Supreme Court Rejects Bihar Power Distributor’s Bid For 3-Member Panel After It Consented To Sole Arbitrator

South Bihar Power Distribution Company Ltd. and Vikriti Power Ltd. (formerly India Power Corporation (Bodhgaya) Ltd.) were parties to a 2013 distribution franchisee agreement providing for arbitration by a three-member tribunal.

With the parties’ consent, the Patna High Court appointed successive sole arbitrators.

The appellant participated in the proceedings, filed counterclaims, and consented to an extension of time, but later objected to the sole arbitrator and sought constitution of a three-member tribunal.

The respondents sought a further extension under Section 29A of the Arbitration and Conciliation Act, 1996 (“1996 Act”).

The High Court upheld the sole arbitrator, rejected the appellant’s objections, and extended the arbitrator’s mandate.

During the appeals, the Supreme Court directed the District Court to consider a further extension application; the Principal District Judge-cum-Commercial Court, Patna granted a six-month extension.

Section 4 of the 1996 Act deems a party to have waived an objection to non-compliance with an arbitration agreement where, with knowledge of the non-compliance, it proceeds with arbitration without objecting in time; Section 16(2) requires a jurisdictional plea to be raised no later than submission of the statement of defence.

Section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) bars proceedings against a corporate debtor during the moratorium but does not prevent the debtor from pursuing a claim for recovery that may improve its financial position.

Under Sections 2(1)(e) and 29A(4)–(6) of the 1996 Act, the power to extend the arbitral mandate and, where appropriate, substitute arbitrators belongs to the “court” defined in Section 2(1)(e)—the principal civil court of original jurisdiction or a High Court exercising ordinary original civil jurisdiction—not to a High Court solely because it appointed the arbitrator under Section 11.

The Court relied on State of West Bengal v. Associated Contractors, Chief Engineer (NH) PWD (Roads) v. M/s BSC & C and C JV, Jagdeep Chowgule v. Sheela Chowgule, Rohan Builders (India) (P) Ltd. v. Berger Paints (India) Ltd., C. Velusamy v. K. Indhera, and Union of India v. Pam Development Private Limited.

The appellant had twice consented to the appointment of a sole arbitrator, participated in the proceedings, agreed to an extension, and filed counterclaims before the tribunal.

Its belated objection to the tribunal’s composition was therefore barred by waiver and acquiescence under Sections 4 and 16 of the 1996 Act; the High Court’s appointment orders had also not been challenged.

The Court agreed that the IBC moratorium did not prevent the second respondent from pursuing its own arbitral claim, and noted that the resolution professional had authorised the proceedings with the committee of creditors’ approval.

However, the High Court’s Section 11 appointment jurisdiction did not make it the “court” empowered under Section 29A.

That authority vested in the court identified by Section 2(1)(e), so the High Court was wrong on this point.

The District Court’s subsequent six-month extension, granted pursuant to the Supreme Court’s direction, meant that setting aside the High Court’s ruling on jurisdiction would not materially affect the outcome.

In light of the District Court’s six-month extension, the Court lifted its prior embargo on delivery of the award and directed the arbitrator to conclude the proceedings and issue the award within six weeks.

The civil appeals were dismissed with no order as to costs.