Full Judgment Text
REPORTABLE
2025 INSC 698
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6856 OF 2025
(Arising out of Special Leave Petition (C) No. 9740 of 2022)
M/S GAYATRI PROJECT LIMITED ...APPELLANT(S)
VERSUS
MADHYA PRADESH ROAD
DEVELOPMENT CORPORATION LIMITED ...RESPONDENT(S)
J U D G M E N T
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2025.05.15
13:26:03 IST
Reason:
J.B. PARDIWALA, J.:
For the convenience of the exposition, this judgment is divided in the following
parts: -
INDEX
A. FACTUAL MATRIX ................................................................................... 3
B. ISSUES FOR DETERMINATION ........................................................... 16
C. ANALYSIS .................................................................................................. 16
i. Can an Award passed under the Act, 1996 be annulled on the ground
of lack of jurisdiction where no plea of applicability of MP Act, 1993
was raised before the Arbitral Tribunal? ............................................. 34
a. Is there a conflict between the decisions of L.G. Chaudhary (II) and
Lion Engineering ? ............................................................................... 37
b. Whether a plea of lack of jurisdiction may be raised for the first time
under Section 34 of the Act, 1996 if no such objection was taken before
the arbitral tribunal? ............................................................................ 51
D. CONCLUSION ........................................................................................... 58
Special Leave Petition (C) No. 9740 of 2022 Page 1 of 64
1. Leave Granted.
2. This appeal arises from the judgment and order passed by the High Court of
Madhya Pradesh, Principal Seat at Jabalpur dated 07.01.2022 in Arbitration
Appeal No. 79 of 2021 by which the appeal filed by the appellant herein under
Section 37 of the Arbitration and Conciliation Act, 1996 (for short, the “ Act,
1996 ”) came to be dismissed thereby affirming the order dated 20.12.2019
passed by the Commercial Court and 19th Additional Sessions Judge, Bhopal
(M.P.) allowing application filed by the respondent herein under Section 34
of the Act, 1996.
3. It appears that the respondent herein suffered an award dated 08.07.2011
passed by the Arbitral Tribunal (for short, the “ Tribuna l”). The said award
was challenged by the respondent Corporation under Section 34 of the Act,
1996. The appeal filed by the Corporation under Section 34 of the Act, 1996
came to be allowed on the ground that the Tribunal had no jurisdiction to pass
the award in view of the provisions of the M.P. Madhyastham Adhikaran
Adhiniyam, 1983 (for short, the “ MP Act, 1983 ”). The order passed by the
Commercial Court and 19th Additional Sessions Judge, Bhopal (M.P.) came
to be challenged by way of appeal before the High Court under Section 37 of
the Act, 1996. The appeal came to be dismissed.
Special Leave Petition (C) No. 9740 of 2022 Page 2 of 64
A. FACTUAL MATRIX
4. The facts giving rise to this appeal may be summarised as under:-
(i) The appellant executed a “works contract” dated 12.12.2005 with the
respondent for “Rehabilitation and Strengthening of Khargone -
Barwani Road (SH-26) Project Road No. 19” & “Rehabilitation and
Strengthening of Khargone - Bistan Road (SH-31) Project Road No.
20” in the State of Madhya Pradesh. Clause 67.3 of the “General
Conditions of Contract” read with Clause 67.4 of the “Conditions of
Particular Application” provided for arbitration as the means for
resolution of disputes between the Parties.
(ii) The arbitration agreement mandated that the tribunal shall comprise of
three members, one to be appointed by each party and the two co-
arbitrators had to nominate the presiding arbitrator.
(iii) Clause 67.4 of the Conditions of Particular Application – Part-II reads
thus: -
“Sub-Clause 67.4 : Arbitration
Any dispute in respect of which:
a) the decision, if any, of the Board has not become final
and binding pursuant to Sub-Clause 67.2, and
b) amicable settlement has not been reached:
(i) In the case of dispute arising between the
Employer and a domestic Contractor or between
the Employer and a foreign Contractor who opts
for the application of the Indian Arbitration and
Special Leave Petition (C) No. 9740 of 2022 Page 3 of 64
Conciliation Act, 1996 related to any matter
arising out of or connected with this Contract,
such dispute shall be referred to the award of
two Arbitrators (one each to be appointed by
each party) and an Umpire to be appointed by
the Arbitrators, or if there is no agreement, to be
appointed by the Arbitration Committee of the
Indian Council of Arbitration. The Indian
Arbitration and Conciliation Act, 1996, the rules
there under and any statutory modification or
re-enactment thereof, shall apply to these
arbitration proceedings; or (2) in the case of
dispute arising between the Employer and a
foreign Contractor, by application of the
UNCITRAL Arbitration Rules related to any
matter arising out of or connected with this
Contract, such dispute shaft be referred to the
award of two Arbitrators (one each to be
appointed by each party) and an Umpire to be
appointed by the Arbitrators, or if there is no
agreement, to be appointed by the International
Centre for Alternative Dispute Resolution
(ICADR). The UNCITRAL Arbitration Rules shall
apply to the arbitration proceedings.
(ii) Neither party shall be limited in the proceedings
before such arbitrators to the evidence or
arguments already put before the Engineer, for
the purpose of obtaining his said decision. No
such decision shall disqualify the Engineer from
being called as a witness and giving evidence
before the arbitrators or any matter whatsoever
relevant to the dispute.
(iii) The reference to arbitration may proceed
notwithstanding that the Works shall not then
be or be alleged to be complete, provided always
that the obligations of the Employer, the
Engineer and the Contractor shall not be altered
by the reason of the arbitration being conducted
during the progress of the Works. Neither party
shall be entitled to suspend the Works, and
payment to the Contractor shall be continued to
be made as provided by the Contract.
(iv) If one of the parties fail to appoint its arbitrators
in pursuance of sub para (i) and (ii) above, within
60 days after receipt of the notice of the
appointment of its arbitrators by the other party,
Special Leave Petition (C) No. 9740 of 2022 Page 4 of 64
then the Secretary General of the Permanent
Court of Arbitration, the Hague, in the case of
foreign contractors opting for the application of
the UNCITRAL Arbitration Rules, or the Ministry
of Road Transport and Highways in the case of
Indian contractors, and the foreign contractors
who opt for the application of Indian Arbitration
and Conciliation Act 1996, as the case may be,
shall appoint the arbitrator. A certified copy of
the Secretary General's order or Ministry of Road
Transport and Highways order, as the case may
be, making such an appointment shall be
furnished to both the parties.
(v) Arbitration proceedings shall be held at Bhopal,
India, and the language of the arbitration
proceedings and that of all documents and
communications between the parties shall be
English.
(vi) The decision of the majority of arbitrators shall
be final and binding upon both parties. The
expenses of the arbitrators as determined by the
arbitrators shall be shared equally by the
Employer and the Contractor, However, the
expenses incurred by each party in connection
with the preparation, presentation, etc., of its
case prior to, during and after the arbitration
proceeding shall be borne by each party itself.
(vii) All arbitration awards shall be in writing and
shall state the reasons for the award.”
(iv) This Court vide its judgment dated 14.01.2010 in the matter of VA Tech
Escher Wyass Flovel Limited v. M.P. State Electricity Board & Anr.
reported in (2011) 13 SCC 261 , held that the State Act would apply
only to such works contracts which did not have an arbitration clause.
(v) In VA Tech (supra), this Court held as under: -
“1. Heard the learned counsel for the parties. This appeal
has been filed against the impugned judgment of the High
Special Leave Petition (C) No. 9740 of 2022 Page 5 of 64
Court of Madhya Pradesh dated 5-3-2003. It appears that
the appellant was awarded a work contract by the
respondents. There was some dispute between the parties
and there is an arbitration clause in the agreement. The
appellant filed an application under Section 9 of the
Arbitration and Conciliation Act, 1996 (for short “the 1996
Act”) which was rejected by the learned Additional District
Judge and that order has been upheld by the High Court.
Hence, this appeal.
2. Section 7(1) of the Madhya Pradesh Madhyastham
Adhikaran Adhiniyam, 1983 (for short “the 1983 Act”)
provides as follows:
“7. Reference to Tribunal.—(1) Either party to a
works contract shall irrespective of the fact
whether the agreement contains an arbitration
clause or not, refer in writing the dispute to the
Tribunal.”
3. Subsequently, Parliament enacted the 1996 Act. The
1996 Act only applies where there is an arbitration clause
but it does not apply where there is none. The 1996 Act
covers all kinds of disputes including the dispute relating to
work contracts. In our opinion, the 1983 Act and the 1996
Act can be harmonised by holding that the 1983 Act only
applies where there is no arbitration clause but it stands
impliedly repealed by the 1996 Act where there is an
arbitration clause. We hold accordingly. Hence, the
impugned judgment cannot be sustained and we hold that
the application under Section 9 of the 1996 Act was
maintainable.
4. The appeal is allowed accordingly. No costs.”
(vi) The disputes arose between the parties from 06.08.2010 onwards in
relation to the appellant’s right to be reimbursed additional cost incurred
by it on account of introduction of subsequent legislation on increase in
Special Leave Petition (C) No. 9740 of 2022 Page 6 of 64
entry tax on High-Speed Diesel under Clause 70.8 of the Particular
Conditions of Contract.
(vii) The appellant invoked arbitration under Clause 67.4 vide its notice
dated 06.08.2010 and the Tribunal stood constituted on 24.09.2010.
(viii) The Tribunal passed a unanimous award dated 08.07.2011 in favour of
the appellant for a sum of Rs. 1,03,55,187 (i.e. Rs. 1.04 Crore). The
relevant paras 1.19 and 3.1 respectively of the Arbitral Award are as
follows: -
“1.19 The valuation of the claim as assessed by the
Engineer in its letter dt 18.03.2009 (CD - 01 pages 20 &
21) and recommended for reimbursement is Rs
1,03,55,187.00. This amount is agreed to by both the parties
as the valuation of the claim.
3.1 The Claimant has referred two claims for arbitration
before this AT. After careful examination and consideration
of the written/ oral submissions and evidence presented by
both the parties to the extent relevant, AT awards amounts
against each claim as under:
Amount Claimed
Amount Awarded
Claim No. 1 Rs. 1,03,55,187.00 Rs. 1,03,55,187.00
Claim No. 2 Amount not specified Rs. Nil
................................. ...............................
Total
Amount
Rs. 1,03,55,187.00
plus Interest.
Rs. 1,03,55,187.00
(ix) As is evident from Para 1.19 of the Award quoted above, the
quantification of this amount was in-fact recommended by the Engineer
and had been admitted by the respondent. The Tribunal also awarded
Special Leave Petition (C) No. 9740 of 2022 Page 7 of 64
future interest at the rate of 10% p.a. from the date of the award till the
date of actual payment as per para 3.1. As of 17.02.2025, the amount
payable by the respondent to the appellant stands at Rs. 2,44,63,775.
(x) The respondent challenged the award before the Civil Court under
Section 34 of the Arbitration Act vide a petition filed on 30.09.2011.
However, the respondent in its petition admittedly did not challenge the
jurisdiction of the Tribunal. The respondent has admitted this fact in
Para 5 of its counter affidavit filed before this Court. The respondent’s
grounds for challenge were essentially on matters of appreciation of
evidence by the Tribunal which grounds were, in any case, untenable
given the limited scope of Section 34 of the Arbitration Act.
(xi) A two Judge Bench of this Court delivered a judgment in the matter
titled MP Rural Road Development Authority & Anr v. L.G.
Chaudhary Engineers & Contractors , reported in (2012) 3 SCC 495 ,
wherein it held VA Tech (supra) to be per incuriam . The relevant para
42 reads as under: -
“42. Therefore, the appeal is allowed and the judgment of
the High Court which is based on the reasoning of Va
Tech [Va Tech Escher Wyass Flovel Ltd. v. M.P. SEB,
Misc. Appeal No. 380 of 2003, order dated 5-3-2003 (MP)]
is set aside. This Court holds that the decision in Va
Tech [(2011) 13 SCC 261] has been rendered per incuriam.
In that view of the matter the arbitration proceeding may
proceed under the M.P. Act of 1983 and not under the AC
Act, 1996.”
Special Leave Petition (C) No. 9740 of 2022 Page 8 of 64
(xii) The Division Bench, however, differed on the point of applicability of
the State Act to such works contracts which had been terminated, and
this difference of opinion caused this matter to be referred to a larger
bench in the follow terms: -
“Order
60. In view of some divergence of views expressed in the
two judgments delivered today by us, the matter may be
placed before the Hon'ble the Chief Justice of India for
constituting a larger Bench to resolve the divergence.”
(xiii) The appellant filed its reply dated 16.03.2012 before the Civil Court
wherein each of the grounds raised by the respondent in its Section 34
petition were duly responded to.
(xiv) Relying on the judgment of this Court in L.G. Chaudhary (I) (supra),
the respondent moved an application dated 26.06.2012 before the Civil
Court seeking to introduce the ground of lack of jurisdiction in its
Section 34 petition.
(xv) A Full-Bench of the High Court delivered a judgment dated 05.05.2017
in the matter of Viva Highways Ltd & Ors v. M.P. Road Development
Corporation Limited , reported in AIR 2017 MP 103 , which, in-effect,
reiterated the ratio of L.G. Chaudhary (I) (supra) insofar as this Court
had held that the State Act would apply to all work contracts in the State
of Madhya Pradesh notwithstanding the existing of an arbitration
agreement therein.
Special Leave Petition (C) No. 9740 of 2022 Page 9 of 64
(xvi) Relying on the Full Bench decision of the High Court, referred to above,
the respondent moved yet one another application dated 15.01.2018
before the Civil Court wherein it again sought to introduce additional
grounds to its Section 34 petition contending lack of jurisdiction of the
Tribunal.
(xvii) A three-Judge Bench of this Court delivered a judgment on 22.03.2018,
in the matter of Lion Engineering Consultants v. State of Madhya
Pradesh reported in (2018) 16 SCC 758, taking the view that objections
regarding lack of jurisdiction of an arbitral tribunal, being a question of
law, can be raised in Section 34 proceedings even if no such objections
had been raised during the arbitral proceedings. Para 4 thereof is to the
following effect: -
“4. We find merit in the contentions raised on behalf of the
State. We proceed on the footing that the amendment being
beyond limitation is not to be allowed as the amendment is
not pressed. We do not see any bar to plea of jurisdiction
being raised by way of an objection under Section 34 of the
Act even if no such objection was raised under Section 16.”
(xviii) A three-Judge Bench of this Court passed its judgment in M.P. Road
Development Authority & Anr v. L.G. Chaudhary Engineers &
Contractors reported in (2018) 10 SCC 826 , effectively stating that the
State Act would prevail over the Arbitration Act in light of Section 2(4)
of the Arbitration Act. The relevant para 14 is quoted below: -
Special Leave Petition (C) No. 9740 of 2022 Page 10 of 64
“ 14. In view of the above, we are of the view that the State
law will prevail in terms of Section 2(4) of the Central Act.
The reference under the State law was valid and could be
decided in accordance with the State. Accordingly, we set
aside the impugned order [Gammon India Ltd. v. State of
M.P., WP No. 8375 of 2010, order dated 29-11-2010 (MP)]
and restore the proceedings before the Tribunal. The
appeal is, accordingly, allowed in above terms.”
(xix) In para 17 of the aforesaid judgment, however, this Court categorically
excluded such cases where awards had already been made. It was held
that “in such cases, if no objection to the jurisdiction was taken at
relevant stage, the award may not be annulled on that ground”. It is
necessary to quote para 17 as under: -
“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.”
