The Supreme Court while passing an order in Quippo Construction Equipment ltd vs. Janardan Nirman Pvt. Ltd made pertinent observations regarding when could the right to object be waived during arbitral proceedings.
The Bench comprising of Justices UU Lalit and Vineet Saran observed that when a party chooses not to participate in the arbitration proceedings while also failing to register any objections before the arbitrator, such party may be barred from raising objections after the passing of an ex parte arbitral award.
Waiver of Right to object is found in Section 4 of the Arbitration and Conciliation Act, 1996 which states:
A party who knows that (a) Any provision of this Part from which the parties may derogate, or (b) Any requirement under the arbitration agreement; has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.
Background of the case:
The case at hand involved four agreements containing arbitration clauses between two parties, wherein three agreements designated New Delhi as the venue and one stated Kolkata as the place of arbitration.
When disputes arose between the two parties, a sole arbitrator was appointed to conduct arbitration proceedings in New Delhi. The respondents however had objections to the conduct of these proceedings and chose to move to the civil court in this regard.
Meanwhile, the arbitral proceedings continued without the participation of the respondent and culminated as a result an ex parte award was passed in the opposite party’s favour in March 2015. Notably, this was a common award covering the claims for all four agreements between the two parties.
Initially, the Calcutta High Court dismissed the plea by the respondents challenging the March 2015 common award in July.
A subsequent plea was moved by the respondent before the District Court in Alipore, contending that one of the four agreements designated Kolkata as the venue of arbitration. This plea was eventually dismissed, prompting a challenge before the Calcutta High Court.
In February 2019, the Calcutta High Court gave a ruling favourable to the respondent, which was challenged before the Supreme Court.
The respondent raised mainly two objections before the SC namely, 1)that each agreement ought to have resulted in independent arbitral proceedings and hence the common award was not valid, 2) that Kolkata was the stated venue of arbitration in one of the agreements, whereas the arbitral proceedings were conducted in New Delhi.
The main question before the SC was, “whether the respondent could be said to have waived the right to raise any of the aforesaid objections?”
The bench while answering in negative stated, “Considering the facts that the respondent failed to participate in the proceedings before the Arbitrator and did not raise any submission that the Arbitrator did not have jurisdiction or that he was exceeding the scope of his authority, the respondent must be deemed to have waived all such objections.”
Regarding the submission of different venues, the court noted, “It is not as if there were completely different mechanisms for appointment of Arbitrator in each of the agreements. The only distinction is that according to one of the agreements the venue was to be at Kolkata. The specification of ‘place of arbitration’ may have special significance in an International Commercial Arbitration, where the ‘place of arbitration’ may determine which curial law would apply. However, in the present case, the applicable substantive as well as curial law would be the same.”
Advocates for the case:
Senior Advocate Ritin Rai appeared for the appellant and
Advocate Kuriakose Varghese argued for the respondent.
Read the Judgment here: