2014 (3) TMI 225 - SC - Indian Laws

Jurisdiction of arbitrator - respondent has submitted that the appellant having participated in the proceedings before the learned arbitrator without any demur or objection cannot now be permitted to raise the objection with regard to the jurisdiction of the arbitrator at this belated stage - appellant terminated the contract on the ground of delay on commencement of the work and subsequently executed the work which was of inferior quality - Held that - Pursuant to section 4 of the Arbitration and Conciliation Act, 1996, a party which knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. High Court had appointed an arbitrator - If further objections were to be made after this order, they should have been made prior to the first arbitration hearing. But the appellants had not raised any such objections. The appellants therefore had clearly failed to meet the stated requirement to object to arbitration without delay. As such their right to object is deemed to be waived. - appeal dismissed.

Summary

Issues:
1. Jurisdiction of the arbitrator in appointment and decision-making.
2. Compliance with the Arbitration Act, 1996 and the General Conditions of Contract.
3. Waiver of objections to jurisdiction by participating in arbitration proceedings.

Detailed Analysis:
1. The appeal before the Supreme Court challenged the judgment of the Calcutta High Court regarding the appointment and decision of the arbitrator in a construction dispute. The appellant argued that the High Court erred in appointing a former judge as the sole arbitrator, contrary to contractual conditions. The appellant contended that the arbitrator lacked jurisdiction to decide certain matters. Conversely, the respondent argued that the appellant participated in the arbitration proceedings without objection, thus waiving the right to challenge jurisdiction. The respondent emphasized the competence of the Arbitral Tribunal to rule on its jurisdiction, as per Section 16 of the Arbitration Act, 1996.

2. The arbitration agreement, as per clause 64 of the General Conditions of Contract, outlined the procedure for appointing arbitrators based on claim value and complexity. The agreement required a panel of Gazetted Railway Officers for arbitrator selection. However, due to the repeal of the Arbitration Act, 1940 by the Arbitration Act, 1996, the provision for two arbitrators and an Umpire became redundant. Consequently, the respondent requested the Railways to appoint a sole arbitrator. The High Court appointed an arbitrator, which the appellant did not challenge, leading to its finality. The appellant's failure to object to jurisdiction during the arbitration proceedings resulted in a waiver of the right to challenge jurisdiction, as per Section 4 read with Section 16 of the Arbitration Act, 1996.

3. The Supreme Court upheld the High Court's decision, emphasizing the principle of kompetenz-kompetenz, allowing the Arbitral Tribunal to rule on its jurisdiction. Citing a previous case, the court reiterated that parties must raise objections promptly to avoid waiving the right to challenge arbitration proceedings. In this case, the appellant's failure to object during the arbitration process led to a deemed waiver of jurisdictional objections. Therefore, the court dismissed the appeal, finding no merit and ordered no costs to be paid.

In conclusion, the judgment focused on the jurisdiction of the arbitrator, compliance with the Arbitration Act, 1996, and the General Conditions of Contract, and the waiver of objections by participating in the arbitration proceedings. The court's decision highlighted the importance of timely objections and the consequences of waiving jurisdictional challenges in arbitration disputes.