The Delhi High Court set aside an arbitral award passed against M/s Supreme Infrastructure India Ltd., highlighting that silence or inaction on a Section 21 notice under the Arbitration and Conciliation Act, 1996, cannot be treated as implied consent for the appointment of an arbitrator by the opposite party.
Background of the Case
The dispute arose when CPWD terminated a contract awarded to Supreme Infrastructure for construction work related to an additional office complex for the Supreme Court in New Delhi. Following the termination, Freyssinet Memard India Pvt. Ltd., a subcontractor, initiated arbitration proceedings. They claimed to have sent a Section 21 notice invoking the arbitration clause, and then unilaterally appointed an arbitrator.
However, Supreme Infrastructure contended they never received the notice. The addresses used for delivery did not match the address mentioned in the original work order. As a result, they were unaware of the arbitration proceedings and the award passed on March 15, 2016.
“An arbitrator is not vested with the necessary jurisdiction unless both parties agree, either explicitly or through court appointment,” the Court emphasized.
Petitioner’s Argument
The counsel for Supreme Infrastructure argued that:
- The notice under Section 21 was never served on the correct address as per the work order.
- No intimation about the arbitrator’s appointment or hearing was received.
- The award was made ex parte, violating principles of natural justice.
- The signed copy of the arbitral award was never served, meaning limitation to challenge under Section 34 had not yet started.
They further relied on previous judgments to establish that unilateral appointments violate the foundational principles of arbitration, which rest on mutual consent and fairness.
Respondent’s Defense
Freyssinet Memard claimed they had sent the notice to known addresses of the petitioner and presumed that the lack of response indicated acceptance. They defended the validity of the arbitral award and stated that the petitioner deliberately avoided the proceedings.
Justice Jyoti Singh ruled in favor of the petitioner, making several key observations:
- Section 21 mandates the respondent must receive the arbitration notice for proceedings to lawfully commence.
- Non-receipt of the notice at the address given in the work order renders the initiation void.
- The unilateral appointment of an arbitrator without mutual agreement or court intervention is legally unsustainable.
- Even if the notice was delivered and went unanswered, the only legal route for appointment was through the court.
“Mere inaction by a party called upon to appoint an arbitrator does not mean consent. The correct course is to approach the court for appointment,” stated the Court.
The Court found that the ex parte award was passed without proper communication and due process, which is a serious legal flaw. Notably, the arbitrator herself had expressed doubts about whether her communications were ever received by the petitioner.
Based on the lack of valid service of notice, unilateral appointment of the arbitrator, and denial of the opportunity to participate in proceedings, the Court set aside the arbitral award.
Case Title – M/s Supreme Infrastructure India Limited v Freyssinet Memard India Pvt. Ltd.
Case No. – O.M.P. (COMM) 395/2024 & I.A. 39304/2024, 39307/2024
Appearance-
For Petitioner- Mr. Ashish Mohan, Senior Advocate with Mr. Subhro Prokas Mukherjee, Mr. Ashok Tripathi, Mr. Avinash Shukla and Ms. Sagrika Tanwar, Advocates.
For Respondent- Mr. Sidharth Borah, Advocate.