(xx) In the present case, the respondent had admittedly not raised the issue
of jurisdiction either before the Tribunal nor in its initial petition filed
under Section 34. Clearly, therefore, the instant case fell within the
ambit of Para 17 of LG Choudhary-II referred to above.
(xxi) The Civil Court passed its judgment dated 20.12.2019 allowing the
respondent’s Section 34 petition on the ground that the Tribunal lacked
jurisdiction to adjudicate the disputes. The Court observed, albeit
erroneously, that para 17 of L.G. Chaudhary (II) (supra) did not save
Special Leave Petition (C) No. 9740 of 2022 Page 11 of 64
the instant case, inasmuch as the issue of jurisdiction could have been
raised in the Section 34 proceeding even though no such objection had
been ever raised during the arbitral proceedings. The paras 12 and 13
respectively read as follows: -
“12. The relevant part of the Hon’ble Supreme Court’s
precedent- “M.P. Rural Road Road Development Authority
& Ors. Vs. M/s L.G. Chaudhary Engineering and
Construction Civil Appeal No. 974/12 dated 13-03-2018”
is as follows:
“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 that ground.”
13. It is also observable that as far as the question of non-
objection of the Applicants on the point of jurisdiction of the
arbitrator is concerned, the provisions under Section 34 (2)
(B) confers special jurisdiction to the Courts, where it does
not need to rely on the objections or non-objections of either
party. Under Section 34 (2) (B) (i) if the Court is aware that
the subject matter of the dispute is not arbitrable under the
said act, then such an arbitral award can be set aside by the
Court. Apart from this, it is also observable that Clause 28
of the Contract also regards such provisions as void, which
confers jurisdiction to Courts not having jurisdiction. It has
been clarified by the Hon’ble Supreme Court in M/s L.G.
Choudhary with regards to the above precedent that
wherever award has been passed, even in those cases, the
above objection can be raised at the time of application
under Section 34 of the Central Act. It is for this reason the
argument made by the Non- Applicant in this context is not
just.”
Special Leave Petition (C) No. 9740 of 2022 Page 12 of 64
(xxii) This Court in JMC Projects (India) Ltd v. Madhya Pradesh Road
Development Corporation reported in (2020) SCC OnLine SC 1452
took note of the exception carved out in L.G. Chaudhary (II) (supra).
In a case based on similar facts, this Court held that the award should
not be set aside on the ground of jurisdiction alone. The order dated
10.01.2020 passed by this Court is as follows: -
“Leave granted.
Mr. K. V. Vishwanathan, learned senior counsel appearing
for the appellant, has shown us our order dated 08.03.2018
in Madhya Pradesh Rural Road Development Authority &
Anr. v. M/s. L. G. Chaudhary Engineers and Contractors
(Civil Appeal No. 974 of 2012) (being the lead case) and
has pointed out paragraph Nos. 22 to 27 thereof which are
quoted hereinbelow:
“C.A. No. 2751 of 2018 @ SLP (C)No.
11615/2012, C.A. No. 2753 of 2018 @ SLP
(C)No. 11617/2012, C.A. No. 2754 of 2018 @
SLP (C)No. 11618/2012, C.A. No. 2755 of 2018
@ SLP (C)No. 11619/2012, C.A. Nos. 2756-2757
of 2018 @ SLP (C)Nos. 11633-11634/2012, C.A.
Nos. 2758-2759 of 2018 @ SLP (C)Nos. 11631-
11632/2012 & C.A. Nos. 2760-2761 of 2018 @
SLP (C)No. 11628- 11629/2012:
22. 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.
23. The appeals are, accordingly, disposed of.
C.A. No. 2616@ SLP (C)No. 35641/2011:
24. Leave granted.
Special Leave Petition (C) No. 9740 of 2022 Page 13 of 64
25. In view of order passed in C.A. No. 2751 of
2018 @ SLP (C)No. 16615/2012, no objection
having been raised by the respondents in terms of
Section 16(2) of the Arbitration and Conciliation
Act, 1996 at appropriate stage within the time
stipulated, the award could not have been
annulled.
26. Accordingly, this appeal is allowed, the
impugned judgment is set aside and the award is
restored.
27. It is, however make it clear that this order will
not debar proceedings under Section 34 of the
Arbitration and Conciliation Act, 1996.”
It is clear that in the present case, an Award has already
been passed which is dated 07.01.2011.
This being the case, and following the aforesaid judgment
of this Court, the impugned judgment dated 24.10.2018 is
set aside. The Section 34 proceedings will continue with all
objections that may be raised but excluding the objection as
to the applicability of the Madhya Pradesh Madhyastham
Adhikaran Adhiniyam, 1983.
The matter stands disposed of accordingly.”
(xxiii) The High Court passed the impugned judgment dated 07.01.2022 under
Section 37 of the Act of 1996. The High Court held that the Tribunal
lacked jurisdiction to adjudicate the disputes between the parties. The
High Court, in effect, held that the exception carved out in L.G.
Chaudhary (II) (supra), as reiterated in JMC Projects (supra), could
not be relied upon as JMC Projects (supra) had not considered the law
laid down by this Court in Lion Engineering (supra). Paras 21, 22 and
Special Leave Petition (C) No. 9740 of 2022 Page 14 of 64
23 respectively of the impugned judgment dated 07.01.2022 are as
under: -
“21. Now, we shall consider the specific objection of the
appellant regarding lack of objection on jurisdiction under
Section 16(2) of the Act of 1996 before the arbitral tribunal
in view of order dated 13.03.2018 in C.A. No. 2616 of
201810 and in M/s. JMC Projects (India) Ltd.
22. It is true that the Hon’ble Supreme Court in its order
dated 13.03.2018 in C.A.No.2616 of 2018 has held that
award cannot be annulled on the ground of lack of
jurisdiction if the objection under Section 16(2) was not
taken before the arbitral tribunal. This view was based on
a decision of two judge bench of the Hon’ble Supreme Court
in MSP Infrastructure Ltd. Vs. M.P. Road Development
Corp. Ltd.
23. However, a bench of three-judges of the Hon’ble
Supreme Court in a subsequent decision in Lion Engg.
Consultants Vs. State of M.P. partly overruled MSP
Infrastructure Ltd and held that the objection regarding
lack of jurisdiction can be taken under Section 34 of the Act
of 1996, even if no objection under Section 16(2) was taken
before the arbitral tribunal. Thus, in view of the subsequent
decision of the larger bench, this Court is of the view that
the objection regarding lack of jurisdiction could have been
taken before the learned trial Court under Section 34 of the
Act of 1996, even though no such objection was taken
before the arbitral tribunal under Section 16(2) of the Act.
The Hon’ble Supreme Court in the matter of M/s. JMC
Projects (India) Ltd. has not referred to the decision in the
matter of Lion Engineers which was subsequent to the
decision of C.A. No. 2616 of 2018. Hence, The learned trial
Court acted in accordance with law while entertaining the
objection under Section 34 of the 1996 Act and setting aside
the arbitral award on the ground of lack of jurisdiction.”
Special Leave Petition (C) No. 9740 of 2022 Page 15 of 64
B. ISSUES FOR DETERMINATION
5. Having heard the learned counsels appearing for the parties and having gone
through the materials on record, the two pivotal questions that fall for our
consideration are as under: -
I. Whether an arbitral award rendered under the Act, 1996 where the
arbitration proceedings was to be governed by the MP Act, 1983, can
be set-aside or annulled solely on the ground of lack of jurisdiction,
even when no such plea was raised before the arbitral tribunal in terms
of Section 16 sub-section (2) of the Act, 1996?
II. Whether the decision of this Court in LG Choudhary (II) (supra) could
be said to be per incuriam for not having taken into consideration the
decision of this Court in Lion Engineering (supra)? In other words,
whether there is any conflict between the decisions of this Court in Lion
Engineering (supra) and LG Choudhary (II) (supra), insofar as the
observations pertaining to the stage at which a plea of lack of
jurisdiction may be raised under the Act, 1996, are concerned?
C. ANALYSIS
6. The MP Act, 1983 was first looked into by this Court in the case of State of
M.P. v. Anshuman Shukla reported in (2008) 7 SCC 487 . This Court
speaking through S.B. Sinha J. (as he then was) after going through the various
provisions of the MP Act, 1983, observed that the said legislation was a special
Special Leave Petition (C) No. 9740 of 2022 Page 16 of 64
Act that was enacted for providing compulsory arbitration on disputes to
which the State Government or a public undertaking (wholly or substantially
owned or controlled by the State Government), is a party, and for matters
incidental thereto or connected therewith. It observed that the MP Act, 1983
postulates creation of a separate forum for the purpose of determination of
disputes arising inter alia out of the works contract. The Madhya Pradesh
Arbitration Tribunal established thereunder, is not a domestic or an ad hoc
arbitral tribunal, by virtue of the unique scheme of provisions that govern its
framework. The members of the MP Arbitral Tribunal are not nominated by
the parties, the Tribunal has the power to reject a reference for arbitration; it
has the power to suo-motu summon records; take note of evidence; award
costs and interests. The Chairperson of the M.P. State Arbitration Tribunal has
the power to refer disputes to another bench. It contains provisions,
prescribing a special time-limit and procedure for the passing of an award and
for its subsequent challenge, respectively. Accordingly, this Court held that
the provisions of the Arbitration Act, 1940 (for short, the “ Act, 1940 ”) and the
Act, 1996 would have no application to arbitrations governed by the MP Act,
1983 or any award passed thereunder. The relevant observations read as under:
-
“3. Before embarking on the said question we may notice the
statutory provisions of the Act for resolution of the legal issue.
4. The Act came into force with effect from 1-3-1985. It was
enacted to provide for the establishment of a tribunal to
Special Leave Petition (C) No. 9740 of 2022 Page 17 of 64
arbitrate on disputes to which the State Government or a public
undertaking (wholly or substantially owned or controlled by
the State Government), is a party, and for matters incidental
thereto or connected therewith.
5. The Arbitral Tribunal is constituted in terms of Section 3 of
the Act for resolving all disputes and differences pertaining to
works contract or arising out of or connected with execution,
discharge or satisfaction of any such works contract.
6. Section 7 provides for reference to the Tribunal. Such
reference may be made irrespective of the fact as to whether
the agreement contains an arbitration clause or not. Section 7-
A provides for the particulars on the basis whereof the
reference petition is to be filed. Section 7-B provides for
limitation for filing an application [...]
7. Chapter IV of the Act contains Sections 16 to 18. Section 16
deals with passing of an award by the Tribunal and/or its
Benches. Section 17 gives finality to the award made
thereunder. Such awards made, in terms of Section 18 would
be deemed to be a decree within the meaning of Section 2(2) of
the Code of Civil Procedure, 1908. Section 19 confers a power
of revision on the High Court [...]
xxx xxx xxx
14. The Act is a special Act. It provided for compulsory
arbitration. It provides for a reference. The Tribunal has the
power of rejecting the reference at the threshold. It provides
for a special limitation. It fixes a time-limit for passing an
award. Section 14 of the Act provides that proceeding and the
award can be challenged under special circumstances. Section
17, as noticed hereinbefore, provides for finality of the award,
notwithstanding anything to the contrary contained in any
other law relating to arbitration.
xxx xxx xxx
28. The provisions of the Act referred to hereinbefore clearly
postulate that the State of Madhya Pradesh has created a
separate forum for the purpose of determination of disputes
arising inter alia out of the works contract. The Tribunal is not
Special Leave Petition (C) No. 9740 of 2022 Page 18 of 64
one which can be said to be a domestic tribunal. The Members
of the Tribunal are not nominated by the parties. The
disputants do not have any control over their appointment. The
Tribunal may reject a reference at the threshold. It has the
power to summon records. It has the power to record evidence.
Its functions are not limited to one Bench. The Chairman of the
Tribunal can refer the disputes to another Bench. Its decision
is final. It can award costs. It can award interests. The finality
of the decision is fortified by a legal fiction created by making
an award a decree of a civil court. It is executable as a decree
of a civil court. The award of the Arbitral Tribunal is not
subject to the provisions of the Arbitration Act, 1940 and the
Arbitration and Conciliation Act, 1996. The provisions of the
said Acts have no application.
29. We are, therefore, of the opinion that the Tribunal for all
intent and purport is a court. The Tribunal has to determine a
lis. There are two parties before it. Its proceedings are judicial
proceedings subject to the revisional order which may be
passed by the High Court.
(Emphasis supplied)
7. In VA Tech (supra) the short point that fell for the consideration of this Court
was whether, an application under Section 9 of the Act, 1996 could be said to
be maintainable, where the arbitration proceedings were governed by the MP
Act, 1983. In other words, where the dispute had to be resolved by way of
arbitration in terms of the MP Act, 1983, more particularly Section 7(1),
thereof, could the Act, 1996 be said to also be applicable simultaneously or
alternatively for such disputes. This Court held that since both the MP Act,
1983 and the Act, 1996 respectively were similar in nature inasmuch as both
provided frameworks for resolution of dispute by way of arbitration, any
potential conflict or overlap in their application ought to be construed
Special Leave Petition (C) No. 9740 of 2022 Page 19 of 64
harmoniously. This Court observed that the gravamen of Section 7 of the MP
Act, 1983 which provided for reference to arbitral tribunal was only to make
arbitration compulsory for resolving disputes arising out of work contracts
involving either the State Government or a Public Undertaking of Madhya
Pradesh. As per VA Tech (supra) what has been conveyed in so many words
by the plain language of Section 7 of the MP Act, 1983 is only to mandate
arbitration in respect of such work contracts, and the said provision by no
means in the opinion of this Court was intended to override any legislation
enacted by the Parliament, be it the Act, 1996 (sic or the Arbitration Act,
1940). As per VA Tech (supra), Section 7 of the MP Act, 1983 cannot be
construed to oust the application of Act, 1996 to the arbitration clauses which
are otherwise governed by the provisions of the said Act. Accordingly, it held
that the MP Act, 1983 would apply only to the disputes pertaining to work
contracts as aforementioned which do not contain an arbitration clause i.e.,
where the Act, 1996 is otherwise inapplicable. In all other disputes, where the
work contract contains an arbitration clause, the Act, 1996 would be
applicable and the MP Act, 1983 inapplicable.
8. Remarkably, the decision of this Court in VA Tech (supra) inadvertently failed
to take into consideration and refer to its earlier decision in Anshuman Shukla
(supra).
Special Leave Petition (C) No. 9740 of 2022 Page 20 of 64
9. However, interestingly in the subsequent decision of Ravikant Bansal v. M.P.
Rural Road Development Authority reported in (2012) 3 SCC 513 , a
coordinate bench of this Court comprising of one of the judges (Markandey
Katju J.) who had earlier delivered the decision of VA Tech (supra), held that
the ratio of VA Tech (supra) would not be applicable where the arbitration
clause itself expressly stipulates that the arbitration would take place before
the Madhya Pradesh Arbitration Tribunal in terms of the MP Act, 1983. In
other words, Ravikant Bansal (supra) held that where the arbitration clause
stipulates that the arbitration proceedings have to take place in terms of the
MP Act, 1983 or by the arbitral tribunal established thereunder, then the Act,
1996 would have no application. The relevant observations read as under: -
“2. This petition has been filed against the judgment and order
dated 11-3-2011 passed by the High Court of Madhya Pradesh
at Gwalior Bench in Ravikant Bansal v. M.P. Rural Road
Development Authority. The learned counsel for the petitioner
has relied on a decision of this Court in Va Tech Escher Wyass
Flovel Ltd. v. M.P. SEB2 decided on 14-1-2010.
