Non-Participation In Arbitral Proceedings Results In Waiver Of Right To Raise Objections On Jurisdiction After Award : SC [Read Judgment]

The Supreme Court on Wednesday held that non-participation in Arbitral proceedings by a party and failur to raise objections before the Arbitrator would preclude the party from doing so after the passing of an Arbitral Award.

A bench comprising Justices Uday Umesh Lalit & Vineet Saran further pointed out that the specification of a "Venue" or "Place" of arbitration may not hold much significance in domestic arbitrations as against international commercial arbitrations due to the uniform applicability of the substantive & curial law.

Factual Matrix:

Four agreements rid with Arbitration Clauses were signed between two parties. 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 followed and reference was agreed to be made in this regard vis-à-vis intricacies of the proceedings.

Due to disputes arising between the parties, Appellant invoked the Arbitration clause and notice to the Appellant, wherein a Sole Arbitrator was apointed and the proceedings were to be conducted in New Delhi.

The Respondent, however, disputed the existence of the Arbitaration Agreement between 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, the Appellant's application seeking reference of dispute to arbitration in light of existence of Arbitration agreements between parties was allowed and the Respondent's plaint was returned.

The Respondent was not a party to the Abitration proceedings and an ex-parte award, which was a common award engulfing all agreements between parties was made in favour of the Appellant in March 2015.

Following this, a plea was preferred by the respondent before the District Court, Alipore, contending, inter alia, that one of the four agreements designated Kolkata as the venue of arbitration. This plea was eventually dismissed and was challenged in the Calcutta High Court.

The Calcutta High Court gave a ruling favourable to the respondent, which led to the  opposite party ( Appellant) to come in appeal before the Supreme Court.

What the Supreme Court Held:

In terms of an objection raised by the Respondent in so far as passing of a common order in all four agreements, especially since one of the Arbitration Agreement's stated that Kolkata was the designated Venue of Arbitration in one of the Agreements, the Supreme Court observed that, since  "at no stage, the aforesaid objections were raised by the respondent before the Arbitrator and the respondent let the arbitral proceedings conclude and culminate in an ex-parte award" , whether it would lead to have waived their right to raise any of the aforesaid objections at this stage?

The Court observed that the Respondent could not raise such an objection at the present stage and that as it "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 must be deemed to have waived all such objections."

In this regard, the Court reproduced Section 4 of the Arbitration and Conciliation Act, 1996 which states:

"Waiver of right to object: A party who knows that (a) Any provision of this Part from which the parties may derogate, or (b) Any requirement under the arbitration agreement; has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object."

The Court also noted that the said objection did not have any practical nuances as the "specification of place of arbitration may be significance in an International Commercial Arbitration, where the place of arbitration may determine which curial law would apply" but not in the present domestic arbitration.

In light of this the Court allowed the Appellant's appeal and noted that the Respondent was precluded from raising an objection with regard to the Venue or place of arbitration at this stage.

The Court concluded :

"It was possible for the respondent to raise submissions that arbitration pertaining to each of the agreements be considered and dealt with separately. It was also possible for him to contend that in respect of the agreement where the venue was agreed to be at Kolkata, the arbitration proceedings be conducted accordingly. Considering the facts that the respondent 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 must be deemed to have waived all such objections". 

Case Details 

Title : Quippo Construction Equipment Ltd v Janardan Nirman Pvt Ltd

Case No : Civil Appeal No. 2378/2020

Bench     : Justices U U Lalit & Vineet Saran

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