Non-Response Can't Be Presumed As Consent For Appointment Of Arbitrator: Delhi High Court

The court has held that there was no consent by the petitioner with respect to the appointment of Mr. Kasana as the Arbitrator. The respondent by merely putting a cautionary caveat in the notice that “non-response/silence with respect to the appointment of an arbitrator will be presumed as a consent” took the petitioner's silence as consent. It can only apply to the respondent, not to the law. The appointment of the Arbitrator in the present case was unilateral and the arbitral proceedings stand vitiated ab initio.

Brief facts of the case:

The disputes between the parties arose with respect to the MoU dated 20.12.2019 between the petitioner and the respondent. The nature of the MoU was a sub-contract for the construction of a railway platform and certain other structures. Clause 16 of the MoU states that the Arbitrator should be mutually appointed by both parties. On 21.06.2021, the respondent addressed a notice to the petitioner with respect to the appointment of Mr. M.P.S. Kasana as the Arbitrator. It was mentioned in the notice that non-response or silence shall be treated as a consent vis-à-vis appointment.

Then the arbitrator was appointed, and the proceedings started. During the arbitration proceedings, the petitioner filed a specific application before the Arbitrator under Section 21 read with Section 32 of the Arbitration & Conciliation Act, 1996 to terminate the arbitral proceedings on the ground that the appointment of the arbitrator was unilateral. But the Arbitrator rejected the application and continued the proceeding. Then, the award came to be rendered by the Arbitrator on 18.05.2023.

The award was in favour of the respondent, so the petitioner challenged the award by means of the present proceedings under Section 34 of the Arbitration Act stating that the impugned award is a nullity as the arbitrator had been unilaterally appointed by the respondent without the consent of the petitioner.

Observation of the Court:

The court relied on the decision in Lt. Col. H.S. Bedi in which this Court held that the mere insertion, in Section 21 notice of a caveat that failure to object to the arbitration of the disputes by the named Arbitrator would imply consent, would not necessarily mean that the opposite party had consented to the arbitration as it did not expressly object.

The court set aside the impugned award solely on the ground that the appointment of the arbitrator was unilateral, and it stands vitiated ab initio.

“33. For all the aforesaid reasons, I am of the opinion that the learned Arbitrator had no jurisdiction to arbitrate on the disputes at hand, as his appointment was unilateral. The appointment of the Arbitrator, therefore, stands vitiated ab initio. The arbitral proceedings also, therefore, stand rendered a nullity. The impugned award, therefore, is liable to be set aside even on this sole ground.

34. Without therefore, entering into any other aspect of the dispute, the impugned award stands set aside solely on the ground that the appointment of the Arbitrator was unilateral.”

The petition was allowed with no orders as to costs.

Case Title: M/S S. K. BUILDERS versus M/S CLS CONSTRUCTION PVT LTD

Citation: 2024 LiveLaw (Del) 898

Case Number: O.M.P. (COMM) 297/2023

Appearance:

For Appellant(s) Mr. Rajshekhar Rao, Sr. Adv. with Mr. Mayank Sharma, Mr. Anshul Kulshrestha and Mr. Zahid L. Ahmed, Advs.

For Respondent(s) Mr. Kirti Uppal, Sr. Advocate with Mr. Sidharth Chopra, Mr. Harshita Gulati, Ms. Diksha Mathur, Mr. Aditya Raj and Mr. Navneet Thakran, Advocates

Date of Judgment: 08.08.2024

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