3. We are of the opinion that the aforesaid decision is
distinguishable because in the present case the arbitration
clause itself mentions that the arbitration will be by the
Madhya Pradesh Arbitration Tribunal. Hence, in this case
arbitration has to be done by the Tribunal.”
10. In view of the conflict between Anshuman Shukla (supra) and VA Tech
(supra), and that between VA Tech (supra) and Ravikant Bansal (supra), the
issue as regards the applicability of the MP Act, 1983 viz- à-viz the Act, 1996
once again fell for the consideration of this Court in L.G. Chaudhary (I)
Special Leave Petition (C) No. 9740 of 2022 Page 21 of 64
(supra). In L.G. Chaudhary (I) (supra) the question before this Court was
whether the MP Act, 1983 and the arbitral tribunal statutorily established
thereunder, would continue to have jurisdiction over disputes pertaining to
work contracts as mentioned in Section(s) 2(d) and 2(i) thereunder, in view of
the subsequent enactment of the Act, 1996.
11. In L.G. Chaudhary (I) (supra), A.K. Ganguly J. (as he then was) held that the
MP Act, 1983 is a special law providing for statutory arbitration in the State
of Madhya Pradesh. The opinion of A.K. Ganguly J. is in two parts: -
(i) First, placing reliance on the decision of Anshuman Shukla (supra), it
was held that the MP Arbitral Tribunal established thereunder had
distinct features from an ordinary arbitral tribunal constituted in terms
of the Act, 1996. It observed that the structure of the M.P. State
Arbitration Tribunal, the manner of appointment and term of office of
its members was significantly at variance from that under the Act, 1996.
Unlike the Act, 1996, the MP Act, 1983 vests the MP Arbitral Tribunal
with inherent powers that may be necessary for the ends of justice or to
prevent abuse of the process of the Tribunal. Even the procedure for
making a reference to arbitration, for passing an award thereunder,
thereafter challenging it and the limitation period thereof, was in stark
contrast to the Act, 1996. Accordingly, it held that in view of the unique
Special Leave Petition (C) No. 9740 of 2022 Page 22 of 64
statutory provisions governing the framework of arbitration under the
MP Act, 1983 that are either absent or at variance with the Act, 1996,
shows that there is inconsistency between the two legislations, and that
the M.P. State Arbitration Tribunal as held in Anshuman Shukla
(supra) is akin to a statutory forum for adjudication of disputes in
contrast to an arbitral tribunal under the Act, 1996 whose edifice is party
autonomy. Accordingly, it held VA Tech (supra) to be per incuriam .
The relevant observations read as under: -
“18. If this Court compares the provisions of the M.P.
Act with the AC Act, 1996 then the Court finds that the
provisions of the M.P. Act are inconsistent with the
provisions of the AC Act, 1996. The M.P. Act is a special
law providing for statutory arbitration in the State of
Madhya Pradesh even in the absence of arbitration
agreement. Under the provisions of the AC Act, 1996 in
the absence of an arbitration agreement, arbitration is
not possible. There is also difference in the formation of
the Arbitration Tribunal as is clear from Section 2(1)(d)
of the AC Act, 1996. Again, under the AC Act, 1996,
“Arbitral Tribunal” is defined under Section 2(1)(d) as
a sole arbitrator or a panel of arbitrators. But under the
M.P. Act such a Tribunal is created under Sections 3 and
4 of the Act. And under the M.P. Act “dispute” has a
special meaning as defined under Section 2(d) of the Act
whereas “dispute” has not been defined under the AC
Act, 1996.
xxx xxx xxx
20. The structure of the Tribunal under the M.P. Act is
also different from the structure of a Tribunal under the
AC Act, 1996. It is clear from Section 4 of the M.P. Act
that the composition of the Tribunal and their
qualification is statutorily provided [...]
Special Leave Petition (C) No. 9740 of 2022 Page 23 of 64
21. The term of office and salaries and allowances are
also statutorily provided under Sections 5 and 6 of the
M.P. Act. Section 8 provides for the procedure to be
followed by the Tribunal on receipt of reference and
Section 9 provides for the constitution of Benches and
the Chairman's power of distribution of business. Under
Section 16(2) of the M.P. Act there is a time-limit for
giving the award which is absent in the AC Act, 1996.
22. Section 17-A of the M.P. Act confers inherent power
on the Arbitral Tribunal to make orders as may be
necessary for the ends of justice or to prevent abuse of
the process of the Tribunal. Section 17-B also provides
for power conferred on the Tribunal for correction of
clerical or arithmetical mistakes. No such power is given
to an Arbitral Tribunal under the AC Act, 1996. Section
19 of the M.P. Act gives the High Court the suo motu
power of revision. The High Court has also been given
the power of revision to be exercised on an application
made by an aggrieved party within three months of the
award. While doing so, the High Court is to act like a
Revisional Court under Section 115 CPC.
23. It is clear from the aforesaid enumeration of the
statutory provisions that under the M.P. Act the parties'
autonomy in the choice of Arbitral Tribunal is not there.
24. In State of M.P. v. Anshuman Shukla this Court
while referring to the M.P. Act and dealing with the
nature of the Arbitral Tribunal constituted under the
said Act held that the said Act is a special Act and
provides for compulsory arbitration. It provides for a
reference and the Tribunal has been given the power of
rejecting the reference at the threshold. It also held that
the M.P. Act provides for a special limitation and fixes
a time-limit for passing an award. It has also been held
that Section 14 of the M.P. Act provides that the award
can be challenged under special circumstances and
Section 17 provides for finality of the award,
notwithstanding anything to the contrary contained in
any other law relating to arbitration. All these features
of the Act were pointed out by this Court in Anshuman
Special Leave Petition (C) No. 9740 of 2022 Page 24 of 64
Shukla to show that there is inconsistency between the
provisions of the AC Act, 1996 and those of the M.P. Act.
xxx xxx xxx
26. It is clear, therefore, that in view of the aforesaid
finding of a coordinate Bench of this Court on the
distinct features of an Arbitral Tribunal under the said
5
M.P. Act in Anshuman Shukla case the provisions of the
M.P. Act are saved under Section 2(4) of the AC Act,
1996. This Court while rendering the decision in Va
Tech has not either noticed the previous decision of the
coordinate Bench of this Court in Anshuman Shukla or
the provisions of Section 2(4) of the AC Act, 1996.
Therefore, we are constrained to hold that the decision
of this Court in Va Tech was rendered per incuriam.”
(Emphasis supplied)
(ii) Secondly, A.K. Ganguly J. negativing the argument of there being a
repugnancy between the Act, 1996 and the MP Act, 1983, observed that
since the Act, 1996, more particularly Section 2 sub-section (4) clearly
stipulates that Part I of the Act, 1996 shall apply insofar as the
provisions thereunder are not inconsistent with the other enactment or
with any other rule made thereunder, the MP Act, 1983 respectively and
its provisions will have precedence and continue to apply over an above
the Act, 1996. It further observed that although the Act, 1996 came into
force after the MP Act, 1983 yet there is nothing to indicate that the Act,
1996 either expressly or impliedly has repealed the MP Act, 1983. The
aforesaid is reinforced from Section 2 sub-section (5) of the Act, 1996
which contains a saving clause for other laws being already in force in
Special Leave Petition (C) No. 9740 of 2022 Page 25 of 64
India. On the contrary, Section 85 of the Act, 1996 when read with
Section 2 sub-section(s) (4) and (5) shows that the legislature had no
such intention to repeal the MP Act, 1983. Even otherwise, the subject-
matter of the MP Act, 1983 falls within the concurrent list, and the said
Act had received the assent of the President while the erstwhile
Arbitration Act, 1940 was in force. Both the Acts operated in view of
Section 46 of the 1940 Act. The relevant observations read as under: -
“16. If this Court looks at Section 2(4) of the AC Act,
1996, it will appear that Part I of the AC Act, 1996 which
is from Section 2 to Section 43, shall, except sub-section
(1) of Section 40 and Sections 41 and 43, apply to every
arbitration under any other enactment for the time being
in force where the arbitration was pursuant to an
arbitration agreement except insofar as the provisions
of this Part i.e. Part I are inconsistent with the other
enactment or with any other rule made thereunder.
17. Similar provision relating to statutory arbitration
was also there in Section 46 of the Arbitration Act,
1940. [...]
xxx xxx xxx
36. In reply the learned counsel for the respondent only
submitted that the M.P. Act is repugnant to the AC Act,
1996 since the same is a later Act made by Parliament.
The learned counsel referred to the provisions of
Article 254 of the Constitution. The learned counsel
also urged that in view of the provision of Section 85 of
the AC Act, 1996, the M.P. Act stands impliedly
repealed.
37. The said argument cannot be accepted. The
provision for repeal under Section 85 of the AC Act,
1996 does not show that there is any express repeal of
the M.P. Act. Apart from that, the provision of Section
Special Leave Petition (C) No. 9740 of 2022 Page 26 of 64
2(4) of the AC Act clearly militates against the aforesaid
submissions.
38. The argument of repugnancy is also not tenable.
Entry 13 of the Concurrent List in the Seventh Schedule
of the Constitution runs as follows [...] In view of the
aforesaid entry, the State Government is competent to
enact laws in relation to arbitration.
39. The M.P. Act of 1983 was made when the previous
Arbitration Act of 1940 was in the field. That Act of 1940
was a Central law. Both the Acts operated in view of
Section 46 of the 1940 Act. The M.P. Act, 1983 was
reserved for the assent of the President and admittedly
received the same on 17-10-1983 which was published
in the Madhya Pradesh Gazette Extraordinary dated 12-
10-1983. Therefore, the requirement of Article 254(2) of
the Constitution was satisfied. Thus, the M.P. Act of
1983 prevails in the State of Madhya Pradesh.
Thereafter, the AC Act, 1996 was enacted by Parliament
repealing the earlier laws of arbitration of 1940. It has
also been noted that the AC Act, 1996 saves the
provisions of the M.P. Act, 1983 under Sections 2(4) and
2(5) thereof. Therefore, there cannot be any
repugnancy. [...]
xxx xxx xxx
41. It is clear from the aforesaid observations that in the
instant case the latter Act made by Parliament i.e. the
AC Act, 1996 clearly showed an intention to the effect
that the State law of arbitration i.e. the M.P. Act should
operate in the State of Madhya Pradesh in respect of
certain specified types of arbitrations which are under
the M.P. Act, 1983. This is clear from Sections 2(4) and
2(5) of the AC Act, 1996. Therefore, there is no
substance in the argument of repugnancy and is
accordingly rejected.”
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 27 of 64
12. However, Gyan Sudha Misra J. in her dissenting opinion in L.G. Chaudhary
(I) (supra) held that where the nature of the dispute does not fall within the
definition of work contract under Section 2(i) of the MP Act, 1983, such
disputes can be resolved by way of arbitration under the Act, 1996,
notwithstanding the fact that such work contract is otherwise governed by the
MP Act, 1983. She observed that a reference to arbitration under the MP Act,
1983 postulates two requirements, namely; (i) the existence of a ‘works
contract’ involving either the State Government or a Public Undertaking of
Madhya Pradesh and (ii) that such contract pertains to the execution of any of
the work enumerated in Section 2(i) thereof. Section 2(i) in turn lays down in
explicit terms as to the nature and scope of “works contract” by enumerating
the specific nature of disputes that would be covered, i.e., “ work relating to
construction, repair or maintenance ... supply of goods or material and all
other matters relating to the execution of any of the said works”. However,
since Section 2(i) of the MP Act, 1983 only covers specific and well-defined
‘works’ and is applicable only in respect of disputes pertaining to its
execution, and does not include disputes of repudiation, cancellation or
termination of such works, the legal and logical consequence of the aforesaid
would be that, insofar as the dispute is not of the nature enumerated in Section
2(i) of the MP Act, 1983, such dispute would be outside the jurisdiction of the
M.P. State Arbitration Tribunal, and can be decided by an arbitral tribunal in
terms of the Act, 1996, irrespective of whether arbitration clause requires the
Special Leave Petition (C) No. 9740 of 2022 Page 28 of 64
dispute to be referred to arbitration under the MP Act, 1983. The relevant
observations read as under: -
“46. On perusal of the aforesaid provision enumerated under
Section 7, it is explicitly clear that the matter in the event of
existence of a dispute between the parties in certain categories
of cases where the State of Madhya Pradesh is a contracting
party, the dispute shall be referred in writing to the Tribunal
irrespective of the fact whether the agreement contains an
arbitration clause or not. From this provision it is clearly
apparent that reference of any dispute to the Tribunal
postulates an existence of a works contract and in the definition
of “works contract” under Section 2(i) of the M.P. Arbitration
Tribunal Act, 1983, it has clearly and unequivocally been
specified as to what is a “works contract” in relation to which
the dispute is required to be referred in writing to the Tribunal.
xxx xxx xxx
48. Thus, on a perusal of the definition of “works contract”, it
is manifestly clear that while the “works contract” means an
agreement pertaining to matters relating to the execution of
any of the work enumerated in the definition of “works
contract”, the same does not include the dispute pertaining to
termination, cancellation or repudiation of works contract and
the entire nature of transaction laid down therein relates to
disputes which arise out of execution of the nature of work
specified in the “works contract”. However, the question
whether the “works contract” has been legally repudiated and
rightly cancelled or not is the question or dispute pertaining to
termination of works contract and has not been incorporated
even remotely within the definition of “works contract”.
49. In view of this, the legal and logical consequence which
can be reasonably drawn from the definition of “works
contract” would be, that if there is a dispute between the
contracting parties for any reason relating to works contract
which include execution of any work relating to construction,
repair or maintenance of any building or superstructure, dam,
weir, canal, reservoir, tank, lake, road, well, bridge, culvert,
factory, workshop, powerhouse, transformers or such other
works of the State Government or public undertaking including
Special Leave Petition (C) No. 9740 of 2022 Page 29 of 64
an agreement for the supply of goods or material and all other
matters relating to the execution of any of the said works, the
same would fall within the ambit of the definition of “works
contract” and hence all disputes pertaining to or arising out of
execution of the works contract will have to be referred to the
M.P. State Arbitration Tribunal as envisaged under Section 7
of the 1983 Act. Hence, in addition to the reasons assigned in
the judgment and order of learned Brother Ganguly, J.
disputes arising out of execution of works contract have to be
referred to the M.P. State Arbitration Tribunal and not under
the Arbitration and Conciliation Act, 1996.
xxx xxx xxx
51. [...] But the same cannot be allowed to be raised under the
M.P. Act of 1983 since the definition of “works contract”
unambiguously lays down in explicit terms as to what is the
nature and scope of “works contract” and further enumerates
the specific nature of disputes arising out of the execution of
works contract which would come within the definition of a
“works contract”. However, the same does not even vaguely
include the issue or dispute arising out of cancellation and
termination of contract due to which this question, in my
considered opinion, would not fall within the jurisdiction of the
M.P. State Arbitration Tribunal so as to be referred for
adjudication arising out of its termination.
