Summary
Upholding an arbitral award against the Municipal Corporation of Greater Mumbai, the Court held that the arbitration clause allowing the ICSID Secretary General to appoint the presiding arbitrator if the co-arbitrators failed to do so within 30 days was only an enabling fallback, triggered on a party's request, and did not end the co-arbitrators' power to appoint. The Corporation's silence through three such appointments confirmed that reading.
Issues
- Whether, under Clause 8.3(b) of the agreement, the co-arbitrators lost the power to appoint the presiding arbitrator after 30 days, so that the tribunal was improperly constituted.
- Whether the appellant had waived its objection to the tribunal's constitution, and what bearing its conduct had on interpreting the clause.
- Whether the award was liable to be set aside under Section 34 for lack of jurisdiction or patent illegality.
Provisions considered
- Section 16, Arbitration and Conciliation Act, 1996The appellant's objection to the tribunal's constitution, raised before the statement of defence, was held to be within the time in Section 16(2); but the tribunal's rejection of it on merits was upheld. (¶¶ 39, 55, 58, 60, 61, 62, 66)
- Section 4, Arbitration and Conciliation Act, 1996Held that statutory waiver did not apply because the Section 16 objection was filed within the time in Section 16(2); the appellant's earlier conduct was nonetheless relevant to how it understood the contract. (¶¶ 40, 57, 61, 66)
- Section 34(2)(a)(v) and Section 34(2A), Arbitration and Conciliation Act, 1996Held that the tribunal was not constituted contrary to the arbitration agreement and its plausible interpretation of the clause disclosed no patent illegality, so the award could not be set aside. (¶¶ 36, 37, 68)
- Section 37, Arbitration and Conciliation Act, 1996The appellant's appeal under this section had been dismissed by the High Court; the Supreme Court held that both the Section 34 and Section 37 courts rightly refused to interfere. (¶¶ 3, 24, 68)
Held
- Clause 8.3(b) vests the power to appoint the presiding arbitrator in the two party-appointed arbitrators; its second part, under which the ICSID Secretary General 'shall' appoint the third arbitrator at a party's request if the co-arbitrators fail within 30 days, is an enabling fail-safe. It specifies no consequence of delay and does not extinguish the co-arbitrators' power, and a court cannot read such a consequence into it. (¶¶ 30, 31, 32, 33)
- The ICSID mechanism comes into play only on the condition precedent of a request by a party; the word 'shall' obliges the Secretary General to act once such a request is made. As neither party approached the ICSID, the co-arbitrators' power remained. Reading the clause as leaving the co-arbitrators waiting indefinitely for a party to approach the ICSID would be commercially irrational. (¶¶ 32, 33, 34, 35)
- The arbitrator is the master of the evidence and of the interpretation of the contract; a plausible interpretation cannot be interfered with under Section 34 merely because another view is possible. This was not a case of a tribunal formed by a procedure alien to the agreement, and no ground under Section 34(2)(a)(v) or patent illegality under Section 34(2A) was made out. (¶¶ 36, 37)
- Statutory waiver under Section 4 is attracted only if an objection to the tribunal's constitution is not raised within the time in Section 16(2), that is, by the statement of defence; as the appellant's Section 16 application was filed within that time, Section 4 did not apply. (¶¶ 58, 60, 61)
- Even so, when a jurisdictional objection alleges non-compliance with the arbitration clause, a party's conduct from the invocation of arbitration is a relevant aid to understanding how it read the contract. The appellant agreed to put the arbitration in abeyance for conciliation and raised no objection when three presiding arbitrators were successively appointed by the co-arbitrators, objecting only after the preliminary meeting; it had never read the clause as it now urged. (¶¶ 62, 63, 64, 65, 66, 67)
- A party cannot keep a 'jurisdictional ace' up its sleeve and rely on a timely Section 16 application to wipe out its earlier conduct and acquiescence; filing such an application does not regularise that conduct. (¶¶ 66, 67)
Result
Appeals dismissed; the High Court's refusal under Sections 34 and 37 to set aside the arbitral award dated 05.06.2010 upheld; no costs; pending applications disposed of.