Full Judgment Text
Reportable
IN THE SUPREME COURT OF INDIA
2026 INSC 425
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. ............. OF 2026
(@ SLP (C) No. 33075 of 2025)
M/s. MCM Worldwide Private Limited … Appellant
versus
M/s. Construction Industry Development Council … Respondent
J U D G M E N T
SANJAY KUMAR, J
Leave granted.
1.
During the arbitral proceedings between the parties, a fundamental
2.
legal aspect came to be glossed over on a patent misunderstanding of a
decision of this Court. Hence, this order, to clarify the legal position.
3. Arbitration commenced between the parties upon appointment of a
sole Arbitrator by the Delhi High Court in the context of the disputes arising
under their Memorandum of Understanding (MoU) dated 02.03.2006 read
with the Memorandum of Understanding (MoU) dated 05.05.2008 of the
respondent, M/s. Construction Industry Development Council, with
Signature Not Verified
Employment Generation and Marketing Mission, Department of Rural
Digitally signed by
babita pandey
Date: 2026.04.28
17:18:20 IST
Reason:
Development, Government of Andhra Pradesh.
4. The appellant, M/s. MCM Worldwide Private Limited, had earlier
filed a suit in CS DJ No. 428 of 2018 for recovery of its alleged dues before
the learned District & Session Judge, South-East, Saket Courts, New
Delhi, but the respondent filed an application therein under Section 8 of
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the Arbitration and Conciliation Act, 1996 , to refer the parties to arbitration
in terms of the arbitration clause in the MoU dated 05.05.2008, read with
Clause 4 of the MoU dated 02.03.2006. On 03.08.2019, the suit was
disposed of on this premise. However, as the respondent failed to agree
to the appointment of an arbitrator, the appellant approached the Delhi
High Court by way of a petition under Section 11(6) of the Arbitration Act,
resulting in the appointment of a sole arbitrator by the High Court by order
dated 27.09.2021, which was thereafter confirmed on 11.10.2021.
5. While so, at the stage of framing of issues by the learned Arbitrator,
the respondent filed an application under Order VII, Rule 11 of the Code
of Civil Procedure, 1908, seeking rejection of the appellant’s claim petition
on the ground that its claims were barred by limitation. However, the
learned Arbitrator dismissed the application on merits, by order dated
16.04.2022. Assailing the said order, the respondent filed OMP (Comm.)
No. 24 of 2022, an application under Section 34 of the Arbitration Act,
before the learned District Judge (Comm.), South-East, Saket Courts,
1
For short, ‘the Arbitration Act’
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New Delhi. The application was rejected by the learned District Judge on
11.11.2022, holding that the said order was not amenable to challenge
under Section 34 of the Arbitration Act. The respondent assailed this order
before the Delhi High Court in FAO (Comm.) No. 50 of 2023. The High
Court dismissed the same on 24.02.2023 but granted liberty to the
respondent to file an application before the learned Arbitrator under
Section 16 of the Arbitration Act.
6. Pursuant to such liberty, the respondent filed an application before
the learned Arbitrator under Section 16 of the Arbitration Act with the
following prayer: -
‘Dismiss the present statement of claim as the same is not maintainable
since the Ld. Sole Arbitrator does not possess jurisdiction to entertain the
same due to barred by limitation.’
This application was dismissed by the learned Arbitrator on
19.05.2023. Aggrieved thereby, the respondent again filed an application
under Section 34 of the Arbitration Act in OMP (Comm.) No. 64 of 2023
before the learned District Judge (Commercial Court-01), South-East,
Saket Courts, New Delhi. Significantly, the appellant raised the issue of
maintainability of this application under Section 34 of the Arbitration Act
against an order passed under Section 16 thereof. The specific contention
of the appellant was that, in the scheme of the Arbitration Act, an order
rejecting the contention that the arbitrator lacked jurisdiction could only be
assailed after the award was made by the arbitrator, upon conclusion of
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the arbitral proceedings, and not prior thereto. While so, the respondent
placed reliance on the decision of this Court in Indian Farmers Fertilizer
2
Cooperative Limited vs. Bhadra Products and the appellant
conceded, on the strength thereof, that the application under Section 34
of the Arbitration Act was maintainable.
In the light of the parties being ad idem on the maintainability of the
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application, the learned District Judge considered the matter on merits
and dismissed the respondent’s application under Section 34 of the
Arbitration Act, by order dated 26.03.2024. This order was challenged by
the respondent before a Division Bench of the Delhi High Court, by way
of an appeal under Section 37 of the Arbitration Act, in FAO (Comm.) No.
