Sanchayita Lahkar

The High Court of Delhi Single Bench of Justice Jyoti Singh held that arbitral proceedings initiated without proper notice under Section 21 of the Arbitration and Conciliation Act, 1996, are unsustainable in law and consequently set aside an ex parte arbitral award dated 15 March 2016. The court directed that the parties retain the liberty to pursue appropriate legal remedies in accordance with law. The judgment arose from a challenge under Section 34 of the Arbitration Act filed by the petitioner against the award issued by a sole arbitrator appointed unilaterally by the respondent.

Justice Singh determined that the petitioner had not received the statutorily required notice under Section 21 nor any communication from the arbitrator prior to or during the proceedings. It was also found that the signed copy of the award had not been delivered to the petitioner, preventing the commencement of limitation for filing a challenge. The Court stated, "In the absence of an agreement to the contrary, notice under Section 21, invoking the arbitration clause, preceding the reference of disputes, is mandatory." The Court further held that unilateral appointment of the arbitrator in the absence of mutual consent rendered the entire proceedings and the resultant award void ab initio.

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The dispute arose out of a construction project involving the petitioner, a construction company, which had been awarded work for developing an additional office complex for the Supreme Court of India. The project, located near Pragati Maidan, New Delhi, included the construction of a three-level basement. Pursuant to the project, the petitioner issued a work order on 6 February 2013 to the respondent, a private company, for the design, supply, and installation of pre-stressed sil anchors.

The address provided in the work order for the petitioner was 'Supreme City, Hiranandani Complex, Near Chitrath Studio Powai, Mumbai, 400076'. However, following the termination of the petitioner's contract by CPWD on 24 July 2014, disputes arose between the parties. The work order contained a dispute resolution mechanism, which mandated initial negotiations, followed by arbitration under Indian law with the seat designated at New Delhi.

According to the petitioner, it never received any notice under Section 21 of the Arbitration and Conciliation Act, 1996, invoking arbitration. The respondent, however, unilaterally appointed a sole arbitrator, and no communication regarding the initiation of proceedings or appointment of the arbitrator was ever delivered to the petitioner.

The arbitral proceedings culminated in an ex parte award dated 15 March 2016. The petitioner contended that it did not receive a signed copy of the arbitral award as required under Section 31(5) of the Act. It claimed that it became aware of the arbitral award only when the respondent filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, before the NCLT, Mumbai, and the NCLT forwarded a copy of the petition via email on 28 June 2024.

The petitioner’s legal challenge was anchored on three core assertions: the non-service of the notice under Section 21; unilateral and impermissible appointment of the arbitrator; and denial of an opportunity to participate in the proceedings, which led to the ex parte award.

In its defence, the respondent argued that the notice had been sent to addresses associated with the petitioner, namely: 903-905, Millennium Plaza, Tower 'B', 9th Floor, Sec-27, Gurgaon, Haryana and Supreme House, Plot No. 94/c, Pratap Gad, Opp. IIT Main Gate, Powai, Mumbai. The respondent submitted that it was not mandatory to send notice to the address mentioned in the work order.

The petitioner contested the validity of these addresses, asserting that neither matched the address listed in the work order. Moreover, the petitioner relied on the record of courier and speed post vouchers that demonstrated incomplete address information and absence of confirmed delivery.

The petitioner also cited a letter dated 3 November 2016 by the arbitrator addressed to the Post Master, Defence Colony, requesting delivery receipts of communications sent on 17 March 2016. The arbitrator stated that the notices had neither been received by the recipient nor returned undelivered, thereby casting doubt on actual delivery.

On the legal question of unilateral appointment, the petitioner relied on precedents, including Vineet Dujodwala and Others v. Phoneix ARC Pvt. Ltd. and M/s. ABL Biotechnologies Ltd. & Ors. v. M/s. Technology Development Board & Anr., which reaffirmed that appointments without the consent of the other party are void. The petitioner also referred to Dharma Prathishthanam v. Madhok Construction (P) Ltd., which held that absence of response to a notice cannot be construed as consent to the arbitrator’s appointment.

The respondent countered by stating that inaction by the petitioner after notice equated to implied consent. It also argued that delivery to addresses known to the respondent sufficed for compliance.

Justice Jyoti Singh recorded in clear terms, "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." The Court stated that limitation under Section 34(3) commences only after delivery of the signed award as per Section 31(5), which had not occurred.

The Court referred to Union of India v. Tecco Trichy Engineers & Contractors and Benarsi Krishna Committee v. Karmyogi Shelters Pvt. Ltd., observing that "delivery of an arbitral award under Section 31(5) is not an empty formality... it sets in motion several periods of limitation."

In determining the issue of the Section 21 notice, the Court stated, "It is evident that when the Work Order was placed the address given by the Petitioner was... reflected on the Work Order. Admittedly, no notice was sent on this address by the Respondent." The Court found no proof that the notices were served.

Citing Bharat Chugh v. MC Agrawal HUF and Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd., the Court observed, "In the absence of such express waiver, the provision must be given full effect to." It concluded, "Without such notice, the arbitration proceedings that are commenced would be unsustainable in law."

With respect to unilateral appointment, the Court remarked, "It needs no debate that unilateral appointment of an Arbitrator is untenable in law," and relied on the judgements in Perkins Eastman Architects DPC v. HSCC (India) Ltd. and Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV).

The Court also examined Dulal Poddar v. Executive Engineer, Dona Canal Division, and recorded, "From the contents of the letter, it is obvious that even the learned Arbitrator was unsure if the notice was served on the Petitioner."

Justice Singh held that even if notice had been sent and not responded to, the respondent should have approached the court under Section 11 for appointment, stating, "It is settled that if one party to the arbitration agreement does not consent... the sender invoking the arbitration agreement can only fall back on the Court appointing the Arbitrator."

In Dharma Prathishthanam (supra), the Supreme Court had held: "A unilateral appointment and a unilateral reference — both will be illegal." The Delhi High Court adopted this rationale.

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The Court concluded that the arbitral award dated 15 March 2016 could not be sustained in law due to the absence of notice under Section 21 and the invalid unilateral appointment. Justice Jyoti Singh stated, "The impugned arbitral award dated 15.03.2016 passed by the learned Arbitrator cannot be sustained in law and is accordingly set aside."

Further, the Court clarified the parties’ legal position: "Parties will, however, be at liberty to take recourse to legal proceedings to seek enforcement of their rights in accordance with law."

The Court also disposed of pending applications related to the matter: "Petition along with pending applications stands disposed of."

Advocates Representing the Parties:
For the Petitioners: Mr. Ashish Mohan, Senior Advocate with Mr. Subhro Prokas Mukherjee, Mr. Ashok Tripathi, Mr. Avinash Shukla and Ms. Sagrika Tanwar, Advocates

For the Respondents: Mr. Sidharth Borah, Advocate

Case Title: M/s Supreme Infrastructure India Limited v. Freyssinet Memard India Pvt. Ltd.

Neutral Citation: 2025: DHC:3483

Case Number: O.M.P. (COMM) 395/2024

Bench: Justice Jyoti Singh

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