Defect Of Jurisdiction Rendering Decision Void Can Be Challenged At Any Stage: Delhi HC While Setting Aside Award U/s. 34 Of Arbitration And Conciliation Act

The Delhi High Court observed that a defect of jurisdiction which renders a decision void, can be challenged at any stage because the same strikes at the very foundation of the power of court or tribunal to decide a dispute.

The Court observed thus in a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) against the award rendered by the Sole Arbitrator in disputes which arose from a contract for construction of rural roads under the Pradhan Mantri Gram Sadak Yojana.

A Single Bench of Justice Anup Jairam Bhambhani held, “There also cannot be any cavil with the proposition of law that a defect of jurisdiction, which renders a decision void, can be challenged at any stage, since such defect strikes at the very foundation of the power of the court or tribunal to decide a dispute.”

Advocate Nikhilesh Krishnan represented the petitioner while Advocate Ajay Kumar Tiwari represented the respondent.

In this case, the genesis of the disputes was a contract between the petitioner company named Telecommunication Consultants India Ltd. (TCIL) and Madhya Pradesh Rural Road Development Authority (MPRRDA) for construction of roads. Subsequently, in order to execute the contract, the TCIL and the respondent named Shivaa Trading entered into a Memorandum of Understanding (MoU), pursuant to which work orders were issued to the respondent for completion of the work. However, due to various defaults alleged to have been committed by the respondent, the petitioner terminated its contract with the respondent and completed the balance work at the respondent’s risk and cost.

In this backdrop, vide a notice issued to the respondent, the petitioner invoked arbitration in view of clause 19 of the MoU. Simultaneously, vide a letter, the petitioner appointed a person as the Sole Arbitrator, to decide the disputes between the parties and proceeded to file their statement of claims before the Arbitrator. Thereupon, the respondent also filed its statement of defence along with its counter-claims in the matter. Arbitral proceedings carried-on for sometime, culminating in the passing of Arbitral Award, which award was challenged by way of the petition before the High Court.

The High Court in the above context of the case said, “Upon a conspectus of the averments contained in the petition and in the reply; and having heard learned counsel for the parties, this court is of the view that the present case is squarely covered by the decision of the Supreme Court in Bharat Broadband Network Ltd. vs. United Telecoms Ltd. (supra). Just as in Bharat Broadband, in the present case as well, the party that had appointed the Arbitrator had itself subsequently challenged the award on the ground that the Arbitrator was ineligible to act as such, in light of section 12(5) of the A&C Act.”

The Court noted that the enunciation of the law by the Supreme Court on the point is clear and unequivocal, inasmuch as the challenge under section 12(5) is attracted in a case where the arbitrator becomes de jure ineligible to perform his function by reason of falling in one or more of the categories specified in the Seventh Schedule to the A&C Act.

“In such circumstances, the Supreme Court has held, that since an arbitrator so appointed inherently lacks jurisdiction to act as an arbitrator, the very appointment of the arbitrator and the arbitral proceedings conducted are rendered void ab-initio. The Supreme Court has also held that any waiver in terms of the proviso to section 12(5) of the A&C Act must be 'express' and 'in writing' and must have been granted 'subsequent' to disputes having arisen between the parties. These have been held to be necessary prerequisites for the waiver to section 12(5) being valid”, it added.

Furthermore, the Court observed that the judgments of the Division Bench of the court and of other Co-ordinate Benches, also make for a consistent and unbroken line of case-law on the point and admittedly, no such waiver was granted by the parties to the appointment of the arbitrator in the case.

“It may also be observed that in the present case, both the claims as well as the counter-claims filed by the parties, have been rejected by the learned Arbitrator. … As a sequitur to be above, the court is persuaded to allow the present petition, solely on the ground that the learned Arbitrator appointed in the matter was de jure ineligible to act as such; and consequently, all proceedings in arbitration, including Arbitral Award dated 17.12.2021 rendered by him, are void ab-initio and of no legal effect”, it also said.

Accordingly, the High Court disposed of the petition and set aside the arbitral award.

Cause Title- Telecommunication Consultants India Ltd v. Shivaa Trading (Neutral Citation: 2024:DHC:3094)

Appearance:

Petitioner: Advocates Nikhilesh Krishnan, Ritika Priya, and Abhishek Bhushan.

Respondent: Advocate Ajay Kumar Tiwari

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