Parties can waive objections to an arbitrator's eligibility by consenting to their appointment and participating in proceedings, as per Sections 12(5) and 34 of the Arbitration and Conciliation Act.

JUDGMENT :

G.S. KULKARNI, J.

1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, “ACA”) is directed against the judgment and order dated 16 May 2023 passed by the Commercial Court at Thane whereby the respondent’s application under Section 34 of the ACA for setting aside the arbitral award dated 29 September 2020 passed by the learned sole arbitrator is allowed, as aconsequence of which, the arbitral award rendered by the learned sole arbitrator stands quashed and set aside.

2. The only ground on which the arbitral award is set aside by the Commercial Court is to the effect that the learned arbitrator was the Managing Director of the respondent, hence, in view of the provisions of Section 12(5) of the ACA, he was ineligible to act as an arbitrator. Also referring to the provisions of Sections 14 and 15 of the ACA, the Commercial Court felt that on such count the arbitral award suffered a patent illegality so as to set aside the same by applying Section 34(2A) of the ACA.

3. Thus, the issue as urged in the present appeal is a pure question of law, namely: ‘when the learned sole arbitrator was appointed by consent of the parties, and who happened to be the Managing Director of the respondent having conducted the arbitral proceedings culminating into an award, whether the arbitral award could be set aside on the ground of ineligibility of the arbitrator in terms of Section 12(5) of the ACA and other relevant provisions’.

4. Relevant to the controversy, the facts many of which are not in dispute can be noted:- An agreement dated 30 October 2013 was entered between the respondent and the appellant under which the appellant was awarded water supply works, namely, rehabilitation of existing components of ‘Stem Water Supply System’, ‘repairing of raw water pump station at Shahad’, ‘construction of CCT, SUMP, pump house’ and back wash water recirculation system’ at Temghar Water Treatment Plant. The contract work pertained to two locations.The appellant executing the work on all items under the contract is not in dispute. The genesis of dispute between the parties and subject matter of arbitration is in relation to extra work ordered by the respondent which, according to the appellant, was outside the scope of contractual work and for its essential completion. In such context, on 01 February 2019, a notice was issued by the appellant to the respondent demanding payment. Respondent disputed the appellant’s claim. As the agreement dated 30 October 2013 as entered between the parties contained an arbitration agreement in clause 17b thereof, to provide that in case of disputes between the Contractor (Appellant) and the field officers (of the Respondent) regarding the tender/contract, the “Member Secretary STEM (Respondent)” shall be the sole arbitrator and no external arbitrator shall be appointed.

5. On such premise, the appellant filed an application before this Court under Section 11 of the ACA (Arbitration Petition No. 72 of 2019) however, such application came to be withdrawn, as the appellant had failed to issue a notice under Section 21 of the ACA, invoking arbitration and as per the arbitration agreement. The appellant accordingly issued a notice to the respondent dated 05 July 2019, invoking the arbitration agreement whereby the respondent was called upon to appoint an arbitral tribunal. On 22 July 2019, respondent replied to the appellant’s notice through its advocate according consent for the appointment of an arbitrator. The consent of the respondent was in the following terms:-

“2. My client states that, keeping all contentions and averments open for argument as well as denying all the allegation made by your goodself, my client is ready and willing to refer the disputes as raised by your client for arbitration as per clause 17 of the general conditions of contract to appoint Hon’ble Col. Vivekanand Choudhary (retd.), Managing director of Stem Water Dist. & infra co. pvt. Ltd. as the arbitrator f