52. As already stated, fallout certainly would be otherwise if
the matter were to be adjudicated by an arbitrator appointed
under the Arbitration and Conciliation Act, 1996 and that
would be in view of the ratio of the decisions of the Supreme
Court referred to hereinbefore which has held it permissible
for the arbitrator to adjudicate even the dispute arising out of
cancellation or termination of an agreement or contract. This
however, cannot be allowed to broaden or expand the ambit
and scope of the M.P. Act of 1983 where the State Legislature
has passed a specific legislation in respect of certain specified
types of arbitration determining as to what is the nature of
disputes to be referred to the M.P. State Arbitration Tribunal
and that specifically permits the reference of dispute arising
out of execution of contract but clearly leaves out any dispute
arising out of termination, cancellation or repudiation of
“works contract”.
Special Leave Petition (C) No. 9740 of 2022 Page 30 of 64
53. In order to clarify the point further, what needs to be
emphasised is that if the nature of dispute referred to the
arbitrator like the instant matter, related to a dispute
pertaining to construction, repair, maintenance of any building
or superstructure, dam or for the reasons stated within the
definition of “works contract”, the matter may be referred to
the M.P. Tribunal in view of the fact that if there is a dispute in
relation to execution of a works contract, then irrespective of
the fact whether the agreement contains an arbitration clause
or not, the dispute is required to be referred to the M.P. State
Arbitration Tribunal for adjudication. But when the contract
itself has been terminated, cancelled or repudiated as it has
happened in the instant case, then the nature of dispute does
not fall within the definition of “works contract” for the sole
reason that it does not include any dispute pertaining to
cancellation of a works contract implying that when the works
contract itself is not in existence by virtue of its cancellation,
the dispute cannot be referred to the M.P. State Arbitration
Tribunal but may have to be decided by an arbitrator
appointed under the Arbitration and Conciliation Act, 1996.
54. Hence, if the nature of the dispute is such which falls within
the definition of “works contract” under Section 2(i) of the
M.P. Act, 1983 and one of the contracting parties to the
agreement is the State of M.P., then irrespective of an
arbitration agreement the dispute will have to be referred to
the Tribunal in terms of Section 7 of the Act of 1983. But if the
works contract itself has been repudiated and hence not in
existence at all by virtue of its cancellation/termination, then
in my considered view, the dispute will have to be referred to
an independent arbitrator to be appointed under the
Arbitration and Conciliation Act, 1996 since the M.P. Act,
1983 envisages reference of a dispute to the State Tribunal only
in respect of certain specified types of arbitration enumerated
under Section 2(i) of the M.P. Act, 1983.
xxx xxx xxx
57. Thus, the sum and substance of what I wish to emphasise is
that the question as to whether the dispute would be referred
to the M.P. Tribunal in terms of Section 7 of the M.P. Act of
1983 or to an independent arbitrator under the Arbitration and
Special Leave Petition (C) No. 9740 of 2022 Page 31 of 64
Conciliation Act, 1996 will depend upon the factum whether
the works contract is existing between the parties or not out of
which the dispute has arisen. In case, the works contract itself
has been repudiated/cancelled, then, in view of its non-
existence, Section 7 of the M.P. Act pertaining to reference of
dispute to the Tribunal would not come into play at all by virtue
of the fact that the dispute relating to execution of works
contract alone can be referred to the Tribunal in view of the
specific nature of works contract enumerated within the
definition of works contract under the Act of 1983. However,
when the works contract itself becomes non-existent as a
consequence of its cancellation, the matter will have to be
referred to an independent arbitrator under the Arbitration
and Conciliation Act, 1996 and not to the M.P. State
Arbitration Tribunal.
58. Thus, while holding that the M.P. Act, 1983 should operate
in the State of M.P. in respect of certain specified types of
arbitration, the appointment of an independent arbitrator by
the High Court under the Arbitration and Conciliation Act,
1996 needs to be sustained since the works contract itself is not
in existence by virtue of its cancellation and hence this part of
the dispute could not have been referred to the M.P. State
Tribunal.”
(Emphasis supplied)
13. In view of the cleavage of opinion expressed by this Court in L.G. Chaudhary
(I) (supra), the issue of applicability of the MP Act, 1983 viz- à-viz the Act,
1996 came to be referred to a three-Judge Bench of this Court, culminating
into the decision of L.G. Chaudhary (II) (supra). Answering the aforesaid
reference, L.G. Chaudhary (II) (supra) held that the definition of “dispute”
under Section 2(d) of the sic Act, 1996 (which due to an inadvertent
typographical error in para 5 of L.G. Chaudhary (II) (supra) was written as
the Act, 1996 instead of MP Act, 1983) would cover and include any dispute
Special Leave Petition (C) No. 9740 of 2022 Page 32 of 64
that arises after the termination, repudiation or cancellation of the contract or
pertains thereto. It observed that the dissenting opinion of Gyan Sudha Misra
J. in L.G. Chaudhary (I) (supra) failed to notice the said provision i.e. Section
2(d) of the MP Act, 1983, and accordingly, it held that the view expressed by
A.K. Ganguly J. in L.G. Chaudhary (I) (supra) that reference to arbitration
for disputes covered under the MP Act, 1983 would mandatorily lie before the
M.P. State Arbitration Tribunal in terms of the said Act and would not be
governed the provisions of the Act, 1996, is the correct interpretation, and the
law laid down by VA Tech (supra) was held to be per incuriam . The relevant
observations read as under: -
“4. When the matter was considered by a Bench of this Court
on 24-1-2012 (order in M.P. Rural Road Development
Authority v. L.G. Chaudhary Engineers and Contractors), this
Court held that the judgment in VA Tech Escher Wyass Flovel
Ltd. was per incuriam insofar as it held that the M.P. Act
stands impliedly repealed by the Central Act. While Hon'ble
Ganguly, J., held that the State Act will cover a dispute even
after termination of the “works contract”, Hon'ble Gyan
Sudha Mishra, J. took a different view [...]
5. We find from the definition under Section 2(d) of the
Arbitration and Conciliation Act, 1996 that even after a
contract is terminated, the subject-matter of dispute is covered
by the said definition. The said provision has not been even
referred to in the judgment rendered by Hon'ble Gyan Sudha
Mishra, J.
6. In view of the above, we are of the opinion that the view
expressed by Hon'ble Ganguly, J. is the correct interpretation
and not the contra view of Hon'ble Gyan Sudha Mishra, J.
Reference stands answered accordingly.
Special Leave Petition (C) No. 9740 of 2022 Page 33 of 64
7. Taking up appeal on merits, we find that the High Court
proceeded on the basis of the judgment of this Court in VA
Tech Escher Wyass Flovel Ltd. which has been held to be per
incuriam. The M.P. Act cannot be held to be impliedly
repealed.
8. We are, thus, in agreement with the proposed opinion of
Hon'ble Ganguly, J. [...]”
(Emphasis supplied)
i. Can an Award passed under the Act, 1996 be annulled on the ground
of lack of jurisdiction where no plea of applicability of MP Act, 1993
was raised before the Arbitral Tribunal?
14. It is worthwhile to note, that the decision of L.G. Chaudhary (II) (supra) did
not merely decide the aforesaid reference arising from L.G. Chaudhary (I)
(supra), but also elucidated how, the courts are expected to deal with the
various issues that may arise therefrom insofar as the pending proceedings that
were inadvertently initiated under the Act, 1996 and any awards already
passed thereunder are concerned.
15. In the entire batch of matters that had been referred to this Court in L.G.
Chaudhary (II) (supra), this Court in few of the civil appeals where the
reference to arbitration under the Act, 1996 had been challenged, while the
matters were still at the pre-award stage, however the statement of defence
had already been filed without raising a plea of lack of jurisdiction, held that
in such instances, the plea of lack of jurisdiction cannot be allowed to be now
Special Leave Petition (C) No. 9740 of 2022 Page 34 of 64
raised in terms of Section 16 sub-section (2) of the Act, 1996 and as such the
award cannot be annulled only on such ground. Similarly, in a batch of matters
where the award had already been passed but no objection of jurisdiction was
raised in terms of Section 16(2) of the Act, 1996, there L.G. Chaudhary (II)
(supra) whilst restoring the award again reiterated that the award could not
have been annulled only on the ground of jurisdiction, but clarified that, all
other challenges to the award may be made in appropriate proceedings under
Section 34 of the Act, 1996. Lastly, in one of the civil appeals, where the
execution proceedings for the award passed were pending, this Court in view
of the prolonged nature of the litigation, directed that the award be treated to
have been rendered under the MP Act, 1983 and transferred the execution
proceedings to the High Court of Madhya Pradesh at Jabalpur. The relevant
observations read as under: -
“ CA No. 2751 of 2018 arising out of SLP (C) No. 11615 of 2012,
CA No. 2753 of 2018 arising out of SLP (C) No. 11617 of 2012, CA
No. 2754 of 2018 arising out of SLP (C) No. 11618 of 2012, CA No.
2755 of 2018 arising out of SLP (C) No. 11619 of 2012, CAs Nos.
2756-57 of 2018 arising out of SLPs (C) Nos. 11633-34 of 2012,
CAs Nos. 2758-59 of 2018 arising out of SLPs (C) Nos. 11631-32
of 2012 & CAs Nos. 2760-61 of 2018 arising out of SLPs (C) Nos.
11628-29 of 2012
15. Leave granted. In view of order passed in Civil Appeal No.
2615 of 2018 [arising out of SLP (C) No. 16889 of 2012], the
impugned order is set aside and the application(s) filed by the
respondent(s) under Section 11 of the Arbitration and
Conciliation Act, 1996 are dismissed.
16. However, since it is stated that proceedings are pending
before the arbitrator in pursuance of the impugned order, the
Special Leave Petition (C) No. 9740 of 2022 Page 35 of 64
same will stand transferred to the State Tribunal and the State
Tribunal may proceed further taking into account the
proceedings which have already been taken. The learned
counsel for the respondent(s) pointed out that in view of
Section 16(2), the objection to the jurisdiction could not be
raised after statement of defence was filed. This contention
cannot be accepted in view of the fact that the SLP was filed
prior to the filing of statement of defence wherein this objection
was raised.
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.
xxx xxx xxx
CA No. 2616 arising out of SLP (C) No. 35641 of 2011
19. Leave granted. In view of the order passed in CA No. 2751
of 2018 arising out of SLP (C) No. 16615 of 2012, no objection
having been raised by the respondents in terms of Section 16(2)
of the Arbitration and Conciliation Act, 1996 at appropriate
stage within the time stipulated, the award could not have been
annulled.
20. Accordingly, this appeal is allowed, the impugned
judgment is set aside and the award is restored. It is, however,
made clear that this order will not debar proceedings under
Section 34 of the Arbitration and Conciliation Act, 1996.
xxx xxx xxx
Civil Appeal No. 4261 of 2018
34. The Division Bench vide order dated 5-7-2012 directed
that the enforceability of the decree will depend upon the fate
of another appeal which was pending between the parties. The
said appeal, FAO (OS) No. 23 of 1998, is still pending but the
High Court has deferred the same pending decision of the
larger Bench of this Court in pursuance of the judgment of this
Court in M.P. Rural Road Development Authority v. L.G.
Special Leave Petition (C) No. 9740 of 2022 Page 36 of 64
Chaudhary Engineers and Contractors. It may be noted that
the larger Bench has decided the matter on 8-3-2018. In terms
of the said decision, the dispute between the parties has to be
settled in accordance with the provisions of the M.P.
Madhyastham Adhikaran Adhiniyam, 1983 (the M.P. Act).
However, since in the present case the award has been
rendered long back which was not challenged by the
respondents and the matter is pending at the stage of execution,
we direct that the award to be treated to have been rendered
under the M.P. Act.
35. In view of the above, we transfer pending proceedings
before the Delhi High Court being FAO (OS) No. 23 of 1998
and connected matters to the High Court of Madhya Pradesh
at Jabalpur to be treated as revision petition under the M.P.
Act.
(Emphasis supplied)
a. Is there a conflict between the decisions of L.G. Chaudhary (II) and
Lion Engineering ?
16. At this stage, it is apposite to note, that prior to the decision of L.G.
Chaudhary (II) (supra), this Court in one another decision of Lion
Engineering (supra) had looked into the issue as to at what stage a plea of
lack of jurisdiction or applicability of any State Act may be raised. The facts
of Lion Engineering (supra) were that the respondent State therein had sought
to amend its pleadings in the proceedings under Section 34 of the Act, 1996
to raise the objection of a lack of jurisdiction on the ground of applicability of
the MP Act, 1983. The said amendment application was rejected by the trial
court as being barred by limitation. The High Court however, in exercise of
Special Leave Petition (C) No. 9740 of 2022 Page 37 of 64
its supervisory jurisdiction under Article 227 of the Constitution allowed the
said amendment. In appeal, before this Court it was inter-alia contended by
the appellant therein, that the amendment ought not to have been allowed,
since the objection of lack of jurisdiction had never been raised before the
arbitral tribunal and hence was barred by Section 16 sub-section (2) of the Act,
1996. This Court held that any legal plea arising on undisputed facts can be
raised in the proceedings under Section 34 of the Act, 1996 even if they were
never raised under Section 16. It further held that, such plea being a question
of law arising from admitted facts, can be raised without seeking any
amendment of the pleadings. Accordingly, it held that there is no bar to plea
of jurisdiction being raised by way of an objection under Section 34 of the Act
even if no such objection was raised under Section 16. The relevant
observations read as under: -
“3. The learned Advocate General for the State of M.P.
submitted that the amendment sought is formal. Legal plea
arising on undisputed facts is not precluded by Section
34(2)(b) of the Act. Even if an objection to jurisdiction is not
raised under Section 16 of the Act, the same can be raised
under Section 34 of the Act. It is not even necessary to consider
the application for amendment as it is a legal plea, on admitted
facts, which can be raised in any case. He thus submits the
amendment being unnecessary is not pressed. The learned
Advocate General also submitted that observations in MSP
Infrastructure Ltd., particularly in paras 16 and 17 do not lay
down correct law.
4. We find merit in the contentions raised on behalf of the State.
We proceed on the footing that the amendment being beyond
limitation is not to be allowed as the amendment is not
pressed. We do not see any bar to plea of jurisdiction being
Special Leave Petition (C) No. 9740 of 2022 Page 38 of 64
raised by way of an objection under Section 34 of the Act even
if no such objection was raised under Section 16.
(Emphasis supplied)
17. Lion Engineering (supra) expressing disagreement with the view taken in
MSP Infrastructure Ltd. v. M.P. Road Development Corpn. Ltd. , reported
in (2015) 13 SCC 713 , further held that the ground of ‘public policy of India’
in Section 34 of the Act, 1996 would include violation of not only a Central
law but also a State law, and hence, it would be open for the parties to argue
the aspect of applicability of the MP Act, 1983 even without a formal pleading,
being purely a legal plea in the proceedings under Section 34 of the Act, 1996.
The relevant observations read as under: -
“6. Both stages are independent. Observations in paras 16 and
17 in MSP Infrastructure Ltd. do not, in our view, lay down
correct law. We also do not agree with the observation that the
public policy of India does not refer to a State law and refers
only to an all-India law.
7. In our considered view, the public policy of India refers to
law in force in India whether State law or Central law.
Accordingly, we overrule the observations to the contrary in
paras 16 and 17 of the judgment in MSP Infrastructure Ltd.
9. The matter may now be taken up by the trial court for
consideration of objections under Section 34 of the Central
Act. It will be open for the respondents to argue that its
objection that the Act stands excluded by the M.P.
Madhyastham Adhikaran Adhiniyam, 1983 could be raised
even without a formal pleading, being purely a legal plea. It
will also be open to the appellant to argue to the contrary. We
leave the question to be gone into by the court concerned.
