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Plea under Sec 39 Arbitration Act not maintainable until arbitral award has been made: Delhi HC

The Delhi High Court has held that a plea under Section 39 of the Arbitration and Conciliation Act, 1996 is maintainable only when the arbitral award has been made but has not been delivered to the parties on account of non-payment of fee. (Janapriya Engineers Syndicate Pvt Ltd vs UOI)

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The order was passed by a Bench of Justice V Kameswar Rao in petition under Section 39 of the Arbitration and Conciliation Act, 1996.

The Petitioner, Janapriya Engineers Syndicate Pvt Ltd and Respondent, UOI had a contract for the construction of a project in Bangalore.

Owing to certain disputes, Union Of India terminated the contract and in December 2014, a sole arbitrator from the Standing Panel of Arbitrators was appointed to adjudicate upon the disputes.

While the arbitration proceedings continued, the sole arbitrator sought consent from the parties to continue on the post even after his superannuation in November 2018, to which the parties agreed.

In February 2019, the sole arbitrator advised the parties to pay Rs 27,00,000 on or before April 26, 2019, towards the arbitration fee, to be shared equally by the parties.

While the Petitioner agreed to pay their 50% share of the arbitration fee as well as the Respondent’s share upon confirmation from the Responent, the Respondent objected to the fee on the ground that at the time of asking for consent for continuing as the sole arbitrator, it was not disclosed that he would be charging arbitration fees post his superannuation.

Respondent thus requested the arbitrator to continue without claiming any fees or else resign in terms of Section 14 (1) (a) of the Act.

The Petitioner responded to the request by stating that there was no provision in the Act under which the parties could demand the resignation of the arbitrator and in the interest of early finalization of the matter, offered to pay the arbitration fee.

The Respondents then sought time to obtain legal opinion on the same.

In August 2019, the Petitioner wrote to the Respondent requesting them to expedite the decision with regard to payment of arbitration fees.

When it did not bear any results, the Petitioner preferred the present petition under Section 39, seeking a direction to the sole arbitrator to pass/deliver the arbitral Award as expeditiously as possible on payment of the costs demanded by him.

The Petitioner broadly argued that if a party refused to pay its share of fees/deposit, Section 38 permitted the other party to pay the share of the party and then claim it in terms of Section 31 of the Act at the time of making the Award.

The Petitioner stated that it would be deeply prejudiced if the Award was not published on acocunt of the Respondent’s blatant refusal to pay the fee of the arbitrator.

The Respondent, on the other hand, argued that a plea under Section 39 was not applicable as the arbitration proceedings were on-going and were yet to be concluded.

It further submitted that the sole arbitrator's conduct of keeping the proceedings pending until superannuation and then demanding fees raised serious doubts on the bona fide of the arbitrator.

Before the Court, the sole arbitrator justified the demand of fee on the ground that after his superannuation, all his privileges and facilities, secretarial service, salaries etc had ceased and therefore he ought to be compendated for his time, effort and resources.

The Court was also informed that the issue of his fee and expenses was never made an issue before him during the time of adjudication of the matter.

After hearing the parties, the Court opined that it did not agree with the Petitioner's submissions.

The Court noted that as per sole arbitrator's stand, the drafting of the Award was to commence on payment of the fee and it did not suggest that the Award had been "made" and was "ready to be delivered".

Perusal of Section 39 (2) of the Act clearly contemplates that the application is maintainable when the Award is made, but not delivered to the parties as a party has not paid the fee demanded by the learned arbitrator.
Delhi High Court

The Court explained that a party could invoke the provision of Section 39(2) for the purpose of delivery of the Award as it would entitle a party to either challenge the Award or seek execution of the same.

In the present case, since the award had not been prepared/pronounced or ready for delivery, the situation contemplated under Section 39 had not arisen.

In view of the above, without going into the other submissions made by the parties, the Court concluded that the petitions were premature and were dismissed for being not maintainable.

Senior Advocate Sudhir Nandrajog with Advocates Ananga Bhattacharya, Devahuti Tamuli, Sonia Parween appeared for the Petitioner.

UOI was represented by Advocates Gaurav Varma, Ruchir Mishra, Sanjay Kr Saxena, Mukesh Kr Tiwari, Ramneek Mishra, Abhishek Rana. , Manu Chaturvedi.

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