17 December 2021, Friday

2 years ago

Unilateral appointment of arbitrator not a ground to set aside the award: Delhi High Court

08 November 2021 | Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited | OMP (Comm) 297/2021 | Suresh Kumar Kait J | Delhi High Court | 2021 SCC OnLine Del 4883

The Delhi High Court has refused to apply the Perkins rule to set aside an award.

In accordance with the agreement, the respondent appointed in 2018 a sole arbitrator (a former Judge of the Punjab and Haryana High Court). His award of March 2021 was challenged by the petitioner mainly on the ground that the arbitrator lacked inherent jurisdiction to entertain and try the disputes because he was, contrary to the Perkins discourse, unilaterally appointed by the respondent (in October 2018 before the Perkins decision).

The challenge was rejected on the reasoning that the petitioner never objected before the award went against him, and actively participated in the arbitration proceedings in the following manner (among others):

  1. Applying to the Section 9 court but withdrawing the application to apply to the tribunal and making an application under Section 17 ACA
  2. Applying to the tribunal under Section 16 ACA to challenge composite reference of four agreements.
  3. Filing counterclaim.

Kait J also notes that the Perkins decision was handed up on 26 November 2019 during the pendency of arbitral proceedings, but no objection was raised. The objections came later once the award was against the petitioner.

Further, he distinguished several authorities:

  1. Perkins 2019 SCC OnLine SC 1517 and TRF (2017) 8 SCC 377 were distinguished as cases under Section 11 ACA.
  2. Proddatur 2020 SCC OnLine Del 350. was distinguished to say that it deals with the challenge of the arbitrator’s mandate under Section 12(5) ACA during pendency of arbitral proceedings. It was then stated that in the case at hand the petitioner did not claim disqualification under any of the grounds enumerated under Section 12(5) read with Seventh Schedule ACA.
  3. Bharat Broadband (2019) 5 SCC 755 as dealing with disqualification under Section 12 (5) ACA
  4. Hindustan Zinc (2019) 17 SCC 82 did not apply because State Commission’s authority to make the appointment was under challenge and not unilateral appointment of an arbitrator.

The challenge that the award dealt with different agreements was rejected concluding that the agreements constituted a composite transaction and should be consolidated and heard together. The challenge that the arbitrator made erroneous findings was rejected relying on Delhi Airport 2021 SCC OnLine SC 695.

However, an award of compensation of Rs. 4.00 crore was severed and set aside relying among others on Bachhaj Nahgar v. Nilima Mandal (2008) 17 SCC 491 (where relief is granted despite no prayer or pleading, miscarriage of justice occurs).

Read the judgment here.


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