Telecommunication Consultants India Ltd v. Shivaa Trading, OMP(COMM) 311 of 2022

Summary

On April 9, 2024, in the case of Telecommunication Consultants India Ltd v. Shivaa Trading,[1] The Delhi High Court addressed the validity of an arbitration award. The petitioner challenged the award under section 34 of the Arbitration & Conciliation Act 1996, alleging that the arbitrator’s appointment was invalid due to a violation of Section 12(5) of the Act.

Case Timeline

• The dispute arose from a contract for the construction of rural roads under the Pradhan Mantri Gram Sadak Yojana.
• The parties entered into a Memorandum of Understanding (MoU) with an arbitration clause allowing the petitioner to appoint a sole arbitrator.
• After the termination of the contract, the petitioner invoked arbitration as per clause 19 of the MoU.
• The petitioner unilaterally appointed an arbitrator, and proceedings commenced.
• The arbitrator rendered an award on 17.12.2021, which the petitioner challenged through the present petition under section 34 of the Act.

Issue raised

1. Whether the appointment of the arbitrator was valid and whether the award rendered by the arbitrator is valid?

Arguments Advanced

Petitioner

• The petitioner argued that the appointment of the arbitrator was void ab initio under Section 12(5) of the Arbitration & Conciliation Act. They contended that the arbitrator’s relationship with the parties or the subject matter of the dispute fell under one of the categories specified in the 7^th Schedule of the Act, rendering the appointment ineligible. This argument was supported by cases like Bharat Broadband Network Ltd. vs. United Telecom Limited[2] and Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd.,[3] which highlighted the automatic termination of the arbitrator’s mandate in such cases.
• The petitioner emphasized that any waiver of the applicability of Section 12(5) must be expressed and in writing, as per the proviso to the section. They asserted that no such express waiver was granted by the parties after the disputes had arisen between them.
• The petitioner argued that a defect of jurisdiction strikes at the very foundation of the tribunal’s authority to decide the dispute. They highlighted the principle that such defects can be challenged at any stage of the proceedings, as they render any decision void ab initio.

Respondent

• The respondent pointed out that the petitioner actively participated in the arbitration proceedings without raising any initial objection to the arbitrator’s appointment. They argued that the petitioner’s subsequent challenge to the award, based on the appointment they made, was unfair and amounted to contradictory behaviour.
• The respondent emphasized the principle of fairness and justice, arguing that it was against these principles to permit a party to challenge an award based on the arbitrator’s alleged ineligibility after participating in the proceedings. They contended that the petitioner’s objection was a strategic manoeuvre in response to an unfavourable decision rather than a genuine concern about the arbitrator’s jurisdiction.
• The respondent invoked the legal doctrine of “approbate and reprobate,” arguing that the petitioner cannot selectively accept the benefits of their actions (such as participating in arbitration) while disavowing the consequences (such as the validity of the arbitrator’s appointment). They asserted that consistency and fairness demanded that the petitioner’s challenge to the award be rejected.

Analysis

The Delhi High Court’s analysis delved into the intricacies of arbitration law, balancing the competing interests of procedural fairness and the integrity of arbitral proceedings. It includes the following:

• The court examined Section 12(5) of the Arbitration & Conciliation Act, which outlines the eligibility criteria for arbitrators. It emphasized that individuals falling under the categories specified in the 7^th Schedule are ineligible unless the parties expressly waive this ineligibility in writing after a dispute arises.
• The court further clarified the significance of an express written waiver for appointments falling under Section 12(5). It made clear that simply participating in arbitration proceedings does not constitute such a waiver. Through a close examination of the parties’ actions after the dispute arose, the court found an absence of any explicit written agreement to waive the applicability of Section 12(5).
• The court emphasized the fundamental nature of defects in jurisdiction, which can undermine the legitimacy of arbitral proceedings. Such defects strike at the very core of the tribunal’s authority to adjudicate disputes, rendering any resulting decisions void from the outset. The court rejected the argument that the petitioner’s participation in the proceedings implied a waiver of their right to challenge the arbitrator’s jurisdiction. It reiterated that objections to jurisdiction can be raised at any stage and are not subject to waiver.
• While acknowledging the respondent’s concerns regarding fairness and consistency, the court prioritized adherence to statutory requirements and the overarching principles of procedural fairness in arbitration. It noted that allowing parties to challenge awards based on an arbitrator’s alleged ineligibility serves the objective of upholding the integrity of arbitral proceedings. This ensures that parties are not subjected to decisions rendered by arbitrators who lack the requisite authority.

Conclusion

This decision reaffirms the critical importance of strict compliance with statutory provisions in arbitrator appointments, the necessity of express waivers for appointments falling under Section 12(5), and the fundamental nature of jurisdictional defects in arbitral proceedings.

[1] OMP(COMM) 311 of 2022.

[2] (2019) 5 SCC 755.

[3] (2020) 20 SCC 760.