Full Judgment Text
2024 INSC 643
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 8528-8529 OF 2024
M/s. Modern Builders … Appellant
versus
State of Madhya Pradesh & Anr. … Respondents
J U D G M E N T
ABHAY S. OKA, J.
FACTUAL ASPECTS
1. The appellant was appointed as a contractor to construct
a minor bridge. The contract was granted by the first
respondent–State of Madhya Pradesh. The second respondent,
Executive Engineer, National Highway Division Sagar, Madhya
Pradesh, rescinded the contract by the letter dated 9th
November 2001. Clause 29 in the work order incorporated an
arbitration clause. The appellant requested for constitution of
an Arbitral Board. The said request was rejected. Even the
subsequent representation was rejected. Therefore, the
appellant applied for a reference to the Madhya Pradesh
Arbitration Tribunal, Bhopal (for short, ‘the Arbitration
Signature Not Verified
Digitally signed by
KAVITA PAHUJA
Date: 2024.08.30
17:04:25 IST
Reason:
Tribunal’) in accordance with Section 7 of the Madhya Pradesh
Madhyastham Adhikaran Adhiniyam, 1983 (for short, ‘the
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1983 Act’). By the order dated 19th April 2010, the Arbitration
Tribunal concluded that as there was an arbitration clause in
the contract, the provisions of the Arbitration and Conciliation
Act, 1996 (for short, ‘the Arbitration Act’) would apply. The
Tribunal held that only when there is no arbitration clause, the
provisions of the 1983 Act would apply. In view of this order,
the appellant filed a petition under Section 11(6) of the
Arbitration Act before the High Court of Madhya Pradesh at
Jabalpur. The petition was allowed, and a retired District
Judge was appointed as the Arbitrator. An award was made
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on 25 April 2014 by the learned Arbitrator.
2. The respondents, aggrieved by the said award, preferred
a petition under Section 34 of the Arbitration Act before the
District Judge, Jabalpur. The learned District Judge dismissed
the said petition. The respondents filed an appeal under
Section 37 of the Arbitration Act before the High Court for
challenging the order of the District Court. By the impugned
judgment, the High Court proceeded to set aside the award only
on the ground that as held by this Court in the case of Madhya
Pradesh Rural Road Development Authority & Anr. v. L. G.
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Chaudhary Engineers and Contractors , the provisions of
the 1983 Act were applicable.
SUBMISSIONS
3. The learned counsel appearing for the appellant invited
our attention to the fact that the decision in the case of
1
(2018) 10 SCC 826
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1
Madhya Pradesh Rural Road Development Authority was
rendered nearly four years after the date of the award.
However, in paragraph 17 of the said decision, this Court
observed that if an award is already made by the Arbitrator and
if the objection to the jurisdiction of the Arbitrator was not
raised at an appropriate stage, the award may not be annulled
only on that ground. The learned counsel submitted that the
respondents did not challenge the order passed by the High
Court under Section 11(6) of the Arbitration Act. The objection
regarding the jurisdiction of the arbitration was raised only in
the written submissions. He would, therefore, submit that the
award could not have been set aside based on the decision of
this Court.
4. The learned counsel appearing for the respondents
submitted that, as seen from the award, a contention was
raised in the written statement filed before the Arbitrator that
the appellant should have taken recourse to Section 7 of the
1983 Act. Therefore, the dispute was raised at the appropriate
stage, and hence, paragraph 17 of the decision in the case of
1
Madhya Pradesh Rural Road Development Authority will
have no application.
CONSIDERATION OF SUBMISSIONS
5. A few factual aspects will have to be noted. After the
contract granted to the appellant was rescinded, the appellant
invoked Section 7 of the 1983 Act by approaching the
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Arbitration Tribunal. By the order dated 19 April 2010, the
Arbitration Tribunal held that in view of the arbitration clause
Civil Appeal No.8528-8529 of 2024 Page 3 of 7
in the contract, the 1983 Act will have no application and the
appellant will have to take recourse to the Arbitration Act. In
view of this order, the appellant invoked the jurisdiction of the
High Court under Section 11(6) of the Arbitration Act by filing
a petition for the appointment of an Arbitrator. The order dated
nd
22 July 2011 passed by the High Court on the said petition
shows that the respondents' opposition was only on the merits
of the claim. The objection based on the applicability of the
1983 Act was not raised. The respondents did not challenge the
order of appointment of the Arbitrator passed by the High
Court under Section 11(6) of the Arbitration Act. Even before
the learned Arbitrator, Section 16(1) of the Arbitration Act was
not invoked to raise the jurisdiction issue. However, in the
written statement filed before the Arbitrator, the contention
regarding the applicability of the 1983 Act was raised.
