The dispute arose from a Share Subscription and Shareholders Agreement between investors and the promoters of Financial Software and Systems Pvt. Ltd. The agreement contained a detailed exit mechanism enabling investors to realise their investment through methods such as secondary sale, buy-back, or strategic sale.

Following the failure of the promoters to provide an exit, arbitration was initiated under the Singapore International Arbitration Centre (SIAC) Rules, with Singapore as the seat. The arbitral tribunal rendered an award in July 2024 granting damages to the investors equivalent to the exit price and providing for a strategic sale mechanism in case of non-payment.

The award was challenged before the Singapore High Court, which rejected the challenge and upheld the award. Notably, issues such as waiver, buy-back, and alleged violations of Indian law were considered and rejected. No appeal was filed against this decision.

Subsequently, enforcement proceedings were initiated before the Madras High Court under Sections 47 and Section 49 of the A&C Act. The appellants resisted enforcement under Section 48, primarily invoking the “public policy of India” exception. The High Court rejected these objections, applied transnational issue estoppel, and enforced the award. The matter then reached the Supreme Court.

This judgment envisages to promote procedural flexibility in arbitration by according primacy to substantive justice over technical formalities. The Court has tried to ensure that the invested time, financial resources, and evidence-based efforts of the parties in the arbitration proceedings do not go to waste. The verdict opined that if a reasoned award is deemed to be unenforceable solely on the grounds of delay, it will undermine the faith in arbitration.  

However, this judgment also raises concerns about the purpose of Section 29A, post award remedies, award enforceability and interpretive conflict.

Firstly, the verdict enables a party to file for a Section 29A application to seek an extension of the arbitral tribunal’s mandate even after an award has been passed by the tribunal after the lapse of 18 months prescribed period. It is unclear whether there would be any outer limit or limitation period for the Court to entertain such applications.

Notably, Section 34 is the only appeal mechanism under the Act, which has a limitation period of three months from the date on which the parties received the signed copy of the arbitral award. This judgment introduces uncertainty as to whether such proceedings would suspend, overlap with, or run parallel to the limitation clock prescribed under Section 34 by permitting post-award applications under Section 29A for retrospective extension of the tribunal’s mandate. Further, awards that were previously rendered unenforceable due to the expiry of the Tribunal’s mandate may now be revived through such application, encouraging parties to approach courts and seek retrospective validation. 

Secondly, the ruling has placed the status of an arbitral award passed after the expiry of mandate in a grey zone by characterising such awards as not non-est but merely unenforceable pending judicial extension under Section 29A of the Act. 

Thirdly, a bare reading of Section 29A of the Act states that if a tribunal fails to pass an award within a stipulated timeline, the tribunal’s mandate ‘shall’ be terminated mandatorily. As per the recent stance adopted by the Hon’ble Apex Court, minimal judicial interference is warranted and efforts should be made to sustain the arbitral awards passed by a tribunal. However, such approach should not be undertaken to validate an award passed by a tribunal which had previously become functus officio. This is further reinforced by the fact that the 1940 Act, provided for extension of the tribunal’s mandate irrespective of whether an award has been passed. The present Act, in absence of such provision indicates the legislature’s intention to exclude post award extension of tribunal’s mandate. Thus, accepting the contrary interpretation in the name of pro-arbitration policy would undermine the statutory discipline consciously introduced by the legislature through Section 29A.

Fourthly, this decision raises a conundrum when viewed in the context of the legal provisions pertaining to the mandate of the arbitral tribunal. Section 29A(4) of the Act has a proviso, wherein the mandate of the arbitrator continues till the extension application is disposed of. While Section 32(3) of the Act, on the other hand, provides that the mandate of a tribunal terminates with the termination of the arbitral proceedings. This decision affirms the court’s power to extend the mandate of the tribunal after the award and the termination of the mandate, creating tension due to the unclear implications of how a mandate, which has ceased to exist, can be revived or considered to continue. This overlap results in conflation of finality in the termination of mandate, thus broadening the scope of judicial intervention. 

Lastly, in Fatehpuria, the Court took a strong stance by ordering substitution to prevent delay and ensure the time-bound requirement under Section 29A of the Act, thus emphasising efficiency in arbitration. But Veluswamy expands the discretionary scope of substitution, thereby redefining it as an extraordinary measure to be taken with circumspection. This judicial development may weaken the deterrent against delay and even encourage laxness in procedure, thus defeating the purpose of speedy dispute resolution as embodied in the statute.