Holding

A party’s long participation and acquiescence in arbitration proceedings bars it from later challenging the appointment of the arbitrator, as waiver and estoppel apply.

Summary

The parties entered into a contract containing an arbitration clause that named the Director/Unit Head of the Calcutta Metropolitan Development Authority as the sole arbitrator. The appellant, fearing bias, applied under Section 20 of the Arbitration Act, 1940, for the appointment of an independent arbitrator, and the High Court appointed Shri Amitav Guba on 19 April 1983. Both parties subsequently participated in the arbitration, filing claims, attending 74 sittings and obtaining multiple extensions. In 1985 the respondent challenged the validity of the appointment, arguing that the court lacked jurisdiction to appoint a new arbitrator after the parties had already submitted to the proceedings. The Calcutta High Court set aside the appointment order, but the Supreme Court held that the respondent’s long participation and acquiescence amounted to waiver and estoppel, precluding a later challenge to the arbitrator’s appointment. Consequently, the Supreme Court allowed the appeal, set aside the High Court order, and ordered the arbitration to continue before the appointed arbitrator.

Issues considered

Whether a party who has participated in arbitration proceedings can later challenge the appointment of the arbitrator on grounds of bias or disqualification.
Whether the court has jurisdiction to set aside an arbitrator’s appointment after the parties have acquiesced to the arbitration process.

Legislation cited

Arbitration Act, 1940s. 20

Subjects

ArbitrationAppointment of arbitratorWaiverEstoppelJurisdictionSection 20BiasDisqualificationAcquiescence

Judgment

PRASUN ROY A
v.
'~ CALCUTIA METROPOLITAN DEVELOPMENT
AUTHORITY & ANR.

JULY 20, 1987
B
[SABYASACHI MUKHARJI AND G.L. OZA, JJ.]
~
Arbitration Act, 1940; s. 20-Arbitrator appointed by Court-
Parties submitting to his jurisdiction by filing claims, attending sit-
• -<(.__
tings-Challenge to appointment order-Whether permissible.

Clause 24 of the arbitration agreement between the parties pro-
c
vided for reference of all questions of dispute arising under the contract
,. to the sole arbitration of the Director/Unit Heads of the respondent
Authority, not connected with the particular work. All such officers
having already expressed their opinion in respect of the disputes that
had arisen, the appellant apprehended that he may not get justice or D
proper relief. He, therefore, moved an application under s. 20 of the
Arbitration Act for appointment of an independent member of the bar
~ as arbitrator instead of the named officer of the respondent Authority.

A Single Judge of the High Court held that the arbitrator named
had disqualified himself on the ground of bias and appointed an outside E

,
advocate as the sole arbitrator on April 19, 1983. When arbitration
proceedings commenced both the parties submitted to his jurisdiction
and tiled their respective claims and documents. Upto November 1985
the said arbitrator held 74 sittings which were attended by the parties of
both sides and their counsel. Respondent No. 1 had moved three
--.,(, interlocutory applications. Both the parties got extension of arbitration F
proceedings at least/4 times upto November 1985.

Respondent No. 1 challenged the validity of the order of appoint·
ment of arbitrator dated April 19, 1983 in the year 1985, when another
Single Judge took the view that if the court was bound to enforce the
particular agreement with which the parties came to the court, the G
parties were not entitled to have any fresh opportunity to appoint a new
. ~rbitrator as that would amount to a new agreement between the
parties. He further observed that no appointment can be made by the
Court on the ground of disqualification of the arbitrator without having
proper materials on record and without coming to a definite finding on
this point. Until then the Court did not have the jurisdiction to appoint H
569
570 SUPREME COURT REPORTS [1987] 3.S.C.R.

A any new arbitrator and had to follow the correct machinery. This order ~~
of the Single Judge dated December 8, 1986 setting aside the earlier
order dated April 19, 1983 was assailed in the appeal by special leave.

Allowing the appeal, this Court,

B HELD: Long participation and acquiescence in arbitration pro- .1
ceediugs preclude a party from contending that the proceedings were """!
without jurisdiction. The principle is that a party' shall not be allowed to
blow hot and cold simultaneously. [S73FJ _... .

Basically the principle of waiver and estoppel is not only appli-
C cable where the award had 1-een made but also where a party challenges
the proceedings in which he participated. In the instant case, there was
no demur but something which can be called acquiescence on the part of :A
the respondents or which precludes them from challenging the parti-
cipation. [574G-H]

D Arbn. Jupiter General Insce. Co. Ltd. v. Corporation of Calcutta,
A.I.R. 1956 Calcutta 470 at 472; Chowdhury Murtaza Hossein v.
Mussumat Bibi Bechunnissa, 3 I.A. 209; N. Chellappan v. Secretary,
Kera/a State Electricity Board & Anr., (1975] 1 S.C.C. 289 and Russel
on Arbitration, 18th Edu. p. 105, referred to.

E CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1466
of 1987.

