Case Law Details

Case Name : Bharat Oman Refineries Ltd. Vs M/s. Mantech Consultants (Bombay High Court)
Appeal Number : Appeal No. 702 of 2011
Date of Judgement/Order : 02/05/2012
Related Assessment Year :
Courts : All High Courts (3796) Bombay High Court (681)

The parties cannot be deprived of their rights to challenge the award on the ground that there is a delay of 2 years and four months and the Award as declared after such a long period, in our view, can be challenged under Section 34 of the Act. The party cannot be remedy-less. Even under Section 16, the objection even if decided, can be re-agitated under Section 34 of the Act. There is no such scheme for the delayed action of the Arbitrator. Considering the aforesaid aspects, in our view, the award is bad in law.

The learned Single Judge has referred and relied upon Section 15 of the Act. It means the substituted Arbitrator can be appointed as per the agreed terms and that too within the stipulated period. Once the stipulated period is expired, and since the mandate is over, there is no question of appointment of Arbitrator. The Arbitrator is terminated by efflux of time.

 In Snehadeep, (Supra) the Written statement was filed before the Arbitrator, though period was expired. Both the parties, participated, before the Arbitrator, even after expiry of mandatory period. The facts are totally different here. The clause also very distinctive in the present case. There is no conflict of law in view of clear distinguishable facts. The law is binding if facts are similar and not when facts are different. In the present case such objection was raised and the Court had decided the same. Even the challenge about mandate of Arbitration was not raised in Section 34 Petition. The fact based decision cannot be treated as precedents, specially when those are distinct and distinguishable.

The doctrine of “waiver” or “deemed waiver” or “estoppal” is always based on facts and circumstances of each case, conduct of the parties in each case and as per the agreement entered into between the parties. The Apex Court Judgment in NBCC Ltd. (Supra) in fact recognized the importance of imposition of time limit for the conclusion of the Arbitration proceedings. The parties have to stand by the terms of the contract including the Arbitrator.

HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

APPEAL NO. 702 OF 2011

IN

ARBITRATION PETITION NO. 477 OF 2006

Bharat Oman Refineries Ltd.

vs.

M/s. Mantech Consultants

Judgment pronounced on : May 02, 2012

JUDGMENT: (Per P.B. Majmudar, J.)

This appeal is directed against the order dated 2 nd September, 2011 passed by the learned single Judge in Arbitration Petition No. 477 of 2006. By the aforesaid order, the learned single Judge allowed the petition filed by the respondent herein under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) and the Award dated 17 th August, 2006 passed by the sole Arbitrator is set aside on the ground that the same was not made within the stipulated time allowed by the arbitration agreement.

2. The appellant, Bharat Oman Refineries Ltd., and the respondent M/s. Mantech Consultants, entered into an agreement on 30 th December, 1996 by which the respondent was to carry out certain work in respect of inter-state pipeline project. The agreement contained an arbitration clause. According to the appellant, since the respondent had not carried out the work as per the agreement, the parties agreed to close the contract. Subsequently certain disputes arose between the parties to the agreement and respondent herein invoked the arbitration clause. The respondent thereafter preferred an application under Section 11 of the Act, being Arbitration Application No. 74 of 2000, for appointment of an Arbitrator. By an order of this Court dated 23 rd February, 2001 the said application was disposed of by appointing one S.K. Saini, who is an employee of the appellant, as an Arbitrator to hear and decide the disputes and differences and the claims between the parties. The arbitrator thereafter commenced the proceedings. The arbitrator convened the first meeting on 14th June, 2001 and fixed the schedule of dates for pleadings, etc. On 9th July, 2002, arguments commenced before the arbitrator. The arguments were concluded on 21st April, 2004. The Arbitrator thereafter declared his award in writing and the same was published on 17 th August, 2006. Subsequently, the respondent herein made an application under Section  33 of the Act seeking interpretation of large contents of the said award. The Arbitrator rejected the said application on the ground that the same was not justified.

3. The respondent thereafter preferred an Arbitration Petition before this Court under Section 34 of the Act for setting aside the Award dated 17 th August, 2006. The learned single Judge, after hearing both the sides, set aside the award of the arbitrator on the ground that the award passed by the Arbitrator was not in accordance with the Arbitration Agreement as the arbitrator has no authority to proceed with the award after stipulated time provided in the agreement and there is undue delay in declaring the award after the conclusion of arguments. The learned single Judge accordingly allowed the petition and set aside the award on the aforesaid ground. The learned single Judge also came to the conclusion that in view of Section 15 (1) (b) of the Act, the mandate of the Arbitrator would automatically stand terminated in terms of the arbitration agreement when time limit for making the Award expired. The aforesaid order of the learned single Judge is challenged by the appellant by way of this appeal.