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 39 of 64
18. It is in this aforesaid context, that the respondent herein has contended before
us that there exists a conflict between the decisions of this Court in Lion
Engineering (supra) and L.G. Chaudhary (II) (supra), insofar as the issue of
when a plea of lack of jurisdiction on the basis of applicability of a State law
can be raised. It was submitted that Lion Engineering (supra) clearly holds
that an objection of lack of jurisdiction is a legal plea that may be raised for
the first time in the proceedings under Section 34 of the Act, 1996, even if the
same was never raised before the arbitral tribunal, and being a question of law,
Section 16 sub-section (2) of the Act, 1996 would have no application. It was
further canvassed on behalf of the respondents herein that the decision of L.G.
Chaudhary (II) (supra) to the extent that it holds that no plea of lack of
jurisdiction can be raised in the proceedings under Section 34, if it was never
raised before the arbitral tribunal, could be said to be per incuriam, as it failed
to refer and advert to the earlier binding decision of Lion Engineering (supra),
which as per the respondents herein, lays down a contradictory view.
19. We are however, not impressed by the aforesaid submission that has been
canvassed on behalf of the respondents herein, primarily for the following
three reasons: -
(i) First, that merely because L.G. Chaudhary (II) (supra) does not refer
to the decision of Lion Engineering (supra), would not render it per
Special Leave Petition (C) No. 9740 of 2022 Page 40 of 64
incuriam, if either such omission in referring does not amount to a non-
consideration of the ratio of an earlier decision or where there is no
palpable conflict or contradiction in the ratio of both decisions. Lion
Engineering (supra) holds that a plea of lack of jurisdiction being a
question of law may be raised for the first time under Section 34 of the
Act, 1996 even if it was never raised before the arbitral tribunal.
Whereas, L.G. Chaudhary (II) (supra) holds that where such plea of
lack of jurisdiction was not taken before the arbitral tribunal, then an
award that has been so passed by the tribunal will not be annulled only
on the ground of lack of jurisdiction. If L.G. Chaudhary (II) (supra)
was not conscious of the position of law laid in Lion Engineering
(supra), then there was no need for it to clarify that an award would not
be annulled only on the ground of lack of jurisdiction. As even without
the aforesaid clarification, such awards would not have been susceptible
to annulment, if not for the ratio of Lion Engineering (supra). Thus, in
our opinion, even if L.G. Chaudhary (II) (supra) does not refer to the
decision of Lion Engineering (supra), it cannot be termed to be per
incuriam, as the very factum that the aforesaid observations were made
by L.G. Chaudhary (II) (supra) in paras 16, 17 and 19, shows that this
Court was well aware of the decision of Lion Engineering (supra), and
accordingly chose to carve out an exception to the ratio of Lion
Special Leave Petition (C) No. 9740 of 2022 Page 41 of 64
Engineering (supra) keeping in mind the cleavage of judicial view that
was prevailing earlier.
(ii) Secondly, the decision of Lion Engineering (supra) only dealt with the
question whether an amendment of pleadings was required or not, to
raise a plea of jurisdiction. It was in this aforesaid context, that this
Court held that such objection being a question of law can be raised by
way of an objection in the proceedings under Section 34 of the Act,
1996 even if no such objection was raised under Section 16 of the Act,
1996. Thus, the aforesaid observations could be said to be confined only
to the issue of requirement to amend the pleadings for raising such an
objection, and cannot be stretched to apply blanketly in all cases.
(iii) Thirdly, even otherwise, the ratio of Lion Engineering (supra) in paras
6 to 9 only goes so far as to hold that where a plea of jurisdiction
involves purely a question of law and is based on undisputed facts, then
such a plea may be raised for the first time in the proceedings under
Section 34 of the Act, 1996, notwithstanding the bar of Section 16 sub-
section (2) or whether, such plea was taken before the arbitral tribunal
or not. However, Lion Engineering (supra) does not address the
question whether an award may be annulled only on the ground of lack
of jurisdiction or not. It does not disturb the settled position of law as
regards the scope of Section 34 of the Act, 1996 i.e., an award may be
set aside only if such lack of jurisdiction goes to the root of the matter
Special Leave Petition (C) No. 9740 of 2022 Page 42 of 64
and results in a patent illegality. On the contrary, L.G. Chaudhary (II)
(supra) specifically addresses this question in the context of the issue of
applicability of MP Act, 1983 and explicitly states that any award
already passed shall not be annulled only on the ground of lack of
jurisdiction where such plea was not raised at the relevant stage. Thus,
the aforesaid ratio of Lion Engineering (supra) by no stretch can be
construed to mean that such a plea of jurisdiction would automatically
result in annulment of an award, de hors the fact whether such lack of
jurisdiction goes to the root of the award rendered or not. The ratio of
L.G. Chaudhary (II) (supra) unlike Lion Engineering (supra) does not
deal with whether it is permissible for such plea of jurisdiction to be
raised under Section 34 or not, and only deals with the issue whether an
award may be annulled only on the ground of jurisdiction or not, which
was never an issue before Lion Engineering (supra), hence there is no
conflict or contradiction between the ratios of the aforesaid two
decisions.
20. What can be discerned from the aforesaid is that L.G. Chaudhary (II) (supra)
carved out an exception to the general rule that was laid in Lion Engineering
(supra), that although a plea of lack of jurisdiction being a question of law can
be raised for the first time in the proceedings under Section 34 of the Act,
1996, yet insofar as the MP Act, 1983 is concerned, particularly the state of
Special Leave Petition (C) No. 9740 of 2022 Page 43 of 64
flux in which the position of law regarding its applicability stood, in cases
where either the award has already been passed or where the statement of
defence is already been filed, and no plea of lack of jurisdiction or
applicability of the MP Act, 1983, has been raised before the arbitral tribunal,
then such a plea of jurisdiction will no longer be available, and the award
cannot be annulled solely on such ground.
21. In JMC Projects (supra) this Court reiterated the aforesaid exception carved
out in L.G. Chaudhary (II) (supra) and held that since the award had already
been passed, all objections except the plea of lack of jurisdiction and the
applicability of the MP Act, 1983 may be raised in the proceedings under
Section 34 of the Act, 1996.
22. In Sweta Construction v. Chhattisgarh State Power Generation Company
Ltd. reported in (2022) SCC OnLine SC 1447 , while dealing with an issue
pertaining to the applicability of the Chhattisgarh Madhyastham Adhikaran
Adhiniyam, 1983, which is pari materia to the MP Act, 1983, this Court
followed the ratio laid down in L.G. Chaudhary (II) (supra), and reiterated
that where awards have already been made and if no objection to the
jurisdiction was taken at the relevant stage, then the award may not be
annulled “only” on that ground. The relevant observations read as under: -
12. [...] Thus what was opined was that where awards have
already been made and if no objection to the jurisdiction was
Special Leave Petition (C) No. 9740 of 2022 Page 44 of 64
taken at the relevant stage, the award may not be annulled
“only” on that ground and the appeals dealing with those
aspects were granted a favourable consideration.
13. [...] It was however, clarified in the very next paragraph
that the order would not debar proceedings under Section 34
of the 1996 Act.
23. Furthermore, this Court in Sweta Construction (supra), taking note of the
ostensible conflict between the decisions of L.G. Chaudhary (II) (supra) and
Lion Engineering (supra), made the following pertinent observations: -
(i) First, that, in Lion Engineering (supra) the controversy before the
court was different inasmuch as it was dealing with the issue of an
amendment in pleadings being sought beyond the period of limitation.
This Court observed that, it was in this context that Lion Engineering
(supra) held that no amendment of pleadings was required to raise a plea
of jurisdiction, and such objection being a question of law can be raised
by way of an objection in the proceedings under Section 34 of the Act,
1996 even if no such objection was raised under Section 16 of the Act,
1996. The relevant observations read as under: -
“15. However, as pointed by the learned counsel for the
respondent, there appears to be some lack of clarity on
the issue raised in the present petition on account of the
same three-Judge Bench having opined in another order
passed in Lion Engg. Consultants v. State of M.P. on 22-
3-2018 i.e. about three weeks after that. The issue
however, raised was whether there was any bar to the
plea of jurisdiction being raised by way of an objection
under Section 34 of the 1996 Act even if no objection
was raised under Section 16 of that Act. It was opined
Special Leave Petition (C) No. 9740 of 2022 Page 45 of 64
that public policy of India refers to law enforced in India
i.e. both Central law as well as the State law. The
respondent State was given liberty to argue before the
trial court its objections that the 1996 Act stood
excluded by the State Adhiniyam even without formal
pleadings being a pure legal plea. This was in the
context of an amendment sought being beyond
limitation. In that context there is an observation in one
sentence, “we do not see any bar to plea of jurisdiction
being raised by way of an objection under Section 34 of
the Act even if no objection was raised under Section 16
of that Act”.”
(Emphasis supplied)
(ii) Secondly, that the decision of Lion Engineering (supra) was only an
order unlike the decision of L.G. Chaudhary (II) (supra) which was a
substantive judgment, and thus, the observations of Lion Engineering
(supra) would by no means detract or take away the law laid down in
L.G. Chaudhary (II) (supra) as regards the maintainability of the plea
of jurisdiction where awards have already been passed, and no such
objection was raised before the arbitral tribunal at the relevant stage.
The relevant observations read as under: -
“16. If we appreciate the aforesaid observation in Lion
Engg. Consultants and that too emerging from identical
Bench in the two matters, we would have to construe as
what is meant by this sentence extracted aforesaid. We
take note of the fact that this is an order and not a
judgment. The controversy before the Court was
something different as noticed by us aforesaid. In that
context, this sentence has been inserted, but that does
not take away the law laid down in the substantive
judgment (in M.P. Rural Road Development Authority)
Special Leave Petition (C) No. 9740 of 2022 Page 46 of 64
dealing with the issue at hand in respect of awards
already made where petitions were pending before the
competent Court under Section 34 of the said Act.”
(Emphasis supplied)
(iii) Thirdly, that the law expounded in L.G. Chaudhary (II) (supra) insofar
as those awards which have already been passed are concerned, should
be read as one made by this Court under Article 142 of the Constitution
to do substantive justice inter se the parties, keeping in mind the
cleavage of judicial view earlier and to ensure that the objective of
arbitration as an expeditious and effective alternative dispute resolution
mechanism is not defeated. The relevant observations read as under: -
“17. This Court (in M.P. Rural Road Development
Authority) in the context of the 1996 Act and the 1983
Adhiniyam, keeping in mind the cleavage of judicial
view earlier and expounding on the law in that judgment
has in succinct terms set out that the objections under
Section 34 of the said Act, where no such plea of
jurisdiction was raised in proceedings before the
arbitrator, should not be dealt with “alone” on the plea
of jurisdiction i.e. it should be considered on merits. One
can say that possibly this part of the order can also be
read as one made under Article 142 of the Constitution
of India to do substantive justice inter se the parties,
more so, when arbitration as an alternative dispute
resolution mechanism presupposes an expeditious
disposal of commercial disputes and that objective
would stand nullified if a contrary view was taken.”
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 47 of 64
(iv) Lastly, it observed that even otherwise, the conduct of the respondent
therein of accepting the notice of invocation and commencing
arbitration under the Act, 1996 on their own volition amounts to a
waiver of their right to claim initiation of arbitration under the State
Act. In such circumstances it was held that the respondent therein
cannot be now permitted to approbate and reprobate a right it failed to
exercise on it own, and that too in a manner which would defeat the
entire object of arbitration. The relevant observations read as under: -
“18. We are also of the view that in particular facts of
the present case, the position is even more gross
because when the appellant claimed arbitration, the
respondent accepted invocation of arbitration,
suggested a panel of arbitrators, the appellant chose one
of the arbitrators out of the two suggested and the
arbitrator was so appointed as the sole arbitrator. Thus,
the arbitration proceedings commenced in pursuance to
the acts of the respondent and it cannot be permitted to
get away to say that the whole process was gone through
because of some misconception or inappropriate legal
advice. Arbitration by consent is always possible. The
mode and manner of conduct of arbitration is possible
and how those arbitration proceedings would be
governed is also a matter of consent. If at all there were
any rights of the respondent to have claimed arbitration
under the 1983 Adhiniyam, that right was never
exercised or waived. The respondent cannot be
permitted to approbate and reprobate and that too in
arbitration proceedings and that too in dispute or
resolution through the method of arbitration defeating
the very purpose of an alternative dispute resolution to
arbitration as an expeditious remedy.”
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 48 of 64
24. In yet another decision of this Court in Modern Builders v. State of Madhya
Pradesh & Anr. reported in (2024) 10 SCC 637 , the appellant contractor
therein had approached the M.P. State Arbitration Tribunal for initiation of
arbitration in respect of certain disputes, however the reference was rejected
by the State Tribunal in view of the law laid down by VA Tech (supra) that
held field at that time. Accordingly, the appellant therein initiated arbitration
under the Act, 1996, and consequently an award was passed. The aforesaid
award came to be challenged, wherein the High Court under Section 37 of the
Act, 1996 set-aside the award only on the ground that the arbitral tribunal had
no jurisdiction in view of the MP Act, 1983. In appeal, this Court setting aside
the order of the High Court, held that even though the objection based on
applicability of the MP Act, 1983 had been raised by the respondent therein
in its written statement filed before the arbitrator, nevertheless, in view of the
fact that the respondents therein neither raised this objection when the Section
11 petition was filed by the appellant, nor did it take recourse of Section 16 of
the Act, 1996 to challenge the jurisdiction of the arbitral tribunal, it would be
unjust to set aside the award only on the ground of the failure of the appellant
to take recourse to the MP Act, 1983. Furthermore, in light of the fact that the
only reason the appellant took recourse to the Act, 1996 was because its earlier
reference to the M.P. State Arbitration Tribunal had been rejected in terms of
the decision of VA Tech (supra), this Court held that it is a fit case to exercise
Special Leave Petition (C) No. 9740 of 2022 Page 49 of 64
its jurisdiction under Article 142 of the Constitution and restore the award to
ensure complete justice. The relevant observations read as under: -
“6. 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
Arbitration Tribunal. By the order dated 19-4-2010, the
Arbitration Tribunal held that in view of the arbitration clause
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.
7. The order dated 22-7-2011 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.
9. 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 was
made on 25-4-2014. 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.
Special Leave Petition (C) No. 9740 of 2022 Page 50 of 64
10. 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 para 17 of the
decision in M.P. 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.
(Emphasis supplied)
25. What can be discerned from the above is that, this Court has consistently held
that an exception has been carved out in L.G. Chaudhary (II) (supra) whereby
any awards that have already been made and if no objection to the jurisdiction
was taken at the relevant stage, then the award may not be annulled “only” on
that ground.
b. Whether a plea of lack of jurisdiction may be raised for the first time
under Section 34 of the Act, 1996 if no such objection was taken before
the arbitral tribunal?
26. The aforesaid may be looked at from one another angle, with a view to obviate
the possibility of any confusion. The respondent herein placed much emphasis
on the observations made in Lion Engineering (supra) to canvass that a plea
of lack of jurisdiction being a question of law may be raised at any stage. Even
where no such plea was raised at the time of filing of written submissions, the
same can be validly raised for the first time in the proceedings under Section
Special Leave Petition (C) No. 9740 of 2022 Page 51 of 64
34 of the Act, 1996, and the bar under Section 16 sub-section (2), would not
come in the way.
27. Before adverting to the aforesaid submission, it would be apposite to first look
into the interplay between Section(s) 16 and 34 of the Act, 1996, respectively.