83 of 2024. Notably, the Division Bench did not choose to consider the
maintainability of either the application filed under Section 34 of the
Arbitration Act or the appeal filed before it under Section 37 thereof, in the
context of an order passed by the learned Arbitrator, rejecting the plea of
lack of jurisdiction under Section 16 of the Arbitration Act. The judgment
dated 08.05.2025 of the Division Bench, allowing the appeal, focused on
the merits, without addressing the essential issue as to whether the case
was proceeding on the right track. The said judgment is called in question
before us in this appeal.
2
(2018) 2 SCC 534
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8. Having given our earnest consideration to the matter, we are of the
opinion that neither the learned District Judge nor the Division Bench were
correct in entertaining the matters brought before them, i.e., under Section
34 and, thereafter, under Section 37, of the Arbitration Act. In this regard,
we may note that Section 16 of the Arbitration Act is titled ‘Competence of
arbitral tribunal to rule on its jurisdiction’ and Section 16(1) provides that
the arbitral tribunal may rule on its own jurisdiction, including ruling on any
objection with respect to existence or validity of the arbitration agreement.
Section 16(2) states that a plea that the arbitral tribunal does not have
jurisdiction should be raised not later than the submission of the statement
of defence, but a party would not be precluded from raising such a plea
merely because he has appointed or participated in the appointment of
the arbitrator. Section 16(3) states that a plea that the arbitral tribunal is
exceeding the scope of its authority should be raised as soon as the
matter alleged to be beyond the scope of such authority is raised during
the arbitral proceedings. Section 16(4) stipulates that, in either of the
cases referred to in Section 16(2) or (3), the arbitral tribunal may admit a
later plea, if it considers the delay justified. Section 16(5) categorically
mandates that once the arbitral tribunal decides on a plea raised under
Section 16(2) or (3) and where the arbitral tribunal rejects such plea, it
shall continue with the arbitral proceedings and make an arbitral award.
Section 16(6) states that the party aggrieved by such an arbitral award
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may then make an application for setting it aside in accordance with
Section 34 of the Arbitration Act. It is also relevant to note that Section 37
of the Arbitration Act, titled ‘Appealable orders’, provides for an appeal
being filed only in the event an arbitrator upholds the plea of lack of
jurisdiction under Section 16(2) or (3), i.e., where the arbitrator puts an
end to the arbitration proceedings by accepting the plea that he/she has
no jurisdiction to proceed further.
9. This being the scheme of the Arbitration Act, the crucial question
that arises in the present scenario is whether the respondent was entitled
to file an application under Section 34 of the Arbitration Act against the
learned Arbitrator’s order dated 19.05.2023 under Section 16(2), rejecting
the plea that she lacked jurisdiction to continue with the arbitral
proceedings. Though an issue in that regard was not raised before the
Delhi High Court, the Division Bench ought to have been mindful of the
scheme of the Arbitration Act and should have applied its mind to this
basic and foundational aspect.
At this stage, it would be apposite to take note of what this Court
10.
had held in Indian Farmers Fertilizer Cooperative Limited ( supra ), the
decision cited before the learned District Judge during the hearing of the
application under Section 34 of the Arbitration Act. This decision did not
relate to an order passed under Section 16 of the Arbitration Act. It
recorded that an interesting question arises as to whether an award
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delivered by an arbitrator, which decides the issue of limitation, can be
said to be an interim award and whether such an interim award can be set
aside under Section 34 of the Arbitration Act. The background of that case
was that, after initiation of arbitral proceedings, the learned Arbitrator
therein deemed it fit to take up the issue of limitation first. Thereupon, the
issue was decided in favour of the claimant, holding that the claims were
not time-barred. This decision came to be challenged by way of an
application under Section 34 of the Arbitration Act, by styling it as a ‘First
Partial Award’. The learned District Judge before whom the application
was filed dismissed it, stating that he lacked jurisdiction as the decision
could not be said to be an interim award for the purposes of Section 34 of
the Arbitration Act. The High Court agreed with this view and the matter
came before this Court.
