2002 (2) TMI 1337 - SC - Indian Laws

Summary

Issues Involved:
1. Authority and jurisdiction of the Arbitrator post-transfer.
2. Acquiescence and estoppel in arbitration proceedings.
3. Applicability of mandatory and directory provisions of law in arbitration.

Detailed Analysis:

1. Authority and Jurisdiction of the Arbitrator Post-Transfer:
The primary issue was whether the Arbitrator, appointed by designation, retained authority to continue arbitration proceedings after being transferred to a different position. The Board argued that the Arbitrator, Shri R.K. Jain, lost his authority and jurisdiction upon his transfer and that the proceedings should have been taken over by his successor. The trial court and appellate court initially upheld the Arbitrator's authority, but the High Court set aside the awards, agreeing with the Board's contention.

2. Acquiescence and Estoppel in Arbitration Proceedings:
The appellant contended that the Board, by participating in the arbitration proceedings after the Arbitrator's transfer without raising any objections, had acquiesced to the continuation of the Arbitrator and was estopped from challenging the awards. The Supreme Court referenced several precedents, including *N. Chellappan vs. Secretary, Kerala State Electricity Board & Anr.*, and *Prasun Roy vs. Calcutta Metropolitan Development Authority & Anr.*, to establish that a party participating in arbitration proceedings without protest is deemed to have acquiesced and cannot later challenge the Arbitrator's authority.

3. Applicability of Mandatory and Directory Provisions of Law in Arbitration:
The Court distinguished between objections based on breaches of mandatory provisions of law and those based on agreements between parties. It held that:
- If an objection arises from an agreement and the party participates in proceedings without protest, they are estopped from later challenging the validity.
- If the objection is based on a breach of a mandatory legal provision, the party is not estopped from raising it even after participating in the proceedings.
- If the provision breached is directory, participation without protest precludes later objections.

In this case, the Court concluded that the continuation of arbitration by the transferred Arbitrator was not in breach of any mandatory legal provision but, at most, a breach of the agreement. Since the Board participated without protest, it waived its right to challenge the proceedings and awards.

Conclusion:
The Supreme Court allowed the appeals, set aside the High Court's judgment, and reinstated the trial court's decision to make the awards rule of the Court. The Board was deemed to have acquiesced to the Arbitrator's authority post-transfer by its conduct, and thus, its objections were not meritorious. The appeals were allowed with costs quantified at Rs. 10,000.