In a significant ruling, the Allahabad High Court dismissed a series of appeals filed by Bharat Sanchar Nigam Limited (BSNL), challenging the arbitral awards in favour of Chaurasiya Enterprises. The appeals were filed under Section 37 of the Arbitration and Conciliation Act, 1996, against orders passed by the Commercial Court in Varanasi, which had upheld the arbitral awards under Section 34 of the same Act. The High Court, through its judgment, addressed key issues related to the time limit for filing pleadings, the conduct of arbitration during the COVID-19 pandemic, and the alleged bias of the arbitrator.
Case Background
The dispute originated from a tender floated by BSNL in 2015 for laying underground Optical Fiber Cable in Bhadoi district, Uttar Pradesh. Chaurasiya Enterprises was awarded the contract, but disputes regarding payment arose, prompting the company to issue a notice to BSNL on March 20, 2019, seeking payment of dues and the appointment of an arbitrator. Despite a reminder on May 8, 2019, BSNL failed to respond, leading Chaurasiya Enterprises to approach the Allahabad High Court under Section 11(4) of the Arbitration and Conciliation Act, resulting in the appointment of retired District Judge Sri Brahmdeo Mishra as the sole arbitrator on November 8, 2019.
BSNL’s counsel, B.K. Singh Raghuvanshi, argued that the arbitrator’s conduct was biased and violated natural justice principles, especially due to BSNL’s inability to participate effectively during the COVID-19 pandemic. The primary contention was that the arbitrator continued proceedings and passed an ex parte award despite BSNL’s repeated requests for extensions, citing the health issues of its counsel and the general difficulties posed by the pandemic.
Important Legal Issues Addressed
The High Court, comprising Chief Justice Arun Bhansali and Justice Vikas Budhwar, addressed multiple legal issues:
1. Time Limit for Filing Pleadings (Section 23(4)):
BSNL argued that the six-month timeline for completing pleadings, as prescribed under Section 23(4), had expired, thereby terminating the arbitrator’s mandate. The Court, however, cited a recent judgment of the Calcutta High Court in Yashovardhan Sinha HUF & Anr. Vs. Satyatej Vyapaar Pvt. Ltd., which clarified that the provision under Section 23(4) is not mandatory and does not result in automatic termination of the arbitrator’s mandate. The Court observed, “The statute does not prescribe an automatic termination of mandate for delay in completing pleadings, particularly when COVID-19-related disruptions had been judicially recognized.”
2. Conduct During the Pandemic:
The Court acknowledged the challenges posed by COVID-19 and referred to the Supreme Court’s suo moto orders excluding the period from March 15, 2020, to February 28, 2022, from limitation calculations under various legal proceedings. The Court noted that despite these relaxations, BSNL’s conduct was “reckless and marked by prolonged absenteeism,” with multiple opportunities to file pleadings and participate in hearings being squandered.
3. Bias and Fairness of the Arbitrator:
BSNL claimed bias on the arbitrator’s part, as he refused to accommodate the delays caused by BSNL’s counsel’s illness and the subsequent death of his wife due to COVID-19. The Court found these allegations unsubstantiated, stating, “Mere allegations of bias cannot suffice; they must be supported by evidence, which is lacking in this case.” The Court emphasized that the arbitrator had acted within his discretion, adhering to the procedural mandates and keeping BSNL informed through various communication channels, including telephonic calls, registered posts, and even WhatsApp messages.
Key Observations of the Court
Justice Vikas Budhwar, who authored the judgment, made several key observations:
– “An arbitrator is not expected to wait indefinitely in anticipation of a party’s participation, especially when the party is adequately notified of the proceedings.”
– “The law does not envisage the termination of mandate due to procedural delays, particularly when one party contributes to the delay.”
The Court upheld the Commercial Court’s decision, affirming the arbitral awards in favor of Chaurasiya Enterprises. The awards included compensation totaling over INR 1 crore across multiple arbitration cases, primarily for outstanding dues related to the contract for laying optical fiber cables.
Details of the Case
– Case Title: BSNL & Another vs. Chaurasiya Enterprises & Others
– Case Numbers: ARPL(A) No. 305 of 2024 (Leading); Connected Cases: 306, 307, 308, 310 of 2024
– Bench: Chief Justice Arun Bhansali and Justice Vikas Budhwar
– Counsel for Appellants (BSNL): B.K. Singh Raghuvanshi
– Counsel for Respondents (Chaurasiya Enterprises): Daya Shankar Dubey and Mahendra Kumar Mishra
