Losing parties can't use 12-month arbitration deadline as ground to challenge award: Madras High Court

The Madras High Court recently held that the failure of a party to object to the non-passing of an arbitral award within 12 months implies that it consented to extension of the tribunal's mandate [Ayyasamy v. A Shanmugavel]..Justice R Vijayakumar said that the legislative intent of inserting Section 29A(4) of the Arbitration and Conciliation Act, 1996 was only for expeditious disposal of arbitration proceedings and not a means for an unsuccessful party to challenge the award.“The objection relating to the invalidity of the award has been raised by the respondents only after they have suffered an adverse order. If such an interpretation is given to Section 29-A(4) of the Arbitration and Conciliation Act, the parties would resort to this argument after coming to know that they have suffered an adverse order. The legislative intent of inserting Section 29-A of the Act is only for expeditious disposal of the arbitration proceedings and not to confer a new defence upon an unsuccessful party to challenge the award and to reopen the entire proceedings,” the High Court said..The appellant and the respondents in the present case had been directed by the Supreme Court to go for arbitration over a dispute on their right to participate in the administration of a private hotel.The Supreme Court appointed former Madras High Court judge, Justice Prabha Sridevan, as the sole arbitrator. The arbitrator sent a notice to the parties on November 3, 2016 requesting them to appear on December 1, 2016. She reserved the award on October 12, 2017 and passed it on March 28, 2018.One of the parties then challenged the award before a district court, which set it aside on the sole ground that it had not been passed within the 12-month period mandated by Section 29A of the Act..Counsel for the appellant argued that the arbitrator had reserved orders after hearing the final submissions of the parties, and the award was pronounced six months later. During this period, the respondents did not raise any objection on the ground that the mandate of the arbitrator had expired.Since the award was not in their favour, the respondents raised a technical objection belatedly, he argued..The Court arrived at a conclusion that the arbitrator had entered upon the reference on November 3, 2016. Therefore, the award had to be passed on or before November 2, 2017. However, as per Section 29A, the parties may agree to extend the mandate of the arbitrator by 6 months. It also noted that award was passed within a period of 6 months after the date of completion of 12 months. It thus held,"...the respondents have not raised any objection with regard to non passing of the award and waited till an award was passed by the Sole Arbitrator on 28.03.2018. Therefore, it could be concluded that the respondents have not only given their implied consent for passing of the award, but also they waived their rights to object to the passing of the award beyond a period of 12 months.".The Court agreed that the objections relating to the invalidity of the award had been raised by the respondents only after they suffered an adverse order.It further noted that the district court had passed its order on the preliminary issue, without going into the merits of the case..Therefore, it set aside the district court order and held that the award was legally valid on the ground that the parties had displayed implied consent.“The award having been passed, within a period of 18 months from the date of entering upon the reference by the Sole Arbitrator, with the implied consent of the respondents after having waived their right to object, is valid in the eye of law.".Senior Advocate Sricharan Rengarajan and Advocate C Ramesh appeared for the appellant.Senior Advocate S Meenakshi Sundaram and Advocate RT Arivukumar appeared for the respondents..[Read Order]