4. Mr. Bharucha, learned senior Counsel appearing for the appellant, submits that the learned single Judge has gravely erred in setting aside the Award of the Arbitrator on the ground that the award was declared after the  stipulated time provided in the agreement. It is submitted by Mr. Bharucha that the respondent herein had never objected before the Arbitrator that the Arbitrator has no jurisdiction to proceed with the matter and on the contrary the respondent in fact participated in the proceedings and even provided a stamp paper to the Arbitrator and in view of the same, the respondent herein has no right to challenge the award on the ground of delay especially when he had never objected before the Arbitrator in this behalf and proceeded with the arbitration proceedings. It is submitted by Mr. Bharucha that the learned single Judge has not taken into consideration the provisions of Section 4 of the Act which provides that if a party fails to take objection and participation in the arbitration proceedings, subsequently he cannot challenge the award. It is submitted by Mr. Bharucha that no such argument was raised before the Arbitrator in any manner and having participated before the Arbitrator, this point is not permissible to be taken in an Arbitration Petition under Section 34 of the Act. It is submitted by Mr. Bharucha that in any case the arbitration agreement is a contract between the parties and the parties can also extend the time limit provided in the agreement between them and in view of the conduct of the respondent, it can be presumed that he has agreed for extension of time impliedly. It is submitted by Mr. Bharucha that the respondent has never asked the Arbitrator not to proceed with the matter. It is submitted by Mr. Bharucha that Section 15 of the Act has no application and the said Section has application only subsequent to the arbitration agreement and during the pendency of the proceedings before the Arbitrator. It is submitted by Mr. Bharucha that the learned single Judge gravely erred in relying on the judgment of the Supreme Court in the case of NBCC Limited vs. J.G. Engineering Pvt. Ltd.1 as in the aforesaid case, Section 4 of the Act was not under consideration. It is submitted by Mr. Bharucha that the question as to whether in a given case a party can give implied consent by their conduct was not under consideration before the Supreme Court. It is submitted by Mr. Bharucha that in view of the conduct of the respondent, it can be presumed that there is implied consent as per the provisions of the Act. It is vehemently argued by Mr. Bharucha that in a limited jurisdiction under Section 34 of the Act, such a point could not have been raised for the first time before the learned singe Judge. It is submitted by Mr. Bharucha that the learned single Judge was even otherwise bound by the judgment of another single Judge in the case of Mascon Multiservices & Consultants Pvt. Ltd. vs. Bharat Oman Refineries Ltd, and another2. In order to substantiate his arguments, Mr. Bharucha has relied upon the following judgments.

(i) K. Balakrishna Rao and others vs. Haji Abdulla Sait and others3

(ii) Ambika Prasad Mishra vs. State of U.P. and others4;

(iii) Narayan Prasad Lohia vs. Nikunj Kumar Lohia and others5

(iv) Gas Authority of India Ltd. And another vs. Keti Construction (I) Ltd. 1 (2010) 2SCC 385

 (v) Indian Oil Corporation Ltd. Rep. By its Chief LPG Manager ( Engg.) S. Chandran vs. Devi Constructions, Engineering Contractors and P.K. Kutty, Deputy General Manager (LP), TWSD, Sole Arbitrator7 (vi) Shyam Telecom Ltd. vs. Arun Ltd. 8

(vii) NBCC Limited vs. J.G. Engineering Private Limited 9 (viii) M/s. Snehdeep Auto Centre vs. Hindustan Petroleum Corporation Ltd. , decided on April 16, 2012 (Appeal No. 143 of 2012) (ix) B.K. Gopakumar vs. National Film Development Corporation Ltd., Mumbai10

5. Mr. Bharucha heavily relied upon the judgment of the Division Bench of this Court in the case of Snehdeep (supra). In the said judgment, the Division Bench has distinguished the Supreme Court judgment in the case of NBCC Ltd. (supra). It is submitted by Mr. Bharucha that since the point in issue is covered by the said Division Bench judgment, the appeal is required to be allowed and the order of the learned single judge is required to be set aside as even if the time limit in the agreement is over by conduct of the parties, the arbitrator still retains his jurisdiction to decide the dispute.

