WAIVER OF RIGHT TO OBJECT IN ARBITRATION PROCEEDINGS

BY SHREYA PRIYADARSHNI

LEGAL INTERN, H.K. LAW OFFICES

INTRODUCTION

Arbitration is the procedure to solve disputes in which parties present their dispute by way of agreement to one or more arbitrator and decision of the arbitrator is binding on both the parties to the dispute. It is a form of Additional Dispute Resolution (ADR) which solves disputes outside courts. In other words, arbitration is the form of dispute resolution in which the dispute is determined by a third party who is an arbitrator. The disputing parties, through an agreement present their disputes and hand over the power to the arbitrator(s) to resolve disputes whose decision is binding on both the parties. Now a days arbitration is widely used to resolve disputes. People prefer arbitration to resolve their disputes instead of litigation because of its quick disposal. It is time efficient as well as cost efficient which means that arbitration solve disputes in minimal time and in minimal cost as well. It is an alternative to court litigation and is widely used in both public and private sector.

In arbitration proceedings parties must have to comply with the provisions of the arbitration agreement. However, there are many instances where parties are not complying with the same and if such circumstances arise then the other party needs to object in the arbitration proceedings within specified time without doing undue delay, against the party who is not complying with the arbitration agreement. On the other hand, if the party has not object in the proceeding and knowingly proceeds with the same then such party is said to be “waived off his right to object”.

This Principle is a direct consequence of the prohibition of inconsistent behavior which in turn is derived from the Principle of good faith and fair dealing. A party who has knowledge that any non-mandatory provision of the applicable arbitration law or any requirement under the arbitration agreement has not been complied with must raise an objection without undue delay before it proceeds with the arbitration. Any objection which is raised at a later stage of the proceedings is regarded as inconsistent with its previous behavior because, given that party’s knowledge of the non-compliance, its silence is regarded as a waiver of his right to object. A party proceeds with the arbitration if it appears at a hearing or submits a brief or any other communication to the arbitral tribunal and/or to the other party. A party would not be deemed to have waived its right to object, if, for example, a postal strike or a similar impediment prevents it for an extended period of time from sending communications.

WAIVER OF RIGHT TO OBJECT

Waiver of right to object is mentioned in Section 4 of the Arbitration and Conciliation Act, 1996. According to the Section 4, if a party is aware of the thing that the other party has not complied with any of the provisions of Part 1 of the Act or any requirement mentioned in the arbitration agreement and proceeds with the arbitration without raising any objection against the non-complying party, within specified time frame, without doing undue delay then, such party is said to have waived his right to object. That is, a party must have raised his objection against non-complying party as soon as he comes to know about the non-compliance of Part-1 of the Act or arbitration agreement. If he doesn’t do so within the stipulated time frame without undue delay then he cannot do the same at a later stage. The objective of section 4 is to preclude the party to interrupt in between the arbitral proceeding from raising objection at any time when they please. The party must justify and give reasonable excuse for the failure of raising objection within reasonable time. Whether an objection is raised without undue delay must be considered taking into account the circumstances of the case, including the nature of the provision which the arbitral tribunal did not comply with. When a time limit is provided for, such time limit must be examined first because such time limit, whether provided for in the applicable arbitration law or in the arbitration agreement, has priority over the general formula of “undue delay”.

Waiver of right as mentioned in Section 4 of the Arbitration and Conciliation Act, 1996 is based on the “principle of estoppel” according to which a person cannot deny the from the thing which he asserted previously or agreed to by law. The silence of the party even after knowing the fact of non-compliance is considered as waiver of his right to object and such party cannot raise objection even against non-compliance in subsequent proceedings in domestic courts as well. However, if the situation like postal strike or likewise impediments precluded the party from sending communication of his objection then the party is not said to have waived his right to object.

Only objection against infringement of non-mandatory provisions can be waived. However, there are exceptions which say that objection against the infringement of mandatory provisions of the applicable arbitration law can be waived as well. The exceptions lie within sections 16(2) and 16(3) of the Act of 1996. As per 16(2) a plea stating that the arbitral tribunal does not have jurisdiction must be raised before the submission of the statement of defence and not after that. Section 16(3) says that as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings, the objection can be raised for an arbitral tribunal exceeding its scope.

CASE LAWS DEALING WITH SECTION 4 

In the case of Satish Kumar v. Union of India[1], the court held that “a party who has not object certain facts before the tribunal is barred from doing the same at a later stage of the proceedings”. 

In the case of Narayan Prasad Lohia v. Nikunj Kumar Lohia & Ors.[2], the court observed that the party have to justify his failure from raising objection against the non-complying party within the reasonable time frame.

In the case of Quippo Construction Equipment Ltd. v. Janardan Nirman Pvt. Ltd.[3], the court held that “a party that does not dispute a legitimate fact before the arbitral tribunal would lose its right to object with respect to all those matters. The main objective of this is to protect arbitral proceedings and is based on the principle of estoppel, which precludes a person from asserting something contrary to a previous action or statement of that person”.

CONCLUSION 

Waiver of right to object in arbitration proceedings as mentioned in Section of 4 of the Arbitration and Conciliation Act, 1996 aims to protect arbitration proceedings. It prevents the party to object any time at his will in between the arbitration proceedings as the consequent of such objection would be an interference in delivering justice. It prevents the party from denying the thing which he has agreed to by law earlier either expressly or impliedly. Thus, it prevents arbitrary interference of the party in between the arbitral proceedings and promotes the idea of good faith and fair dealing to provide justice.


[1] Satish Kumar v. Union of India & Ors. 152 (2008) DLT 475

[2] Narayan Prasad Lohia vs Nikunj Kumar Lohia & Ors., MANU/SC/0114/2002

[3] Quippo Construction Equipment Ltd vs. Janardan Nirman Pvt. Ltd., MANU/SCOR/63062/2019

Published by meghachaturvedi

Associate Partner, H.K. Law Offices

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