Delhi High Court
M/S Supreme Infrastructure India … vs Freyssinet Memard India Pvt. Ltd on 5 May, 2025
Author: Jyoti Singh
Bench: Jyoti Singh
$~106
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 5th May, 2025
+ O.M.P. (COMM) 395/2024 & I.A. 39304/2024, 39307/2024
M/S SUPREME INFRASTRUCTURE INDIA
LIMITED .....Petitioner
Through: Mr. Ashish Mohan, Senior Advocate
with Mr. Subhro Prokas Mukherjee, Mr. Ashok
Tripathi, Mr. Avinash Shukla and Ms. Sagrika
Tanwar, Advocates.
versus
FREYSSINET MEMARD INDIA PVT.
LTD. .....Respondent
Through: Mr. Sidharth Borah, Advocate.
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JUDGEMENT
JYOTI SINGH, J. (ORAL)
1. This petition is filed on behalf of the Petitioner under Section 34 of
the Arbitration and Conciliation Act, 1996 (‘1996 Act’) challenging an
arbitral award dated 15.03.2016 passed by the learned Sole Arbitrator.
2. Factual matrix to the extent necessary and as averred in the petition is
that Petitioner is a Non-Government Public Company engaged in the
business of construction works. On 15.10.2012, Petitioner was awarded
work of construction of an additional office complex for the Supreme Court,
located adjacent to Pragati Maidan, New Delhi which included RCC
Framework with a three-level basement. On 06.02.2013, Petitioner issued a
Work Order to the Respondent for design, supply and installation of pre-
stressed sil anchors. Petitioner’s address mentioned in the Work Order was
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 1 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
‘Supreme City, Hiranandani Complex, Near Chitrath Studio Powai,
Mumbai, 400076’.
3. It is averred that on 24.07.2014, CPWD terminated the contract with
the Petitioner. Work Order contains a Dispute Resolution Mechanism
providing for amicable negotiations failing which disputes were to be
referred to arbitration under the Governing Law of India and seat of
arbitration was designated at New Delhi. Invoking the arbitration clause,
Respondent purportedly sent a notice to the Petitioner under Section 21 of
1996 Act, which was never served upon the Petitioner and subsequently
Respondent unilaterally appointed a Sole Arbitrator. Petitioner was not
informed of the appointment the learned Arbitrator and the notice sent by
the Arbitrator was never received and as a result, Petitioner was unaware of
the commencement or pendency of the arbitral proceedings.
4. It is stated that on 15.03.2016, arbitral proceedings culminated in an
ex parte arbitral award, however, the signed copy of the award was not
served on the Petitioner, as required under Section 31(5) of the 1996 Act.
Petitioner urges that in 2019, Respondent filed Execution Petition bearing
No. 566/2019 before the Bombay High Court which was withdrawn on
27.10.2021 due to non-payment of stamp duty on the award. The execution
petition was refiled after payment of stamp duty as Commercial Execution
No. 14691/2022, which was again withdrawn on 17.10.2022 under an
erroneous assertion that Petitioner was under liquidation. On or around
10.04.2024, Respondent filed a petition under Section 9 of Insolvency and
Bankruptcy Code, 2016 (‘IBC, 2016’) against the Petitioner before National
Company Law Tribunal, Mumbai, pursuant to which NCLT sent a copy of
the petition to the Petitioner by e-mail dated 28.06.2024 and it is on this date
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 2 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
as per the Petitioner, it became aware of the arbitral proceedings and the ex
parte arbitral award.
5. Challenging the impugned award dated 15.03.2016, Mr. Ashish
Mohan, learned Senior Counsel for the Petitioner submits that notice under
Section 21 of the 1996 Act allegedly sent by the Respondent was not
received by the Petitioner. The notice was purportedly sent on two
addresses: (a) 903-905, Millennium Plaza, Tower ‘B’, 9th Floor, Sec-27,
Gurgaon, Haryana; and (b) Supreme House, Plot No. 94/c, Pratap Gad. Opp.
IIT Main Gate, Powai, Mumbai, 400076, but neither of them was the
address mentioned on the Work Order as the address on the Work Order was
‘Supreme City, Hiranandani Complex, Near Chitrath Studio Powai,
Mumbai, 400076’. Assuming that Respondent could have sent the notice on
the two addresses, which no doubt are also the addresses of the Petitioner,
notices were never delivered on these addresses and this is evident from the
courier and the speed post vouchers, which are a part of the arbitral record.
It is thus argued that in the absence of the notice under Section 21 of 1996
Act, the very commencement of the arbitral proceedings was invalid,
thereby vitiating the award.
6. It is further argued that Petitioner did not receive notice of initiation
of the arbitral proceedings from the learned Arbitrator and was thus unable
to place its response to the claims of the Respondent and that this is
sufficient ground to set aside the impugned award. To support this plea,
learned Senior Counsel refers to a letter by the Arbitrator dated 03.11.2016
addressed to the Post Master, Defence Colony, stating that communication
dated 17.03.2016 sent by her by Speed Post had not been received/returned
back till date and asking the concerned Authority to furnish original delivery
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 3 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
receipts.
