reasonable. (Para 4 , 5 , 16 , 17 )
3. Statutory timeline under Section 29A is not rigid; court can extend mandate. Exclusion of pandemic period applied. (Para 39 , 40 , 44 , 46 )
4. Termination of mandate under Section 29A is conditional and transitory, subject to court extension. Award within timeline, considering pandemic exclusion. (Para 40 , 41 , 42 , 43 )
5. Dismissed petition challenging award; allowed application for withdrawal of deposited amount. (Para 73 , 74 )
6. What is the effect of the expiry of the mandate of an arbitrator under Section 29A of the Arbitration and Conciliation Act, 1996?
The termination of the mandate is conditional and transitory, subject to the power of the Court to extend the period. The Court can extend time even after expiry or after an award is rendered. (Para 40 , 41 , 42 , 43 )
7. Is the period of the COVID-19 pandemic excluded while computing timelines under Section 29A of the Arbitration and Conciliation Act, 1996?
Yes, the Supreme Court's order in Suo Motu Writ Petition (C) No. 3 of 2020 excludes the period from 15.03.2020 to 28.02.2022 for computing timelines under Sections 23(4) and 29A of the Act. (Para 44 , 45 )
8. What is the scope of judicial review for the rate of interest awarded by an arbitral tribunal under Section 34 of the Arbitration and Conciliation Act, 1996?
Courts do not ordinarily interfere with the rate of interest awarded unless it is demonstrably arbitrary, unconscionable, or in conflict with the fundamental policy of Indian law. A plausible view by the tribunal is respected. (Para 60 , 62 , 63 , 64 )
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* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment reserved on: 13.02.2026 Judgment pronounced on: 01.04.2026 + O.M.P. (COMM) 73/2024 & I.A. 43484/2024 (Seeking withdrawal of amount deposited by petitioner)
UNION OF INDIA .....Petitioner Through: Mr. Vikas Kumar Sharma, Senior Central Government Counsel.
versus M/S VARINDERA CONSTRUCTIONS LTD. .....Respondent Through: Ms. Risha Mittal and Mr. Md.
Adil Alam, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR
J U D G M E N T
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition under Section 34 of the Arbitration and Conciliation Act, 1996, A&C Act has been filed impugning the Arbitral Award dated 27.08.2023 along with the corrigendum dated 20.10.2023, Arbitral Award, passed by the learned Sole Arbitrator in disputes arising out of Contract dated 03.11.2014 executed between the parties for the construction of dwelling units under the Married Accommodation Project at Jodhpur.
2. By way of the present proceeding, the Petitioner seeks to assail the Impugned Arbitral Award, principally on the ground that the mandate of the learned Arbitrator had expired under Section 29A of the A&C Act, prior to the pronouncement of the Award, and that the grant of interest by the learned Arbitral Tribunal is legally unsustainable.
BRIEF FACTS:
3. Shorn of unnecessary details, the facts germane to the institution of the present Appeal are as follows:
I. Briefly stated, the disputes between the parties arise out of a works contract awarded by Union of India, UOI to the Respondent for the construction of dwelling units for Officers, JCOs and ORs under the Married Accommodation Project at Jodhpur.
II. The contract was awarded pursuant to a Letter of Acceptance dated 03.11.2014 for a total contract value of ₹138,95,30,116/-. The date of commencement of the work was 27.11.2014 and the stipulated period for completion of the project was 25 months, with the original date of completion being 26.12.2016. The work was eventually completed on 10.03.2017.
III. Upon completion of the work, the Respondent submitted its final bill on 27.06.2017. The undisputed portion of the final bill was paid by UOI on 30.11.2019. Certain disputes thereafter arose between the parties, inter alia, concerning alleged delay in payment of the final bill, claims relating to prolonged bank guarantees, delayed or under payments of Running Account Receipts, RARs , and claims pertaining to deviation works and additional items.
IV. In view of the disputes having arisen between the parties, an Arbitral Tribunal comprising a learned Sole Arbitrator came to be constituted pursuant to an Order dated 15.09.2020 passed by this Court in ARB.P. 378/2020.
V. The learned Arbitrator entered upon reference and arbitral proceedings commenced under the provisions of the A&C Act.
VI. During the course of the arbitral proceedings, the Respondent filed its Statement of Claim raising several claims, including interest on delayed payment of the final bill, losses on account of prolonged bank guarantees, losses due to delayed and underpayments of RARs, and claims relating to deviation works and additional items. UOI filed its Statement of Defence opposing the claims and also raised a counterclaim.
VII. The Petitioner claims that the pleadings in the arbitral proceedings were completed on 24.05.2021.
VIII. During the pendency of the arbitral proceedings, UOI filed an Application dated 10.04.2023 before the learned Arbitrator, invoking Section 29A of the A&C Act, contending that the mandate of the learned Arbitrator had expired and seeking termination of the arbitral proceedings on that ground. The said Application was heard by the learned Arbitrator and was ultimately dealt with in the Impugned Award.
IX. The learned Sole Arbitrator thereafter rendered the Arbitral Award dated 27.08.2023, whereby several claims of the Respondent were partly allowed. Under the Award, amounts were granted under different heads, including claims relating to delayed payment
