Arbitration In IndiaJURISDICTIONAL DEFECTS RENDERING AN ARBITRAL AWARD VOID CAN BE CHALLENGED AT ANY STAGE OF THE PROCEEDINGS

The Delhi High Court, in the case of Telecommunications Consultants India Ltd. v. Shivaa Trading [O.M.P. (COMM) 311/2022 decided on 09.04.2024], held that a jurisdictional defect that invalidates a decision, is subject to challenge at any stage as it since it undermines the fundamental authority of the court or tribunal to adjudicate a dispute.

FACTS

Telecommunications Consultants India Pvt. Ltd. (hereinafter referred to as the “Petitioner”) had entered into a contract with the Madhya Pradesh Rural Road Development Authority for the construction of roads. Subsequently, the petitioner executed a Memorandum of Understanding with Shivaa Trading (hereinafter referred to as the “Respondent” on 10.09.2007 (hereinafter referred to as “MoU“), under which work orders were issued to the Respondent for the fulfillment of the assigned tasks. However, owing to purported breaches by the Respondent, the Petitioner terminated Contract on 31.01.2013. The Petitioner then completed the remaining work at the Respondent’s expense and liability.

The Petitioner invoked the arbitration clause of the MoU vide Notice dated 11.10.2017. The Arbitral proceedings commenced and an Arbitral Award was passed on 17.12.2021 (hereinafter referred to as the “Impugned Award”). Being aggrieved and dissatisfied by the Impugned Award, the Petitioner has challenged the Impugned Award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”).

ISSUES BEFORE THE DELHI HIGH COURT

1. Whether the Ld. Arbitrator was de jure ineligible and was hit by Section 12(5) of the A&C Act?
2. Whether a defect of jurisdiction that renders a decision invalid can be contested at any stage because it undermines the court’s or tribunal’s ability to resolve a dispute ?

CONTENTIONS OF THE PARTIES

The Petitioner contended that the Ld. Arbitrator was dejure ineligible to conduct the proceedings as was hit by Section 12(5) of the A&C Act.

The Petitioner upon Bharat Broadband Network Ltd. vs. United Telecom Limited [(2019) 5 SCC 755], and submitted that the concept of deemed waiver of the right to object by conduct under Section 4 of the A&C Act does not apply to Section 12 (5) of the A&C Act.

The Petitioner further relied upon Balvant N. Viswamitra & Others vs. Yadav Sadashiv Mule (dead) thru LRs & Others [(2004) 8 SCC 706]   and argued that as the Arbitral Tribunal did not possess the jurisdiction, the present petition cannot be considered to be  time-barred.

The Respondent contended that the Arbitrator was appointed by the Petitioner, however, during the Arbitration proceedings no contest against the Ld. Arbitrator was even shown by the Petitioner. It was argued that the Petitioner only opted to challenge the award after it was rendered against them.

The Respondent further contended that it would be contradictory to the principles of fairness and justice to allow a party, that appointed the arbitrator without contesting their jurisdiction, to subsequently challenge the award on the basis that the appointed arbitrator inherently lacked jurisdiction to issue the award.

DECISION AND FINDINGS

The Delhi High Court held that challenge of Ld. Arbitrator being de jure ineligible for conducting the arbitral proceedings under Section 12(5) of the A&C Act can be preferred at any point of time.

The High Court held that it is undisputed that a jurisdictional defect, which renders a decision void, is subject to challenge at any point, as such a defect undermines the fundamental authority of the court or tribunal to adjudicate a dispute.

The High Court rendered the Impugned Award ab intio void on the sole ground that the Ld. Arbitrator was de jure ineligible under Section 12(5) of the A&C Act.

AMLEGALS REMARKS

The Delhi High Court  upheld the intent of legislation of impartiality of the Arbitrator. It underscores the parties’ right to contest awards based on the Arbitrator’s ineligibility even after the conclusion of the arbitration proceedings.  The ruling clarifies the legal concept that a defect of jurisdiction can be contested at any stage, emphasizing the importance of jurisdictional concerns in arbitration. Therefore, the decision of the High Court serves to be a landmark one as it emphasizes the jurisdictional integrity and rights of parties in arbitration disputes.

– Team AMLEGALS assisted by Ms. Deepanshi Kapoor (Intern)