Delhi High Court
Sushma Jain vs M/S. Naveen Board Co. & Ors. on 28 February, 2014
Author: Valmiki J. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO No.182/2012
% 28th February, 2014
SUSHMA JAIN ..... Appellant
Through: Mr. Sudhir Kumar Jain, AR of the
appellant.
Versus
M/S. NAVEEN BOARD CO. & ORS. ..... Respondents
Through: None.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
1. Respondents have been served but do not appear. Reports of
ordinary service and courier show that respondents have refused service.
Since the respondents have chosen not to appear, I am proceeding to decide
the appeal.
2. This appeal is filed under Section 37 of the Arbitration &
Conciliation Act, 1996 (hereinafter referred to as 'the Act') against the
impugned order of the court below dated 26.11.2011 which has accepted the
objections of the respondents under Section 34 of the Act and set aside the
FAO No.182/2012 Page 1 of 5
Award dated 28.3.2003. Award has been set aside by giving a finding that
the clauses in the bills dated 31.8.1999 and 20.9.1999 did not amount to an
arbitration agreement because there were no signatures on the same. The
court below has given this conclusion in spite of the fact that respondents
had failed to appear in the arbitration proceedings and take such objection to
jurisdiction under Section 16 of the Act before the arbitrator, and an exparte
Award was passed for a sum of Rs.51,984/- in favour of the
appellant/claimant and against the respondents with respect to the Paper and
Paper Boards which were supplied by the appellant/claimant to the
respondents.
3. I am indeed surprised at the way in which the trial court has
dealt with this matter. This is all the more so because before the trial court
the binding judgment of the Supreme Court in the case of Narayan Prasad
Lohia Vs. Nikunj Kumar Lohia and Ors. (2002) 3 SCC 572 was cited and
which holds that objection as to jurisdiction of the arbitrator has to be
necessarily taken before the arbitrator by filing of an application under
Section 16 of the Act and which if not done, objection as to jurisdiction is
deemed to be waived. Para 16 of this judgment of the Supreme Court reads
as under:-
FAO No.182/2012 Page 2 of 5
"16. It has been held by a Constitution Bench of this Court, in the
case of Konkan Railway Corporation Ltd. v. Rani Construction
Pvt.Ltd.(2002)1SCR728 that Section 16 enables the arbitral tribunal
to rule on its own jurisdiction. It has been held that under
Section 16 the arbitral tribunal can rule on any objection with respect
to existence or validity of the arbitration agreement. It is held that the
arbitral tribunals authority under Section 16, is not confined to the
width of its jurisdiction but goes also to the root of its jurisdiction.
Not only this decision is binding on this Court, but we are in
respectful agreement with the same. Thus it is no longer open to
contend that, under Section 16, party cannot challenge the
composition of the arbitral tribunal before the arbitral tribunal itself.
Such a challenge must be taken, under Section 16(2), not later than
the submission of the statement of defence. Section 16(2) makes it
clear that such a challenge can be taken even though the party may
have participated in the appointment of the arbitrator and/or may
have himself appointed the arbitrator. Needless to state a party would
be free, if he so choose, not to raise such a challenge. Thus a conjoint
reading of Sections 10 and 16 shows that an objection to the
composition of the arbitral tribunal is a mater which is derogable. It
is derogable because a party is free not to object within the time
prescribed in Section 16(2). If a party chooses not to so object there
will be a deemed waiver under Section 4. Thus, we are unable to
accept the submission that Section 10 is a Non-derivable provision.
In our view Section 10 has to be read along with Section 16 and is,
therefore a derogable provision."
4. The court below has distinguished this judgment on the ground
that in the present case the respondents did not appear before the arbitrator
resulting in an exparte Award and therefore the Supreme Court judgment in
the case of Narayan Prasad Lohia (supra) is not applicable. There cannot
be a more perverse reading of the ratio of the Supreme Court judgment by
the court below in the case of Narayan Prasad Lohia (supra) inasmuch as
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whether the Award is exparte or contested, Section 16 of the Act comes into
play as also the ratio laid down in para 16 of the judgment i.e it is not open
to a person who does not contest the arbitration proceedings by remaining
exparte to raise objections under Section 34 of the Act with respect to
jurisdiction because by failing to raise objection as to jurisdiction before the
arbitrator objection as to jurisdiction is deemed to be waived. Trial court is
completely unjustified in distinguishing the direct ratio of the judgment of
the Supreme Court more so when the basis of distinguishing the ratio is on a
wholly unacceptable basis because a person cannot take advantage of his
own wrong in failing to appear before the arbitrator and not objecting to the
jurisdiction and raising the objection for the first time in a petition under
Section 34 challenging the existence of an arbitration agreement.
5. In view of the above, appeal is allowed. The impugned
judgment of the court below dated 26.11.2011 is set aside and it is held that
the respondents were estopped from challenging the jurisdiction of arbitrator
because they had waived their objections by not appearing in the arbitration
proceedings and resulting in the Award against them for goods supplied for
a sum of Rs.51,984/- alongwith pendente lite and future interest. In view of
the impugned judgment dated 26.11.2011 of the court below being set aside,
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Award dated 28.3.2003 will be applicable and enforceable. Parties are left
to bear their own costs.
FEBRUARY 28, 2014 VALMIKI J. MEHTA, J.
Ne