7. It is further argued that since Petitioner did not receive notice under
Section 21 of the 1996 Act and the Respondent on its own appointed the
Sole Arbitrator, the appointment is a unilateral appointment and cannot be
sustained in law, vitiating the entire arbitral proceedings and consequently
the impugned award. It is also urged that even prior to introduction of
Section 12(5) of the 1996 Act, Courts have repeatedly held that unilateral
appointment is a nullity and this singular factor is sufficient to vitiate the
award. In this context, reliance is placed on the judgments of this Court in
Vineet Dujodwala and Others v. Phoneix ARC Pvt. Ltd. and Another,
2024 SCC OnLine Del 5940 and M/s. ABL Biotechnologies Ltd. & Ors. v.
M/s. Technology Development Board & Anr., O.M.P. 607/2010, decided
on 19.09.2024.
8. The third infirmity highlighted by learned Senior Counsel, which
according to him is again sufficient to set aside the award is that, assuming
for the sake of argument that Petitioner had received the notice under
Section 21 of the 1996 Act and failed to respond to the same, the only
course open to the Respondent was to invoke the jurisdiction of the Court
for appointment of an Arbitrator. Petitioner’s non-response to Respondent’s
proposal for appointment of a Sole Arbitrator named by it could not be
construed as consent. To support this plea, learned Senior Counsel relies on
the judgment of the Supreme Court in Dharma Prathishthanam v. Madhok
Construction (P) Ltd., (2005) 9 SCC 686 and judgments of this Court in
Lucent Technologies Inc. v. ICICI Bank Limited and Others, 2009 SCC
OnLine Del 3213 and Lt. Col. H.S. Bedi (Retd) & Anr. v. STCI Finance
Limited, 2018 SCC OnLine Del 12577.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 4 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
9. Responding to the objection of delay in filing the present petition,
learned Senior Counsel submits that there is no delay inasmuch as the signed
copy of the award has not been received by the Petitioner till date. It is
submitted that the form and content of an arbitral award are provided in
Section 31 of the 1996 Act. The arbitral award, drawn up in the manner
prescribed by Section 31, is required to be signed and dated and as per sub-
Section (5), after the arbitral award is made, signed copy has to be delivered
to each party and ‘party’ as defined in Section 2(h) of the 1996 Act means
and connotes party to an arbitration agreement. Section 34(3) of the 1996
Act provides that limitation of three months commences from the date of
receipt of the arbitral award by the party and therefore, since the signed copy
has not been received till date by the Petitioner, limitation has not even
commenced. It is urged that Petitioner was not aware of either the arbitral
proceedings or the ex parte award and learnt of the same for the first time
only when it received copy of the petition vide e-mail dated 28.06.2024
from NCLT but this date will not trigger commencement of limitation period
as it was unaccompanied by a signed copy of the award.
10. Learned counsel for the Respondent defends the impugned award and
submits that no ground has been made out by the Petitioner for setting aside
the same. It is submitted that Respondent had sent a notice under Section 21
of the 1996 Act at the addresses known to the Respondent and it is not
mandatory that the notice ought to have been sent at the address mentioned
in the Work Order. The letter of the Arbitrator heavily relied upon by the
Petitioner cannot come to its aid as the letter does not indicate that the
notices were not served and merely states that proof of delivery was not
received or returned back till date. Petitioner was deliberately avoiding the
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 5 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
arbitral proceedings even after receipt of the notice and there is no merit in
its contentions. Insofar as the alleged unilateral appointment is concerned, it
is urged that when Petitioner failed to respond to the notice under Section 21
of the 1996 Act, it was presumed that Petitioner had consented to the
appointment proposed by the Respondent and waived its right to contest the
same.
11. Heard learned Senior counsel for the Petitioner and counsel for the
Respondent.
12. Challenge in the present petition is laid to an ex parte arbitral award
dated 15.03.2016 passed by the learned Arbitrator on multiple grounds.
Before proceeding to examine the grounds of challenge, it is imperative to
deal with the issue of delay in filing the petition, raised by the Respondent
albeit subtly. Petitioner claims that the signed copy of the arbitral award has
not been received till date and the period of limitation prescribed under
Section 34(3) of the 1996 Act having not commenced, petition cannot be
held to be barred by limitation. Respondent is unable to traverse this stand of
the Petitioner and no material is placed on record to show that signed copy
of the award was delivered to the Petitioner at any time prior to the filing of
this petition.
13. A plain reading of Section 34(3) of the 1996 Act shows that an
application for setting aside an award may not be made after three months
have elapsed from the date on which the party making the application has
received the arbitral award. In Union of India v. Tecco Trichy Engineers &
Contractors, (2005) 4 SCC 239, the short question before the Supreme
Court was as to what would be the effective date on which an award can be
said to be received by the party as that would be the date from which
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 6 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
limitation would begin under Sub-Section (3) of Section 34 of the 1996 Act.
Examining the issue, the Supreme Court held as follows:-
“4. The short question which arises for decision in this appeal is: which is
the effective date on which the appellant was delivered with and received
the arbitral award as that would be the date wherefrom the limitation
within the meaning of sub-section (3) of Section 34 of the Act shall be
calculated.
