Concerning the contention that the Appellant waived the right to object due to his conduct, the Delhi High Court opined that even if the Appellant participated in the proceedings without raising any objections, it cannot be said that he had waived his right under Section 12(5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act”).
Moreover, it was expounded that the award passed by an ineligible Arbitrator is not binding on the parties as ineligibility goes to the root of the jurisdiction and such an award cannot be said to be binding.
It was propounded that a waiver can only happen by way of an express written agreement and the same cannot be inferred by the conduct of the parties. Therefore, the fact that a party participated in the proceedings cannot be interpreted as a waiver of the right to object to the ineligibility of the Arbitrator.
Brief Facts:
The present appeal has been preferred under Section 37 of the A&C Act against the order passed by the Learned Commercial Court vide which the application of the Appellant for setting aside the Arbitral Award was rejected.
Background of the Case:
In 2014, the Appellant on receiving information about the availability of a property for sale gave a cheque to the brokers to book a flat in the said building. A buyer agreement was executed between the Respondent company and the Appellant. It was submitted that the amount written on the Agreement was different and higher from the amount that was communicated to the Appellant because of which the Appellant sought cancellation of the transaction. However, he was informed that the money paid by him would be forfeited.
Thereafter, the parties agreed to transfer the said amount towards the purchase of a smaller unit and therefore, a new Buyer Agreement was entered into. It was contended by the Appellant that the said new Agreement did not contain the adjustment of the money already paid by the Appellant. It was argued that the Appellant did not agree to the changes made in the Agreement and was coerced to sign. Further, the required changes in the property were not implemented by the Respondent company and hence, the Appellant did not wish to proceed with the transaction.
It was submitted that during the course of arbitral proceedings, the Appellant contended the procedure for the appointment of the Arbitrator. Both the Appellant and his proxy counsel had left the proceedings. The Arbitrator proceeded ex parte and passed an arbitral award in favour of the Respondent company.
The main issue to be ascertained was whether the Award should be set aside on the ground of the ineligible appointment of the Arbitrator. The Learned Commercial Court recorded that as per Section 12 of the A&C Act, the Arbitrator made disclosures before accepting the appointment and the same was unchallenged by the Appellant. Therefore, the appointment of the Arbitrator was in accordance with the law.
Contentions of the Appellant:
The Appellant argued that the Arbitrator was unilaterally appointed by the Respondent Company which is impermissible. The Arbitrator was biased and the principles of natural justice were violated by the Arbitrator.
Contentions of the Respondents:
The Respondent argued that the Appellant neither challenged the appointment of Arbitrator during the course of proceedings nor raised any objections. Therefore, the Appellant now after the passing of the award cannot do so.
Observations of the Court:
The Court noted that the Arbitrator was appointed unilaterally by the Respondent company and there was no written agreement between the parties to concur on the appointment of the said Arbitrator.
Relying on multiple precedents, the Bench remarked that it is well established that if the appointment of an Arbitrator is ineligible the counter-party can approach the Court for the appointment of an Arbitrator under Section 11 of the A&C Act. It was re-iterated that an employee is ineligible to be appointed as an arbitrator by virtue of law and that such ineligibility extends to a person appointed by such officials who are otherwise ineligible to act as Arbitrator.
The High Court held that the Arbitrator was ineligible to act as he was appointed unilaterally.
Concerning the contention that the Appellant waived the right to object due to his conduct, the Court relied on previous judgements and opined that even if the Appellant participated in the proceedings without raising any objections, it cannot be said that he had waived his right under Section 12(5) of the A&C Act.
Moreover, it was expounded that the award passed by an ineligible Arbitrator is not binding on the parties as ineligibility goes to the root of the jurisdiction and such an award cannot be said to be binding.
Concerning the ratio of the case Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited (2021 284 DLT 722), the Delhi High Court did not agree with the decision in Kanodia case wherein Bharat Broadband Network Limited v. United Telecoms Limited (2012 5 SCC 755) was distinguished.
It was propounded that the Bharat Broadband case expressly held that in terms of Section 12(5), a waiver can only happen by way of an express written agreement and the same cannot be inferred by the conduct of the parties.
Therefore, the fact that a party participated in the proceedings cannot be interpreted as a waiver of the right to object to the ineligibility of the Arbitrator.
The decision of the Court:
Based on the above-mentioned reasons, the Delhi High Court allowed the appeal and accordingly set aside the award.
Case Title: Govind Singh v. M/s Satya Group Pvt. Ltd. & Anr.
Coram: Hon’ble Mr. Justice Vibhu Bakhru, Hon’ble Mr. Justice Amit Mahajan
Case No.: FAO(COMM) 136/2022
Advocates for the Appellant: Adv. Mr. Abhinav Sharma
Advocates for Respondents: Adv. Ms. Kadambari, Mr. Sonu Kumar, Mr. Amitender Tiwari, Mr. Sahil Khanna, Ms. Ayushi
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