Party Estopped From Challenging Award On The Ground Of Mandate Expiry After Accepting Extension Of Arbitrator's Mandate: Supreme Court

The Supreme Court on Tuesday (May 26) has held that a party who continues to participate in arbitration proceedings without objecting to the extension of the arbitrator's mandate cannot later challenge the award on the ground that the mandate had expired. A bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe heard the dispute that arose out of arbitration proceedings between the Gujarat Water Supply and Sewerage Board and Saryu Plastics Pvt. Ltd. relating to supply contracts for PVC pipes. Under the arbitration agreement executed on April 3, 2012, the arbitrator's mandate was initially fixed for six months. Though the parties formally extended the mandate until September 30, 2014, the arbitrator thereafter continued extending the timeline unilaterally while proceedings remained pending. The Board later argued before the courts that it had never consented to extension of the mandate beyond September 30, 2015, and therefore the award delivered on October 27, 2015, was without jurisdiction. Opposing the Appellant's contention, the Respondent-award holder argued that though six months was granted to the arbitrator to pass an award, the Appellants had a tacit approval in extending the mandate of an arbitrator beyond six months, as they neither protested against the extension nor refused to participate in the arbitral proceedings. Rejecting the Appellant's contention, the judgment authored by Justice Aradhe observed that the Board's conduct throughout the proceedings clearly demonstrated acquiescence to the continuation of the arbitrator's mandate. The Bench noted that after September 2014, the arbitrator repeatedly extended the mandate and continued conducting proceedings. Despite this, the Board never objected that the arbitrator lacked authority to proceed. Significantly, when the arbitrator fixed a hearing on October 15, 2015, the Board merely informed the arbitrator through an email dated October 14, 2015 that it would not be able to attend due to “pre-engagements.” The Board did not state that the arbitrator's mandate had expired. “In the facts of the present case, Section 29A of the Act does not apply. At the relevant time, there was no statutory provision prescribing that an extension of the mandate of the Arbitrator must be in a particular form or be reduced to writing. The ground of challenge to the Award is not based on breach of any statutory provision. The Arbitrator had unilaterally extended the mandate on three occasions and even after expiry of the mandate had fixed a date of hearing. The Arbitrator had unilaterally extended the mandate on three occasions and even after expiry of the mandate had fixed a date of hearing. The Board did not raise any objection in its email dated 14.10.2015 that the mandate of the Arbitrator has expired. The Board thus had tacitly agreed to extension of the mandate of the Arbitrator…The Board participated in the proceeding before the Arbitrator and had acquiesced with the alleged invalidity and cannot be allowed to turn around after the Award was passed and is estopped from challenging the Award on the ground that the mandate of the Arbitrator had expired.”, the court observed.HeadnoteArbitration And Conciliation Act, 1996 - Section 14 & Mandate of Arbitrator – Estoppel / Acquiescence - Contractual time limits for arbitral awards – The appellant board actively participated in the arbitration proceedings and failed to raise objections regarding the expiration of the arbitrator's mandate despite multiple unilateral extensions and subsequent hearing fixtures - Held that the grievance regarding the expiry of the mandate is governed by the contract and not by statute - Having participated and acquiesced in the continuation of the proceedings, the appellant is estopped from challenging the validity of the award on the ground of expired mandate after the award has been passed. [Para 18-21]Principles of Natural Justice - Allegation of denial of procedural fairness – The appellant consistently engaged in dilatory tactics, failed to file point-wise replies, remained absent during scheduled meetings, and declined to attend a final hearing while merely expressing inability without seeking an adjournment - Held: The arbitrator was fully justified in treating the matter as heard and passing the award - A party cannot invoke the principles of natural justice to impugn an award when the delay and lack of presentation were substantially a result of its own conduct. [Paras 23–25]Section 33(1)(a) – Power to Modify Award – Scope of Review: Substitution of Interest – The Commercial Court, purporting to act under Section 33(1)(a), modified the arbitral award by substituting "simple interest" with "compound interest" for the pendente lite period, exponentially increasing the appellant's liability – Held that Section 33(1)(a) is strictly confined to the correction of computational, clerical, or typographical errors and does not contemplate a substantive review or...

Party Estopped From Challenging Award On The Ground Of Mandate Expiry After Accepting Extension Of Arbitrator's Mandate: Supreme Court

Yash Mittal

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Yash Mittal

Party Estopped From Challenging Award On The Ground Of Mandate Expiry After Accepting Extension Of Arbitrator's Mandate: Supreme Court

Yash Mittal

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Yash Mittal

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