These two provisions, although distinct in form and function, yet are
intrinsically linked in the broader scheme of the Act, insofar as the stage at
which issues pertaining to the jurisdiction of the arbitral tribunal may be
validly raised.
28. In Union of India v. Pam Development (P) Ltd. reported in (2014) 11 SCC
366 this Court held that where a party does not raise a plea of jurisdiction
before the arbitral tribunal, then such a plea is deemed to have been waived in
view of the provisions contained in Section 4 read with Section
16 of the Arbitration Act, 1996, and in consequence cannot be raised for the
first time in the proceedings under Section 34. The relevant observations read
as under: -
“16. As noticed above, the appellant not only filed the
statement of defence but also raised a counterclaim against the
respondent. Since the appellant has not raised the objection
with regard to the competence/jurisdiction of the Arbitral
Tribunal before the learned arbitrator, the same is deemed to
have been waived in view of the provisions contained in Section
4 read with Section 16 of the Arbitration Act, 1996.
17. Section 16 of the Arbitration Act, 1996 provides that the
Arbitral Tribunal may rule on its own jurisdiction. Section 16
clearly recognises the principle of kompetenz-kompetenz.
Special Leave Petition (C) No. 9740 of 2022 Page 52 of 64
Section 16(2) mandates that a plea that the Arbitral Tribunal
does not have jurisdiction shall be raised not later than the
submission of the statement of defence. Section 4 provides that
a party who knows that any requirement under the arbitration
agreement has not been complied with and yet proceeds with
the arbitration without stating his objection to such non-
compliance without undue delay shall be deemed to have
waived his right to so object.
8. In our opinion, the High Court has correctly come to the
conclusion that the appellant having failed to raise the plea of
jurisdiction before the Arbitral Tribunal cannot be permitted
to raise for the first time in the Court. [...]
(Emphasis supplied)
29. In Gas Authority of India Ltd. v. Keti Construction (I) Ltd. reported in (2007)
5 SCC 38 this Court held that where a party does not raise
a plea of lack of jurisdiction before the arbitral tribunal, he must make out a
strong case why he did not do so if he chooses to move a petition for setting
aside the award under Section 34 of the Act, 1996 on such ground. The
relevant observations read as under: -
“25. Where a party has received notice and he does not raise
a plea of lack of jurisdiction before the Arbitral Tribunal, he
must make out a strong case why he did not do so if he chooses
to move a petition for setting aside the award under Section
34(2)(a)(v) of the Act on the ground that the composition of the
Arbitral Tribunal was not in accordance with the agreement of
the parties. If plea of jurisdiction is not taken before the
arbitrator as provided in Section 16 of the Act, such a plea
cannot be permitted to be raised in proceedings under Section
34 of the Act for setting aside the award, unless good reasons
are shown.”
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 53 of 64
30. A similar view was reiterated in AC Chokshi Share Broker (P) Ltd. v. Jatin
Pratap Desai reported in (2025) SCC OnLine SC 281 wherein it was held
that when the jurisdictional issue has not been raised in accordance with
Section 16 of the Act, 1996, it is deemed that the objecting party has waived
his right, in terms of Section 4, and the same cannot be raised at a later stage
such as under Section 34 or 37 of the Act. The relevant observations read as
under: -
“20. The High Court in the impugned order relied on this
rationale of a “private” transaction to hold that the arbitral
tribunal lacked inherent jurisdiction to decide the claim
against respondent no. 1, and such a jurisdictional plea could
be raised at any stage even if it was not raised before the
arbitral tribunal. From the above reasons, it is clear that there
is no inherent lack of jurisdiction. Consequently, any issue
regarding the scope of Bye-law 248(a) ought to have been
raised in accordance with Section 16 of the Act, i.e. during the
arbitration, not later than the submission of statement of
defence. Neither respondent has, in their statements of defence
or Section 34 petitions, raised an objection to the arbitral
tribunal's jurisdiction in clear terms beyond stating that there
is a misjoinder of parties as they are not jointly and severally
liable. A clear jurisdictional issue was only raised at the
Section 37 appeal stage, as has also been noted by the High
Court in the impugned order.
21. This Court has held, in several judgments, that when the
jurisdictional issue has not been raised in accordance with
Section 16, it is deemed that the objecting party has waived his
right, in terms of Section 4 of the Act to raise the same at a
later stage. Such objection cannot be raised for the first time
when the party is challenging the award under Section
34. Here, respondent no. 1 not only filed his statement of
defence and participated in the arbitral proceedings but also
filed a counter-claim, thereby submitting to the arbitral
tribunal's jurisdiction. Hence, any jurisdictional objection
must be rejected on this ground as well.”
Special Leave Petition (C) No. 9740 of 2022 Page 54 of 64
(Emphasis supplied)
31. The fallacy of the aforesaid argument of the respondent herein lies in the very
fact, that it has misconstrued the observations of this Court in Lion
Engineering (supra) by ignoring the very settled position of law as regards
the interplay between Section(s) 16 and 34 of the Act, 1996, respectively.
32. The observations made by this Court in Lion Engineering (supra) that “ We
do not see any bar to plea of jurisdiction being raised by way of an objection
under Section 34 of the Act even if no such objection was raised under Section
16 ” cannot be singled out and construed devoid of its context. The aforesaid
observations have to be construed in light of the settled position of law by a
catena of decisions of this Court. The decision of this Court in Pam
Development (supra) has held that where a plea of lack of jurisdiction is not
raised before the arbitral tribunal, such a plea cannot be raised later in the
proceedings under Section 34. Pam Development (supra) says this, not
because such a plea is barred from being raised only by virtue of Section 16
sub-section (2), but rather says this, because such a plea is deemed to have
been waived on account of the failure of the party in raising such a plea. Thus,
Pam Development (supra) in no manner lays down that a plea of lack of
jurisdiction cannot be raised in the proceedings under Section 34 due to the
bar of Section 16 sub-section (2) of the Act, 1996, and thus to this extent both
Special Leave Petition (C) No. 9740 of 2022 Page 55 of 64
the decisions of Pam Development (supra) and Lion Engineering (supra) are
in tune with each other. The variance between the decisions of Pam
Development (supra) and Lion Engineering (supra) is only in respect of
whether a failure to raise such a plea at the relevant stage in terms of Section
16 sub-section (2) of the Act, 1996 would amount to a ‘waiver’ or not, and
this issue was never examined or looked into by Lion Engineering (supra).
33. On the contrary Lion Engineering (supra) specifically observed in para 9 that
“ It will be open for the respondents to argue that its objection that the Act
stands excluded by the M.P. Madhyastham Adhikaran Adhiniyam, 1983 could
be raised even without a formal pleading, being purely a legal plea. It will
also be open to the appellant to argue to the contrary. We leave the question
to be gone into by the court concerned .” The observations that it will be open
for the respondents therein to argue that such an object could be raised even
without a formal pleading AND that it will be open for the appellants therein
to argue the contrary, clearly shows that the very issue of whether such a plea
can be allowed to be raised or not i.e., issues such as whether it is a purely
legal plea or whether there was any waiver or not etc. were never decided by
this Court in Lion Engineering (supra) and rather was left to be gone into by
the court under Section 34 of the Act, 1996. The aforesaid observations clearly
show, that although such a plea may be raised for the first time in the
proceedings under Section 34 of the Act, 1996, it may still nevertheless be
Special Leave Petition (C) No. 9740 of 2022 Page 56 of 64
rejected if it is found that such a plea is not purely a question of law or that the
party raising the plea had waived it in terms of Pam Development (supra).
Whereas Gas Authority of India (supra) goes one step ahead of Pam
Development (supra) and lays down that where a party makes out a strong and
good reason for its failure to take a plea of lack of jurisdiction before the
arbitral tribunal, then there would be no deemed waiver of such a plea, and the
same may then be looked into by the courts under Section 34 of the Act, 1996.
34. Thus, insofar as the manner in which the question of whether a plea of lack of
jurisdiction being raised for the first time under Section 34 of the Act, 1996
has to be decided, the decision of this Court in Pam Development (supra) and
Gas Authority of India (supra) would be applicable, as Lion Engineering
(supra) only decided the limited issue of whether the bar under Section 16 sub-
section (2) would preclude raising of such a plea i.e., whether such a plea is
maintainable or not, and never decided or laid down when the courts would
entertain such a plea. It is in this aforesaid context that the observations of this
Court in L.G. Chaudhary (II) (supra), more particularly at para 17 that “ 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” assumes significance. What has been conveyed, in so many
words, by this Court in L.G. Chaudhary (II) (supra) is that any failure to raise
Special Leave Petition (C) No. 9740 of 2022 Page 57 of 64
the issue of applicability of the MP Act, 1983 before the arbitral tribunal is not
a strong and good reason in terms of Gas Authority of India (supra) to permit
raising such a plea in the proceedings under Section 34 of the Act, 1996.
35. Thus, what can be discerned from the aforesaid is that although a plea of lack
of jurisdiction, being a question of law, can be raised even for the first time in
the proceedings under Section 34 as held in Lion Engineering (supra), yet
such a plea ought not to be allowed to be raised as it is deemed to have been
waived in view of Section 4 of the Act, 1996 as per Pam Development (supra),
unless the party makes out a strong and good reason for its failure to take such
a plea before the arbitral tribunal as per Gas Authority of India (supra), and
as per the dictum of L.G. Chaudhary (II) (supra) any failure to raise the issue
of applicability of the MP Act, 1983 before the arbitral tribunal is not a strong
and good reason to permit raising such a plea in the proceedings under Section
34 of the Act, 1996.
D. CONCLUSION
36. What emerges from the foregoing is that although Lion Engineering (supra)
affirms that a plea of lack of jurisdiction, being a question of law, may be
raised for the first time under Section 34 of the Act, 1996, yet such a plea is
nevertheless subject to the waiver as held in Pam Development (supra).
Special Leave Petition (C) No. 9740 of 2022 Page 58 of 64
Furthermore, as per Gas Authority of India (supra), such a plea may only be
entertained if the party demonstrates a strong and sufficient reason for not
raising it before the arbitral tribunal. However, L.G. Chaudhary (II) (supra)
makes it clear that a failure to raise the issue of applicability of the MP Act,
1983 at the appropriate stage cannot be regarded as a sufficient reason, and
therefore the plea cannot be permitted at the stage of Section 34 proceedings.
37. L.G. Chaudhary (II) (supra) carved out the aforesaid limited exception to the
general rule laid down in Lion Engineering (supra) that a plea of lack of
jurisdiction, being a pure question of law, may be raised for the first time under
Section 34 of the Act, 1996. The failure of L.G. Chaudhary (II) (supra) to
take into consideration the decision of this Court in Lion Engineering (supra)
does not render the former per incuriam , as there exists no direct conflict
between the two. While Lion Engineering (supra) permits a jurisdictional
plea to be raised under Section 34 of the Act, 1996 even if not urged under
Section 16, L.G. Chaudhary (II) (supra) merely clarifies that an arbitral award
will not be annulled solely on that ground, particularly where the issue was
not raised before the tribunal. On the contrary, the aforesaid observations of
L.G. Chaudhary (II) (supra) had been consciously made by this Court keeping
in mind the ratio of Lion Engineering (supra), even though the latter was
never explicitly referred to. L.G. Chaudhary (II) (supra) cannot be termed to
be per incuriam, as the very factum that the aforesaid observations were made
Special Leave Petition (C) No. 9740 of 2022 Page 59 of 64
by L.G. Chaudhary (II) (supra) in paras 16, 17 and 19 respectively shows that
this Court was well aware of the decision of this Court in Lion Engineering
(supra), and accordingly chose to carve out an exception to the ratio of Lion
Engineering (supra) keeping in mind the cleavage of judicial view that was
prevailing earlier.
38. In view of the above exposition of law, what has been conveyed by this Court
in L.G. Chaudhary (II) (supra) in so many words is that: -
i. Where the arbitration proceedings are still underway, but no statement
of defence has been filed, there it would be open for the parties to raise
an objection of lack of jurisdiction in view of the applicability of MP
Act, 1983. The parties will also be at liberty to approach the High Court
by way of a petition under Article 227 of the Constitution for seeking a
transfer of the arbitration proceedings to the M.P. State Arbitration
Tribunal under the MP Act, 1983.
ii. Where the arbitration proceedings are still underway, but statement of
defence has already been filed i.e., the relevant stage for raising an issue
of jurisdiction is already crossed, there it would not be open for the
parties to raise an objection of lack of jurisdiction in view of the
applicability of MP Act, 1983. Furthermore, in such scenarios since the
arbitration proceedings have already commenced and made substantial
Special Leave Petition (C) No. 9740 of 2022 Page 60 of 64
progress, it would not be appropriate to transfer such proceedings to the
M.P. State Arbitration Tribunal under the MP Act, 1983, and the better
course of action would be to let the arbitration proceedings conclude.
iii. As per L.G. Chaudhary (II) (supra) where the arbitration proceedings
have concluded and an award has been passed, and if no objection to
the jurisdiction in view of the applicability of MP Act, 1983 was taken
at the relevant stage then such an award cannot be annulled only on the
ground of lack of jurisdiction.
iv. Any award passed by an arbitral tribunal under the Act, 1996, where
otherwise the MP Act, 1983 was applicable, such an award may be
challenged or assailed in terms of Section 34 and thereafter Section 37
of the Act, 1996 and other relevant provisions thereunder.
v. Any award passed by an arbitral tribunal under the Act, 1996, where
otherwise the MP Act, 1983 was applicable, such an award must be
executed in terms of the MP Act, 1983 and the relevant provisions
thereunder.
vi. Where the objection based on applicability of the MP Act, 1983 had
been raised in the written statement or statement of defence, but the
parties never took steps towards challenging the jurisdiction of the
arbitral tribunal under Section 16 of the Act, 1996 or where such plea
of jurisdiction was turned down in view of the position of law that was
prevailing prior to L.G. Chaudhary (II) (supra) i.e., such challenge to
Special Leave Petition (C) No. 9740 of 2022 Page 61 of 64
the jurisdiction was decided prior to the date of pronouncement of L.G.
Chaudhary (II) (supra), then even in such cases, as per the decision of
this Court in Modern Builders (supra), the award should not be
disturbed or set-aside only on the ground of lack of jurisdiction.
39. In the present case at hand, we take note of the following circumstances
emerging from the facts on record: -
a. It is an admitted fact that at the time of constitution of the arbitral tribunal,
the respondent never objected to the invocation of arbitration under the
Act, 1996 and both the parties proceeded to nominated their respective co-
arbitrators.
b. On the date of invocation of the Act, 1996, and commencement of
arbitration proceedings, as well as of the date when the arbitration
proceeding concluded and the award in question passed, the erstwhile
decision of this Court in VA Tech (supra) held the field.
c. The respondent herein never raised any objection to the arbitral tribunal’s
lack of jurisdiction during the arbitration proceedings either in its statement
of defence or by way of an application under Section 16 of the Act, 1996.
d. Even when the award was challenged by the respondents, the initial
petition filed by them under Section 34 of the Act, 1996 also did not contain
any objection as regards the lack of jurisdiction of the arbitral tribunal.
Special Leave Petition (C) No. 9740 of 2022 Page 62 of 64
e. The ground of lack of jurisdiction was introduced by the respondents
herein only after the decision of L.G. Chaudhary (II) (supra) by way of an
application for amending the grounds of its petition under Section 34 of the
Act, 1996, i.e., after the award had been passed.