From the Judgment and Order dated 8.12.1986 of the Calcutta
High Court in Matter No. 1636 of 1985.

F A.K. Sen. Shanker Kumar Ghosh and D.P. Mukherjee for
the Appellant.

S.N. Kacker and G.S. Chatterjee for the Respondents.

The Judgment of the Court was delivered by
G •
SABYASACHI MUKHARJI, J. Special leave granted. this is a~"f
application challenging the order of the learned single judge dated the
8th December, 1986 of the High Court of Calcutta. By the impugned
judgment the said learned Judge has set aside the order dated the 19th
April, 1983 of another learned single judge on the ground, inter-alia,
H that the first learned Judge, when she passed the order, acted without
P. ROY v. CALCUTTA METROPOLITAN [MUKHARJI. J.[ 571

jurisdiction. There was an arbitration agreement. Clause 25 of the said
Agreement, inter alia, was as follows: A

"except where otherwise provided in the contract all ques-
tions of disputes relating to the granting of specifications,
designs, drawings and instructions hereinbefore mentioned
and as to the quality of workmanship and materials used in B
the work or as to any question claims, rights, matters, or
things whatsoever in any way arising out of or relating to
the contract, designs, drawings, specifications, estimates,
instructions orders or these conditions or otherwise con-
cerning the work or execution or failure to execute the
same where arising during the progress of the work or after
completion or abandonment thereof was to be referred to c
sole arbitration of the Director/Unit Head, C.M.D.A. not
connected with the particular work as may be appointed by
the authority. The award of the arbitrator shall be final,
conclusive and binding on all the parties to the contract."
D
~ On that basis the appellant had moved an application for
removal of the named arbitrator before the first learned Judge which
came up for hearing on 19th April, 1983 and this was by filing of an
application under Section 20 of the Arbitration Act for an order for
filing the arbitration agreement, for appointment of an arbitrator and
for other consequential reliefs. By the order dated 19.4.83 the said E

p
learned Judge has recorded the facts of this case and further recorded
that by virtue of the Clause 25 of the agreement the appellant herein
and prayed for appointment of an arbitrator for determination of the
dispute that had arisen which had been set out in paragraph 15 of the
petition. Inasmuch as according to the appellant the directors of all the
units of Calcutta Metropolitan Development Authority had already F
expressed their opinion in respect of the disputes that had arisen bet-
ween the appellant and the respondent and inasmuch as by the Central
Tender Committee, the directors were members. Under the circum-
stances the appellant apprehended that the appellant might not get
justice or proper relief under such circumstances. There was reason-
... ~ able basis of the apprehension against the unnamed arbitrator, and it G
was urged that instead of appointing any officer of the respondent as
arbitrator an independent member of the Bar be appointed as arbi-
trator. The learned Judge passed such order on 19th April, 1983 while
recording these facts as alleged by the petitioner. These appear to have
been reasons for appointing Sri Amitav Guba as the arbitrator in this
case in terms of prayer (c) of the said petition. H

-- y -.-
572 SUPREME COURT REPORTS [1987] 3.S.C.R.

A The learned judge in the impugned order has observed that the
Court was bound to enforce the particular agreement with which the
parties came to the Court, and the parties were not entitled to have
any fresh opportunity to appoint a new arbitrator as that would
amount to a new agreement between the parties. This position is good
in so far as it goes. But that does not solve the problem in all situa-
B tions. The learned Judge also observed that no appointment can be
made by the "ourt on the ground of disqualification of the arbitrator
without having proper materials on record and without coming to a
definite finding on this point. The learned Judge further observed that .>
the Court either should have given effect to the agreed machinery for
appointment of the arbitrator or it could have appointed afresh after
C coming to a clear finding that all directors of tha Unit of C.M.D.A.
were biased against the appellant herein as well as they had rendered
themselves disqualified from being appointed as arbitrators. Until all
of them were found disqualified, the Court did not have the jurisdic-
tion to appoint any new one and had to follow the correct machinery.
It appears that the first learned Judge has in fact held that the
D arbitrator named had disqualified himself on the ground of bias and on
that basis, appointed an outside Advocate, Shri Amitav Guba as the
arbitrator. If the respondents were not satisfied they could have
moved an appeal against the order; instead respondents participated in
the arbitration proceedings and acquiesced in such appointment. The
order was made on 19.4.83 appointing Shri Amitav Guba an advocate
E of the Calcutta High Court as sole Arbitrator. The arbitrator
appointed, started arbitration proceedings in which both the parties
submitted to his jurisdiction and filed their respective claims and other
documents in support thereof. It appears from the List of Dates sub-
mitted before us that respondent No. 1 moved three interlocutory
applications at different points of time which were, however, disposed
F of with orders in favour of the appellant. Both parties got extention of
the arbitration proceedings even by Hon'ble Mrs. Justice Pratibha
Bonnerjea at least 14 times and the last extention was granted upto
November, 1985 by Justice Mrs. Bonnerjea. In the meantime the said
Arbitrator had held 74 sittings which were attended by the parties of
both sides and their counsel. A large amount of time and money, same
G at the cost of public have been spent on these.