6. Now, coming to the decision of this Court in the case of
1
Madhya Pradesh Rural Road Development Authority , after
considering the provisions of the 1983 Act and the Arbitration
Act, in the light of Section 2(4) of the Arbitration Act, this Court
held that although there was an arbitration clause, the 1983
Act would apply. In paragraph 17, this Court held thus:
“17. We do not express any opinion on
the applicability of the State Act where
award has already been made. In such
cases if no objection to the jurisdiction
of the arbitration was taken at relevant
stage, the award may not be annulled
only on that ground. ”
Civil Appeal No.8528-8529 of 2024 Page 4 of 7
7. As noted earlier, in the facts of the case, before taking
recourse to the Arbitration Act, the appellant had taken
recourse to Section 7 of the 1983 Act. The order of the
Arbitration Tribunal, holding that the Arbitration Act will
apply, led the appellant to file a petition under Section 11(6) of
the Arbitration Act, which was not objected to on the grounds
of the applicability of the 1983 Act. The objection of the State
government was confined to the merits of the claim. The award
is only in the sum of Rs. 6,52,235/- with interest. The award
th
was made on 25 April 2014. Therefore, in the facts of the case,
it will be unjust to set aside the award only on the ground of
the failure of the appellant to take recourse to the 1983 Act. In
fact, the appellant had taken recourse to the 1983 Act before
seeking the appointment of an Arbitrator. In this case, as can
be seen from the impugned judgment, the award has been set
aside only on the ground that the appellant ought to have
invoked the provisions of the 1983 Act. Even assuming that
the observations in paragraph 17 of the decision in the case of
1
Madhya Pradesh Rural Road Development Authority , are
not applicable, this is a fit case to exercise jurisdiction under
Article 142 of the Constitution of India to ensure that complete
justice is done. Therefore, by setting aside the impugned
judgment, the appeal under Section 37 of the Arbitration Act
will have to be restored with a request to the High Court to
decide the same on merits.
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8. Accordingly, the impugned judgment dated 12 May
2022 passed in the Review Petition no.584 of 2021, and the
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order dated 5 July 2021 passed in the Arbitration Appeal
no.45 of 2019 are set aside. The Arbitration Appeal no.45 of
2019 is restored to the file of the High Court of Madhya
Pradesh, Principal Seat at Jabalpur. The restored appeal shall
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be listed before the roster bench on Monday, the 30
September 2024. The parties to the appeal shall appear before
the High Court on that day, and no further notice of the date
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fixed in the appeal shall be given to the parties. On 30
September 2024, the High Court will fix a date for hearing the
restored appeal, which shall be heard and decided in
accordance with law and in light of the observations made in
this judgment. All the issues on the merits of the restored
appeal under Section 37 of the Arbitration Act are kept open.
However, the award should not be set aside on the grounds of
the applicability of the 1983 Act.
9. If the appellant has withdrawn the amount paid as per
the award, the same shall be deposited by the appellant with
the High Court within two months from today. The amount
shall be invested by the High Court in a fixed deposit with any
nationalised bank till the disposal of the restored appeal. The
High Court, while deciding the appeal, shall pass appropriate
directions regarding the withdrawal of the amount with interest
accrued thereon.
10. Subject to the observations made above, the appeals are
allowed.
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11. The Registry shall forward a copy of this judgment to the
Registrar (Judicial) of the High Court of Madhya Pradesh at
Jabalpur.
...…………………………….J.
(Abhay S Oka)
..…………………………….J.
(Augustine George Masih)
New Delhi;
August 30, 2024.
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