Delhi High Court Rules Against Third Party Beneficiaries' Challenge To Arbitration Award Under Section 34 Of A&C Act

Delhi High Court Rules Against Third Party Beneficiaries' Challenge To Arbitration Award Under Section 34 Of A&C Act

Justice Pratibha M. Singh of the Delhi High Court has ruled that only parties to an arbitration agreement can challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996. The court further held that third-party beneficiaries of domain names in India who are impacted by the arbitral award lack the standing to challenge the award.

Jindal Steel & Power Ltd. (JSPL) discovered that another entity, Nspire Solutions Pvt. Ltd. (Nspire), registered 'jsplsteel.in' as its domain name. JSPL lodged a complaint under the IN-Domain Name Dispute Resolution Policy (INDRP), managed by the non-profit organization NIXI in India. NIXI received the complaint and issued a notice to Nspire on February 8, 2023.

Nspire responded to the notice, and the dispute was referred to arbitration, heard by a sole arbitrator. The arbitrator found that JSPL had been using the name since 1998, holding considerable reputation and goodwill. The domain name wholly incorporated the JSPL mark, and the addition of 'steel' did not prevent it from creating confusing similarity. Nspire contended the domain name was registered for a client named Mukesh Udeshi (Mr. Mukesh), but the arbitrator held this claim was unsupported by evidence.

The arbitrator determined Nspire had no legitimate interests in the domain name and that it was registered or used in bad faith. The domain name was registered to sell to a third party or to mislead users and divert traffic from JSPL. The arbitrator ordered Nspire to transfer the domain name to JSPL.

Aggrieved by the award, Mr. Mukesh, who claimed to be the beneficial owner of the impugned domain name, challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act), arguing that the award was against natural justice principles as it was issued without giving him a hearing.

JSPL contended that Nspire was the official registrant of the domain name. The INDRP Rules of Procedure applied only to the complainant, the registrar, and the registrant, excluding Mr. Udeshi from the matter. JSPL also noted that Mr. Udeshi was aware of the proceedings but chose not to appear before the sole arbitrator.

Furthermore, under Section 34, read with Section 2(1)(h) of the Arbitration Act, only a party to the impugned award could challenge it, rendering Mr. Udeshi's petition under Section 34 non-maintainable.

The High Court noted that the Internet Corporation for Assigned Names and Numbers (ICANN) governs the globally operating domain name registration system. It is an international organization free from governmental control, maintaining policies through various supporting organizations and advisory committees representing diverse stakeholder groups.

ICANN recognizes the registries under which registrars operate, enabling domain name registrations. The registry maintains a master database of all registered domain names within each top-level domain (TLD) and generates the zone file essential for internet traffic routing globally. The Uniform Domain Name Dispute Resolution Policy (UDRP) by ICANN is a highly successful online dispute resolution mechanism, governing domain name disputes for over 25 years. Registrants must agree to UDRP conditions when registering generic top-level domains (gTLDs). The UDRP provides an online dispute resolution framework involving the registrar, registrant, complainant, and the administering center.

Upon filing a complaint, the accredited center issues a notice to the registrar to block the infringing domain name, and the registrant is allowed to respond. A panelist is appointed to decide the dispute, and the decision is binding on the complainant, the registrar, and the registrant.

The High Court noted that country code top-level domains (ccTLDs) are governed by domestic dispute resolution policies. In India, the '.in domain' is managed by NIXI, with similar procedures to the UDRP under the INDRP Rules of Procedure.

Mr. Mukesh claimed to be the beneficial owner of the domain name but was not reflected as the registrant in the WHOIS database maintained by NIXI. The listed registrant, Nspire, claimed to be a service provider for Mr. Mukesh. Mr. Mukesh failed to seek impleadment in the INDRP proceedings, resulting in no notice being issued to him by NIXI or the panelists.

The High Court concluded that since Mr. Mukesh was not a party to the arbitral proceedings, he was not entitled to file a petition under Section 34 of the Arbitration Act. The court relied on the case M/s Tara Logitech Pvt. Ltd. v. Religare Finvest Ltd., which held that Section 34 permits only parties to the arbitration agreement to challenge an arbitral award.

Therefore, the High Court did not examine the merits of the impugned award and held that Mr. Mukesh could pursue other legal remedies if available. The petition was dismissed.