Jayesh H. Pandya & Anr. vs Subhtex India Ltd. & Ors.

HELD: 1.1 It is clear from the bare reading of sub-section 1(a) of Section 14 of the Arbitration and Conciliation Act 1996 that mandate of an arbitrator shall terminate if it fails to act without undue delay. In the instant case, the first preliminary meeting was held on 4th May, 2007 and the Arbitrator in terms of the agreement was supposed to conclude and pass the award within a period of four months which indisputedly stood expired on 4 th September, 2007 and in the meantime the appellants recorded their objection of not consenting for extension of time beyond 4th September, 2007 and thus, it can be construed that parties were not in agreement for extension to the mandate of the Arbitrator failing which the arbitral proceedings automatically stood terminated. [Para 16][777-A-B]

1.2 Sub-section (2) of Section 14 clearly stipulates that if a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), the party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate and the appellants rightly applied to the Court for termination of the mandate of the Arbitrator pursuant to the provisions of this Section and the Court was within its jurisdiction to decide accordingly. [Para 17][777-C-D]

1.3 It is true that the object of the scheme of the Act, 1996 is to secure expeditious resolution of disputes and it is based on the fulcrum of promptitude but at the same time the Arbitrator is required to adjudicate the disputes in view of the agreed terms of contract and the procedure. Therefore, the arbitration proceedings are supposed to be governed and run by the terms as agreed by the parties. The Arbitrator, therefore, cannot go beyond the clause of the arbitration agreement. The legislative intent underlying the Act need to be respected. The speedy and alternative resolution to the dispute thus cannot be overlooked but at the same time, proceedings have to be governed and run by the terms agreed between the parties in concluding the arbitral proceedings failing which it would frustrate the mandate of the object of the Act with which it has been legislated by the Parliament to act upon on agreed terms and conditions of the agreement in concluding the arbitral proceedings. [Para 18][777-E-G]

1.4 In the instant case, from the pleadings on record noticed by the High Court in its impugned judgment the proceedings stood terminated as the appellants have not recorded their consent for extension of time which was the requirement and essence of the conditions of the agreement and the Arbitrator became de jure unable to perform his functions after the expiry of four months from the date of first preliminary meeting but that was declined by the High Court on the premise that after the appellants have participated in the arbitral proceedings, that waived their right to question extension of time as it was inpracticable for the Arbitrator to conclude the proceedings within a period of four months and the High Court was of the view that the Act has been legislated with an object to facilitate an efficacious recourse to arbitration failing which it will be in grave peril. [Para 19][778-E-G]

1.5 The essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The voluntary choice is the essence of waiver. There should exist an opportunity for choice between the relinquishment and an enforcement of the right in question. It cannot be held that there has been a waiver of valuable rights where the circumstances show that what was done was involuntary. That apart, the doctrine of “waiver” or “deemed waiver” or “estoppel” is always based on facts and circumstances of each case, conduct of the parties in each case and as per the agreement entered into between the parties. The parties have to stand by the terms of contract including the Arbitrator. [Para 20][778-G-H; 779-A-B]

NBCC Limited v. J.G. Engineering Private Limited [2010]

2 SCC 385 : [2010] 1 SCR 109 – relied on.

1.6 The clause so referred indicates that the parties have admittedly agreed and the time period so prescribed is final and binding. It means the arbitration proceedings should commence and end within the prescribed period of time which in the instant case was of four months and expired on 4th September, 2007 and, there was no occasion for either party to raise an objection as long as the time was available at the command of the Arbitrator to conclude the arbitral proceedings and pass an award within the time schedule fixed under the terms of contract as agreed by the parties. That apart, there is no provision under the arbitration agreement to condone the delay when agreement between the parties binds them to see that the arbitration proceedings should be concluded within the time prescribed. This time restriction is well within the scope and purport of the Act, 1996 at national and international arbitrations. [Paras 21, 22] [779-B-D]

1.7 The time fixed for the arbitration and/or schedule of time limit in such arbitration proceedings, as it is recognised by law, there is no reason not to accept the same, basically in the instant facts and circumstances where the parties themselves agreed to bind themselves by the time limit. Section 14 read with Section 15 of the Act, 1996 also recognise this mechanism and after the expiry of four months period from the date of first preliminary meeting, the Arbitrator indeed became de jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the parties as prayed for stood terminated. Thus, the judgment and order of the High Court is set aside. [Para 23, 24] [779-E-G]