In Dharma Pratisthanam v. Madhok Construction (Pvt.) Ltd., (2005) 9 SCC 686, a three Judge Bench of the Hon’ble Supreme Court had the occasion to consider the effect of acquiescence on appointment of arbitrator. In that regard, the Hon’ble Supreme Court examined the difference between the unilateral appointment and unilateral reference. While both were termed to be illegal, at the same time, it was observed that it would make a difference if in respect of unilateral appointment and reference, other party submits to the jurisdiction of the arbitrator and waives its rights which it had under the agreement. In that situation, the arbitrator was held entitled to proceed with reference and the party submitting to his jurisdiction and participating in the proceedings precluded and estopped from raising any objection in that regard, at a later stage. If, however, that party had failed to act when called upon, it could not lead to an inference of implied consent or acquiescence being drawn. Thus, the appellant in that case was found to have not responded to the proposal by the other side to join in the appointment of the sole arbitrator. Such an act was not construed as its consent. Meerut Development Authority v. Civil Engineering Construction Corporation, 2020 (3) AWC 2532.
Tag Archives: Arbitration Award
Sub-Section (5) of Section 11 clearly provides that if the parties fail to agree upon any procedure for appointment of an arbitrator, then the party has to call upon other with a request regarding the appointment of an arbitrator requested and in case if the other person declines or the appointment procedure fails, then it gives a cause of action to the person so concerned to file a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996. Invocation of Section 11(6) of the Arbitration and Conciliation Act, 1996 is squarely based on a default of a party.
Under Section 11(6) of the Arbitration and Conciliation Act, 1996 the Court has jurisdiction to make the appointment only when the person including an institution, fails to perform any function entrusted to it under that procedure. Deepak Goel v. Avinash Chandra, 2020 (4) AWC 3720 (LB).
Under Section 15(2) of the Arbitration and Conciliation Act, 1996, in a situation where the mandate of an arbitrator terminates, a substitute arbitrator is required to be appointed according to the rules that were applicable to the appointment of the arbitrator who is replaced. In Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204, the term “rules” appearing in Section 15(2) of the Act has been understood to be referring to the provisions for appointment contained in the arbitration agreement or any rules of any institution under which the disputes are to be referred to arbitration.
The Hon’ble Apex Court in Government of Haryana v. G.F. Toll Road Pvt. Ltd., (2019) 3 SCC 505, it was held as under:
“The High Court while considering the appointment under Section 15 failed to take note of the provisions of Section 15(2) of the Arbitration and Conciliation Act. Section 15(2) provides that a substitute arbitrator must be appointed according to the rules that are applicable for the appointment of the arbitrator being replaced. This would imply that the appointment of a substitute arbitrator must be according to the same procedure adopted in the original agreement at the initial stage. Deepak Goel v. Avinash Chandra, 2020 (4) AWC 3720 (LB).
Sub-section (3) of Section 36 of the Arbitration Act mandates that while considering an application for stay filed along with or after filing of objection under Section 34 of the Arbitration Act, if stay is to be granted then it shall be subject to such conditions as may be deemed fit. The said sub-section clearly mandates that the grant of stay of the operation of the award is to be for reasons to be recorded in writing “subject to such conditions as it may deem fit”. The proviso makes it clear that the Court has to “have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure”. The phrase “have due regard to” would only mean that the provisions of CPC are to be taken into consideration, and not that they are mandatory. While considering the phrase “having regard to”, this Court in Shri Sitaram Sugar Co. Ltd. v. Union of India, (1990) 3 SCC 223 has held as under :
“The words “having regard to” in sub-section are the legislative instruction for the general guidance of the Government in determining the price of sugar. They are not strictly mandatory, but in essence directory”.
In the present context, the phrase used is “having regard to” the provisions of CPC and not “in accordance with” the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Section 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. the Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. The provisions of CPC are to be followed as a guidance, whereas the provisions of the Arbitration Act are essentially to be first applied. Since, the Arbitration Act is a self-contained Act, the provisions of CPC will apply only insofar as the same are not inconsistent with the spirit and provisions of the Arbitration Act. Pam Developments (P) Ltd. v. State of W.B., (2019) 8 SCC 112
Given the fact that an appellate proceeding is a continuation of the original proceeding as has been held in Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri, AIR 1941 FC 5, and repeatedly followed in various judgments, any delay beyond 120 days in the filing of an appeal under Section 37 from an application being either dismissed or allowed under Section 34 of the Arbitration & Conciliation Act, 1996 should not be allowed as it will defeat the overall statutory purpose of arbitration proceedings being decided with utmost dispatch. N.V. International v. State of Assam, (2020) 2 SCC 109. (See also Union of India v. Varindera Constructions Ltd., (2020) 2 SCC 111.)
