Judgment
* IN THE HIGH COURT OF DELHI AT NEW DELHI + FAO No.182/2012 28th February, 2014 % SUSHMA JAIN Through: ..... Appellant Mr. Sudhir Kumar Jain, AR of the appellant. Versus M/S. NAVEEN BOARD CO. & ORS. Through: None. ..... Respondents CORAM: HON’BLE MR. JUSTICE VALMIKI J.MEHTA To be referred to the Reporter or not?. VALMIKI J.
MEHTA, J (ORAL) 1. Respondents have been served but do not appear. Reports of ordinary service and courier show that respondents have refused service. Since the respondents have chosen not to appear, I am proceeding to decide the appeal.
2. This appeal is filed under Section 37 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) against the impugned order of the court below dated 26.11.2011 which has accepted the objections of the respondents under Section 34 of the Act and set aside the Award dated 28.3.2003. Award has been set aside by giving a finding that the clauses in the bills dated 31.8.1999 and 20.9.1999 did not amount to an arbitration agreement because there were no signatures on the same. The court below has given this conclusion in spite of the fact that respondents had failed to appear in the arbitration proceedings and take such objection to jurisdiction under Section 16 of the Act before the arbitrator, and an exparte Award was passed for a sum of Rs.51,984/- in favour of the appellant/claimant and against the respondents with respect to the Paper and Paper Boards which were supplied by the appellant/claimant to the respondents.
3. I am indeed surprised at the way in which the trial court has dealt with this matter. This is all the more so because before the trial court the binding judgment of the Supreme Court in the case of Narayan Prasad Lohia Vs. Nikunj Kumar Lohia and Ors. (2002) 3 SCC572was cited and which holds that objection as to jurisdiction of the arbitrator has to be necessarily taken before the arbitrator by filing of an application under Section 16 of the Act and which if not done, objection as to jurisdiction is deemed to be waived. Para 16 of this judgment of the Supreme Court reads
“16. It has been held by a Constitution Bench of this Court, in the case of Konkan Railway Corporation Ltd. v. Rani Construction Pvt.Ltd.(2002)1SCR728 that Section 16 enables the arbitral tribunal to rule on its own jurisdiction. It has been held that under Section 16 the arbitral tribunal can rule on any objection with respect to existence or validity of the arbitration agreement. It is held that the arbitral tribunals authority under Section 16, is not confined to the width of its jurisdiction but goes also to the root of its jurisdiction. Not only this decision is binding on this Court, but we are in respectful agreement with the same. Thus it is no longer open to contend that, under Section 16, 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 a party would be free, if he so choose, 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 mater 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-derivable provision. In our view Section 10 has to be read along with Section 16 and is, therefore a derogable provision.”
4. The court below has distinguished this judgment on the ground that in the present case the respondents did not appear before the arbitrator resulting in an exparte Award and therefore the Supreme Court judgment in the case of Narayan Prasad Lohia (supra) is not applicable. There cannot be a more perverse reading of the ratio of the Supreme Court judgment by the court below in the case of Narayan Prasad Lohia (supra) inasmuch as whether the Award is exparte or contested, Section 16 of the Act comes into play as also the ratio laid down in para 16 of the judgment i.e it is not open to a person who does not contest the arbitration proceedings by remaining exparte to raise objections under Section 34 of the Act with respect to jurisdiction because by failing to raise objection as to jurisdiction before the arbitrator objection as to jurisdiction is deemed to be waived. Trial court is completely unjustified in distinguishing the direct ratio of the judgment of the Supreme Court more so when the basis of distinguishing the ratio is on a wholly unacceptable basis because a person cannot take advantage of his own wrong in failing to appear before the arbitrator and not objecting to the jurisdiction and raising the objection for the first time in a petition under Section 34 challenging the existence of an arbitration agreement.
5. In view of the above, appeal is allowed. The impugned judgment of the court below dated 26.11.2011 is set aside and it is held that the respondents were estopped from challenging the jurisdiction of arbitrator because they had waived their objections by not appearing in the arbitration proceedings and resulting in the Award against them for goods supplied for a sum of Rs.51,984/- alongwith pendente lite and future interest. In view of the impugned judgment dated 26.11.2011 of the court below being set aside, Award dated 28.3.2003 will be applicable and enforceable. Parties are left to bear their own costs. FEBRUARY28 2014 Ne FAO No.182/2012