In the year 1985 the respondent No. 1 challenged the validity of
the order of appointment of arbitrator passed by first learned judge
where she acted on the basis of the findings mentioned hereinbefore.

H Can a party be permitted to do that? In Arbn. Jupiter General
P. ROY v. CALCUTIA METROPOLITAN [MUKHARJI. J.] 573

Insce. Co. Ltd. v. Corporation of Calcutta, (A.LR. 1956 Calcutta 470 A
at 472) P.B. Mukherji, J. as the learned Chief Justice then was
observed:

"It is necessary to state at the outset that Courts do not
favour this kind of contention and conduct of an applicant
who participates in arbitration proceedings without protest B
and fully avails of the entire arbitration proceedings and
then when he sees that the award has gone against him he
comes forward to challenge the whole of the arbitration
proceedings and without jurisdiction on the ground of a
known disability of a party. That view of the Court is ably
stated by the Editor of the 15th Edition of Russell on the C
Law of Arbitration at page 295 in the following terms:

'Although a party may by reason of some disability be
legally incapable of submitting matters to arbitration that
fact is not one that can be raised as a ground for disputing
the award by other parties to a reference who were aware D
of the disability. If one of the parties is incapable the objec-
tion should be taken to the submission. A party will not be
permitted to lie by & join in the submission and then if it
suits its purpose attack the award on the ground. The pre-
sumption in the absence of proof to the contrary will be
that the party complaining was aware of the disability when E
the submission was made.' "

Mr. Kacker submitted that this principle could be invoked only
in a situation where the challenge is made only after the making of an
award, and not before. We are unable to accept this differentiation.
The principle is that a party shall not be allowed to blow hot and cold F
simultaneously. Long participation and acquiescence in the proceed-
ing preclude such a party from contending that the proceedings were
without jurisdiction.

Russell on Arbitration, 18th Edition page 105 explains the posi-
.- tion as follows: G

"If the parties to the reference either agree beforehand to
the method of appointment, or afterwards acquiescence in
the appointment made, with full knowledge of all the
circumstances, they will be precluded from objecting to
such appointment as invalidating subsequent proceedings. H
574 SUPREME COURT REPORTS [1987] 3.S.C.R.

A Attending and taking part in the proceedings with full
knowledge of the relevant fact will amount to such
acquiescence."

The Judicial Committee in decision in Chowdhury Murtaza
Hossein v. Mussumat Bibi Bechunnissa, (3 I.A. 209) observed at
B page 220: -'

"On the whole, therefore, their Lordships think that the
appellant, having a clear knowledge of the circumstances
on which he might have founded an objection to the
arbitrators proceedings to make their awards, did submit to
c the arbitration going on; that he allowed the arbitrators to
deal with the case as is stood before them, taking his
chance of the decision being more or less favourable to
himself; and that is too late for him, after the award has
been made, and on the application to file the award, to
insist on this objection to the filing of the award."
D
Relying on the aforesaid observations this Court in N. Chellappan v.
Secretary, Kera/a State Electricity Board and Another, [1975] 1 S.C.C.
289, acted upon the principle that acquiescence defeated the right of
the applicant at a later stage. In that case the facts were similar. It was
held by conduct there was acquiscence. Even in a case where initial
E order was not passed by consent of the parties a party by participation
and acquiescence can preclude future challenges.

In the grounds of appeal no prejudice has been indicated by the
appointment of the second arbitrator.

F Mr. S.N. Kacker, learned counsel for the respondents drew our
attention to the fact that the decision in the Chowdhuri Murtaza
Hosse in 's case was where the party challenged the appointment of the
receiver after the award was made. He also submits that in this case the
respondents herein had challenged the order of appointment of the
arbitrator on 19.4.83 and not after the arbitrator had made the award.
G We are unable to accept this distinction. Basically the principle of 'f
waiver and estoppel is not only applicable where the award had been
made but also where a party to the proceeding challenges the proceed-
ings in which he participated. In the facts of this case, there was no
demur but something which can be called acquiescence on the part of
the respondents which precludes them from challenging the participa-
H tion.
P. ROY v. CALCUTIA METROPOLITAN [MUKHARJI. J.J 575

In that view of the matter, we are of the opinion that the judg- A
ment and impugned order cannot be sustained. In the premises the
appeal is allowed. The order and judgment of the High Court dated
the 8th December, 1986 are set aside. The arbitration proceedings will
go on before the Arbitrator appointed by order dated 19th April, 1983.
Time for making the award is extended for four months from today. B
... For further extention of time the party may apply to the High Court of
Calcutta.

The appeal is disposed of accordingly. The parties will bear their
respective costs.

P.S.S. Appeal allowed. C

'