6. Mr. Seervai, learned senior Counsel, appearing for the respondent, on the other hand submits that as per Section 7 of the Act the arbitration agreement should be in writing. It is submitted that the moment time limit prescribed in the agreement is over, the Arbitrator becomes functus officio and he has no jurisdiction to proceed with the matter. It is submitted that the Arbitrator is not party to the agreement between the parties and his mandate is terminated automatically as per the time limit provided in the agreement and subsequently, therefore, even if he proceeds further, such proceedings will be without jurisdiction. Jurisdiction of the Arbitrator is not governed by the conduct of the parties but is governed by the statute. Mr. Seervai has relied upon the provisions of Sections 14 and 15 of the Act. It is submitted by him that simply because one party can be said to have waived his right by proceeding with the arbitration, by such conduct, the arbitrator cannot get jurisdiction to proceed further with the matter as, according to him, moment the time limit prescribed in the agreement is over, the arbitrator has no jurisdiction unless a new agreement is arrived at between the parties by which time limit provided in the original agreement is extended. It is submitted by Mr. Seervai that the new agreement is required to be entered into by the parties in writing as per Section 7 of the Act. It is submitted that in the instant case even after the arguments were over, there is a delay of more than two years. It is submitted by Mr. Seervai that when the point is covered by the judgment of the Supreme Court in the case of NBCC Ltd. (supra), the Division Bench could not have distinguished the Supreme Court judgment which, according to him, is not distinguishable. It is submitted by Mr. Seervai that by reading the judgment of the Supreme Court it is clear that the Supreme Court was of the opinion that once there is a time limit provided in the agreement, there is no question of any waiver and even if there is no reference to Section 4 of the Act, it is clear that Section 4 has no application in such an eventuality. It is submitted by Mr. Seervai that the Division Bench judgment is per incurium as the law declared by the Supreme Court is binding to all Courts. It is further submitted that the Division Bench in the aforesaid case has not considered the provisions of Sections 14 and 15 of the Act. It is submitted that the Division Bench judgment is contrary to law and provisions of the Act and, therefore, this Court may not follow the same on the ground that it is per incurium. Mr. Seervai has also tried to argue that even otherwise there is no question of waiver in the instant case. It is submitted that by unilateral action by one party, time limit provided in the agreement cannot be said to be extended and as per the mandate in the agreement, the arbitrator was required to pronounce the award within the stipulated time which is admittedly not done in this case. In support of his argument, Mr. Seervai has relied upon the following judgments. (i) Kifayatullah Haji Gulam Rasool and others vs. Smt. Bilkish Ismail Mehsania and others11

(ii) Ghanshyam Sarda vs. Govind Kumar Sarda 12 (iii) B.K. Gopakumar vs. National Film Development Corporation Ltd., Mumbai13

(iv) Teltech Instrumentation Pvt. Ltd. vs. Bharat Petroleum Corporation Ltd.14

11 AIR 2000 Bom. 424

12 A.P. No. 400 of 2009 decided on 16/07/2009 by the High Court of Calcutta. 13 2011 (2) R.A.J. 285 (Bom.)

14 Decided on 1st March, 2012 in Arbitration Petition No. 962 of 2010 (Bombay High Court)

7. Mr. Bharucha, in rejoinder, submits that as per Section 4 of the Act, the arbitrator is entitled to proceed with the arbitration if the parties to the agreement do not object before the Arbitrator that he cannot proceed further with the matter. Mr. Bharucha submits that on 14 th March, 2006, the arbitrator wrote to the respondent requesting it to send him a Rs. 100/- stamp paper stating that he was trying his best to publish the award by 31 st March, 2006 and latest by 30th April, 2006. The arbitrator vide his letter dated 19 th May, 2006 to the appellant and the respondent recorded receipt of stamp paper from the respondent. Mr. Bharucha further submits that since the Division Bench has already considered the Supreme Court judgment and has interpreted the same in a particular way, this Court is bound by the said judgment and there is no question of per incurium.

8. We have heard the learned counsel appearing for the parties. We have also gone through the Award of the Arbitrator and the order of the learned single Judge and the documents forming part of this appeal. We have also gone through the written submissions as well as the judgments of both the sides.

