2004 (11) TMI 610 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the unilateral appointment of the arbitrator.
2. Validity of the arbitration award.
3. Jurisdiction and consent in arbitration proceedings.
4. Timeliness of filing objections to the arbitration award.

Detailed Analysis:

1. Validity of the Unilateral Appointment of the Arbitrator:
The primary issue was whether the respondent could unilaterally appoint an arbitrator without the appellant's consent. The arbitration clause in the agreement stated, "Settlement of disputes shall be through arbitration as per the Indian Arbitration Act," referring to the Arbitration Act, 1940. The respondent appointed Shri Swami Dayal as the Sole Arbitrator without the appellant's consent. The court concluded that the procedure followed by the respondent was "wholly unknown to law" and that both the appointment of the arbitrator and the reference of disputes must be based on mutual consent. The court emphasized that "one party cannot usurp the jurisdiction of the Court and proceed to act unilaterally," making the appointment and reference void ab initio.

2. Validity of the Arbitration Award:
The arbitrator, Shri Swami Dayal, gave an award in favor of the respondent, which the appellant challenged. The court held that the award was a nullity because it was based on an invalid appointment and reference. The court cited several precedents, including Thawardas Pherumal and Anr. Vs. Union of India and Waverly Jute Mills Co. Ltd. Vs. Raymond and Co. (India) Pvt. Ltd., to support the view that an award on a reference presupposes a valid reference. Without a valid reference, the award is considered a nullity.

3. Jurisdiction and Consent in Arbitration Proceedings:
The court extensively discussed the importance of consent in arbitration proceedings. It stated that an arbitrator derives authority from the arbitration agreement and the mutual consent of the parties. The court reiterated that "consent is of the very essence of arbitration," and without it, any proceedings or awards are void. The court also referenced the Constitution Bench decision in Khardah Company Ltd. Vs. Raymond & Co. (India) Private Ltd., which held that jurisdictional competence in arbitration is conferred by the agreement and consent of the parties.

4. Timeliness of Filing Objections to the Arbitration Award:
The appellant filed objections to the award beyond the prescribed period, arguing that they only became aware of the award on the date of the court appearance. The court noted that ordinarily, the objections would be dismissed for being time-barred. However, given that the award was deemed a nullity, the court found it unnecessary to remand the matter for further hearing. The court declared the award void ab initio, obviating the need for remand and further proceedings.

Conclusion:
The appeal was allowed, and the impugned award, along with the appointment of the arbitrator and the reference made to him, was set aside as void ab initio and nullity. The respondent was granted liberty to seek enforcement of their claim through appropriate legal remedies, with the possibility of seeking condonation of delay due to the time lost in the present proceedings. No order as to costs was made.