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The Bombay High Court has ruled that even though the parties had participated in the arbitral proceedings continued by the Arbitrator after his mandate had expired, the same cannot amount to a waiver under Section 4 of the Arbitration and Conciliation Act, 1996 (A&C Act). The court remarked that Section 29A of the A&C Act that provides the time limit for passing the award, is a non-derogable provision and thus, Section 4 of the Act has no application.
The bench of Justice R.I. Chagla made the observation in a petition for extension of time limit for passing of the award filed by the petitioner-claimant, Mahaveer Realities. The court, while appointing a substitute arbitrator, said that the arbitral proceedings would continue from the expiry of the mandate of the erstwhile Arbitrator. It added that proceedings carried on by the erstwhile Arbitrator after the expiry of its mandate, shall be disregarded by the substitute Arbitrator.
The bench dismissed the claim that since the parties knowingly proceeded before the Arbitrator after the expiry of its mandate, they were deemed to have waived their right to object to the continuation of proceedings after expiry of the mandate.
Noting that voluntary choice is the essence of waiver, the court said that the respondent/ counter-claimant, Shirish J. Shah, had no choice but to participate in the arbitral proceedings which were continued by the Arbitrator after the expiry of its mandate. Thus, the same cannot be considered to be a voluntary choice of continuation of mandate of the Arbitrator. It concluded that the proceedings after expiry of the Arbitrator’s mandate would be contrary to Section 29A of the A&C Act.
The Arbitrator was appointed pursuant to an order dated 19.09.2018 passed by the court. In view of the Joint Pursis filed by the parties, the completion of the arbitral proceedings was extended by 6 months, i.e., till 31.03.2020.
The court was informed by the parties that taking into account the Covid 19 pandemic and the order of the Supreme Court in Re: Cognizance For Extension Of Limitation dated 10.01.2022, the six month extension of mandate would expire in May, 2022.
The petitioner, Mahaveer Realities, in its application seeking extension of the time limit for passing of the award, claimed that after the six-month extension period had expired, the proceedings were continued by the Arbitrator and a preliminary award was passed on 15.09.2022 in its favour. The same was challenged by the respondent before the District Judge who rejected its application for stay of the preliminary award.
In view of the same, the petitioner contended that since the parties knowingly proceeded before the Arbitrator even after the expiry of its mandate, the parties would be deemed to have waived their right to object to the continuation of the proceedings after expiry of the mandate.
Referring to the provisions of Section 29A of the A&C Act, the court remarked that the award is required to be made by the Arbitrator within a period of 12 months from the date of completion of pleadings. Though the parties may by consent extend the period by a further period not exceeding six months, there can be no further extension of the mandate of the arbitrator beyond that, the court said. “Further, this provision is not derogable and hence Section 4 of the Arbitration Act has no application,” it added.
The bench referred to the top court’s decision in Jayesh H. Pandya & Anr. vs. Subhtex India Ltd. & Ors, (2020) 17 SCC 383, where the court had held that the essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The Apex Court had ruled that voluntary choice is the essence of waiver and that there can be no waiver of valuable rights where the circumstances show that what was done was involuntary.
In view of the same, the High Court said, “Having considered the said decision of the Supreme Court, it is clear that the Respondent had no choice but to participate in the arbitral proceedings which were continued by the Arbitrator. Thus, this cannot be considered to be a voluntary choice of continuation of the mandate of the Arbitrator. The proceedings after expiry of termination of mandate would be contrary to Section 29A of the Act and though there has been a Preliminary Award as well as a challenge to the Preliminary Award in the District Court, Pune that cannot be taken into account or considered to be a waiver of the non-derogable statutory provision.”
The bench referred to the top court’s decision in Jayesh H. Pandya & Anr. vs. Subhtex India Ltd. & Ors, (2020) 17 SCC 383, where the court had held that the essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The Apex Court had ruled that voluntary choice is the essence of waiver and that there can be no waiver of valuable rights where the circumstances show that what was done was involuntary.
The bench referred to the top court’s decision in Jayesh H. Pandya & Anr. vs. Subhtex India Ltd. & Ors, (2020) 17 SCC 383, where the court had held that the essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The Apex Court had ruled that voluntary choice is the essence of waiver and that there can be no waiver of valuable rights where the circumstances show that what was done was involuntary.
Taking note that the mandate of the Arbitrator came to an end in May, 2022, the court said that further extension of mandate can only be from June, 2022.
The court thus appointed a substitute arbitrator by further extending the mandate of arbitration.
“The time limit for final arguments and passing of the arbitral award as provided in Section 29 A (1), (2) read with the Section 29A (4) and (5) of the Arbitration Act is extended by a period of six months from the date of this Order,” the court said. It added: “It is clarified that the proceedings will continue from the expiry of mandate of the erstwhile Arbitrator i.e. from June, 2022. The proceedings carried on by the erstwhile Arbitrator after the expiry of the mandate shall be disregarded by the Arbitrator appointed by this Order.”
Case Title: Mahaveer Realities & Ors. vs Shirish J. Shah
Dated: 21.07.2023
Counsel for the Petitioner: Mr. G.R. Agrawal with Mr. Ajinkya Udane and N.P Boraste
Counsel for the Respondent: Dr. Abhinav Chandrachud, Mr. Saurish Shetye and Prem Pandey