40. Thus, the present case is squarely covered by the decision of this Court in L.G.
Chaudhary (II) (supra), more particularly the observations made in paras 6 to
9 thereunder, and as such once the award had been passed and no objection as
to the jurisdiction of the arbitral tribunal had been taken at the relevant stage,
then the award could not have been annulled by the High Court only on the
ground of lack of jurisdiction.
41. For all the foregoing reasons, we have reached the conclusion that the High
Court committed an egregious error in passing the impugned judgment. We
are left with no other option but to set aside the impugned judgment and order
passed by the High Court, and restore the proceedings in Arbitration Case No.
th
48 of 2011 to the court of Commercial Court and 19 Upper District Judge,
Bhopal (M.P.), for deciding all other issues on merit that may have been raised
by the respondent in its petition under Section 34 of the Act, 1996. We
accordingly pass such order. Thus, the appeal is disposed of in the above
terms.
Special Leave Petition (C) No. 9740 of 2022 Page 63 of 64
42. Pending application(s) if any, also stand disposed of.
43. We direct the Registry to circulate a copy of this judgment to all High Courts.
.......................................................... J.
(J.B. Pardiwala)
.......................................................... J.
(R. Mahadevan)
New Delhi;
th
15 May, 2025.
Special Leave Petition (C) No. 9740 of 2022 Page 64 of 64
2025 INSC 698
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 6856 OF 2025
(Arising out of Special Leave Petition (C) No. 9740 of 2022)
M/S GAYATRI PROJECT LIMITED ...APPELLANT(S)
VERSUS
MADHYA PRADESH ROAD
DEVELOPMENT CORPORATION LIMITED ...RESPONDENT(S)
J U D G M E N T
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2025.05.15
13:26:03 IST
Reason:
J.B. PARDIWALA, J.:
For the convenience of the exposition, this judgment is divided in the following
parts: -
INDEX
A. FACTUAL MATRIX ................................................................................... 3
B. ISSUES FOR DETERMINATION ........................................................... 16
C. ANALYSIS .................................................................................................. 16
i. Can an Award passed under the Act, 1996 be annulled on the ground
of lack of jurisdiction where no plea of applicability of MP Act, 1993
was raised before the Arbitral Tribunal? ............................................. 34
a. Is there a conflict between the decisions of L.G. Chaudhary (II) and
Lion Engineering ? ............................................................................... 37
b. Whether a plea of lack of jurisdiction may be raised for the first time
under Section 34 of the Act, 1996 if no such objection was taken before
the arbitral tribunal? ............................................................................ 51
D. CONCLUSION ........................................................................................... 58
Special Leave Petition (C) No. 9740 of 2022 Page 1 of 64
1. Leave Granted.
2. This appeal arises from the judgment and order passed by the High Court of
Madhya Pradesh, Principal Seat at Jabalpur dated 07.01.2022 in Arbitration
Appeal No. 79 of 2021 by which the appeal filed by the appellant herein under
Section 37 of the Arbitration and Conciliation Act, 1996 (for short, the “ Act,
1996 ”) came to be dismissed thereby affirming the order dated 20.12.2019
passed by the Commercial Court and 19th Additional Sessions Judge, Bhopal
(M.P.) allowing application filed by the respondent herein under Section 34
of the Act, 1996.
3. It appears that the respondent herein suffered an award dated 08.07.2011
passed by the Arbitral Tribunal (for short, the “ Tribuna l”). The said award
was challenged by the respondent Corporation under Section 34 of the Act,
1996. The appeal filed by the Corporation under Section 34 of the Act, 1996
came to be allowed on the ground that the Tribunal had no jurisdiction to pass
the award in view of the provisions of the M.P. Madhyastham Adhikaran
Adhiniyam, 1983 (for short, the “ MP Act, 1983 ”). The order passed by the
Commercial Court and 19th Additional Sessions Judge, Bhopal (M.P.) came
to be challenged by way of appeal before the High Court under Section 37 of
the Act, 1996. The appeal came to be dismissed.
Special Leave Petition (C) No. 9740 of 2022 Page 2 of 64
A. FACTUAL MATRIX
4. The facts giving rise to this appeal may be summarised as under:-
(i) The appellant executed a “works contract” dated 12.12.2005 with the
respondent for “Rehabilitation and Strengthening of Khargone -
Barwani Road (SH-26) Project Road No. 19” & “Rehabilitation and
Strengthening of Khargone - Bistan Road (SH-31) Project Road No.
20” in the State of Madhya Pradesh. Clause 67.3 of the “General
Conditions of Contract” read with Clause 67.4 of the “Conditions of
Particular Application” provided for arbitration as the means for
resolution of disputes between the Parties.
(ii) The arbitration agreement mandated that the tribunal shall comprise of
three members, one to be appointed by each party and the two co-
arbitrators had to nominate the presiding arbitrator.
(iii) Clause 67.4 of the Conditions of Particular Application – Part-II reads
thus: -
“Sub-Clause 67.4 : Arbitration
Any dispute in respect of which:
a) the decision, if any, of the Board has not become final
and binding pursuant to Sub-Clause 67.2, and
b) amicable settlement has not been reached:
(i) In the case of dispute arising between the
Employer and a domestic Contractor or between
the Employer and a foreign Contractor who opts
for the application of the Indian Arbitration and
Special Leave Petition (C) No. 9740 of 2022 Page 3 of 64
Conciliation Act, 1996 related to any matter
arising out of or connected with this Contract,
such dispute shall be referred to the award of
two Arbitrators (one each to be appointed by
each party) and an Umpire to be appointed by
the Arbitrators, or if there is no agreement, to be
appointed by the Arbitration Committee of the
Indian Council of Arbitration. The Indian
Arbitration and Conciliation Act, 1996, the rules
there under and any statutory modification or
re-enactment thereof, shall apply to these
arbitration proceedings; or (2) in the case of
dispute arising between the Employer and a
foreign Contractor, by application of the
UNCITRAL Arbitration Rules related to any
matter arising out of or connected with this
Contract, such dispute shaft be referred to the
award of two Arbitrators (one each to be
appointed by each party) and an Umpire to be
appointed by the Arbitrators, or if there is no
agreement, to be appointed by the International
Centre for Alternative Dispute Resolution
(ICADR). The UNCITRAL Arbitration Rules shall
apply to the arbitration proceedings.
(ii) Neither party shall be limited in the proceedings
before such arbitrators to the evidence or
arguments already put before the Engineer, for
the purpose of obtaining his said decision. No
such decision shall disqualify the Engineer from
being called as a witness and giving evidence
before the arbitrators or any matter whatsoever
relevant to the dispute.
(iii) The reference to arbitration may proceed
notwithstanding that the Works shall not then
be or be alleged to be complete, provided always
that the obligations of the Employer, the
Engineer and the Contractor shall not be altered
by the reason of the arbitration being conducted
during the progress of the Works. Neither party
shall be entitled to suspend the Works, and
payment to the Contractor shall be continued to
be made as provided by the Contract.
(iv) If one of the parties fail to appoint its arbitrators
in pursuance of sub para (i) and (ii) above, within
60 days after receipt of the notice of the
appointment of its arbitrators by the other party,
Special Leave Petition (C) No. 9740 of 2022 Page 4 of 64
then the Secretary General of the Permanent
Court of Arbitration, the Hague, in the case of
foreign contractors opting for the application of
the UNCITRAL Arbitration Rules, or the Ministry
of Road Transport and Highways in the case of
Indian contractors, and the foreign contractors
who opt for the application of Indian Arbitration
and Conciliation Act 1996, as the case may be,
shall appoint the arbitrator. A certified copy of
the Secretary General's order or Ministry of Road
Transport and Highways order, as the case may
be, making such an appointment shall be
furnished to both the parties.
(v) Arbitration proceedings shall be held at Bhopal,
India, and the language of the arbitration
proceedings and that of all documents and
communications between the parties shall be
English.
(vi) The decision of the majority of arbitrators shall
be final and binding upon both parties. The
expenses of the arbitrators as determined by the
arbitrators shall be shared equally by the
Employer and the Contractor, However, the
expenses incurred by each party in connection
with the preparation, presentation, etc., of its
case prior to, during and after the arbitration
proceeding shall be borne by each party itself.
(vii) All arbitration awards shall be in writing and
shall state the reasons for the award.”
(iv) This Court vide its judgment dated 14.01.2010 in the matter of VA Tech
Escher Wyass Flovel Limited v. M.P. State Electricity Board & Anr.
reported in (2011) 13 SCC 261 , held that the State Act would apply
only to such works contracts which did not have an arbitration clause.
(v) In VA Tech (supra), this Court held as under: -
“1. Heard the learned counsel for the parties. This appeal
has been filed against the impugned judgment of the High
Special Leave Petition (C) No. 9740 of 2022 Page 5 of 64
Court of Madhya Pradesh dated 5-3-2003. It appears that
the appellant was awarded a work contract by the
respondents. There was some dispute between the parties
and there is an arbitration clause in the agreement. The
appellant filed an application under Section 9 of the
Arbitration and Conciliation Act, 1996 (for short “the 1996
Act”) which was rejected by the learned Additional District
Judge and that order has been upheld by the High Court.
Hence, this appeal.
2. Section 7(1) of the Madhya Pradesh Madhyastham
Adhikaran Adhiniyam, 1983 (for short “the 1983 Act”)
provides as follows:
“7. Reference to Tribunal.—(1) Either party to a
works contract shall irrespective of the fact
whether the agreement contains an arbitration
clause or not, refer in writing the dispute to the
Tribunal.”
3. Subsequently, Parliament enacted the 1996 Act. The
1996 Act only applies where there is an arbitration clause
but it does not apply where there is none. The 1996 Act
covers all kinds of disputes including the dispute relating to
work contracts. In our opinion, the 1983 Act and the 1996
Act can be harmonised by holding that the 1983 Act only
applies where there is no arbitration clause but it stands
impliedly repealed by the 1996 Act where there is an
arbitration clause. We hold accordingly. Hence, the
impugned judgment cannot be sustained and we hold that
the application under Section 9 of the 1996 Act was
maintainable.
4. The appeal is allowed accordingly. No costs.”
(vi) The disputes arose between the parties from 06.08.2010 onwards in
relation to the appellant’s right to be reimbursed additional cost incurred
by it on account of introduction of subsequent legislation on increase in
Special Leave Petition (C) No. 9740 of 2022 Page 6 of 64
entry tax on High-Speed Diesel under Clause 70.8 of the Particular
Conditions of Contract.
(vii) The appellant invoked arbitration under Clause 67.4 vide its notice
dated 06.08.2010 and the Tribunal stood constituted on 24.09.2010.
(viii) The Tribunal passed a unanimous award dated 08.07.2011 in favour of
the appellant for a sum of Rs. 1,03,55,187 (i.e. Rs. 1.04 Crore). The
relevant paras 1.19 and 3.1 respectively of the Arbitral Award are as
follows: -
“1.19 The valuation of the claim as assessed by the
Engineer in its letter dt 18.03.2009 (CD - 01 pages 20 &
21) and recommended for reimbursement is Rs
1,03,55,187.00. This amount is agreed to by both the parties
as the valuation of the claim.
3.1 The Claimant has referred two claims for arbitration
before this AT. After careful examination and consideration
of the written/ oral submissions and evidence presented by
both the parties to the extent relevant, AT awards amounts
against each claim as under:
Amount Claimed
Amount Awarded
Claim No. 1 Rs. 1,03,55,187.00 Rs. 1,03,55,187.00
Claim No. 2 Amount not specified Rs. Nil
................................. ...............................
Total
Amount
Rs. 1,03,55,187.00
plus Interest.
Rs. 1,03,55,187.00
(ix) As is evident from Para 1.19 of the Award quoted above, the
quantification of this amount was in-fact recommended by the Engineer
and had been admitted by the respondent. The Tribunal also awarded
Special Leave Petition (C) No. 9740 of 2022 Page 7 of 64
future interest at the rate of 10% p.a. from the date of the award till the
date of actual payment as per para 3.1. As of 17.02.2025, the amount
payable by the respondent to the appellant stands at Rs. 2,44,63,775.
(x) The respondent challenged the award before the Civil Court under
Section 34 of the Arbitration Act vide a petition filed on 30.09.2011.
However, the respondent in its petition admittedly did not challenge the
jurisdiction of the Tribunal. The respondent has admitted this fact in
Para 5 of its counter affidavit filed before this Court. The respondent’s
grounds for challenge were essentially on matters of appreciation of
evidence by the Tribunal which grounds were, in any case, untenable
given the limited scope of Section 34 of the Arbitration Act.
(xi) A two Judge Bench of this Court delivered a judgment in the matter
titled MP Rural Road Development Authority & Anr v. L.G.
Chaudhary Engineers & Contractors , reported in (2012) 3 SCC 495 ,
wherein it held VA Tech (supra) to be per incuriam . The relevant para
42 reads as under: -
“42. Therefore, the appeal is allowed and the judgment of
the High Court which is based on the reasoning of Va
Tech [Va Tech Escher Wyass Flovel Ltd. v. M.P. SEB,
Misc. Appeal No. 380 of 2003, order dated 5-3-2003 (MP)]
is set aside. This Court holds that the decision in Va
Tech [(2011) 13 SCC 261] has been rendered per incuriam.
In that view of the matter the arbitration proceeding may
proceed under the M.P. Act of 1983 and not under the AC
Act, 1996.”
Special Leave Petition (C) No. 9740 of 2022 Page 8 of 64
(xii) The Division Bench, however, differed on the point of applicability of
the State Act to such works contracts which had been terminated, and
this difference of opinion caused this matter to be referred to a larger
bench in the follow terms: -
“Order
60. In view of some divergence of views expressed in the
two judgments delivered today by us, the matter may be
placed before the Hon'ble the Chief Justice of India for
constituting a larger Bench to resolve the divergence.”
(xiii) The appellant filed its reply dated 16.03.2012 before the Civil Court
wherein each of the grounds raised by the respondent in its Section 34
petition were duly responded to.
(xiv) Relying on the judgment of this Court in L.G. Chaudhary (I) (supra),
the respondent moved an application dated 26.06.2012 before the Civil
Court seeking to introduce the ground of lack of jurisdiction in its
Section 34 petition.
(xv) A Full-Bench of the High Court delivered a judgment dated 05.05.2017
in the matter of Viva Highways Ltd & Ors v. M.P. Road Development
Corporation Limited , reported in AIR 2017 MP 103 , which, in-effect,
reiterated the ratio of L.G. Chaudhary (I) (supra) insofar as this Court
had held that the State Act would apply to all work contracts in the State
of Madhya Pradesh notwithstanding the existing of an arbitration
agreement therein.
Special Leave Petition (C) No. 9740 of 2022 Page 9 of 64
(xvi) Relying on the Full Bench decision of the High Court, referred to above,
the respondent moved yet one another application dated 15.01.2018
before the Civil Court wherein it again sought to introduce additional
grounds to its Section 34 petition contending lack of jurisdiction of the
Tribunal.
(xvii) A three-Judge Bench of this Court delivered a judgment on 22.03.2018,
in the matter of Lion Engineering Consultants v. State of Madhya
Pradesh reported in (2018) 16 SCC 758, taking the view that objections
regarding lack of jurisdiction of an arbitral tribunal, being a question of
law, can be raised in Section 34 proceedings even if no such objections
had been raised during the arbitral proceedings. Para 4 thereof is to the
following effect: -
“4. We find merit in the contentions raised on behalf of the
State. We proceed on the footing that the amendment being
beyond limitation is not to be allowed as the amendment is
not pressed. We do not see any bar to plea of jurisdiction
being raised by way of an objection under Section 34 of the
Act even if no such objection was raised under Section 16.”
