TMI Blog2002 (2) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... (C) NO. 12384 OF 2000 - - - Dated:- 20-2-2002 - G.B. PATTANAIK, S.N. PHUKAN AND S.N. VARIAVA, JJ. Rakesh Dwivedi, Manoj Saxena, Nadira Patharia and Pravir Choudhary for the Appellant. Kailash Vasdev, K.K. Venugopal, S. Singhvi, K.V. Vijayakumar, P.N. Misra, Anil Agarwal, Bina Madhavan, Jaideep Gupta and Neeru Vaid for the Respondent. JUDGMENT S.N. Variava, J. - Leave granted. 2. This appeal is against a judgment dated 18-5-2000. 3. Briefly stated, the facts are as follows : 3.1 The appellant and the respondents are family members who had disputes and difference in respect of the family business and properties. All the parties agreed to resolve their disputes and difference through one Mr. Pramod Kumar Khaitan. Subsequently, on 29-9-1996, they agreed that the said Mr. Pramod Kumar Khaitan and one Mr. Sardul Singh Jain resolve their disputes. For the purposes of this order, we are not deciding whether these two persons acted as arbitrators or mediators. That is a matter of contention between the parties which we are, at present, not called upon to decide. For the purposes of this order, we are presuming that the parties had agreed to the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) 12384 of 2000 to Bench of three Hon ble Judges. Accordingly, the Registry is directed to place the papers before the Hon ble Chief Justice for suitable orders." 6.1 Accordingly, this matter is before this Bench. At this stage, we are only deciding the question of law referred, i.e., whether a mandatory provision of the said Act, can be waived by the parties. 7. It would be appropriate to set out, at this stage, the relevant provisions of the said Act. Sections 4, 5, 10, 11, 16 and 34 read as follows: "4. Waiver of right to object. A party who knows that ( a )any provision of this part from which the parties may derogate, or ( b )any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object. 5. Extent of judicial intervention . Notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s final. (8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to ( a )any qualifications required of the arbitrator by the agreement of the parties; and ( b )other considerations as are likely to secure the appointment of an independent and impartial arbitrator. (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties, where the parties belong to different nationalities. (10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him. (11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts of their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request. (12)( a ) Where the matters refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the court, only if ( a )the party making the application furnishes proof that ( i )a party was under some incapacity; or ( ii )the arbitration agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law for the time being in force; or ( iii )the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or ( iv )the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matter beyond the scope of the submission to arbitration : Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or ( v )The composition of the Arbitral Tribunal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter from which a party could derogate. He submits that in respect of provisions which are non-derogable, there can be no waiver. He submits that section 10 is a provision from which a party cannot derogate. He submits that matters from which a party cannot derogate are those provided in sections 4, 8, 9, 10, 11(4) and (6), 12, 13(4), 16(2), (3) and (5), 22(4), 27, 31, 32, 33, 34(2) and (4), 35, 36, 37, 38(1) and 43(3). He submits that as against these matters from which a party can derogate are those provided under sections 11(2), 19(1) and (2), 20(1) and (2), 22(1), 24, 25, 26 and 31(3). 10. Mr. Venugopal submits that section 10 compulsorily precludes appointment of an even number of arbitrators in public interest and as a matter of public policy. He submits that if there is an even number of arbitrators, there is a high possibility that, at the end of the arbitration, they may differ. He submits that in such a case, parties would then be left remediless and would have to start litigation or a fresh arbitration all over again. He submits that this would result in a colossal waste of time, money and energy. He submits that to avoid such waste of time, money and energy, the Legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 4, 10 and 16 indicates that if an objection is not taken before the Arbitral Tribunal, within the time laid down under section 16(2), then the party would be deemed to have waived its right to object by virtue of section 4. He submits that an award could be challenged on ground of composition of the Arbitral Tribunal only provided that an objection is first taken before the Arbitral Tribunal under section 16, and the Arbitral Tribunal has rejected such an objection. 13. Mr. Dwivedi submits that section 34(2)( a )( v ) does not permit the setting aside of an award on the ground of composition of the Arbitral Tribunal if the composition was in accordance with the agreement of the parties. He submits that section 34(2)( a )( v ) would come into play only if the composition was not in accordance with the agreement of the parties. He points out that in this case, the composition is in accordance with the agreement of the parties and, therefore, the award cannot be set aside on this ground. Mr. Dwivedi submits that even presuming that section 34(2)( a )( v ) permitted a challenge on the ground of composition of the Arbitral Tribunal, still the Court may refuse to set aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 16, a party cannot challenge the composition of the Arbitral Tribunal before the Arbitral Tribunal itself. Such a challenge must be taken, under section 16(2), not later than the submission of the statement of defence. Section 16(2) makes it clear that such a challenge can be taken even though the party may have participated in the appointment of the arbitrator and/or may have himself appointed the arbitrator. Needless to state that a party would be free, if he so chooses, not to raise such a challenge. Thus, a conjoint reading of sections 10 and 16 shows that an objection to the composition of the Arbitral Tribunal, is a matter which is derogable. It is derogable, because, a party is free not to object within the time prescribed in section 16(2). If a party chooses not to so object, there will be a deemed waiver under section 4. Thus, we are unable to accept the submission that section 10 is a non-derogable provision. In our view, section 10 has to be read along with section 16 and is, therefore, a derogable provision. 17. We are also unable to accept Mr. Venugopal s argument that, as a matter of public policy, section 10 should be held to be non-derogable. Even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iking. Allowing such a party to resile would not be in furtherance of any public policy and would be most inequitable. 18. Even otherwise, under the said Act, the grounds of challenge to an arbitral award are very limited. Now an award can be set aside only on a ground of challenge under sections 12, 13 and 16, provided such a challenge is first raised before the Arbitral Tribunal and has been rejected by the Arbitral Tribunal. The only other provision is section 34(2)( a )( v ). Section 34(2)( a )( v ) has been extracted hereinabove. According to Mr. Venugupal, if the composition of the Arbitral Tribunal or the arbitral procedure, even though it may be in accordance with the agreement of the parties, is the conflict with a provision of the Act from which the parties cannot derogate, then the party is entitled to have the award set aside. He submits that the words unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate as well as the words failing such agreement show that an award can be set aside if the agreement is in conflict with a provision of Part I of the said Act or if there is no agreement which is in consonance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds failing such agreement have reference to an agreement providing for the composition of the Arbitral Tribunal or the arbitral procedure. They would come into play only if there is no agreement providing for the composition of the Arbitral Tribunal or the arbitral procedure and the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with Part I of the said Act, then also a challenge to the award would be available. Thus so long as the composition of the Arbitral Tribunal or the arbitral procedure are in accordance with the agreement of the parties, section 34 does not permit challenge to an award merely on the ground that the composition of the Arbitral Tribunal was in conflict with the provisions of Part I of the said Act. This also indicates that section 10 is a derogable provision. 20. Respondents 1 and 2 not having raised any objection to the composition of the Arbitral Tribunal, as provided in section 16, they must be deemed to have waived their right to object. 21. For the reasons aforesaid, the judgments of the learned Single Judge and the Division Bench on the question of law discussed cannot be sustained. They are, accordingly, s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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