TO OBJECT OR NOT OBJECT: THAT IS NO LONGER THE QUESTION

By Nishtha Kumar, Advocate on Record

“To be, or not to be? That is the question—Whether 'tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles, And, by opposing, end them?”

― William Shakespeare, ‘Hamlet’

On 29th April 2020, the Hon’ble Supreme Court of India seems to have resolved a critical Hamletian dilemma pertaining to arbitrations in India. In a succinct Judgment delivered by a bench comprising of Hon’ble Mr. Justice Uday Umesh Lalit and Hon’ble Mr. Justice Vineet Saran, in the case of Quippo Construction Equipment Limited vs. Janardan Nirman Private Limited[1], the Hon’ble Supreme Court has held that if a party to an arbitration agreement fails to participate in the arbitral proceedings, in such a case, the said party shall be deemed to have waived its right to raise objections regarding jurisdiction of the arbitral tribunal or the scope of its authority at a later stage.

I. The Facts

Janardan Nirman Private Limited (hereinafter referred to as ‘JNPL’) is a company engaged in the business of infrastructure development activities.

Quippo Construction Equipment Limited (hereinafter referred to as ‘QCEL’) is a company dealing in the business of providing equipment for infrastructure activities

JNPL approached QCEL to provide, on rent, certain equipment for carrying out the work at JNPL’s worksite. Accordingly, the First Agreement dated 01.08.2010 was entered into between the parties.

Being satisfied with the equipment services provided by QCEL, JNPL further approached QCEL for taking on rent additional equipment. As a result, three more agreements were executed on 02.10.2010, 19.03.2011 and 14.04.2011.

The ‘General Terms and Conditions’ appended to the aforesaid Agreements were not identical. The two different clauses for resolution of disputes between the parties are as under:

---

1. Agreements dated 01.08.2020, 02.10.2010 and 19.03.2011: Article 24 – Exclusive jurisdiction with courts and tribunals at New Delhi. Article 24.1 · Disputes to be referred to Arbitration under Construction Industry Arbitration Association (“CIAA”)Rules and Regulations. Venue for arbitration proceedings would be New Delhi.

2. Agreement dated 14.04.2011: Article 24 – Exclusive jurisdiction with courts and tribunals at Kolkata. Article 24.1 · Disputes to be referred to Arbitration under Rules of the Construction Industry Arbitration Council (“CIAC”) and Regulations. Venue for arbitration proceedings would be Kolkata.

---

According to the Agreements, JNPL was required to make payment within seven days from the date of submission of monthly bills, failing which JNPL would be liable to pay interest for delayed period. Since payments were not forthcoming, QCEL repeatedly wrote to JNPL to pay the outstanding dues. However, as such demand was in vain, QCEL had no other option but to give Notice invoking Arbitration. Relying on Clauses 24 and 24.1, Shri L.C. Jain, President Consumer Forum (Retd.), was appointed as the Sole Arbitrator, to conduct proceedings at New Delhi.

In an apparent complete volte face, JNPL denied existence of any agreement between the parties. JNPL also did not take any steps to participate in the arbitration.

On the other hand, JNPL filed Title Suit No.189 of 2012 in the Court of Civil Judge, Junior Division, Second Court at Sealdah, praying that the agreements be declared null and void and for permanent injunction restraining QCEL from relying on the arbitration clauses contained in the agreements.

At the first instance, the Trial Court stayed the arbitral proceedings. However, upon application by QCEL, subsequently, vide Order dated 26.05.2014, the Trial Court permitted resumption of the arbitral proceedings, inter alia, observing that the disputes between the parties were covered by the arbitration clause.

An appeal (Misc. Appeal No. 57 of 2014) was preferred by JNPL before the Court of Additional District Judge, Second Court, Sealdah, on account of which JNPL repeatedly sought adjournments in the arbitral proceedings. However, since no interim or final order was forthcoming from the appellate court, the Arbitrator proceeded with the arbitral proceedings.

By ex-parte Award dated 24.03.2015, all claims of QCEL under all four agreements were allowed by the Arbitrator.

Soon after the award, OMP No. 449 of 2015 was filed by JNPL in the Hon’ble High Court of Delhi seeking relief under Section 9 of the Arbitration and Conciliation Act 1996 (“Act”). JNPL also preferred a petition under Section 34 of the Act before the Hon’ble Calcutta High Court being A.P. No.1141 of 2015. This Section 34 Petition was dismissed by the Hon’ble Calcutta High Court on 17.07.2015 after observing that it was not clear from the cause title how the petition could have been filed before the Hon’ble Calcutta High Court.

Thereafter, JNPL preferred a petition under Section 34 of the Act being Miscellaneous Case No.298 of 2015 in the Court of District Judge, Alipore. JNPL reiterated its case about non-existence of any agreement and, inter alia, also stated that the venue of arbitration in terms of the Agreement dated 14.04.2011 was at Kolkata.

