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LOHIA V. LOHIA

Lohia v. Lohia (2002) 1 Arb LR 493 (SC)

ISSUE:

  • Whether Section 10 is a non-derogable provision in arbitration? Whether a mandatory provision of the Act can be waived by the parties?

RULE:

  • The appellant contended that Section 10 is a mandatory provision of the Act. In the present matter, the Arbitral tribunal was not validly constituted, hence it should be void and invalid. Moreover, if the constitution of the arbitrators is invalid, it should also render the award void. The appellant also contended that Section 16 does not provide for any challenge of the constitution of the Arbitration Tribunal. Therefore, an invalidly constituted tribunal deems lack of jurisdiction.

FACTS:

  • The Appellant and Respondent had a family dispute over business and properties. For which two arbitrators were hired (Mr. Pramod Kumar Khaitan, and Mr.Sardul Singh Jain).
  • An award was passed by the two arbitrators on 6th October 1996. On 22nd December 1997, the first respondent filed an application in Calcutta High Court for setting aside the award.
  • The contention was that, under Section 10 of The Arbitration and Conciliation Act, 1966, an even number of arbitrators cannot be present.
  • Since in the present matter, two arbitrators were present, it was contended that arbitration was void and invalid.
  • On the same line of reasoning, it was also contended that the award is henceforth also void and invalid.

HELD:

  • The court held the contention of Section 10 is a non-derogable provision, unacceptable.
  • Since it cannot be said that an arbitration agreement becomes invalid when only two arbitrators are appointed. In such a case, Section 11(3), the two arbitrators can appoint a third one.
  • The court held that an appointment of the third arbitrator can be done at a later stage, i.e when the two differ, and need not be mandatorily done at the initial stages of the agreement.
  • Further, the court held that an award can only be set aside under the provisions of Sections 12, 13, 16, and 34. An award cannot be set aside if the composition of the arbitral tribunal and proceedings are in accordance with the agreement between the parties.
  • The right to challenge an award, in case tribunal and proceedings are not in accordance, is also restricted.
  • In a sense that, even if the composition of the arbitral tribunal or the arbitral procedure is not in accordance with the agreement of the parties but if such composition or procedure is in accordance with the provisions of the Act, then the party cannot challenge the award.