9. In order to appreciate the controversy raised in this matter, it would be useful to incorporate herein the relevant arbitration clause i.e. clause No. 29. 3 (b) which reads thus:

“29.3b. The award shall be made in writing and published by the Arbitrator within two years after entering upon the reference or within such extended time not exceeding further twelve months as the Sole Arbitrator shall by a writing under his own hands appoint. The parties hereto shall be deemed to have irrevocably given their consent to the Arbitrator to make and publish the award within the period referred to hereinabove and shall not be entitled to raise any objection or protest thereto under any circumstances whatsoever.”

10. At this stage, reference is required to be made to various provisions of the Act, which read as under:

“2 (b) “arbitration agreement” means an agreement referred to in Section 7.

4. 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.

7. Arbitration agreement.- (1) in this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in  

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

( c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.”

14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate if –

(a) be becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1),a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.

(3) If, under this section or sub-section (3) of Section 12, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of Section 12.

15. Termination of mandate and substitution of arbitrator._ (1) In addition to the circumstances referred to in Section 13 or section 14, the mandate of an arbitrator shall terminate-

(a) Where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

11. In the instant case, it is not in dispute that the award was not declared within two years or even within the extended time provided in the arbitration agreement. The question which requires consideration is whether in such an eventuality, the principles of waiver can be said to be applicable and whether Section 4 of the Act can be pressed into service in view of clear language in the arbitration agreement. The Division Bench in the case of M/s. Snehdeep (supra) has observed as under:

“It is an admitted position that award was passed after the period provided for in the agreement was over. The award was passed on April 10, 2008 after the period specified in the agreement both initial and extendable for making the award was over. However, to our mind the judgment of the Apex Court in the case of N.B.C.C. Ltd. (supra) relied upon by the learned single Judge does not lay down an absolute proposition that moment the award is made after the stipulated period then it must be set aside. In that case the six months period was provided by the High Court by its order and not by agreement between the parties. The respondent in that case had moved an application before the High Court for a declaration that the mandate of the arbitrator stood terminated. The party in that case had taken a clear stand that the mandate of the arbitrator was terminated and his application itself was a clear and unequivocal act to enforce such a time limit. The Apex Court in the said judgment in the case of N.B.C.C. Ltd., (supra observed that –

“The arbitrator was bound to make and publish his award within the time mutually agreed to by the parties, unless the parties consented to further enlargement of time.”

The learned Counsel for the appellant is right in contending that this observation of the Apex Court does not rule out a contingency where conduct of the parties can be implied with certainly to mean that they have consented not to insist on mandatory time limit.

7. The learned single Judge of this Court in the case of Mascon Multiservices (supra) came to the conclusion that the inquiry on facts to find out whether the parties have waived the condition of termination of arbitration by efflux of time is permissible. The learned Judge has held that if a party attends number of meetings after the award has expired it would be a strong indication of the waiver. The learned Judge however cautioned that the strength of indication of waiver is not necessarily directly proportional to the number of meetings attended and it is the nature of meeting and nature of conduct which is important. The learned Judge has held that the conduct should be such that the waiver can be clearly inferred.”

12. At this stage, reference is required to be made to the judgment of the Supreme Court in the case of NBCC Ltd. (supra) wherein the Supreme Court has observed as under.

“22. Taking into consideration the arguments of the appellant, it is necessary to mention here that the Court does not have any power to extend the time limit under the Act unlike Section 28 of the 1940 Act which had such a provision. The Court has therefore been denuded of the power to enlarge time for making and publishing an Award. It is true that apparently there is no provision under the Act for the Court to fix a time limit for the conclusion of an arbitration proceeding, but the Court can opt to do so in the exercise of its inherent power on the application of either party. Where however the arbitration agreement itself provides the procedure for enlargement of time and the parties have taken recourse to it, and consented to the enlargement of time by the arbitrator, the Court cannot exercise its inherent power in extending the time fixed by the parties in the absence of the consent of either of them.”