Meanwhile, the Misc. Appeal before the Additional District Judge, Second Court, Sealdah, and also the O. M. P. under Section 9 of the Act before the Hon’ble Delhi High Court were dismissed.

Subsequently, Miscellaneous Case No.298 of 2015, which was pending in the Court of District Judge, Alipore, also came to be dismissed by Order dated 13.08.2018. Against this order, JNPL preferred C.A.N No.10094 of 2018 before the Hon’ble Calcutta High Court, which was allowed in toto by final Order dated 14.02.2019.

It was against this final Order that QCEL approached the Hon’ble Supreme Court, and the Judgment in question came to be passed.

II. The Findings

At the very outset, the Hon’ble Supreme Court deduced and isolated two vital points, viz.:

(a) Though each of the four agreements provided for arbitration, the award rendered by the Arbitrator was a common award; and

(b) In one of the agreements the venue was stated to be Kolkata and yet the proceedings were conducted at Delhi.

It was also noted that at no stage were objections raised by JNPL before the Arbitrator. Evidently, the Hon’ble Supreme Court opined, JNPL let the arbitral proceedings conclude and culminate in an ex-parteAward. Therefore, the question that arises is:

Issue: Whether JNPL could be said to have waived the right to raise any of objections?

Before deciding the controversy at hand, a closer look at Sections 4, 16 and 20 of the Act were taken by the Hon’ble Supreme. In addition, and in conjunction with the submissions by the parties, reference was also made to the decision of the Hon’ble Supreme Court in Narayan Prasad Lohia vs. Nikunj Kumar Lohia & Ors.[2], and Duro Felguera, S.A. vs. Gangavaram Port Limited[3].

After due analysis of the foregoing, the Hon’ble Supreme Court came to the irrefutable conclusion as under:

(a) In the present case, the arbitration was a domestic and an institutional arbitration, where CIAA was empowered to and did nominate the Arbitrator.

(b) The only distinction was with respect to the place/venue of arbitration, i.e. New Delhi or Kolkata. However, the substantive as well as curial law would be the same, regardless of whether the venue is New Delhi or Kolkata.

(c) It was possible for JNPL to raise submissions that arbitration pertaining to each of the agreements be considered and dealt with separately.

(d) It was also possible for JNPL to contend that in respect of the agreement where the venue was agreed to be at Kolkata, the arbitration proceedings be conducted accordingly.

(e) Considering the facts that JNPL failed to participate and did not raise any submission that the Arbitrator did not have jurisdiction or that he was exceeding the scope of his authority, JNPL must be deemed to have waived all such objections.

(f) Accordingly, JNPL is now precluded from raising any submission or objection as to the venue of arbitration.

As a result, conclusively and decisively, the final Order dated 14.02.2019 by the Hon’ble Calcutta High Court came to be set aside, and law with respect to deemed waiver came to be crystallised by the Hon’ble Supreme Court.

III. The Takeaway

On the one hand, the decision of the Hon’ble Supreme Court has further clarified the position pertaining to Section 4 of the Act, and categorically elucidated that the ‘right to raise objections’ is not an absolute right. On the other hand, the decision of the Hon’ble Supreme Court has vastly drawn inspiration from two maxims, viz.

(a) ‘Volenti non fit injuria’: He who consents to an act is not wronged by it; and

(b) Doctrine of Approbation and Reprobation: A party ought not to be permitted to approbate and reprobate, i.e. blow hot and cold, to suit its own needs. In other words, a person cannot both assert his rights acquired from part of a document and reject the rest of the document at the same time.

The decision of the Hon’ble Supreme Court is a welcomed affirmation in a scenario where parties often resort to dilatory tactics. This decision is also another step towards ensuring the reduction of interference by courts in arbitral proceedings, providing another boost for the independence and finality for arbitral awards.

What further emerges from the findings is that it is vital that once parties are aware of the arbitration proceedings, the challenge to the jurisdiction of the tribunal is brought under Section 16 of the Act, in compliance with the timelines mentioned therein. This is in consonance with the principles enshrined under the Code of Civil Procedure 1908, which also requires objections qua jurisdiction to be raised at the outset, and also to ensure avoidance of all types of dilatory tactics.

The ultimate takeaway from the judgment, in my opinion, is the positive step towards encouraging alternative dispute resolution mechanism and also discouraging frivolous litigation, especially in country which is plagued with huge pendency before regular courts.

* * *

[1] Judgment dated 29.04.2020 in Civil Appeal No. 2378 of 2020 [arising out of S.L.P. (C) No. 11011 of 2019] challenging the final Order dated 14.02.2019 passed by the Hon’ble High Court of Judicature at Calcutta in C.A.N No.10094 of 2018. [2] (2002) 3 SCC 572, at paras 5, 8-9, 14, 16 and 20. [3] (2017) 9 SCC 729, at para 42.