5. Sub-sections (1) and (3) of Section 34 are relevant for our purpose and
are reproduced hereunder:
“34. Application for setting aside arbitral award.–(1) Recourse to a
court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2) and
sub-section (3).
* * *
(3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making that
application had received the arbitral award or, if a request had been
made under Section 33, from the date on which that request had been
disposed of by the Arbitral Tribunal:
Provided that if the court is satisfied that the applicant was prevented
by sufficient cause from making the application within the said period
of three months it may entertain the application within a further
period of thirty days, but not thereafter.”
6. Form and contents of the arbitral award are provided by Section 31 of
the Act. The arbitral award drawn up in the manner prescribed by Section
31 of the Act has to be signed and dated. According to sub-section (5),
“after the arbitral award is made, a signed copy shall be delivered to each
party”. The term “party” is defined by clause (h) of Section 2 of the Act as
meaning “a party to an arbitration agreement”. The definition is to be
read as given unless the context otherwise requires. Under sub-section (3)
of Section 34 the limitation of 3 months commences from the date on which
“the party making that application” had received the arbitral award. We
have to see what is the meaning to be assigned to the term “party” and
“party making the application” for setting aside the award in the context
of the State or a department of the Government, more so a large
organisation like the Railways.
xxx xxx xxx
8. The delivery of an arbitral award under sub-section (5) of Section 31 is
not a matter of mere formality. It is a matter of substance. It is only after
the stage under Section 31 has passed that the stage of termination of
arbitral proceedings within the meaning of Section 32 of the Act arises.
The delivery of arbitral award to the party, to be effective, has to be
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 7 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
“received” by the party. This delivery by the Arbitral Tribunal and receipt
by the party of the award sets in motion several periods of limitation such
as an application for correction and interpretation of an award within 30
days under Section 33(1), an application for making an additional award
under Section 33(4) and an application for setting aside an award under
Section 34(3) and so on. As this delivery of the copy of award has the
effect of conferring certain rights on the party as also bringing to an end
the right to exercise those rights on expiry of the prescribed period of
limitation which would be calculated from that date, the delivery of the
copy of award by the Tribunal and the receipt thereof by each party
constitutes an important stage in the arbitral proceedings.”
14. In Benarsi Krishna Committee and Others v. Karmyogi Shelters
Private Limited, (2012) 9 SCC 496, the Supreme Court held that ‘party to
arbitration’ proceedings means party to the arbitration agreement and if the
copy of the signed award is not delivered to the party, it would not amount
to compliance with provisions of Section 31(5) of the 1996 Act, a provision
which deals with form and content of the arbitral award.
15. From a reading of the aforementioned judgments, it is clear that
delivery of an arbitral award under Section 31(5) is not an empty formality
and as it is only after the stage under Section 31 has passed that the stage of
termination of arbitral proceedings under Section 32 arises and receipt by
the party of the award then sets in motion several periods of limitation such
as for an application for correction under Section 33(1) and application for
setting aside an award under Section 34(3) of the 1996 Act etc. Reading of
Section 31(5) of the 1996 Act leaves no trace of doubt that a ‘signed copy’
of the award must be delivered to the ‘party’ to the arbitration agreement. In
the present case, signed copy of the award has not been received by the
Petitioner till date, an uncontroverted fact, and therefore, limitation period
prescribed under Section 34(3) has not commenced. In light of this, it is held
that the petition is not barred by limitation.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 8 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
16. Learned Senior Counsel for the Petitioner has established that
Petitioner did not receive the notice under Section 21 of the 1996 Act,
allegedly sent by the Respondent on 16.01.2015, invoking the arbitration
agreement. It is evident that when the Work Order was placed the address
given by the Petitioner was ‘Supreme City, Hiranandani Complex, Near
Chitrath Studio Powai, Mumbai, 400076’ and this is clearly reflected on the
Work Order, copy of which is placed on record. This was intended to be the
address for all purposes including correspondences between the parties.
Admittedly, no notice was sent on this address by the Respondent as it
claims to have sent the notices on two other addresses: a) 903-905,
Millennium Plaza, Tower ‘B’, 9th Floor, Sec-27, Gurgaon, Haryana; and (b)
Supreme House, Plot No. 94/c, Pratap Gad. Opp. IIT Main Gate, Powai,
Mumbai, 400076. As rightly flagged by Mr. Mohan, courier and speed post
vouchers, which are part of arbitral record indicate that the addresses on the
vouchers were incomplete and there was no possibility of the notices being
served on the actual addresses. Even today counsel for Respondent is unable
to demonstrate the delivery of the notices under Section 21 of the 1996 Act
on these two addresses by any material on record.