13. Reference is also required to be made to the decision of the Supreme Court in the case of Food Corporation of India and another vs. Great Eastern Shipping Co. Ltd.15. The said judgment is in connection with the Arbitration Act, 1940. In the said case, the Supreme Court has considered as to whether a letter written by one party can be said to be a mandate given by both parties to the arbitration agreement. In para 4, the Supreme Court has observed as under: “4. In both the appeals similar claims have been made. It appears, however, that there is a specific finding made by the learned single Judge that the agreement was signed at Bombay which was affirmed by the Division Bench. We find no material to impeach this finding. It was next contended as it has been contended before the Division Bench that there was a mandate given to the arbitrators to state reasons for the award but it was not complied with. It is true that the appellants had written a letter to their arbitrator stating that he should record reasons for the award. Copies of this letter were also sent to the arbitrator appointed by the respondents. There was, therefore, no mandate given by both parties to the arbitration agreement to both arbitrators to state reasons. The arbitrators could not act on the mandate of one of the parties. This contention of the appellants cannot be accepted. It was next contended that the arbitrators should have given reasons. Unreasoned award is bad. It is true that the recent trend is to have reasoned awards. Indeed a matter is pending in this Court on this aspect. The appointed arbitrators were  men of commerce and they arrived at a consensual figure. Though the recent trend is that the award should be a reasoned award and that would be in consonance with the principles of natural justice, in a case of this nature where two men of commerce in respect of money claim under Charter Party agreement entered into arbitration and the award has awarded a lump sum amount, it appears to us, that the reasons are not far to seek. It is really an accounting of the rival claims of the parties. The Supreme Court, therefore, has clearly held that there was no mandate given by both the parties to the arbitrators asking the arbitrators to give reasons and the arbitrators could not act on the mandate of one of the parties. In NBCC Ltd. (supra), the Supreme Court has held as under in para 12.

 “12. A perusal of the arbitration agreement quite clearly reveals that the arbitrator has the power to enlarge the time to make and publish the award by mutual consent of the parties. Therefore, it is obvious that the arbitrator has no power to further extend the time beyond that which is fixed without the consent of both the parties to the dispute. It is an admitted position that the respondent did not give any consent for extension of time of the arbitrator. Thus given the situation, the arbitrator had no power to further enlarge the time to make and publish the award and therefore his mandate had automatically terminated after the expiry of the time fixed by the parties to conclude the proceedings.”

14. After the judgment of the Supreme Court in the case of NBCC Ltd. (supra), a similar issue came up for consideration before a learned single Judge of this Court (Anoop V. Mohta, J.) in Teltech (supra) wherein it is observed as under:

“14. …. ….. It is relevant to note that they have specifically agreed that the Arbitrator newly appointed, shall be entitled to proceed with the reference from the point at which it was left by his predecessor. If this is so, it is very clear that once the Arbitrator is appointed and a reference is commenced and in this case admittedly first time in the year 1982, the subsequent Arbitrators if appointed and/or not appointed, needs to complete the Arbitration proceedings within the mandate period of 2 years plus one year. The clause nowhere provides that if new Arbitrator and/or Officer is appointed as an Arbitrator, the Arbitration proceedings will re-commenced from that date. On the contrary, the clauses so referred above provides that the new Arbitrator shall continue with the reference from the point at which it was left by his predecessor. This means, the parties have admittedly agreed that the time period so prescribed is final and binding. It means the Arbitration Proceedings should commence and end within the prescribed period, if not, in my view and basically in the present facts and circumstances, there is no question of continuation of Arbitration proceedings once the period of three years lapsed.”

17. I would have, in a given case, referred the matter to the larger Bench in view of the judgment of this Court in Jayesh H. Pandya (supra) cited by the respondents, but considering the peculiar clauses of the agreement between the parties and in view of the fact that the Supreme Court recently in NBCC (supra) considering the provisions of the Arbitration Act, reiterated the position by referring and distinguishing even earlier judgments of the Hon’ble Supreme Court and reiterated that there is no question of unilateral extension of mandate of the arbitration, the mandate automatically gets terminated. Such mandate cannot be extended specifically at the instance of only one party. In view of this, I am not inclined to refer the matter to the Larger Bench, as it is not necessary in view of distinguishing facts and circumstances and the clauses so referred in both these judgments.”

It is true that the Division Bench judgment of this Court in the case of M/s. Snehdeep (supra) is also after the decision of the Supreme Court in the case of NBCC Ltd. (supra).