In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. [Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 the following has been laid down:
“ The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes.
The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.
It may be noticed that the cases referred to above relate to actions in rem. A right in rem is a right exercisable against the world at large, as contrasted from a right in personam which is an interest protected solely against specific individuals. Actions in personam refer to actions determining the rights and interests of the parties themselves in the subject-matter of the case, whereas actions in rem refer to actions determining the title to property and the rights of the parties, not merely among themselves but also against all persons at any time claiming an interest in that property. Correspondingly, a judgment in personam refers to a judgment against a person as distinguished from a judgment against a thing, right or status and a judgment in rem refers to a judgment that determines the status or condition of property which operates directly on the property itself.
Generally and traditionally all disputes relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not however a rigid or inflexible rule. Disputes relating to subordinate rights in personam arising from rights in rem have always been considered to be arbitrable.” Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751
Section 12(5) of the Arbitration & Conciliation Act is a new provision which relates to the de jure inability of an arbitrator to act as such. Under this provision, any prior agreement to the contrary is wiped out by the non obstante clause in Section 12(5) the moment any person whose relationship with the parties or the counsel or the subject-matter of the dispute falls under the Seventh Schedule. The sub-section then declares that such person shall be “ineligible” to be appointed as arbitrator. The only way in which this ineligibility can be removed is by the proviso, which again is a special provision which states that parties may, subsequent to disputes having arisen between them, waive the applicability of Section 12(5) by an express agreement in writing. What is clear, therefore, is that where, under any agreement between the parties, a person falls within any of the categories set out in the Seventh Schedule, he is, as a matter of law, ineligible to be appointed as an arbitrator. The only way in which this ineligibility can be removed, again, in law, is that parties may after disputes have arisen between them, waive the applicability of this sub-section by an “express agreement in writing”. Obviously, the “express agreement in writing” has reference to a person who is interdicted by the Seventh Schedule, but who is stated by parties (after the disputes have arisen between them) to be a person in whom they have faith notwithstanding the fact that such person is interdicted by the eventh Schedule.
Unlike Section 4 of the Arbitration & Conciliation Act which deals with deemed waiver of the right to object by conduct, the proviso to Section 12(5) will only apply if subsequent to disputes having arisen between the parties, the parties waive the applicability of sub-section (5) of Section 12 by an express agreement in writing. For this reason, the argument based on the analogy of Section 7 of the Act must also be rejected. Section 7 deals with arbitration agreements that must be in writing, and then explains that such agreements may be contained in documents which provide a record of such agreements. On the other hand, Section 12(5) refers to an “express agreement in writing”. The expression “express agreement in writing” refers to an agreement made in words as opposed to an agreement which is to be inferred by conduct. Here, Section 9 of the Contract Act, 1872 becomes important. It states:
“9. Promises, express and implied.—Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.”
It is thus necessary that there be an “express” agreement in writing. Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755.
In Assam Urban Water Supply and Sewerage Board v. Subash Projects and Marketing Ltd., (2012) 2 SCC 624, an argument was raised with reference to Section 43 of the Arbitration Act that provisions of Limitation Act, 1963 have been made applicable to Arbitrators and when application is made for setting aside award hence all provisions of Act, 1963 should be held applicable but it was negative. In aforesaid judgment an attempt was made to attract Section4 of the Limitation Act, but it was observed as under:
“The above section enables a party to institute a suit, prefer an appeal or make an application on the day court reopens where the prescribed period for any suit, appeal or application expires on the day when the court is closed. The crucial words in Section 4 of the Limitation Act are ‘prescribed period’. Section 2 (j) of the Limitation Act defines ‘period of limitation’ which means the period of limitation prescribed for any suit, appeal or application by the Schedule, and ‘prescribed period’ means the period of limitation computed in accordance with the provisions of this Act. Section 2 (j) of the Limitation Act when read in the context of Section 34(3) of the Arbitration Act, becomes amply clear that the prescribed period for making an application for setting aside arbitral award is three months. The period of 30 days mentioned in the proviso that follows sub-section (3) of Section 34 of the Arbitration Act is not the period of limitation and therefore, not ‘prescribed period’ forf the purposes of making the application for setting aside the arbitral award. The period of 30 days beyond three months which the court may extend on sufficient cause being shown under the proviso appended to sub-section (3) of Section 34 of the Arbitration Act being not the period of limitation or, in other words, ‘prescribed period’, section 4 of the Limitation Act is not at all attracted.