17. It is no longer res integra that arbitral proceedings in respect of a
particular dispute commence on the date on which a request for that dispute
to be referred to arbitration is received by the Respondent, unless otherwise
agreed by the parties. In Bharat Chugh v. MC Agrawal HUF, 2021 SCC
OnLine Del 5373, this Court held in view of Section 21 which specifically
deals with commencement of arbitral proceedings, if no notice sent by one
party is received by the other party, arbitral proceedings cannot be stated to
have commenced and obviously, something that has not commenced, cannot
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 9 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
continue. In Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd.,
2017 SCC OnLine Del 7228, this Court emphasised on the importance and
mandate of issuing a notice under Section 21 of the 1996 Act. It was held
that a plain reading of Section 21 indicates that except where parties have
agreed to the contrary, the date of commencement of arbitration proceedings
would be the date on which the recipient of the notice receives from the
claimant a request for referring the dispute to arbitration. The object behind
the provision is not difficult to discern. Party to the arbitration agreement
against whom a claim is made should know what the claims are and it is
possible that in response to the notice, the recipient of the notice may accept
some claims either wholly or in part and disputes may get narrowed down.
This may help in even resolving the disputes and reference to arbitration
could be avoided. The Court has enumerated multiple objectives of a notice
under Section 21 in the judgment and I quote the relevant paragraphs
hereunder:-
“25. A plain reading of the above provision indicates that except where
the parties have agreed to the contrary, the date of commencement of
arbitration proceedings would be the date on which the recipient of the
notice (the Petitioner herein) receives from the claimant a request for
referring the dispute to arbitration. The object behind the provision is not
difficult to discern. The party to the arbitration agreement against whom a
claim is made, should know what the claims are. It is possible that in
response to the notice, the recipient of the notice may accept some of the
claims either wholly or in part, and the disputes between the parties may
thus get narrowed down. That is one aspect of the matter. The other is that
such a notice provides an opportunity to the recipient of the notice to point
out if some of the claims are time barred, or barred by any law or
untenable in fact and/or that there are counter-claims and so on.
26. Thirdly, and importantly, where the parties have agreed on a
procedure for the appointment of an arbitrator, unless there is such a
notice invoking the arbitration clause, it will not be possible to know
whether the procedure as envisaged in the arbitration clause has been
followed. Invariably, arbitration clauses do not contemplate the unilateral
appointment of an arbitrator by one of the parties. There has to be aSignature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 10 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
consensus. The notice under Section 21 serves an important purpose of
facilitating a consensus on the appointment of an arbitrator.
27. Fourthly, even assuming that the clause permits one of the parties to
choose the arbitrator, even then it is necessary for the party making such
appointment to let the other party know in advance the name of the person
it proposes to appoint. It is quite possible that such person may be
‘disqualified’ to act an arbitrator for various reasons. On receiving such
notice, the recipient of the notice may be able to point out this defect and
the claimant may be persuaded to appoint a qualified person. This will
avoid needless wastage of time in arbitration proceedings being conducted
by a person not qualified to do so. The second, third and fourth reasons
outlined above are consistent with the requirements of natural justice
which, in any event, govern arbitral proceedings.
28. Lastly, for the purposes of Section 11(6) of the Act, without the notice
under Section 21 of the Act, a party seeking reference of disputes to
arbitration will be unable to demonstrate that there was a failure by one
party to adhere to the procedure and accede to the request for the
appointment of an arbitrator. The trigger for the Court’s jurisdiction under
Section 11 of the Act is such failure by one party to respond.
29. Of course, as noticed earlier, parties may agree to waive the
requirement of such notice under Section 21. However, in the absence of
such express waiver, the provision must be given full effect to. The
legislature should not be presumed to have inserted a provision that serves
a limited purpose of only determining, for the purposes of limitation, when
arbitration proceedings commenced. For a moment, even assuming that
the provision serves only that purpose viz. fixing the date of
commencement of arbitration proceedings for the purpose of Section 43(1)
of the Act, how is such date of commencement to be fixed if the notice
under Section 21 is not issued? The provision talks of the ‘Respondent’
receiving a notice containing a request for the dispute “to be referred to
arbitration”. Those words have been carefully chosen. They indicate an
event that is yet to happen viz. the reference of the disputes to arbitration.
By overlooking this important step, and straightaway filing claims before
an arbitrator appointed by it, a party would be violating the requirement
of Section 21, thus frustrating an important element of the parties
consenting to the appointment of an arbitrator.
30. Considering that the running theme of the Act is the consent or
agreement between the parties at every stage, Section 21 performs an
important function of forging such consensus on several aspects viz. the
scope of the disputes, the determination of which disputes remain
unresolved; of which disputes are time-barred; of identification of the
claims and counter-claims and most importantly, on the choice of
arbitrator. Thus, the inescapable conclusion on a proper interpretation of
Section 21 of the Act is that in the absence of an agreement to theSignature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 11 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
contrary, the notice under Section 21 of the Act by the claimant invoking
the arbitration clause, preceding the reference of disputes to arbitration, is
mandatory. In other words, without such notice, the arbitration
proceedings that are commenced would be unsustainable in law.”
18. It would be relevant to refer to another judgment of the Division
Bench of this Court in Shriram Transport Finance Company Limited v.
Narender Singh, 2022 SCC OnLine Del 3412, in this context, wherein the
Court was dealing with an appeal under Section 37(1)(b) of the 1996 Act
and agreeing with the principles laid down in Alupro Building Systems Pvt.
