Legal Blog: Principle of Waiver under Arbitration Act, 1996

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Saturday, October 23, 2010

Principle of Waiver under Arbitration Act, 1996

"A party who knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object."

The Supreme Court has re-iterated the age old concept of waiver and applied the same in its Judgment, BSNL v. Motorola India Pvt. Ltd. 2008 (7) SCC 431. (Click here for entire Judgment)

This concept has previously been upheld by the Supreme Court in Narayan Prasad Lohia v. Nikunj Kumar Lohia AIR 2002 SC 1139 (Click here for entire Judgment).

On similar lines, the Supreme Court in J.G. Engineers Pvt. Ltd. v. Calcutta Improvement Trust AIR 2002 SC 766 (Click here for entire Judgment) held, inter alia, that Respondents not having taken the objection with regard to the non arbitrability of the claim before the arbitrator, or any objections that the claims were 'excepted matters', and having contested the claims on merits, is estopped from raising such an objection after having suffered the award.

While relying on the above stated Judgments the Delhi High Court recently in Satish Kumar v. Union of India & Ors. 152 (2008) DLT 475 (Click here for the entire Judgment) held that a party not having taken a plea/objection as to a certain fact before the tribunal is estopped from raising the same at a later stage. 

The Delhi High Court, recently held in S.N. Malhotra & Sons v. Airport Authority of India 149 (2008) DLT 757 (DB) (Click here for the entire Judgment) that;

27. Applying the test laid down in the aforesaid case and the statutory provisions referred to hereinabove, and also keeping in mind the fact that the respondent at no stage of the arbitral proceedings chose to raise a challenge to the assumption of jurisdiction by the arbitral tribunal on a matter falling in the category of "excepted matters" under Clause 25 of the agreement between the parties, we are of the considered view that the respondent is now debarred from raising such a plea for the first time under Section 34 of the Act. A conjoint reading of Section 16(2) and Section 4 shows that an objection to the arbitrator having exceeded his jurisdiction falls in the category of case covered by Clause (b) of Section 4. The respondent knew that in respect of the non-compliance of any requirement under the arbitration agreement, it was free to raise challenge. It chose not to do so. As laid down in Narayan Prasad Lohia (supra), if a party chooses not to so object there will be deemed waiver under Section 4. Lohia's case pertained to a statutory prohibition. In the present case, it is the requirement of a clause in an agreement which has not been adhered to. The respondent was all along aware of this non-compliance and participated in the proceedings without demur. The award in respect of the same is not to its liking. The challenge now sought to be raised by the respondent flies in the face of its tacit approval of the matter being dealt with by the arbitrator. Allowing the respondent to resile from his position at this stage without its laying any foundation for the challenge when it was free to raise the same, would be inequitable to say the least.


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