Judgment Name: Govind Singh v. Satya Group Pvt. Ltd
Citation: FAO (COMM) 136/2022
Court: The High Court of Delhi
Coram: Vibhu Bhakhru, J & Amit Mahajan, J
Date: 6th January 2023
Keywords: Section 12 (5) of the Arbitration & Conciliation Act, 1996 (the ‘A&C Act’), Unilateral Appointment, Waiver of rights
Overview
Mere participation in arbitral proceedings does not amount to a waiver of rights under Section 12 (5) of the A&C Act. For a waiver to be considered under the provision, it must be in the form of an express agreement in writing.
Facts
Mr. Govind Singh (“Appellant”) and M/s Satya Group Pvt Lt (“Respondent Company”) entered into a buyer agreement dated 30th June 2014 (“the Agreement”) wherein the Appellant agreed to purchase a flat in a building being developed by the Respondent Company named ‘The Hermitage’ bearing no. T8-804, 2-1 BHK situated in Sector-103, Dwarka Gurugram Expressway, Gurgaon (“the property”). A second Buyer Agreement dated 29th August 2017 was entered into for the purchase of a smaller unit as a result of differences arising from the price of the property. The Appellant claimed that the parties had agreed to transfer the said amount towards the above purchase but the same was not reflected in the Buyer Agreement dated 29th August 2017. A dispute arose between the parties due to the amount not being adjusted. The Appellant invoked the arbitration clause in the Agreement by a notice dated 13.01.2018. Thereafter, the Managing Director of the Respondent Company addressed a letter to the Learned Arbitrator (“Respondent no.2”) referring to the arbitration clause in the Agreement indicating their desire to appoint Respondent no.2 as the sole Arbitrator to adjudicate the disputes that had arisen between the parties and the arbitration commenced.
The Appellant appeared before the Tribunal and objected to its jurisdiction and later left the proceedings along with their counsel. The Tribunal continued ex-parte and passed an award in favour of the Respondent Company. Aggrieved by the Award, the Appellant challenged the same under Section 34 of the A&C Act. The Commercial Court rejected the petition. Aggrieved by the rejection of the petition, the Appellant preferred an appeal under Section 37 of the A&C Act.
Issue
Whether the impugned award is liable to be set aside on the ground that the learned Arbitrator was ineligible to be appointed as an Arbitrator?
Analysis
The court established that the sole Arbitrator was unilaterally appointed by the Managing Director of the Respondent Company. The Court relied on the fact that there was no agreement in writing after the disputes had arisen, whereby the parties had concurred on appointing Respondent No.2 as the sole Arbitrator to adjudicate the disputes between the parties to prove that the sole Arbitrator was unilaterally appointed. The Court relied on the judgments of the Supreme Court in TRF Ltd v. Energo Engineering, Perkins Eastman v. HSCC and its judgment in Proddatur Cable v. Citi Cableto hold that unilateral appointment of sole arbitrator is impermissible in law and Section 12 (5) of the A&C Act would be attracted.
The Respondent Company had contended that by attending the proceedings, the Appellant had waived its right to object to the appointment of the arbitrator. In concern to this aspect the Court relied on the case of Bharat Broadband Network Limited v. United Telecoms Limited) (“Bharat Broadband”). The Supreme Court in Bharat Broadband had laid down that a waiver to object to the appointment of an arbitrator under Section 12 (5) of the A&C Act would only be valid if it existed as an express agreement in writing and an implied waiver of rights under Section 12(5) of the A&C Act cannot be derived in any manner. While considering the reliance on Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited (2021) (“Kanodia Infratech”) by the Respondent Company to support their contention, the court ruled that the distinction created in the said judgment to not apply Bharat Broadband is inapplicable in the current case and therefore Kanodia Infratech cannot be relied upon.
Given the law laid down, the Court in this case held that it was not necessary to examine the question of whether the Appellant had raised an objection to the appointment of the learned Arbitrator. This was because there was no scope for an implied waiver under Section 12 (5) of the A&C Act via mere participation in arbitral proceedings without objecting. The court further ruled that since the Arbitral Award was rendered by an ineligible Arbitrator, the same could not be considered binding. The ineligibility of the arbitrator goes to the root of his jurisdiction and since lack of jurisdiction would make the award liable to be set aside, the Award was bound to be set aside.
Conclusion
The participation of the Appellant in the arbitral proceedings was not considered a waiver of rights under Section 12(5) of the A&C Act. Moreover, the Arbitrator was considered ineligible due to unilateral appointment and hence the award was set aside.
[This case note has been authored by Rishita Khandelwal, an Editor at Mapping ADR.]