Current Affairs

Source: Delhi High Court

Why in News?

Justice Manoj Kumar Ohri held that filing an application under Section 29(A) does not amount to an express waiver in writing of the right to challenge the arbitrator's ineligibility under Section 12(5) of Arbitration and Conciliation Act, 1996

• The Delhi High Court gave this judgment in the case of Umaxe Projects Pvt Ltd v. AIR Force Naval Housing Board.

What is the Background of Umaxe Projects Pvt Ltd v. AIR Force Naval Housing Board Case?

• The petitioner filed petitions under Section 34 of the Arbitration & Conciliation Act, to set aside two final arbitral awards delivered by the same Sole Arbitrator for different projects.
• The respondent contended that implicit waiver could occur through the petitioner's active steps, such as filing a Section 29(A) application for extension of the arbitrator's mandate and opposed the petitioner's reliance on certain judgments, argued that filing an application under Section 29(A) amounted to a waiver.
• The court concluded that the petitioner's objections were not waived, allowing the petitions and setting aside the awards.

What were the Court’s Observations?

• Filing an application under Section 29(A) does not amount to an express waiver in writing of the right to challenge the arbitrator's ineligibility under Section 12(5) of A&B act,1996.
• Mere participation in arbitral proceedings, without an overt act indicating awareness and conscious waiver of the right to object, does not suffice.

What are the legal provisions covered under Umaxe Projects Pvt Ltd v. AIR Force Naval Housing Board Case?

• Section 29(A): Time limit for arbitral award.

(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of Section 23:

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree

(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-section (3), the mandate of the arbitrator(s) shall terminate unless the court has, either prior to or after the expiry of the period so specified, extended the period:
Provided that while extending the period under this sub-section, if the court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.
Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application:
Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.

(5) The extension of the period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the court.

(6) While extending the period referred to in sub-section (4), it shall be open to the court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material.

(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.

(8) It shall be open to the court to impose actual or exemplary costs upon any of the parties under this section.

(9) An application filed under sub-section (5) shall be disposed of by the court as expeditiously as possible and endeavor shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

• Section 12: Grounds for Challenge.

(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,

(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and

(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.
Explanation 1-The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

Explanation 2- The disclosure shall be made by such person in the form specified in the Sixth Schedule.

(3) An arbitrator may be challenged only if-

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or

(b) he does not possess the qualifications agreed to by the parties.

(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.

(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:

Provided that the parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.

What is the Landmark Judgment Cited in the Case?

• Bharat Broadband Network Limited v. United Telecoms Ltd (2017):
  • The Delhi High Court held that filing of statement of defence by a party without objecting to the ineligibility of the arbitrator would amount to waiver under Section 12(5) is not helpful to the respondent’s cause. The waiver has to be expressed and in writing after becoming aware of the ineligibility.