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2021 Supreme(Mad) 470

IN THE HIGH COURT OF JUDICATURE AT MADRAS
M. SUNDAR, J.
Engineering Projects India Ltd., Rep by its General Manager, Om Prakash Agarwal – Appellant
Versus
M/s. Balaji Projects, Rep by its Managing Partner V. Shekar – Respondent
O.P. No. 334 of 2020 & A. No. 1497 of 2020
Decided On : 05-02-2021

Advocates Appeared:
For the Petitioner:P.J. Rishikesh, Advocate.
For the Respondent:H. Karthik Seshadri of M/s. Iyer & Thomas (Law firm), Advocates.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 34(2)(b)(ii) and 34(2A) - Challenge to arbitral award - Jurisdiction of courts - Original petition assailing an arbitral award based on improper jurisdiction proceedings, as the seat of arbitration was agreed to be Chennai, but proceedings were held in Bengaluru, thus raising the issue of waiver and novation of the original arbitration agreement. (Paras 11, 20, 40, and 52)

(B) Waiver of Jurisdiction - Party who fails to raise objections to jurisdiction within prescribed timeline is deemed to have waived such objections, leading to potential novation of the arbitration agreement and changing the seat of arbitration. (Paras 26, 39, and 49)

(C) Unique Case - The factual matrix regarding jurisdiction was unprecedented, having a direct impact on the winding path of arbitration proceedings, leading to jurisdiction issues directly affecting the parties involved. (Paras 30 and 52)

Facts of the case:
The petitioner and respondent entered into an arbitration agreement concerning a construction contract, with Chennai designated as the venue. However, disputes arose, leading the respondent to trigger arbitration proceedings in another jurisdiction, which the petitioner did not contest in a timely manner, resulting in the jurisdiction of the Bengaluru court being questioned.

Findings of Court:
The court found that the petitioner waived its right to object to jurisdiction due to its actions during arbitration, effectively changing the seat from Chennai to Bengaluru.

Issues: Whether the original court had jurisdiction due to the improper filing location which contradicted the parties' agreement on the arbitration seat.

Ratio Decidendi: The court concluded that once a party waives its right to object to jurisdiction and participates in proceedings, such conduct implies acceptance of the jurisdiction, overruling the initial agreement on seat.

Result: Original Petition rejected.

JUDGMENT :

(Prayer: This original petition is filed under Section 34 (2)(b)(ii) and section 34(2A) of the Arbitration and Conciliation Act, 1996 seeking to set aside the award dated 04.12.2019 and the additional award dated 23.01.2020 passed by the Sole Arbitrator in respect of the arbitral proceedings between the petitioner - M/s.Engineering Projects India Ltd. and the respondent - M/s.Balaji Projects and pass such further or other orders as this Hon’ble Court may deem fit and proper in the circumstances of the case and thus render justice.)

1. Captioned ‘Original Petition’ (hereinafter ‘OP’ for the sake of brevity and convenience) is an application under section 34 of ‘The Arbitration and Conciliation Act, 1996 (Act 26 of 1996)’, which shall hereinafter be referred to as ‘A and C Act’ for the sake of brevity, convenience and clarity.

2. Captioned OP has been filed assailing an ‘Arbitral Award dated 04.12.2019 and additional award dated 23.01.2020 bearing reference AC No.30/2018’ (hereinafter collectively and compendiously referred to as ‘impugned award’ for the sake of brevity, convenience and clarity) made in the State of Karnataka by a ‘Arbitral Tribunal’ (‘AT’ for brevity) constituted by a Sole Arbitrator, who is a retired District Judge in the State of Karnataka, who was appointed as sole arbitrator by Hon’ble Karnataka High Court at Bengaluru vide order dated 11.10.2017 in a application under section 11 of A and C Act being C.M.P.No.34 of 2017. To be noted, the entire arbitral proceedings of AT were held in Arbitration Centre – Karnataka (Domestic & International), Bengaluru.

3. Captioned OP being an application under section 34 of the A and C Act, short facts shorn of elaboration will suffice owing to the short statutory perimeter and limited legal landscape of section 34 of the A and C Act within which a legal drill of testing an arbitral award should perambulate. In this view of the matter, it will suffice to set out factual matrix in a nutshell.

4. Short facts, i.e., essential facts imperative for appreciating this order are that there is an agreement dated 18.07.2011 between the petitioner and respondent; that instructions to tenderers / memorandum to tenderers and General Conditions of Contract (GCC) together with this agreement dated 18.07.2011 shall be compendiously and collectively referred to as ‘said contract’ for the sake of convenience and clarity; that said contract was for ‘Construction of common computerized checkpost at Attibele in Anekal Taluk, Bangalore’ (‘hereinafter ‘said work’ for convenience and clarity); that petitioner in captioned OP is an enterprise under the Government of India engaged in infrastructural development / construction / civil work, which was awarded some work by a tender process by the Public Works Department, Government of Karnataka in the year 2005; that tender process culminated in an agreement dated 12.08.2005; that petitioner subcontracted some of the work originally to one sub contractor and subsequently to the respondent in captioned OP; that for the sake of convenience and clarity, petitioner shall be referred to as ‘EPI’ denoting ‘Engineering Projects India Ltd.’ and respondent ‘Balaji Projects’ shall be referred to as ‘contractor’; that contractor was claimant before AT and EPI was respondent before AT; arbitrable disputes arose between EPI and contractor; that there is no disputation that there is arbitration clause in said contract; that this arbitration clause serves as an arbitration agreement between parties being arbitration agreement within the meaning of section 2(1)(b) read with section 7 of the A and C Act; that arbitration clause was triggered; that AT was appointed vide order dated 11.10.2017 made in C.M.P.No.34 of 2017 being proceedings under section 11 of the A and C Act by Karnataka High Court; that before AT, contractor as claimant made claims under vari

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