Ltd. (supra), it was held that if no notice is received under Section 21 by the
recipient, there is no commencement of arbitral proceedings and relevant
paragraphs are as follows:-
“30. A plain reading of this section shows that arbitral proceedings
commence on the date on which the request for the dispute to be referred
to arbitration is received by the respondent concerned. Therefore, the
commencement of arbitral proceedings is incumbent on the “receipt of
such request or notice”. If no notice is received by the respondent
concerned, there is no commencement of arbitral proceedings at all.
Emphasis here is also made to the fact that the notice should not only be
“sent” but also that the notice should be “received” for such request for
commencement.
31. Section 21 will have to be read with Section 34 of the Act. Section
34(2)(iii) provides that an award may be set aside, in the event, where the
party appointing the arbitrator has not given proper notice of the
appointment of an arbitrator or the arbitral proceedings.
32. The judgment in Alupro Building case [Alupro Building Systems (P)
Ltd. v. Ozone Overseas (P) Ltd.2017 SCC OnLine Del 7228] has aptly
explained the relevance of a notice under Section 21 of the Act. It was held
that the Act does not contemplate unilateral appointment of an arbitrator
by one of the parties, there has to be a consensus for such appointment
and as such, the notice under Section 21 of the Act serves an important
purpose of facilitating such a consensus on the appointment of an
arbitrator. It was further held in Alupro Building case [Alupro Building
Systems (P) Ltd. v. Ozone Overseas (P) Ltd.2017 SCC OnLine Del 7228]
that the parties may opt to waive the requirement of notice under Section
21 of the Act. However, in the absence of such a waiver, this provision
must be given full effect to.
33. We are in agreement with the principles as expressed in the decision
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 12 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
of Alupro Building case [Alupro Building Systems (P) Ltd. v. Ozone
Overseas (P) Ltd.2017 SCC OnLine Del 7228] , which are enunciated
below:
(i) The party to the arbitration agreement against whom a claim is
made should know what the claims are. The notice under Section 21 of
the Act provides an opportunity to such party to point out if some of
the claims are time-barred or barred by law or untenable in fact or if
there are counterclaims.
(ii) Where the parties have agreed on a procedure for appointment,
whether or not such procedure has been followed, will not be known
to the other party unless such a notice is received.
(iii) It is necessary for the party making an appointment to let the
other party know in advance the name of the person who it proposes
to appoint as an arbitrator. This will ensure that the suitability of the
person is known to the opposite party including whether or not the
person is qualified or disqualified to act as an arbitrator for the
various reasons set forth in the Act. Thus, the notice facilitates the
parties in arriving at a consensus for appointing an arbitrator.
(iv) Unless such notice of commencement of arbitral proceedings is
issued, a party seeking reference of disputes to arbitration upon
failure of the other party to adhere to such request will be unable to
proceed under Section 11(6) of the Act. Further, the party sending the
notice of commencement may be able to proceed under the provisions
of sub-section 5 of Section 11 of the Act for the appointment of an
arbitrator if such notice does not evoke any response.
34. The appellant Company has relied on the letters dated 20-9-2018 and
27-9-2018 to show compliance with Section 21 of the Act. This reliance by
the appellant Company is completely misconceived. The letter of 20-9-
2018 was a unilateral communication sent by the appellant Company to
the respondent. As discussed above, the letter did not set forth any details
about who was being appointed as an arbitrator or the procedure being
followed. The appellant Company merely stated that they have a right to
initiate arbitral proceedings and so they will initiate arbitral proceedings.
There was no person named as an arbitrator therein nor was any
consensus sought in such appointment. There is no evidence of this letter
ever being received by the respondent on record either. As such, the letter
dated 20-9-2018 would not qualify as notice under Section 21 of the Act.
35. The letter dated 27-9-2018, was never sent to the respondent so there
was no question of this letter being received by the respondent. It was only
sent to the arbitrator. This letter could not qualify to be the notice of
commencement of proceedings either.
36. The record also shows that the parties had no agreement for a waiver
of the requisite notice under Section 21 of the Act.
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 13 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
37. Hence, we hold that the arbitral appointment made by the appellant
Company was not made in accordance with the provisions of Section 21 of
the Act.”
19. Another important objective of the notice under Section 21 that needs
to be underscored is in the context of unilateral appointment of the
Arbitrator. This question also came up for consideration before this Court in
Alupro Building Systems Pvt. Ltd. (supra), while dealing with objections
under Section 34 of the 1996 Act. One of the issues arising before the Court
was whether the non-receipt of notice under Section 21 of the 1996 Act by
the Petitioner therein was itself sufficient to invalidate the impugned award
and the Court also proceeded to examine a connected issue as to whether the
Respondent could have, without invoking the arbitration clause and issuing
notice to the Petitioner under Section 21 of the 1996 Act and assuring its
delivery, filed claims directly before the Arbitrator appointed unilaterally by
the Respondent. The second issue touches upon the next ground raised by
the Petitioner herein relating to unilateral appointment of the Arbitrator, to
which I shall advert in the later part of the judgment.