15. Considering the arguments advanced by both the sides at the Bar, which we have incorporated above, and after considering the written submissions submitted before this Court by both the sides, we are of the opinion that the time limit provided in the arbitration agreement in a given case cannot be said to have been extended by the act of one side or by conduct of one side and the arbitrator may not get jurisdiction to proceed further with the matter in case the arbitration agreement provides particular time limit and the same is not extendable as per the arbitration clause in the agreement. In our view, the jurisdiction of the arbitrator therefore depends upon the arbitration clause in the agreement itself. In any case, each matter is required to be decided as per the clauses in the arbitration agreement in connection with providing particular time limit and in a given case the arbitrator becomes functus officio if the arbitration agreement stipulates that in no circumstances time can be extended beyond particular time. In view of the judgment of the Supreme Court in the case of NBCC (supra), the mandate of an arbitrator shall terminate if he fails to act without undue delay.

16. At this stage it is required to be noted that in the case of Snehdeep (supra), the Division Bench of this Court in paragraph 8 observed as under: “8. In the case at hand after the period stipulated of six months was over on November 3, 2006, the respondent made further submission in the arbitration proceedings on December 14, 2006. The respondent made further submissions on December 21, 2006. On March 3, 2007 the period of four months thereafter expired. Thereafter on March 12,2 007 both the parties therein submitted their written statement. In the written submission, the respondent did not contend that the mandate of arbitrator had come to an end. Thus, the respondent did not take a clear and unambiguous stand that the arbitrator cannot proceed to declare the award as his mandate has come to an end. This conduct of the respondent amounts to clear waiver to the objection of time limit being mandatory requirement for procurement of the award. Making submissions and filing written submissions cannot be termed as formal steps but were integral part of the proceedings before the arbitrator. The respondents had opportunity, both at the time of making oral submissions on December 14, 2006 and December 21, 2006 to raise the contention that the mandate of the arbitrator has come to an end by efflux of time. respondent also had an opportunity to put on record this contention in the written submissions filed on March 12, 2007. This conduct of the respondent amounts to clear waiver on their part to the condition of time limit stipulated in the agreement.”

17. After the conclusion of arguments, there is no question of either side to participate further in the proceedings as the effective hearing in the arbitration proceedings can be said to be over on conclusion of arguments. Thereafter what was required was only to pronounce the award. It is true, after a considerable delay, the arbitrator wrote a letter on 14 th March, 2006 to the respondent pointing out that he is trying his best to publish his award in the matter by 31 st March, 2006 and in any case latest by 30 th April, 2006 and he requested the respondent to send him a stamp paper of Maharashtra State for Rs. 100/- preferably by 23rd March, 2006 to enable him to publish the award. As stated above, the arguments were concluded on 21st April, 2004. The arbitrator wrote another letter on 19 th May, 2006 to the parties wherein he has stated that on his inability to publish the award till 30 th April, 2006, he received a telephone call from one V.P. Patel of Mantech (respondent herein) when he requested the said Patel to publish the award as quickly as possible. The arbitrator has pointed out in the said letter that he had drafted the award in respect of certain claims and expected to complete the same in respect of all the other claims shortly and as requested by respondent he is expected to publish his final award by 31st May, 2006. Subsequently, the respondent wrote a letter dated 24 th May, 2006 acknowledging the said letter dated 19 th May, 2006. The arbitrator vide his letter dated 10th August, 2006 addressed to the appellant and the respondent stated that he has now finalized the award and requested the parties to remain present on 17th August, 2006 at 10.30 a.m. in his office. The arbitrator thereafter published his award on 17 th August, 2006 in the presence of both the sides. The respondent thereafter also sent acknowledge to the arbitrator regarding receipt of the award dated 17th August, 2006.