11. In this factual milieu, this Court opined that, in the event a decision
is made by an arbitrator determining one issue between the parties, it
would have to be treated as an interim award as such issue stood finally
determined between them and could not be re-adjudicated before the
arbitrator again. Reference was made to case law in support of the
proposition that an interim award or partial award would be a final award
on matters covered therein, made at an intermediate stage of the arbitral
proceedings. This Court opined that, as it was clear that the arbitrator had
disposed of one matter between the parties, i.e., the issue of limitation
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finally, that decision would be an interim award within the meaning of
Section 2(1)(c) of the Arbitration Act and would be subsumed within the
expression ‘Arbitral Award’ and could, therefore, be challenged under
Section 34 thereof. Significantly, this Court observed as follows:
‘30. In our view, therefore, it is clear that the award dated 23-7-2015 is an
interim award, which being an arbitral award, can be challenged
separately and independently under Section 34 of the Act. We are of the
view that such an award, which does not relate to the Arbitral Tribunal’s
own jurisdiction under Section 16, does not have to follow the drill of
Sections 16(5) and (6) of the Act. Having said this, we are of the view that
Parliament may consider amending Section 34 of the Act so as to
consolidate all interim awards together with the final arbitral award, so
that one challenge under Section 34 can be made after delivery of the
final arbitral award. Piecemeal challenges like piecemeal awards lead to
unnecessary delay and additional expense.’
[
12. We may note that this Court specifically held that a decision of
the arbitrator on limitation, taken up as a preliminary issue, would
amount to an interim award which would be amenable to challenge
under Section 34 of the Arbitration Act. This is logical as that issue,
once it stands decided, would no longer figure for consideration before
the arbitrator and would, therefore, not be dealt with again in the final
award that would be passed by the arbitrator. Unless such decision is
treated as an interim award, there would be no scope for the party
aggrieved thereby to challenge the correctness thereof.
13. However, if an arbitrator deals with the very same issue of
limitation on an application filed under Section 16 of the Arbitration Act,
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on the ground that the arbitrator lacks jurisdiction on that count, it would
be traceable to Section 16(2) of the Arbitration Act and if the arbitrator
rejects that plea, Sections 16(5) and Section 16(6) would apply. In that
situation, there is no option for the party aggrieved by the decision of
the arbitrator upon the application filed under Section 16 except to wait
till the conclusion of the arbitral proceedings and then raise that issue
by way of an application under Section 34 against the final award.
14. Though the final award, even in this situation, would not focus
upon the issue of limitation as it already stood decided by the rejection
of the application filed under Section 16(2) of the Arbitration Act, the
scheme of Section 16 and, more particularly, Sections 16(5) and 16(6),
would keep the issue alive and enable the party aggrieved to challenge
the validity of the rejection order under Section 16 at the final stage,
even after the passing of the final award.
However, the scheme of Sections 16(5) and 16(6) would not
15.
apply if the arbitrator deals with limitation as a preliminary issue and
makes a decision thereon in favour of the claimant. That is the reason
why this Court observed that, in such a situation, the drill of Sections
16(5) and 16(6) would not have to be followed. This Court went on to
observe that even such interim awards should be made amenable to
challenge under Section 34 of the Arbitration Act after the passing of
the final award, instead of going in for ‘piecemeal’ challenges.
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16. The exclusion of an order passed by an arbitrator under Section
16(2), rejecting the plea of lack of jurisdiction is, therefore, manifest
from the aforestated observations of this Court, but this decision has
now been misunderstood to imply that, even the rejection of a plea
under Section 16(2) of the Arbitration Act must be treated as an interim
award and the same can be subjected to challenge under Section 34
of the Arbitration Act. This understanding on the part of the learned
District Judge, which seems to have found favour with the Division
Bench of the Delhi High Court, is erroneous and unsustainable.
Accepting such a construction would do violence to the very scheme
of the Arbitration Act and render Section 37(2) thereof superfluous, as
it is only an order accepting the plea of lack of jurisdiction under
Section 16(2) or (3) that is amenable to appeal directly, without going
through the process under Section 34 thereof. This crucial aspect of
the matter was entirely lost sight of.
On the above analysis, the respondent was not entitled to file an
17.
application under Section 34 of the Arbitration Act against the order
dated 19.05.2023 passed by the learned Arbitrator rejecting its plea of
lack of jurisdiction on the ground of limitation. As the said application
was not even maintainable, the question of an appeal under Section
37 of the Arbitration Act being entertained against the decision passed
thereon did not arise. The Delhi High Court erred in overlooking this
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crucial aspect and in deciding the appeal on merits. The judgment
dated 08.05.2025 passed by the Division Bench of the Delhi High Court
in FAO (Comm.) No. 83 of 2024 is, accordingly, set aside. It would be
open to the respondent to test the validity of the order dated
19.05.2023 passed by the learned Arbitrator only after passing of the
final award and if the situation so warrants, by way of an application
under Section 34 of the Arbitration Act.
The appeal is allowed in the aforestated terms.
Parties shall bear their own costs.
……………………...J
[SANJAY KUMAR]
.……………………...J
[K. VINOD CHANDRAN]
New Delhi;
April 21, 2026.
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