20. The Court held that in the absence of an express waiver as agreed
between the parties, provisions of Section 21 must be given full effect to as
the Legislature should not be presumed to have inserted a provision that
serves a limited purpose of only determining, for the purpose of limitation,
when arbitration proceedings commenced. Court elaborated that the
provision talks of ‘Respondent’ receiving a notice containing a request for
the dispute to be referred to arbitration and these words have been carefully
chosen and therefore by overlooking this important step and straightaway
filing claims before an Arbitrator appointed by the party, the party would
violate provisions of Section 21 and frustrate an important element of the
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 14 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
parties consenting to the appointment of an Arbitrator. From a conjoint
reading of Section 21 and the aforementioned judgments, the inevitable
conclusion, to my mind, is that in the absence of an agreement to the
contrary, notice under Section 21, invoking the arbitration clause, preceding
the reference of disputes, is mandatory and as held in Alupro Building
Systems Pvt. Ltd. (supra), without such notice, arbitration proceedings that
are commenced would be unsustainable in law.
21. Coming to the case in hand, Petitioner has not received the notice
under Section 21, purportedly sent by the Respondent and therefore, the
arbitral proceedings in question cannot be sustained in law and
consequently, the award deserves to be set aside. Be it noted that non-receipt
of the notice under Section 21 also impacts another important facet in
arbitration regime which is party autonomy in appointing an Arbitrator to
adjudicate the disputes as an alternate dispute resolution mechanism. As
rightly urged by Mr. Mohan, the Arbitrator was appointed without the
consent of the Petitioner and being a unilateral appointment, the same
becomes vulnerable. It needs no debate that unilateral appointment of an
Arbitrator is untenable in law. [Ref. Perkins Eastman Architects DPC and
Another v. HSCC (India) Limited, (2020) 20 SCC 760 and Central
Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV)
A Joint Venture Company, 2024 SCC OnLine SC 3219].
22. It needs to be emphasised that present case relates to a period prior to
amendment of Section 12(1) of the 1996 Act since the amendment came into
force by Section 8(i) of the Arbitration and Conciliation (Amendment) Act,
2015. However, this would make no difference as even prior to the
amendment of 1996 Act, the Supreme Court had clearly held that the very
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 15 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
essence of the arbitral proceedings is consensus ad idem and therefore, there
was no question of arbitration being conducted by an Arbitrator appointed
by one party without the consent of the other. This issue came up before this
Court in Vineet Dujodwala (supra), where the Court was dealing with a
petition under Section 34 of the 1996 Act and one of the grounds urged was
the unilateral appointment of the Arbitrator. Relying on the earlier
judgments of the Supreme Court, Court held that the appointment of the
Arbitrator being unilateral, this singular factor, without reference to any
other infirmity, was sufficient to vitiate the award and I quote:-
“Re. unilateral appointment of the learned Arbitrator
20. Perhaps the most damaging defect in the entire process is the fact that
the appointment of the learned arbitrator was unilateral. A unilateral
appointment, in an arbitral proceeding, is completely impermissible in
law.
21. This is the position that has existed even prior to the amendment of the
1996 Act. The Supreme Court has, even in its decisions prior to the said
amendment, clearly held that the very essence of arbitral proceedings is
consensus ad idem and that, therefore, there can be no question of an
arbitration by an arbitrator appointed by one of the parties without the
consent of the other. One may refer, in this context, to the following
passage from Dharma Prathishthanam v. Madhok Construction (P) Ltd.:
“14. In Thawardas Pherumal v. Union of India a question arose in
the context that no specific question of law was referred to, either by
agreement or by compulsion, for decision of the arbitrator and yet the
same was decided howsoever assuming it to be within his jurisdiction
and essentially for him to decide the same incidentally. It was held
that : (SCR p. 58)
“A reference requires the assent of both sides. If one side is not
prepared to submit a given matter to arbitration when there is an
agreement between them that it should be referred, then recourse
must be had to the court under Section 20 of the Act and the
recalcitrant party can then be compelled to submit the matter under
sub-section (4). In the absence of either, agreement by both sides
about the terms of reference, or an order of the court under Section
20(4) compelling a reference, the arbitrator is not vested with the
necessary exclusive jurisdiction.”
(emphasis in original)
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 16 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
15. A Constitution Bench held in Waverly Jute Mills Co. Ltd. v.
Raymon and Co. (India) (P) Ltd. that:
“[A]n agreement for arbitration is the very foundation on which
the jurisdiction of the arbitrators to act rests, and where that is not
in existence, at the time when they enter on their duties, the
proceedings must be held to be wholly without jurisdiction. And
this defect is not cured by the appearance of the parties in those
proceedings, even if that is without protest, because it is well
settled that consent cannot confer jurisdiction.”
16. Again a three-Judge Bench held in Union of India v. A.L. Rallia
Ram that it is from the terms of the arbitration agreement that the
arbitrator derives his authority to arbitrate and in absence thereof the
proceedings of the arbitrator would be unauthorised.”
(Italics in original; underscoring supplied)
22. Admittedly, the appointment of the arbitrator in the present case was
unilateral. That single factor, even without reference to any other
infirmity, is sufficient to vitiate the award.”