18. Considering the clause in the arbitration agreement that after a period of one year from the date of conclusion of arguments, there was no scope for further enlargement of time and considering the fact that the proceedings before the Arbitrator were concluded on 21 st April, 2004, there was no question of either parties to participate in the arbitration proceedings. In our view, therefore, it can be construed as an act of waiver or active participation in the arbitration proceedings as after the arguments are over, there was no question of any other party to take part in the arbitration proceedings and simply because stamp paper might have been produced by the respondent or might have written a letter of acknowledgement after receipt of the arbitration award itself cannot be treated as an act of waiver in any manner. In any case, after the arguments were concluded, the arbitrator gave his award after about 2 years and four months. As per the clause in the arbitration agreement, even extension was permissible only for one year and admittedly the award was not published within the extended time. In view of the above, the arbitrator becomes functus officio to proceed further and it cannot be said that the respondent had participated in the arbitration proceedings as after conclusion of arguments, there is no question of participating further in the proceedings. Even sending a stamp paper to the arbitrator can be said to be a ministerial act on the part of the respondents and it cannot be said to be in any manner an effective participation in the arbitration proceedings after the conclusion of the arguments. The award of the arbitrator, therefore, has rightly been set aside by the learned single Judge on the ground of undue delay. In any case, as stated above, the matter is required to be considered on the basis of the clause in the arbitration agreement, which we have incorporated above. It is clear that after the aforesaid extended period is over, the arbitrator could not have proceeded further in the matter of even publishing the award, unless both the sides agree by a fresh agreement in writing giving authority to the arbitrator to declare the award even after the stipulated time, in furtherance of the original arbitration agreement. It is also clear that the arbitrator has no authority to pronounce the award after the stipulated time. So far as the Division Bench judgment of this Court is concerned, the said case is, therefore, distinguishable on the facts as in the said case one of the sides actively participated in the proceedings by filing written statement while in the instant case after the conclusion of the arguments, the arbitrator gave his award on 17th August, 2006. Every case ultimately depends upon the nature of the arbitration agreement and in the instant case simply because the respondent has provided stamp paper or might have entered into telephonic conversation with the arbitrator itself cannot be treated as an act of waiver or cannot be construed as an active participation in the judicial proceedings before the arbitrator.

19. So far as the argument of Mr. Seervai that the order of the Division Bench is per incurium and contrary to the Supreme Court judgment in NBCC Ltd. (supra) is concerned, in our view, there is no substance in the said argument as the order of the Division Bench of this Court is binding to this co-ordinate Bench. The Division Bench has interpreted the judgment of the Supreme Court in a particular manner. It is not a case where the Supreme Court judgment has not been taken into account by the Division Bench and, therefore, there is no question of per incurium. However, the facts of the aforesaid case were entirely different as we have indicated above. Since we are of the opinion that in the instant case there cannot be said to be an active participation after the arguments are concluded, the ultimate decision taken by the learned single Judge regarding setting aside the award is required to be upheld. It cannot be said that the respondent had waived its right of proceeding further with the arbitration proceedings as there has been inordinate delay after conclusion of argument and after the arguments were concluded there was no question of either side to have further participation and it can never be said to be a participation in a pending proceeding before the Arbitrator. Since the award of the arbitrator can be said to be against the mandate given to him in the agreement, the subsequent proceeding after conclusion of arguments, in our view, cannot be said to be legal and valid and, therefore, on the ground of lacking inherent jurisdiction at a later stage i.e. after conclusion of argument and before publishing the award, the point in issue can certainly be raised in a petition under Section 34 of the Act.

20. The object and the scheme of the Arbitration Act is to secure expeditious resolution of disputes. Its foundation is based upon National and International Commercial Arbitration practice. The Arbitrator is required to adjudicate the disputes in view of the agreed terms of contract and the agreed procedure. All are bound by the agreed terms. Therefore, the Arbitration proceedings should be governed and run by the terms. The Arbitrator, therefore, cannot go beyond the Arbitration Agreement clauses. We all need to respect the legislative intent underlying the Act. The speedy and alternative solution to the dispute just cannot be overlooked. Delay occurred, if any, may destroy the arbitration scheme itself.

21. In view of the agreed clause itself, after lapse of agreed time, the Arbitrator looses his jurisdiction as per the mandate of Sections 14 and 15 of the Act. Such defect is incurable. The implied consent cannot confer jurisdiction once the agreed period is lapsed. There is no provision to raise objection to the constitution of the Arbitral Tribunal except Sections 14 and 15 of the Act. But, once the Arbitration is closed for award, that stage also goes and the parties have no choice but to wait for the award. There was no reason and/or occasion for the respondent to raise any such objection before the Arbitrator under Section 16 of the Act and/or even before the Court under Section 14 of the Act. Once the matter is closed for judgment/order, a call for stamp-paper is nothing, but a ministerial procedure. It cannot be stated to be judicial proceedings to be attended by all the parties. Even otherwise, how party can presume that the arbitrator would not follow the mandate of the arbitration agreement, once the agreed period is over. The arbitrator could have and/or might have, after expiry of two years, and as extendable by consent one year more, refused to pass Award or terminated the arbitration proceedings suo motu. Any judgment and/or order cannot be presumed or assumed by the parties after closing of the matter unless actual order is passed and/or circulated to the parties.