In Commissioner, M.P. Housing Board v. Mohanlal and Company, AIR 2016 SC 3592, issue of condonation of delay in respect of an application under Section 34 of the Arbitration and Conciliation Act came up for consideration before the Court. After Arbitral Award was given on 11.11.2010, contractor being aggrieved therefrom, instead of filing application/objection under Section 34(1) of the 1996 Act, preferred to file an application under Section 11 of the Act, 1996, in High Court seeking appointment of Arbitrator to adjudicate the dispute. Application was rejected by the Court observing that there is already an arbitral award, hence no further action under Section 11 of Act, 1996 can be allowed. Thereafter contractor filed objection before the Court challenging award on 26.09.2011. He also filed an application under Section 14 requesting to exclude time consumed in the proceedings before High court when he filed application under Section 11 and the same was rejected. That application was allowed by the District Judge taking recourse to Section 141 of the Limitation Act. M.P. Housing Board challenged order of District Judge in Civil Revision Before High Court but failed and that is how matter came to Supreme Court. Relying on Union of India v. Popular Construction company, (2001) 8 SCC 470, Court held that period of limitation under Section 34(3) is mandatory and would bar application of Section 5 of the Limitation Act. Suman Devi v. Addl. Commissioner, 2019 (132) ALR 471.
Section 32 of the Arbitration and Conciliation Act, 1996 contains a heading “Termination of Proceedings”. Sub-section (1) provides that the arbitral proceedings shall be terminated by the final arbitral award or by an order of the Arbitral Tribunal under sub-section (2). Sub-section (2) enumerates the circumstances when the Arbitral Tribunal shall issue an order for the termination of arbitral proceedings. Clause (c) of Section 32(2) of the Arbitration and Conciliation Act, 1996 contemplates two grounds for termination, i.e. (i) the Arbitral Tribunal finds that the continuation of the proceedings has for any other reason become unnecessary, or (ii) impossible. The eventuality as contemplated under Section 32 shall arise only when the claim is not terminated under Section 25(a) and proceeds further. The words “unnecessary” or “impossible” as used in clause (c) of Section 32(2), cannot be said to be covering a situation where proceedings are terminated in default of the claimant. The words “unnecessary” or “impossible” has been used in different contexts than to one of default as contemplated under Section 25(a). Sub-section (3) of Section 32 further provides that the mandate of the Arbitral Tribunal shall terminate with the termination of the arbitral proceedings subject to Section 33 and sub-section (4) of Section 34. Section 33 is the power of the Arbitral Tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature or to give an interpretation of a specific point or part of the award. Section 34(4) reserves the power of the court to adjourn the proceedings in order to give the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. On the termination of proceedings under Sections 32(2) and 33(1), Section 33(3) further contemplates termination of the mandate of the Arbitral Tribunal, whereas the aforesaid words are missing in Section 25. When the legislature has used the phrase “the mandate of the Arbitral Tribunal shall terminate” in Section 32(3), non-use of such phrase in Section 25 (a) has to be treated with a purpose and object. The purpose and object can only be that if the claimant shows sufficient cause, the proceedings can be recommenced. Srei Infrastructure Finance Ltd. v. Tuff Drilling Pvt. Ltd., (2018) 11 SCC 470.
In State of Maharashtra v. ARK Builders Pvt. Ltd., (2011) 4 SCC 616 it was held as under:
“The period of limitation prescribed under Section 34(3) of the Arbitration and Conciliation Act, 1996 would start running only from the date a signed copy of the award is delivered to/received by the party making the application for setting it aside under Section 34(1) of the Act. The legal position on the issue may be stated thus. If the law prescribes that a copy of the order/award is to be communicated, delivered, dispatched, forwarded, rendered or sent to the parties concerned in a particular way and in case the law also sets a period of limitation for challenging the order/award in question by the aggrieved party, then the period of limitation can only commence from the date on which the order/award was received by the party concerned in the manner prescribed by the law.”
In Benarsi Krishna Committee v. Karmyogi Shelters Pvt. Ltd., (2012) 9 SCC 496, it was held as under:
“The view taken in Pushpa Devi Bhagat v. Rajinder Singh, (2006) 5 SCC 566, is in relation to the authority given to an advocate to act on behalf of a party to a proceeding in the proceedings itself, which cannot stand satisfied where a provision such as Section 31 (5) of the 1996 Act is concerned. The said provision clearly indicates that a signed copy of the Award has to be delivered to the party. Accordingly, when a copy of the signed Award is not delivered to the party himself, it would not amount to compliance with the provisions of Section 31(5) of the Act. Om Prakash Mittal v. Vinod Kumar Mittal, 2018 (129) ALR 858.