Section 4 of the Arbitration and Conciliation Act 1996 (Act) provides that a party who, knowing of any non-compliance with a requirement under the Act or the arbitration agreement, proceeds with arbitration without objecting to that compliance, waives its right to so object.

Section 34 of the Act enables the court to set aside an arbitral award on the grounds specified in the section.

Rule 63 of the Indian Council of Arbitration (ICA) Rules stipulates a period of two years for the conclusion of arbitral proceedings by the arbitral tribunal.

Rule 58 of the ICA Rules is in similar terms to section 4 of the Act, providing that a party who does not object to non-compliance with the ICA Rules, waives its right to object.

Oil India Limited (petitioner) entered into a contract with Essar Oil Limited (respondent) under which the respondent was required to drill the offshore wells on a turn-key basis. Under the contract, the petitioner could terminate the contract by giving the respondent 30 days' written notice if it was satisfied as to the incompetency and incapability of the respondent in performing its obligations under the contract. The contract provided for disputes to be resolved by arbitration under the ICA rules, the venue of arbitration being New Delhi, Rajkot or Bhubaneswar, at the option of the petitioner.

Due to adverse weather conditions, the respondent anticipated delay in the completion of drilling operations and therefore requested for an extension, which was granted by the petitioner. Nevertheless, due to continuing adverse weather conditions, the respondent could not complete the operations in the extended time period. Further, the petitioner called on the respondent to obtain the necessary clearances from various authorities to carry out the drilling operations. However, that request was not stipulated in the contract. Therefore, there was further delay in the completion of work, pursuant to which the petitioner unilaterally terminated the contract without giving 30 days' prior notice to the respondent.

Certain disputes arose between the parties, which were referred to an arbitral tribunal consisting of three arbitrators. The majority tribunal held, among other things, that the contract was not rightfully terminated by the petitioner, and made an award in favour of the respondent almost two years after the reference to arbitration.

The petitioner filed a petition before the Delhi High Court to set aside the award under section 34 of the Act, on the ground of delay in rendering the award.

The Delhi High Court dismissed the petition with costs.

The court concluded that the petitioner had waived its right to challenge, as it had failed to object to that delay during the arbitration proceedings. The court for this purpose relied on Rules 63 and 58 of the ICA Rules and section 4 of the Act. The court observed that the petitioner had never persuaded the arbitral tribunal to expedite the award. The court also highlighted the petitioner's conduct towards the challenge to the award, observing that the challenge was made by way of an amendment of the petition, four years after it had been filed.

As regards challenge to the majority award on the merits, the court held that, since both the majority award and the dissenting opinion had thoroughly analysed the evidence regarding the unilateral termination of the contract, the court would not interfere with the award. The court observed that "merely because another view is possible does not constitute a valid reason for the court to interfere with the majority award".

Therefore, the court held that the award did not suffer from any patent illegality and was not contrary to the public policy of India.

With this decision, the Delhi High Court continues to limit its interference under section 34 of the Act. This decision warns the parties to promptly raise objections before the arbitral tribunal with regard to any non-compliance of requirements under the Act or the rules of arbitration. Failure to do so will constitute a waiver of the parties' right to object under section 34.