Section 3 & 4 of Arbitration and Conciliation Act, 1996

Section 3 

Receipt of written communications 

The Section 3 of the Act is crucial to arbitration proceedings, as it outlines the receipt of written communication. It plays a pivotal role in arbitration proceedings by ensuring effective communication between the parties. 

Under Section 3(1)(a) of the Act, a party must deliver a written document personally. Alternatively, it can be sent to the recipient’s business, home, or mailing address, unless the parties agree otherwise.

Section 3(1)(b) of the act stipulates that if none of the places can be found even after a reasonable inquiry, then written communication should be sent to the last known place of the addressee.  

Section 3(2) stipulates that the communication is deemed to have been received on the day it is delivered. And Section 3(3) says that this section does not apply to written communication of proceedings of judicial authority.  

In the case of Avdhesh Mittal vs Deepak Vig CRL.M.C. 1136/2011, the Delhi High Court clarified Section 3’s application to the delivery of arbitral awards. Section 3 only provides for delivery of written communication and does not categorically mention delivery of Arbitral award. Arbitrators deliver arbitral awards to the parties under Section 31(5) through written communication. Notably, Section 3(1)(b) applies to Part I, including Sections 31 and 34. Therefore, excluding it from award delivery under Section 31(5) is unjustified.

In the matter of Ajibar Rahaman and Anr. Vs Cholamandalam Investment and Finance Company Ltd. 2023 decided on 08.08.2023 Section 3 of the 1996 Act relates to receipt of written communications and contemplates a deeming fiction with regard to receipt of any written communication if it is delivered to the addressee personally or at its place of business or habitual residence or mailing address [Section (3)(1)(a)] or if the written communication sent to the addressee’s last known place of business, habitual residence or mailing address by registered letter or by other means which provides for a record of the attempt to deliver it after making a reasonable enquiry [3(1)(b)]. 

Section 4 

Waiver of right to object 

The Section 4 of the Act deals with the Waiver of Right to Object. If a party notices a violation of the arbitration framework or agreement, they must raise objections promptly. Failure to do so within the specified time results in losing the right to object later. This provision ensures that objections are raised promptly, promoting procedural efficiency and fairness in the arbitration process.  

In BSNL v. Motorola India (P) Ltd. (2009) 2 SCC 337, The appellant contested the decision of the Hon’ble High Court to appoint an arbitrator under Section 11 of the Arbitration and Conciliation Act (A&C Act), arguing that the arbitration agreement did not extend to disputes concerning liquidated damages. The Hon’ble Supreme Court ruled that the appellant should have raised objections before the arbitration hearing, as required by Section 4. The Court decided that the appellant waived their right to object by failing to do so after the High Court’s order. 

In the case of Quippo Construction Equipment Ltd. v. Janardan Nirman (P) Ltd. (2020) 18 SCC 277, the Hon’ble Supreme Court reaffirmed its stance. The Court held that if a respondent, despite knowing about the arbitration proceedings, neither participated nor raised jurisdictional objections, they are deemed to have waived such objections. It also explained that the principle of waiver does not apply if the respondent raised objections earlier under Section 11, even if not before the Arbitral Tribunal under Section 16(2). However, a party aware of arbitration who fails to participate or raise objections until filing a petition under Section 34 loses the right to object.

Disclaimer: This blog is for informational purposes only and does not constitute any legal advice. Readers should seek expert legal counsel before taking any action based on the content.