22. The delay by the Arbitrator, to pass the award in such fashion itself, in our view, is a misconduct as contemplated under the Act. It is also illegal as it is not in pursuance of the agreed clause and is in breach of terms. The Arbitrator himself must refuse to continue first and/or ask for extension if parties want to. The permission and/or consent which is required to be in writing as per the agreement clauses cannot be deemed to have been granted on the basis of alleged unilateral waiver by only one party.

23. Another factor is that in a situation like this, the party is bound by the clauses and so also the arbitrator. Once the agreed period is over, they even would not be in a position to appoint or substitute a new Arbitrator, unless by fresh consent in writing if they fail to appoint a new Arbitrator, if required, during the agreed period of 2+1 year. We are not concerned with the fresh agreement between the parties to settle the dispute after expiry of the agreed period of three years. Therefore the respondent has no choice and/or option but to challenge the Award even on these grounds, apart from substantial delay in passing the Award in Section 34 of the Arbitration Act.

24. It is relevant to note that in the present case the parties have already agreed that the award should be declared within a particular time limit. Each and every matter will depend upon the facts and agreement in each case. Once the matter is closed for orders, after hearing both the parties, yet, considering the scope and purpose of the Act, which itself requires that the Arbitrator must pass Award without delay, therefore, there is no jurisdiction that Arbitrator, without giving any reason whatsoever, can pass such delayed Award after more than two years and four months. The Evidence Act and the Code of Civil Procedure (CPC) though not binding, yet, the basic principle just cannot be overlooked even by the Arbitrator. This also covers the passing of Award within a reasonable period of time. In arbitration, all the parties are governed by the agreed rules and the limitation so provided. Even in a civil suit, the Court is required to deliver the judgment within a reasonable period and without undue delay. If the agreed statutory period has expired, without any conclusion and/or decision by the Arbitrator, the delayed Award in question, in our view, is bad in law, apart from the fact that it is contrary to the agreed binding terms between the parties including the Arbitrator.

25. The parties cannot be deprived of their rights to challenge the award on the ground that there is a delay of 2 years and four months and the Award as declared after such a long period, in our view, can be challenged under Section 34 of the Act. The party cannot be remedy-less. Even under Section 16, the objection even if decided, can be re-agitated under Section 34 of the Act. There is no such scheme for the delayed action of the Arbitrator. Considering the aforesaid aspects, in our view, the award is bad in law.

26. The learned Single Judge has referred and relied upon Section 15 of the Act. It means the substituted Arbitrator can be appointed as per the agreed terms and that too within the stipulated period. Once the stipulated period is expired, and since the mandate is over, there is no question of appointment of Arbitrator. The Arbitrator is terminated by efflux of time.

27. In Snehadeep, (Supra) the Written statement was filed before the Arbitrator, though period was expired. Both the parties, participated, before the Arbitrator, even after expiry of mandatory period. The facts are totally different here. The clause also very distinctive in the present case. There is no conflict of law in view of clear distinguishable facts. The law is binding if facts are similar and not when facts are different. In the present case such objection was raised and the Court had decided the same. Even the challenge about mandate of Arbitration was not raised in Section 34 Petition. The fact based decision cannot be treated as precedents, specially when those are distinct and distinguishable.

28. The doctrine of “waiver” or “deemed waiver” or “estoppal” is always based on facts and circumstances of each case, conduct of the parties in each case and as per the agreement entered into between the parties. The Apex Court Judgment in NBCC Ltd. (Supra) in fact recognized the importance of imposition of time limit for the conclusion of the Arbitration proceedings. The parties have to stand by the terms of the contract including the Arbitrator.

29. Considering the aforesaid, we do not find any substance in the appeal and the same is accordingly dismissed.

2 2008 (6) Bom. C.R. 611

3 (1980) 1 SCC 321

4 (1980) 3 SCC 719

5 AIR 2002 SC 1139 and others 6

6 (2007) 5 SCC 38

7 MANU/TN/0808/2009

8 MANU/DE/0867/2004

9 (2010) 2 SCC 385

10 2011 (2) R.A.J. 285 (Bom.)

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0 responses to “Arbitration Award after efflux of prescribed time – Valid or invalid?”

  1. Murali Krishna says:

    Sinply put, agreement between the parties cannot supercede rights provided under statute. Just because parties have agreed that award made by the arbitrator is final and cannot be agitated further, it does not waive of the rights of the parties under the statute.

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