Not Participating in Arbitral Proceedings Leads to Waiver of Right to Raise Objections on Jurisdiction after Award: SC

April 30,2020.

By Sharvari Lohakare.

On Wednesday, the Supreme Court by the bench comprising Justice Uday Umesh Lalit and Justice Vineet Saran, ruled that non-participation in Arbitral proceedings by a party and failure to raise objections before the Arbitrator would bar the party from doing so after the passing of an Arbitral Award.

The bench further pointed out that there should be no much significance given to the specification of a ‘venue’ or ‘place’ of arbitration in domestic arbitrations as against international commercial arbitrations due to the uniform applicability of the substantive and curial law.

Factual Background: Four agreements rid with Arbitration clauses were signed between two parties(Quippo Construction Equipment Ltd v Janardan Nirman Pvt Ltd). While three agreements stipulated that New Delhi shall be the designated ‘venue’, one of them stated Kolkata as the ‘place’ of Arbitration. Arbitration rules of the Construction Industry Arbitration Association were to be followed and reference was agreed to be made in this regard vis-a-vis intricacies of the proceedings. The Appellant invoked the Arbitration clause due to the disputes arising between the parties. The Sole Arbitrator was appointed and the proceedings were to be conducted in New Delhi. The Respondent disputed the existence of Arbitration Agreement between the parties and filed a suit in the Court of Civil Judge, seeking declaration of the agreement as ‘null and void’, thereby obtaining a restraint order which stayed proceedings before the Arbitrator. Subsequently, Appellant’s application was allowed and Respondent’s plaint was returned. The Respondent was not a party to the Arbitration proceedings and an ex-parte award. The respondent filed a plea before the District Court, Alipore which was dismissed and again challenged before the Calcutta High Court. The Calcutta HC gave a ruling favourable to the respondent which led to the Appellant to come in appeal before the Supreme Court.

The Supreme Court observed that the Respondent could not raise an objection at the present stage as it has 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 is deemed to have waived all such objections. On this note, the court reproduced Section 4 of the Arbitration and Conciliation Act, 1996.

The court allowed Appellant’s appeal and noted that the respondent was precluded from raising any objection with regard to the venue or place of arbitration at this stage.

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