23. In this context, I may also refer to an order of the same Bench in M/s.
ABL Biotechnologies Ltd. (supra), where the Court reiterated that it was
settled by the judgment of the Supreme Court in Dharma Prathishthanam
(supra), which was followed by this Court in S.K. Builders v. CLS
Construction Pvt. Ltd., 2024 SCC OnLine Del 5498, that even in respect of
arbitrations which commenced prior to introduction of Section 12(5) of the
1996 Act, Arbitrators could not be unilaterally appointed and any arbitration
by a unilaterally appointed Arbitrator would be a nullity ab initio. Therefore,
even on this score, the impugned award cannot be upheld.
24. There is yet another legal infirmity in the impugned arbitral
proceedings and the award. Petitioner strenuously assails the award on the
ground that it is an ex parte award and no notice was given to the Petitioner
of the appointment of the Arbitrator and/or the arbitral proceedings prior to
its commencement or during its continuance and Petitioner was unable to
defend its case. To support this plea, it is pointed out that the Arbitrator had
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 17 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
written a letter to Post Master, Defence Colony stating that she was unable
to confirm whether her communications dated 17.03.2016 had reached the
Petitioner on either of the two addresses, which aforementioned, were the
addresses not mentioned in the Work Order, as brought out above. The letter
reads ‘That the said speed posts have not been received/returned back till
date. I request you to kindly furnish the original delivery receipts as the
same is required in a court case to be filed at Mumbai…’. From the contents
of the letter, it is obvious that even the learned Arbitrator was unsure if the
notice was served on the Petitioner. From the arbitral record, it is clear that
there is no proof of delivery of the notice to the Petitioner sent by the
Arbitrator and even the Respondent is unable to point to any material which
shows otherwise. In view of this fact, the ex parte arbitral award without
notice being delivered to the Petitioner of the constitution of the Arbitral
Tribunal or the proceedings before it, cannot be sustained. [Ref. Dulal
Poddar v. Executive Engineer, Dona Canal Division and Others, (2004) 1
SCC 73; M/s. Lovely Benefit Chitfund & Finance (P) Ltd. v. Puran Dutt
Sood and Others, 1983 SCC OnLine Del 22, and Komal Narula v. DMI
Finance Pvt. Ltd. and Another, 2021 SCC OnLine Del 3698]
25. The matter can be seen from another angle. Assuming for the sake of
argument, notice sent by the Respondent invoking arbitration under Section
21 of the 1996 Act was delivered to the Petitioner and it was the Petitioner,
which did not respond to the notice. Even in this circumstance, the only
option open to the Respondent was to have invoked the jurisdiction of the
Court for appointment of an Arbitrator and reference of the disputes. It is
settled that if one party to the arbitration agreement does not consent for an
appointment of the Arbitrator and/or there is no response from the recipient
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 18 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
of the notice under Section 21 of the 1996 Act, the sender invoking the
arbitration agreement can only fall back on the Court appointing the
Arbitrator. The underlying principle is ‘party autonomy’ and ‘appointment
of an impartial and independent Arbitrator’, both of which are the
foundations of the arbitration regime. In Dharma Prathishthanam (supra),
the Supreme Court was dealing with the situation where failure of the
Appellant to respond to notice invoking arbitration was considered as
consent to appointment. The Supreme Court held as follows:-
“7. An arbitrator or an Arbitral Tribunal under the scheme of the 1940 Act
is not statutory. It is a forum chosen by the consent of the parties as an
alternate to resolution of disputes by the ordinary forum of law courts. The
essence of arbitration without assistance or intervention of the court is
settlement of the dispute by a tribunal of the own choosing of the parties.
Further, this was not a case where the arbitration clause authorised one of
the parties to appoint an arbitrator without the consent of the other. Two
things are, therefore, of essence in cases like the present one : firstly, the
choice of the tribunal or the arbitrator; and secondly, the reference of the
dispute to the arbitrator. Both should be based on consent given either at
the time of choosing the arbitrator and making reference or else at the
time of entering into the contract between the parties in anticipation of an
occasion for settlement of disputes arising in future. The law of arbitration
does not make the arbitration an adjudication by a statutory body but it
only aids in implementation of the arbitration contract between the parties
which remains a private adjudication by a forum consensually chosen by
the parties and made on a consensual reference.
xxx xxx xxx
12. On a plain reading of the several provisions referred to hereinabove,
we are clearly of the opinion that the procedure followed and the
methodology adopted by the respondent is wholly unknown to law and the
appointment of the sole arbitrator Shri Swami Dayal, the reference of
disputes to such arbitrator and the ex parte proceedings and award given
by the arbitrator are all void ab initio and hence nullity, liable to be
ignored. In case of arbitration without the intervention of the court, the
parties must rigorously stick to the agreement entered into between the
two. If the arbitration clause names an arbitrator as the one already
agreed upon, the appointment of an arbitrator poses no difficulty. If the
arbitration clause does not name an arbitrator but provides for the
manner in which the arbitrator is to be chosen and appointed, then the
parties are bound to act accordingly. If the parties do not agree then
arises the complication which has to be resolved by reference to theSignature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 19 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
provisions of the Act. One party cannot usurp the jurisdiction of the court
and proceed to act unilaterally. A unilateral appointment and a unilateral
reference — both will be illegal. It may make a difference if in respect of a
unilateral appointment and reference the other party submits to the
jurisdiction of the arbitrator and waives its rights which it has under the
agreement, then the arbitrator may proceed with the reference and the
party submitting to his jurisdiction and participating in the proceedings
before him may later on be precluded and estopped from raising any
objection in that regard. According to Russell (Arbitration, 20th Edn., p.
