2019 (8) TMI 1308 - SC - Indian Laws

Supreme Court sets aside judgment, emphasizes adherence to arbitration terms.

The Supreme Court allowed the appeal, setting aside the High Court's judgment. It held that the Arbitrator's mandate had expired, and the appellants had ... Extension of time for completion of the arbitration proceedings - beyond four months period from the date of first preliminary meeting - deemed Waiver of right to the extension of time - appellants have participated in the arbitral proceedings - HELD THAT:- It is clear from the bare reading of subsection 1(a) of Section 14 that mandate of an arbitrator shall terminate if it fails to act without undue delay. In the present case, the first preliminary meeting was held on 4th May, 2007 and the Arbitrator in terms of the agreement was supposed to conclude and pass the award within a period of four months which indisputedly stood expired on 4th September, 2007 and in the meantime the appellants recorded their objection of not consenting for extension of time beyond 4th September, 2007 and thus, it can be construed that parties were not in agreement for extension to the mandate of the Arbitrator failing which the arbitral proceedings automatically stood terminated. The essential element of waiver is that there must be a voluntary and intentional relinquishment of a right. The voluntary choice is the essence of waiver. There should exist an opportunity for choice between the relinquishment and an enforcement of the right in question. It cannot be held that there has been a waiver of valuable rights where the circumstances show that what was done was involuntary. That apart, the doctrine of “waiver” or “deemed waiver” or “estoppel” is always based on facts and circumstances of each case, conduct of the parties in each case and as per the agreement entered into between the parties and this exposition has been affirmed by this Court in NBCC Ltd.(2010 (1) TMI 1140 - SUPREME COURT) regarding adherence to the imposition of time limit for the conclusion of the arbitral proceedings. The parties have to stand by the terms of contract including the Arbitrator. There is no provision under the arbitration agreement to condone the delay when agreement between the parties binds them to see that the arbitration proceedings should be concluded within the time prescribed. This time restriction is well within the scope and purport of the Act, 1996 at national and international arbitrations. The time fixed for the arbitration and/or schedule of time limit in such arbitration proceedings, as it is recognised by law, there is no reason not to accept the same, basically in the present facts and circumstances where the parties themselves agreed to bind themselves by the time limit. Section 14 read with Section 15 of the Act, 1996 also recognise this mechanism and after the expiry of four months period from the date of first preliminary meeting held on 4th May, 2007, the Arbitrator indeed became de jure unable to perform his functions and the mandate to act as an Arbitrator in the arbitral proceedings between the parties as prayed for stood terminated. Appeal allowed. Issues Involved:1. Waiver of right to extension of time for arbitration proceedings.2. Validity of the arbitration agreement.3. Arbitrator's mandate and functus officio status.4. Jurisdiction of the Court to extend arbitration time.Issue-wise Detailed Analysis:1. Waiver of right to extension of time for arbitration proceedings:The High Court dismissed the Arbitration Petition, holding that the appellants had waived their right to enforce the time limit for arbitration proceedings by their conduct. The appellants participated in the arbitration proceedings beyond the stipulated four months without raising timely objections. The Supreme Court, however, overturned this decision, emphasizing that the appellants had consistently objected to the extension of time and had not waived their rights.2. Validity of the arbitration agreement:The appellants contended that the arbitration agreement dated 28th April 2000 was collusive and forged. Despite this, the arbitration proceedings continued, with the High Court and the Arbitrator addressing the validity and enforceability of the agreement. The Supreme Court noted that the appellants had raised objections regarding the agreement's validity, but the focus of the judgment was on the procedural aspects of the arbitration timeline.3. Arbitrator's mandate and functus officio status:The Arbitrator was required to make an award within four months from the first preliminary meeting, as per the arbitration agreement. The Arbitrator's mandate expired on 4th September 2007, and the appellants refused to consent to an extension. The Arbitrator continued proceedings, but the Supreme Court held that the Arbitrator became functus officio after the stipulated period, rendering further proceedings invalid.4. Jurisdiction of the Court to extend arbitration time:The Supreme Court highlighted that under the Arbitration and Conciliation Act, 1996, the Court does not have the power to extend the arbitration time without the consent of both parties. This limitation contrasts with the 1940 Act, which allowed the Court to extend time. The Supreme Court cited the case of NBCC Limited Vs. J.G. Engineering Private Limited, emphasizing that the Arbitrator's mandate automatically terminates if the time is not extended by mutual consent.Conclusion:The Supreme Court allowed the appeal, setting aside the High Court's judgment. It held that the Arbitrator's mandate had expired, and the appellants had not waived their right to enforce the time limit. The respondents were granted the liberty to pursue their grievances as permissible under the law. The judgment underscores the importance of adhering to the agreed terms of arbitration and the limitations on extending arbitration timelines without mutual consent.