Allegation of Bias Can't Be Raised After Award Has Been Passed Under S. 31, Delhi High Court Dismisses S. 34 Application

Brief Facts:

Ircon International Ltd. (“Respondent”) awarded contract to Allied-Dynamic Joint Venture (“Petitioner”) for the following works: "Earthwork in formation and Permanent Way work inside Thermal Power Plant in connection with Railway siding work consisting of earthwork in formation, supply of blanketing material, P. Way linking commissioning and associated work". The total value of the contract was Rs.21,97,61,199/-, with a completion period of 11 months commencing. In terms of the General Conditions of Contract (GCC) Clause No. 8 of the Agreement, 2% of the value was furnished as performance security, and 5% was furnished as retention money by the Petitioner.

The Petitioner commenced work at the site; however, various issues arose, which, according to the Petitioner, led to delays in the completion of the project. Conversely, the Respondent's stand was that though some portion of the site was handed over belatedly, the Petitioner failed to perform its part of the contract, even for works where the sites had been handed over. The work, though delayed, was finally completed in March 2014. However, the Petitioner had various claims against the Respondent, primarily for incorrect deductions and compensation for the delay in handing over the project site. All the claims were referred to the Sole Arbitrator - Mr. Yogesh Kumar Mishra, who rendered the impugned Award rejecting all the claims of the Petitioner. Feeling aggrieved, the Petitioner filed an application in Delhi High Court (“High Court”) under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) challenging the arbitral award.

The Petitioner broadly raises the following three grounds in support of the challenge to the award under Section 34: i) that the Arbitrator was an employee of the Respondent and the award was rendered in a biased manner; ii) that the arbitrator did not award any compensation in respect of the delayed handing over of the project sites, though it is admitted by the Respondent that there was a delay; iii) The delay caused by the Respondent was also admitted, and hence the claims, particularly regarding illegal deductions and compensations, should have been allowed. Additionally, the evidence presented in this regard was not considered.

Observations by the High Court:

The High Court noted that the Agreement itself, under clause 72.2.3, provided a safeguard against bias by stipulating that if an employee is appointed as an arbitrator, he/she must not be connected with the work in question. Despite the Petitioner's claim of raising the issue of bias through letters, the High Court held that there was no formal adjudication or request for a change of arbitrator on grounds of bias by the Petitioner. Given these circumstances, it held that it would impermissible for the Petitioner to wait for the award to be rendered and then approach the High Court with allegations of bias against the arbitrator.

Referring to the decision of the Supreme Court in M/s. Shree Vishnu Constructions v. The Engineer in Chief Military Engineering Service [2023 LiveLaw (SC) 417], the High Court noted that the disqualification of an employee from being appointed as an Arbitrator, as per Section 12(5), which came into effect on 23rd October, 2015, does not apply to the present case, as the invocation of arbitral proceedings occurred before the notification of these amendments.

In addition, the High Court noted that the Petitioner participated fully in the proceedings, and the final award was rendered under Section 31 of the Arbitration Act. Hence, the High Court held that the allegation of bias cannot be agitated at this stage, as such conduct could constitute waiver under Section 4 of the Arbitration Act.

Consequently, the High Court held that there were no grounds under Section 34 for challenging the Award. The application was dismissed.

Case Title: Allied-Dynamic Joint Venture vs Ircon International Ltd, Delhi

Citation: 2024 LiveLaw (Del) 162

Case Number: O.M.P. (COMM) 451/2016

Advocate for the Petitioner: Mr. Akash Kakade

Advocate for the Respondent: Ms. Monisha Handa, Mr. Rajul Shrivastav, Mr. Anubhav Sharma

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