Case Note & Summary
The petitioner, Mangalam Chaudhary Company, a sole proprietary concern, was awarded a subcontract by the respondent, Hindustan Construction Company Ltd., for part of a road construction project in Gujarat. Disputes arose, and the respondent appointed an arbitrator under clause 17 of the contract. The first arbitrator resigned after allegations by the petitioner, and the second arbitrator also resigned. The respondent then appointed a third arbitrator on 3 November 2017. The petitioner objected to this appointment by letter dated 18 November 2017, claiming the arbitrator was not independent. However, the petitioner did not appear at the first meeting on 27 November 2017 and subsequently participated in the arbitration without further objection. The arbitrator passed an award on 8 October 2018, rejecting the petitioner's claims and awarding costs of Rs.3,01,147/- with 12% interest. The petitioner challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, primarily on the ground that the arbitrator was unilaterally appointed and lacked independence. The court held that under the pre-amendment regime, unilateral appointment was permissible if the contract allowed it. The petitioner's initial objection was not pursued, and by participating in the proceedings, the petitioner waived the objection. The court found no ground under Section 34 to interfere with the award, which was not patently illegal or against public policy. The petition was dismissed with costs.
Headnote
A) Arbitration - Appointment of Arbitrator - Unilateral Appointment - Section 11(6) of Arbitration and Conciliation Act, 1996 (pre-amendment) - The court held that under the pre-amendment regime, a party could unilaterally appoint an arbitrator if the arbitration agreement so provided. The petitioner's objection to the third arbitrator's appointment was raised but not pursued; by participating in the proceedings without further protest, the petitioner waived the objection. (Paras 1-10)
B) Arbitration - Challenge to Arbitral Award - Section 34 of Arbitration and Conciliation Act, 1996 - The court held that the petitioner failed to make out any ground under Section 34 to set aside the award. The award was not patently illegal or against public policy. The petition was dismissed with costs. (Paras 1-10)
Issue of Consideration
Whether the appointment of the third arbitrator by the respondent was valid and whether the petitioner's objection to such appointment was waived by participating in the arbitration proceedings without protest.
Final Decision
The court dismissed the petition with costs, upholding the arbitral award.
Law Points
- Arbitration
- Appointment of arbitrator
- Unilateral appointment
- Section 34 of Arbitration and Conciliation Act
- 1996
- Section 11(6) of Arbitration and Conciliation Act
- Pre-amendment position
- Waiver of objection
- Consent to arbitration
Case Details
2019 LawText (BOM) (09) 60
Arbitration Petition No.319 of 2019
Mr.Kedar J. Patil for the Petitioner, Mr.Piyush Raheja with Ms.Manasvi Shah & Mr.Rjutruraj V. Bankar i/b M/s.Lex Legal & Partners for the Respondent
Mangalam Chaudhary Company
Hindustan Construction Company Ltd.
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an arbitral award.
Remedy Sought
The petitioner sought to set aside the arbitral award dated 8 October 2018 rejecting its claims and awarding costs against it.
Filing Reason
The petitioner challenged the award on the ground that the arbitrator was unilaterally appointed by the respondent and was not independent.
Previous Decisions
The arbitral tribunal passed an award on 8 October 2018 rejecting the petitioner's claims and awarding costs of Rs.3,01,147/- with 12% interest.
Issues
Whether the appointment of the third arbitrator by the respondent was valid under the arbitration agreement and the Arbitration and Conciliation Act, 1996.
Whether the petitioner waived its objection to the arbitrator's appointment by participating in the proceedings.
Submissions/Arguments
The petitioner argued that the respondent could not unilaterally appoint an arbitrator who might be associated with the respondent, and that the appointment was invalid.
The respondent contended that the appointment was in accordance with the contract and that the petitioner had waived any objection by participating in the arbitration.
Ratio Decidendi
Under the pre-amendment regime of the Arbitration and Conciliation Act, 1996, a party could unilaterally appoint an arbitrator if the arbitration agreement so provided. An objection to such appointment must be raised and pursued; participation in the proceedings without protest constitutes waiver of the objection.
Judgment Excerpts
By this petition filed under section 34 of the Arbitration & Conciliation Act, 1996, the petitioner has impugned the award dated 8th October, 2018 thereby rejecting the claims made by the petitioner with costs quantified at Rs.3,01,147/- with interest at the rate of 12% p.a. from the date of passing of the award till realization.
The petitioner through its advocate’s letter to the learned arbitrator raised an objection that the respondent could not appoint the learned arbitrator unilaterally who might be associated with the respondent in the past or present as the dispute was required to be referred to an independent, unbiased and unassociated person.
Procedural History
The respondent awarded a subcontract to the petitioner. Disputes arose. The respondent appointed a first arbitrator who resigned after allegations. A second arbitrator also resigned. The respondent appointed a third arbitrator on 3 November 2017. The petitioner objected by letter dated 18 November 2017 but did not appear at the first meeting on 27 November 2017. The arbitrator proceeded and passed an award on 8 October 2018. The petitioner filed this petition under Section 34 on an unspecified date.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34, Section 11(6)
