On Thursday, the Delhi High Court in the case of Salar jung Museum & Anr. v. Design Team Consultant Pvt. Ltd. Comprising of Honorable Justice Prateek Jalan observes that where the party did not participate and hence objection with respect to jurisdiction could not be taken to the present case where party participated but did not raise the objection.
ARGUMENTS RAISED BY PETITIONER
A petition was filed under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an arbitral award.
- According to the petitioner, it entered into a contract with the architects, initially constituted as a partnership firm, and later it had reconstituted into a private limited company by the name of Design Team Consultants Pvt. Ltd. (Defendant in the present case); and hence, the award made in favor of the architects were beyond the scope of the contract.
- The petitioner argued that the arbitrator exceeded his jurisdiction by deciding other claims. According to the petitioner, the arbitrator was appointed by Court for a decision on consultancy fees alone.
ARGUMENTS RAISED BY DEFENDANT
According to Defendant, the award was based on proper consideration of material put before the arbitrator and therefore not liable to set aside under Section 34 of the Arbitration and Conciliation Act, 1996. Also, that the award was based on proper consideration of the contractual terms by the learned arbitrator.
ANALYSIS
Issue 1- Whether the constitution of partnership firm into Design Team Consultants Pvt. Ltd required a fresh agreement?
The petitioner’s contention that the claim raised by the Architects was not maintainable as the agreement was signed by them constituted as a partnership firm, whereas they had later reconstituted themselves as a private limited company was earlier rejected by Court- when the application under Section 11 of the Arbitration and Conciliation Act, 1996 was filed.
Earlier, the Court considered the agreement between the Museum and the Architect wherein the assigns of successors-in-office of the Architect was also included within the definition of the term “consultant”. The Court noticed that the meeting of the Board of Directors of Design Team Consultants Pvt. Ltd. resolved to take over all the existing assets and liabilities of the partnership firm and that the Museum (Petitioner) had been duly informed. On this basis, the contention of the Museum that a new arbitration agreement was required was rejected by the Court.
Issue 2- Whether the arbitrator ought not to have refunded the security deposit and balance of supervision charges?
The argument of the Museum (Petitioner) is that the appointment of the learned arbitrator under Section 11 of the Act was confined to the Architects’ claim of ₹12,86,400/-, being the differential amount of consultancy charges.
However, it is an undisputed fact that the above jurisdictional objection was not raised by the Museum (Petitioner) before the learned arbitrator at any stage. The petitioner cited the judgment of the Supreme Court in Lion Engineering’s case (Lion Engineering Consultants vs. State of Madhya Pradesh, (2018) 16 SCC 758 ) and that a jurisdictional objection can be entertained for the first time under Section 34 of the Act.
DECISION OF THE COURT
According to Court the judgment of Lion engineering (supra) is distinguishable from the facts of the present case. The court observed that “Even in a case where a particular dispute is referred to the arbitrator, and the claimant thereafter seeks an adjudication of other claims as well if the respondent does not object, it can be taken to have agreed to submit the subsequent claims also to arbitration.”
In a case where the affected part is capable of objecting to jurisdictional waiver but fails to raise it before the arbitrator- it signifies consent to arbitrator’s jurisdiction.
The court observed that there exists no difference between the case of Quippo Construction Equipment Limited vs. Janardan Nirman Pvt. Limited 2020 SCC OnLine SC 419 where the party did not participate and hence objection with respect to jurisdiction could not be taken to the present case where the party participated but did not raise the objection.
The court ultimately on examining the case on merits dismissed the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996.
The Judgement has been delivered by Justice Prateek Jalan on 21-05-2020.
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