The Calcutta High Court (“Court”) in the recent judgment of West Bengal Housing Board v. M/s. Abhishek Construction, rejected the challenge to the arbitral award filed under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”) on the grounds that (i) the petitioner waived its right to challenge the non-compliance of the disclosure requirements by the arbitration by participating in the arbitration proceedings, and (ii) unilateral appointment of arbitrator cannot be a ground for seeking setting aside of the award when the arbitration proceedings had commenced prior to the coming into effect of the 2015 amendment to the Act.
Factual Matrix and Arguments:
A notice inviting tender was issued by West Bengal Housing Board (“Petitioner/ Award Debtor”) for the construction of roads at the Eastern High/ Grove/ Nook Housing Project of West Bengal Housing Board at New Town, Kolkata. The bid of M/s. Abhishek Construction (“Respondent/ Award Holder”) was accepted, and a formal agreement was executed.
Disputes arose between the parties leading to the Respondent writing letter to the Petitioner seeking payment against several claims, all of which came to be rejected by the Petitioner.
After completion of the arbitral proceedings, the Arbitrator published the award in favour of the Respondent. Aggrieved by the decision of the Arbitrator, the Petitioner has filed the appeal before the Court challenging the award under Section 34 of the Act.
The Petitioner’s case was that unilateral appointment of the Arbitrator is impermissible under Section 12(5) read with Schedule VII of the Act and that the Arbitrator lacked the inherent jurisdiction to pass the said award as he was appointed by an interested party. Thus, the award passed is non-est in law and is liable to be set aside. Further, by relying upon a few judgments, it was also contented by the Petitioner that the Arbitrator did not disclose in writing any circumstances which would give rise to justifiable doubts regarding his independence or impartiality and that in the absence of such a disclosure, the award is liable to be set aside.
The Court formulated two main issues that were to be decided:
- Whether non-disclosure by the Arbitrator as mandated under Section 12(1) of the Act can be a ground for setting aside an arbitral award?
- Whether the provisions of 2015 Amendment Act in relation to unilateral appointment would apply to arbitral proceedings initiated before October 23, 2015?
The Court decided the first issue in the negative by relying upon a few previous precedents and on the basis that since the Petitioner has not challenged the non-disclosure requirement before the Arbitrator, the Petitioner cannot be allowed to take it up for the first time while filing a challenge to the award under Section 34 of the Act. However, the Court observed that while the Arbitrator’s action of not making a disclosure under Section 12(1) though holds significance, the same cannot be a sole ground for setting aside the arbitral award.
In regard to the second issue, the Court answered the same in the negative on the basis that the 2015 amendments to the Act as interpreted by the Supreme Court in the matter of Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and other judgments, shall only apply to arbitral proceedings commenced before the commencement of the 2015 amendment, unless the parties have agreed otherwise.
Since in the present case, the arbitration commenced in the year 2012 as per Section 21 of the Act, which is much prior to the 2015 amendment to the Act, the amendments incorporated in the Act pursuant to the 2015 amendment shall not be applicable. Thus, the challenge to the award basis the unilateral appointment of the Arbitrator cannot be sustainable as at the time of the appointment of the Arbitrator, there was no bar placed on unilateral appointment of arbitrators, as was subsequently done by the 2015 amendment. However, the Court observed that the adjudication of the challenge to the arbitral award on merits shall be decided in accordance with law.
To conclude, the decision of the Court is a re-affirmation of the decision taken by many courts that objections (if any) in the arbitral proceedings need to be raised at that very instance if an actual violation of the provisions of the Act is noticed. By being silent or by participating in the arbitral proceedings without raising objections at the appropriate time, it would be deemed that such a party has waived its right to raise any concerns pertaining to the arbitral proceedings and may not be able to challenge the same at a later stage.