Arbitration appointment and jurisdictional objections: unilateral tribunal challenge failed after no timely Section 16 objection was raised.
Under a contractual arbitration clause, unilateral appointment by a contractor was held unjustified where the appointing authority had already sent and reiterated a panel of three names for the related contracts, including the dispute contract, so there was no failure to act requiring a fresh panel. A jurisdictional objection to the constitution of the arbitral tribunal could not be raised for the first time under Section 34 of the Arbitration and Conciliation Act, 1996 where no objection had been taken before the tribunal under Section 16; a party who receives notice must ordinarily raise the issue at the threshold or show strong reasons for not doing so. The contractor's challenge therefore failed, and the award in favour of the appellant was restored.
Issues: (i) Whether the contractor was entitled to appoint a sole arbitrator on the footing that the appointing authority had failed to act in terms of the contractual arbitration clause; (ii) whether a challenge to the constitution of the arbitral tribunal could be entertained under Section 34 of the Arbitration and Conciliation Act, 1996 when no objection to jurisdiction had been raised before the arbitral tribunal under Section 16 of the Act.
Issue (i): Whether the contractor was entitled to appoint a sole arbitrator on the footing that the appointing authority had failed to act in terms of the contractual arbitration clause.
Analysis: The contractual mechanism required the appointing authority to send a panel of three names and permitted the contractor to act only if that authority failed to do so within the stipulated period. The correspondence and surrounding circumstances showed that the appellant had already sent a panel and had reiterated it for all the related contracts, including the contract in dispute. The Court treated the exchanges as part of a common dispute-resolution process covering all the contracts and held that the appellant was not bound to send a fresh or separate panel for each contract. On that factual and contractual basis, the contractor's unilateral nomination of an arbitrator was not justified.
Conclusion: The appointment made by the contractor was not valid, and the appellant's appointment of the arbitrator could not be invalidated on that ground.
Issue (ii): Whether a challenge to the constitution of the arbitral tribunal could be entertained under Section 34 of the Arbitration and Conciliation Act, 1996 when no objection to jurisdiction had been raised before the arbitral tribunal under Section 16 of the Act.
Analysis: Section 16 empowers the arbitral tribunal to rule on its own jurisdiction, including objections to the existence or validity of the arbitration agreement. Relying on the scheme of the Act and the Model Law, the Court held that a party who receives notice but does not raise a jurisdictional objection before the tribunal at the threshold must show strong reasons for that omission before seeking to set aside the award under Section 34. Since the contractor did not appear before the arbitrator appointed by the appellant and did not raise any plea under Section 16, the jurisdictional challenge was not available in proceedings under Section 34.
Conclusion: The objection to the tribunal's constitution was barred from being raised for the first time in the Section 34 proceedings.
Final Conclusion: The award in favour of the appellant was restored in substance by setting aside the Division Bench judgment and affirming the Single Judge's dismissal of the Section 34 petition.
Ratio Decidendi: A party that fails to raise a timely jurisdictional objection before the arbitral tribunal under Section 16 of the Arbitration and Conciliation Act, 1996 cannot ordinarily challenge the tribunal's constitution for the first time in proceedings to set aside the award under Section 34.
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