Arbitration and Conciliation Act, 1996 – ss.16, 34, 37, 4 – Constitution of Arbitral Tribunal – Interpretation of arbitration clause – Waiver – The Appellant-MCGM had floated a tender and invited proposals – The stipulated duration for completion of the work under the Agreement was 72 months and the contract was designed to be implemented in stages – The work under the contract was completed – A dispute arose in respect of payment of outstanding dues – On 09.08.2005, the Respondent invoked the arbitration clause as contained in the Agreement – On 07.07.2009, MCGM filed an application u/s.16 of the 1996 Act, challenging the appointment of the Presiding Arbitrator as a ‘nullity’ and seeking consequential reliefs – Arbitral Tribunal dismissed the application holding that the appointment of the Presiding Arbitrator was valid – On 05.06.2010, the Tribunal passed the final award, directing MCGM to pay specified amounts – Application seeking setting aside of the arbitral award u/s.34 of the 1996 Act was filed before the High Court – The Single Judge of the High Court dismissed the application – An appeal was preferred u/s.37 of the 1996 Act – High Court dismissed the appeal and confirmed the judgment and order of the Single Judge – Correctness: Held: 1. In the facts of this case, it cannot be said that the Arbitral Tribunal has been improperly constituted in derogation of the arbitration agreement, or that the interpretation of the arbitration clause as made by the Arbitral Tribunal has resulted in any patent illegality, which would warrant setting aside of the award – As such, the High Court has rightly decided not to interfere with the arbitral award u/s.34(2)(a)(v) or s.34(2A) while rejecting the application to set aside the award. [Para 37]
2. The MCGM raised their objection for the first time, addressing the letter dated 20.02.2009 to the Presiding Arbitrator, alleging that his appointment is a ‘nullity’ since the Co-Arbitrators had not succeeded in appointing the third arbitrator within 30 days and therefore had no power to appoint – In the facts of this case, beyond 30 days from the date of appointment of the second Arbitrator, i.e. 07.10.2005, the MCGM agreed to attempt mediation /conciliation by its letter dated 07.01.2006 and then informed the Co-Arbitrators about there being no mediation / conciliation by its letter dated 15.12.2006 – MCGM passively sat idle while three different persons were appointed as the Presiding Arbitrator under Clause 8.3(b) of the Agreement by the Co-Arbitrators, without any demur. [Paras 54, 63]
3. In the present case, the MCGM was completely aware about the non-compliance of a contractual requirement under the arbitration agreement – It proceeded with the arbitration process without any demur, agreed to keep the arbitration proceedings in abeyance to pursue other methods of dispute resolution (mediation / conciliation), and did not object to such non-compliance on three different occasions when such alleged non-compliance took place – In such a case, filing of an application u/s.16 of the 1996 Act cannot regularize or condone its conduct and such conduct is a relevant consideration to decipher its understanding of the contractual terms while deciding the s.16 application on merits by the Tribunal even in the absence of statutory waiver u/s.4 being attracted – A party cannot keep a ‘jurisdictional ace’ up their sleeve and then claim that filing of the jurisdictional challenge u/s.16 would go back in time and wipe out the past conduct and acquiescence of the party which would clearly evince how the contractual terms were viewed by the parties – If the same is permitted, it will erode the basic principles of alternative dispute resolution and ethos of arbitration. [Paras 66, 67]
Arbitration and Conciliation Act, 1996 – ss.16, 4 – Conduct, Acquiescence and waiver – Discussed. [Paras 39-42, 55, 56]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Ankit Gyan. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.