Not Taking Objection To Non-Compliance Of Provisions Of Arbitration Act Shall Be Deemed Waiver U/S 4 Of Arbitration Act: Delhi Court

The Delhi Commercial Court Bench of Justice SH.RAJ KUMAR TRIPATHI held that a party, who proceeds with the arbitration without stating his objection to non-compliance of any provision of the Arbitration Act, without any undue delay shall be deemed to have waived his right to object as per section 4 of Arbitration Act.

Brief Facts

Petitioner, a wholly owned Government of India company engaged in the business of providing Telecommunication & Information Technology services, was set up by the Ministry of Communications, Government of India, as a Public Limited Company in 1978 for providing Indian telecom expertise in all fields of Telecom, Civil and IT to more than fifty three developing countries around the world.

The Government of Andhra Pradesh authorized/selected M/s Andhra Pradesh Transco (APTRANSCO) for implementing this project. There is no specific vendor approvals procedure followed in APTRANSCO and if the product offered by the vendor complies with the tender requirements, the vendor can supply the products as per their procedural policy.

Petitioner in turn floated the tender for supply, erection and commissioning of 24F ADSS Type Optical Fiber Cable along with associated accessories on 21.12.2010 to any qualified EPC contractor and later opened the tender to individual manufacturers also, in respect of their manufactured BOQ items other than EPC through amendment against which respondent participated being a supplier of hardware and optical accessories.

Pursuant thereto, an LOI was placed on the respondent on 21.02.2011. The same was followed by the purchase order dated 23.02.2011.

Further, a sum of Rs.10,68,987/- had been deducted from the payments due to the petitioner towards liquidated damages imposed for the delay in supplies. It is admitted position that respondent supplied the material in three lots instead of one lot and even the lots supplied by the respondent did not have all the materials required to install the same at site in a single go.

Respondent was requested to honor the add-on purchase order, failing which the consequences as per the contract would have naturally flowed. However, instead of honoring the said add-on purchase order, respondent filed a writ petition bearing WP(C) No.4927/2012 before the Hon'ble Delhi High Court, wherein an interim order dated 14.08.2012 was passed against invocation of the bank guarantee.

Thereafter, upon the directions of Hon'ble Delhi High Court, a meeting between the parties was held on 17.09.2012 for exploring the possibility of an amicable resolution. However, no such resolution was reached between the parties. Later on, respondent vide its notice dated 27.11.2014 invoked arbitration clause between the parties.

Arbitral award dated 06.05.2021 was passed on conclusion of proceedings in the petition. Aggrieved by impugned part(s) of the award, petitioner has filed the present petition.

Contentions

The petitioner submitted that since the impugned award was passed by the learned Sole Arbitrator, who was an employee of the petitioner, the same is liable to be set aside as he was de facto unable to pass the impugned award. In support of his submissions, he relied upon Perkins Eastman vs. HSCC India Ltd. (2020) and Bharat Broadband Network Ltd. vs. United Telecom Ltd. (2019).

Per contra, the respondents submitted that petitioner's challenge to the award, solely based on section 12 (5) of The Act, is erroneous and fallible in the eyes of law as in the present case, the provision u/s 12 (5) of The Act was inserted by Arbitration and Conciliation (Amendment) Act, 2015, which came into force on 23.10.2015 and applies prospectively only. In support of his submissions, counsel for petitioner placed reliance upon Shree Vishnu Constructions vs. Engineer-in-Chief, Military Engineering Service & Others (2023).

Court's Analysis

The court at the outset discussed the applicability of the 2015 Amendment Act to the present case and referred to the Supreme Court judgment in Shree Vishnu Constructions (supra) wherein it was held the 2015 Amendment Act, which came into force w.e.f. 23.10.2015, shall not apply to the arbitral proceeding which commenced in accordance with section 21 of the Act before coming into force of the 2015 Amendment Act, unless parties otherwise agree.

The court further held that as notice invoking arbitration, in the present case was issued prior to 23rd October, 2015, the pre-2015 unamended Act shall apply to the facts of the case.

The court further noticed section 4 of the Arbitration Act which states that not raising objection to any non-compliance of the provisions of the Act shall tantamount to waiver. The court observed that

Applying section 4 of the Act to the facts of the present case, the conduct of petitioner amounts to waiver. Firstly, petitioner did not raise any objection regarding Arbitrator's ineligibility at any stage during the arbitration proceedings. Secondly, petitioner did not raise the ground of ineligibility of Arbitrator in the petition. The objection was taken for the first time during final hearing in the matter.

The court observed that in the aforesaid circumstances, the conduct of petitioner amounts to a deemed waiver u/s 4 of The Act and petitioner cannot be permitted to agitate the said ground at this stage.

The court referred to the Delhi High Court judgment in Allied Dynamic Joint Venture vs. Ircon International Ltd (2024) wherein it was held that the court emphasised that the petitioner having participated in the arbitration proceedings fully and final award in terms of section 31 of The Act having been rendered, the allegation of bias cannot be agitated at this stage since such conduct of petitioner would constitute a waiver under section 4 of The Act.

The court further rejected the contention with respect to the Arbitrator being an ex-employee of the respondent therefore ineligible to act as an arbitrator and referred to the Supreme Court judgment in Aravali Power Co. (P) Ltd. v. Era Infra Engg. Ltd. (2017) wherein it was held that in cases governed by The Act as it stood prior to the 2015 Amendment Act came into force, the fact that the Arbitrator is an employee of the parties is not ipso facto a ground to raise a presumption of bias or lack of independence on his part.

The court concluded that in the case in hand, the impugned award is based on appreciation of facts and evidence and interpretation of contract between the parties. The view taken by learned Arbitrator is a plausible view which does not call for any interference.This court cannot sit in appeal and re-appreciate the evidence led by the parties.

Accordingly, the present petition was dismissed.

Case Title: M/s Telecommunications Consultants India Limited v. Veekay Connectors Pvt. Ltd.

Case Reference: OMP (Comm.) No.01/2022

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