104)–
“An arbitrator is neither more nor less than a private judge of a private
court (called an Arbitral Tribunal) who gives a private judgment
(called an award). He is a judge in that a dispute is submitted to him;
… He is private insofar as (1) he is chosen and paid by the disputants,
(2) he does not sit in public, (3) he acts in accordance with privately
chosen procedure so far as that is not repugnant to public policy, (4) so
far as the law allows he is set up to the exclusion of the State courts, (5)
his authority and powers are only whatsoever he is given by the
disputants’ agreement, (6) the effectiveness of his powers derives wholly
from the private law of contract and accordingly the nature and
exercise of these powers must not be contrary to the proper law of the
contract or the public policy of England, bearing in mind that the
paramount public policy is that freedom of contract is not lightly to be
interfered with.”
xxx xxx xxx
25. Failure to give consent or to appoint an arbitrator in response to a
notice for appointment of an arbitrator given by the other party provides
justification to the other party for taking action under sub-section (2) of
Section 8 of the Act and then it is the court which assumes jurisdiction to
appoint an arbitrator as held by the High Court of Orissa in Niranjan
Swain v. State of Orissa [AIR 1980 Ori 142 : 49 Cut LT 319] .
xxx xxx xxx
27. In the event of the appointment of an arbitrator and reference of
disputes to him being void ab initio as totally incompetent or invalid the
award shall be void and liable to be set aside dehors the provisions of
Section 30 of the Act, in any appropriate proceedings when sought to be
enforced or acted upon. This conclusion flows not only from the decided
cases referred to hereinabove but also from several other cases which we
proceed to notice.
xxx xxx xxx
31. Three types of situations may emerge between the parties and then
before the court. Firstly, an arbitration agreement, under examination
from the point of view of its enforceability, may be one which expresses theSignature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 20 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
parties’ intention to have their disputes settled by arbitration by using
clear and unambiguous language, then the parties and the court have no
other choice but to treat the contract as binding and enforce it. Or, there
may be an agreement suffering from such vagueness or uncertainty as is
not capable of being construed at all by culling out the intention of the
parties with certainty, even by reference to the provisions of the
Arbitration Act, then it shall have to be held that there was no agreement
between the parties in the eye of the law and the question of appointing an
arbitrator or making a reference or disputes by reference to Sections 8, 9
and 20 shall not arise. Secondly, there may be an arbitrator or arbitrators
named, or the authority may be named who shall appoint an arbitrator,
then the parties have already been ad idem on the real identity of the
arbitrator as appointed by them beforehand; the consent is already spelled
out and binds the parties and the court. All that may remain to be done in
the event of an occasion arising for the purpose, is to have the agreement
filed in the court and seek an order of reference to the arbitrator
appointed by the parties. Thirdly, if the arbitrator is not named and the
authority who would appoint the arbitrator is also not specified, the
appointment and reference shall be to a sole arbitrator unless a different
intention is expressly spelt out. The appointment and reference — both
shall be by the consent of the parties. Where the parties do not agree, the
court steps in and assumes jurisdiction to make an appointment, also to
make a reference, subject to the jurisdiction of the court being invoked in
that regard. We hasten to add that mere inaction by a party called upon by
the other one to act does not lead to an inference as to implied consent or
acquiescence being drawn. The appellant not responding to the
respondent’s proposal for joining in the appointment of a sole arbitrator
named by him could not be construed as consent and the only option open
to the respondent was to have invoked the jurisdiction of court for
appointment of an arbitrator and an order of reference of disputes to him.
It is the court which only could have compelled the appellant to join in the
proceedings.”
26. This Court in Lt. Col. H.S. Bedi (Retd) (supra), while adjudicating a
petition under Section 34 of the 1996 Act, relying on the judgment in
Dharma Prathishthanam (supra), held that Arbitrator can only be
appointed with the consent of both the parties and any unilateral
appointment would be void and that mere inaction by a party called upon by
the other one to act, cannot lead to an inference as to implied consent or
acquiescence of such party to such appointment of the Arbitrator. Holding
that the appointment of the Arbitrator and reference of the disputes to him
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 21 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06
was void ab initio, the Court set aside the impugned award. Mr. Mohan is
thus right in his contention that assuming that Petitioner did not respond to
the Section 21 notice after receipt, the only option with the Respondent was
to invoke the jurisdiction of the Court under Section 11 for appointment of
the Arbitrator and reference of disputes.
27. For all the aforesaid reasons, the impugned arbitral award dated
15.03.2016 passed by the learned Arbitrator cannot be sustained in law and
is accordingly set aside. Parties will, however, be at liberty to take recourse
to legal proceedings to seek enforcement of their rights in accordance
with law.
28. Petition along with pending applications stands disposed of.
JYOTI SINGH, J
MAY 05, 2025/shivam
Signature Not Verified
Digitally Signed O.M.P. (COMM) 395/2024 Page 22 of 22
By:KAMAL KUMAR
Signing Date:10.05.2025
19:21:06