(xviii) A three-Judge Bench of this Court passed its judgment in M.P. Road
Development Authority & Anr v. L.G. Chaudhary Engineers &
Contractors reported in (2018) 10 SCC 826 , effectively stating that the
State Act would prevail over the Arbitration Act in light of Section 2(4)
of the Arbitration Act. The relevant para 14 is quoted below: -
Special Leave Petition (C) No. 9740 of 2022 Page 10 of 64
“ 14. In view of the above, we are of the view that the State
law will prevail in terms of Section 2(4) of the Central Act.
The reference under the State law was valid and could be
decided in accordance with the State. Accordingly, we set
aside the impugned order [Gammon India Ltd. v. State of
M.P., WP No. 8375 of 2010, order dated 29-11-2010 (MP)]
and restore the proceedings before the Tribunal. The
appeal is, accordingly, allowed in above terms.”
(xix) In para 17 of the aforesaid judgment, however, this Court categorically
excluded such cases where awards had already been made. It was held
that “in such cases, if no objection to the jurisdiction was taken at
relevant stage, the award may not be annulled on that ground”. It is
necessary to quote para 17 as under: -
“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.”
(xx) In the present case, the respondent had admittedly not raised the issue
of jurisdiction either before the Tribunal nor in its initial petition filed
under Section 34. Clearly, therefore, the instant case fell within the
ambit of Para 17 of LG Choudhary-II referred to above.
(xxi) The Civil Court passed its judgment dated 20.12.2019 allowing the
respondent’s Section 34 petition on the ground that the Tribunal lacked
jurisdiction to adjudicate the disputes. The Court observed, albeit
erroneously, that para 17 of L.G. Chaudhary (II) (supra) did not save
Special Leave Petition (C) No. 9740 of 2022 Page 11 of 64
the instant case, inasmuch as the issue of jurisdiction could have been
raised in the Section 34 proceeding even though no such objection had
been ever raised during the arbitral proceedings. The paras 12 and 13
respectively read as follows: -
“12. The relevant part of the Hon’ble Supreme Court’s
precedent- “M.P. Rural Road Road Development Authority
& Ors. Vs. M/s L.G. Chaudhary Engineering and
Construction Civil Appeal No. 974/12 dated 13-03-2018”
is as follows:
“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 that ground.”
13. It is also observable that as far as the question of non-
objection of the Applicants on the point of jurisdiction of the
arbitrator is concerned, the provisions under Section 34 (2)
(B) confers special jurisdiction to the Courts, where it does
not need to rely on the objections or non-objections of either
party. Under Section 34 (2) (B) (i) if the Court is aware that
the subject matter of the dispute is not arbitrable under the
said act, then such an arbitral award can be set aside by the
Court. Apart from this, it is also observable that Clause 28
of the Contract also regards such provisions as void, which
confers jurisdiction to Courts not having jurisdiction. It has
been clarified by the Hon’ble Supreme Court in M/s L.G.
Choudhary with regards to the above precedent that
wherever award has been passed, even in those cases, the
above objection can be raised at the time of application
under Section 34 of the Central Act. It is for this reason the
argument made by the Non- Applicant in this context is not
just.”
Special Leave Petition (C) No. 9740 of 2022 Page 12 of 64
(xxii) This Court in JMC Projects (India) Ltd v. Madhya Pradesh Road
Development Corporation reported in (2020) SCC OnLine SC 1452
took note of the exception carved out in L.G. Chaudhary (II) (supra).
In a case based on similar facts, this Court held that the award should
not be set aside on the ground of jurisdiction alone. The order dated
10.01.2020 passed by this Court is as follows: -
“Leave granted.
Mr. K. V. Vishwanathan, learned senior counsel appearing
for the appellant, has shown us our order dated 08.03.2018
in Madhya Pradesh Rural Road Development Authority &
Anr. v. M/s. L. G. Chaudhary Engineers and Contractors
(Civil Appeal No. 974 of 2012) (being the lead case) and
has pointed out paragraph Nos. 22 to 27 thereof which are
quoted hereinbelow:
“C.A. No. 2751 of 2018 @ SLP (C)No.
11615/2012, C.A. No. 2753 of 2018 @ SLP
(C)No. 11617/2012, C.A. No. 2754 of 2018 @
SLP (C)No. 11618/2012, C.A. No. 2755 of 2018
@ SLP (C)No. 11619/2012, C.A. Nos. 2756-2757
of 2018 @ SLP (C)Nos. 11633-11634/2012, C.A.
Nos. 2758-2759 of 2018 @ SLP (C)Nos. 11631-
11632/2012 & C.A. Nos. 2760-2761 of 2018 @
SLP (C)No. 11628- 11629/2012:
22. 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.
23. The appeals are, accordingly, disposed of.
C.A. No. 2616@ SLP (C)No. 35641/2011:
24. Leave granted.
Special Leave Petition (C) No. 9740 of 2022 Page 13 of 64
25. In view of order passed in C.A. No. 2751 of
2018 @ SLP (C)No. 16615/2012, no objection
having been raised by the respondents in terms of
Section 16(2) of the Arbitration and Conciliation
Act, 1996 at appropriate stage within the time
stipulated, the award could not have been
annulled.
26. Accordingly, this appeal is allowed, the
impugned judgment is set aside and the award is
restored.
27. It is, however make it clear that this order will
not debar proceedings under Section 34 of the
Arbitration and Conciliation Act, 1996.”
It is clear that in the present case, an Award has already
been passed which is dated 07.01.2011.
This being the case, and following the aforesaid judgment
of this Court, the impugned judgment dated 24.10.2018 is
set aside. The Section 34 proceedings will continue with all
objections that may be raised but excluding the objection as
to the applicability of the Madhya Pradesh Madhyastham
Adhikaran Adhiniyam, 1983.
The matter stands disposed of accordingly.”
(xxiii) The High Court passed the impugned judgment dated 07.01.2022 under
Section 37 of the Act of 1996. The High Court held that the Tribunal
lacked jurisdiction to adjudicate the disputes between the parties. The
High Court, in effect, held that the exception carved out in L.G.
Chaudhary (II) (supra), as reiterated in JMC Projects (supra), could
not be relied upon as JMC Projects (supra) had not considered the law
laid down by this Court in Lion Engineering (supra). Paras 21, 22 and
Special Leave Petition (C) No. 9740 of 2022 Page 14 of 64
23 respectively of the impugned judgment dated 07.01.2022 are as
under: -
“21. Now, we shall consider the specific objection of the
appellant regarding lack of objection on jurisdiction under
Section 16(2) of the Act of 1996 before the arbitral tribunal
in view of order dated 13.03.2018 in C.A. No. 2616 of
201810 and in M/s. JMC Projects (India) Ltd.
22. It is true that the Hon’ble Supreme Court in its order
dated 13.03.2018 in C.A.No.2616 of 2018 has held that
award cannot be annulled on the ground of lack of
jurisdiction if the objection under Section 16(2) was not
taken before the arbitral tribunal. This view was based on
a decision of two judge bench of the Hon’ble Supreme Court
in MSP Infrastructure Ltd. Vs. M.P. Road Development
Corp. Ltd.
23. However, a bench of three-judges of the Hon’ble
Supreme Court in a subsequent decision in Lion Engg.
Consultants Vs. State of M.P. partly overruled MSP
Infrastructure Ltd and held that the objection regarding
lack of jurisdiction can be taken under Section 34 of the Act
of 1996, even if no objection under Section 16(2) was taken
before the arbitral tribunal. Thus, in view of the subsequent
decision of the larger bench, this Court is of the view that
the objection regarding lack of jurisdiction could have been
taken before the learned trial Court under Section 34 of the
Act of 1996, even though no such objection was taken
before the arbitral tribunal under Section 16(2) of the Act.
The Hon’ble Supreme Court in the matter of M/s. JMC
Projects (India) Ltd. has not referred to the decision in the
matter of Lion Engineers which was subsequent to the
decision of C.A. No. 2616 of 2018. Hence, The learned trial
Court acted in accordance with law while entertaining the
objection under Section 34 of the 1996 Act and setting aside
the arbitral award on the ground of lack of jurisdiction.”
Special Leave Petition (C) No. 9740 of 2022 Page 15 of 64
B. ISSUES FOR DETERMINATION
5. Having heard the learned counsels appearing for the parties and having gone
through the materials on record, the two pivotal questions that fall for our
consideration are as under: -
I. Whether an arbitral award rendered under the Act, 1996 where the
arbitration proceedings was to be governed by the MP Act, 1983, can
be set-aside or annulled solely on the ground of lack of jurisdiction,
even when no such plea was raised before the arbitral tribunal in terms
of Section 16 sub-section (2) of the Act, 1996?
II. Whether the decision of this Court in LG Choudhary (II) (supra) could
be said to be per incuriam for not having taken into consideration the
decision of this Court in Lion Engineering (supra)? In other words,
whether there is any conflict between the decisions of this Court in Lion
Engineering (supra) and LG Choudhary (II) (supra), insofar as the
observations pertaining to the stage at which a plea of lack of
jurisdiction may be raised under the Act, 1996, are concerned?
C. ANALYSIS
6. The MP Act, 1983 was first looked into by this Court in the case of State of
M.P. v. Anshuman Shukla reported in (2008) 7 SCC 487 . This Court
speaking through S.B. Sinha J. (as he then was) after going through the various
provisions of the MP Act, 1983, observed that the said legislation was a special
Special Leave Petition (C) No. 9740 of 2022 Page 16 of 64
Act that was enacted for providing compulsory arbitration on disputes to
which the State Government or a public undertaking (wholly or substantially
owned or controlled by the State Government), is a party, and for matters
incidental thereto or connected therewith. It observed that the MP Act, 1983
postulates creation of a separate forum for the purpose of determination of
disputes arising inter alia out of the works contract. The Madhya Pradesh
Arbitration Tribunal established thereunder, is not a domestic or an ad hoc
arbitral tribunal, by virtue of the unique scheme of provisions that govern its
framework. The members of the MP Arbitral Tribunal are not nominated by
the parties, the Tribunal has the power to reject a reference for arbitration; it
has the power to suo-motu summon records; take note of evidence; award
costs and interests. The Chairperson of the M.P. State Arbitration Tribunal has
the power to refer disputes to another bench. It contains provisions,
prescribing a special time-limit and procedure for the passing of an award and
for its subsequent challenge, respectively. Accordingly, this Court held that
the provisions of the Arbitration Act, 1940 (for short, the “ Act, 1940 ”) and the
Act, 1996 would have no application to arbitrations governed by the MP Act,
1983 or any award passed thereunder. The relevant observations read as under:
-
“3. Before embarking on the said question we may notice the
statutory provisions of the Act for resolution of the legal issue.
4. The Act came into force with effect from 1-3-1985. It was
enacted to provide for the establishment of a tribunal to
Special Leave Petition (C) No. 9740 of 2022 Page 17 of 64
arbitrate on disputes to which the State Government or a public
undertaking (wholly or substantially owned or controlled by
the State Government), is a party, and for matters incidental
thereto or connected therewith.
5. The Arbitral Tribunal is constituted in terms of Section 3 of
the Act for resolving all disputes and differences pertaining to
works contract or arising out of or connected with execution,
discharge or satisfaction of any such works contract.
6. Section 7 provides for reference to the Tribunal. Such
reference may be made irrespective of the fact as to whether
the agreement contains an arbitration clause or not. Section 7-
A provides for the particulars on the basis whereof the
reference petition is to be filed. Section 7-B provides for
limitation for filing an application [...]
7. Chapter IV of the Act contains Sections 16 to 18. Section 16
deals with passing of an award by the Tribunal and/or its
Benches. Section 17 gives finality to the award made
thereunder. Such awards made, in terms of Section 18 would
be deemed to be a decree within the meaning of Section 2(2) of
the Code of Civil Procedure, 1908. Section 19 confers a power
of revision on the High Court [...]
xxx xxx xxx
14. The Act is a special Act. It provided for compulsory
arbitration. It provides for a reference. The Tribunal has the
power of rejecting the reference at the threshold. It provides
for a special limitation. It fixes a time-limit for passing an
award. Section 14 of the Act provides that proceeding and the
award can be challenged under special circumstances. Section
17, as noticed hereinbefore, provides for finality of the award,
notwithstanding anything to the contrary contained in any
other law relating to arbitration.
xxx xxx xxx
28. The provisions of the Act referred to hereinbefore clearly
postulate that the State of Madhya Pradesh has created a
separate forum for the purpose of determination of disputes
arising inter alia out of the works contract. The Tribunal is not
Special Leave Petition (C) No. 9740 of 2022 Page 18 of 64
one which can be said to be a domestic tribunal. The Members
of the Tribunal are not nominated by the parties. The
disputants do not have any control over their appointment. The
Tribunal may reject a reference at the threshold. It has the
power to summon records. It has the power to record evidence.
Its functions are not limited to one Bench. The Chairman of the
Tribunal can refer the disputes to another Bench. Its decision
is final. It can award costs. It can award interests. The finality
of the decision is fortified by a legal fiction created by making
an award a decree of a civil court. It is executable as a decree
of a civil court. The award of the Arbitral Tribunal is not
subject to the provisions of the Arbitration Act, 1940 and the
Arbitration and Conciliation Act, 1996. The provisions of the
said Acts have no application.
29. We are, therefore, of the opinion that the Tribunal for all
intent and purport is a court. The Tribunal has to determine a
lis. There are two parties before it. Its proceedings are judicial
proceedings subject to the revisional order which may be
passed by the High Court.
(Emphasis supplied)
7. In VA Tech (supra) the short point that fell for the consideration of this Court
was whether, an application under Section 9 of the Act, 1996 could be said to
be maintainable, where the arbitration proceedings were governed by the MP
Act, 1983. In other words, where the dispute had to be resolved by way of
arbitration in terms of the MP Act, 1983, more particularly Section 7(1),
thereof, could the Act, 1996 be said to also be applicable simultaneously or
alternatively for such disputes. This Court held that since both the MP Act,
1983 and the Act, 1996 respectively were similar in nature inasmuch as both
provided frameworks for resolution of dispute by way of arbitration, any
potential conflict or overlap in their application ought to be construed
Special Leave Petition (C) No. 9740 of 2022 Page 19 of 64
harmoniously. This Court observed that the gravamen of Section 7 of the MP
Act, 1983 which provided for reference to arbitral tribunal was only to make
arbitration compulsory for resolving disputes arising out of work contracts
involving either the State Government or a Public Undertaking of Madhya
Pradesh. As per VA Tech (supra) what has been conveyed in so many words
by the plain language of Section 7 of the MP Act, 1983 is only to mandate
arbitration in respect of such work contracts, and the said provision by no
means in the opinion of this Court was intended to override any legislation
enacted by the Parliament, be it the Act, 1996 (sic or the Arbitration Act,
1940). As per VA Tech (supra), Section 7 of the MP Act, 1983 cannot be
construed to oust the application of Act, 1996 to the arbitration clauses which
are otherwise governed by the provisions of the said Act. Accordingly, it held
that the MP Act, 1983 would apply only to the disputes pertaining to work
contracts as aforementioned which do not contain an arbitration clause i.e.,
where the Act, 1996 is otherwise inapplicable. In all other disputes, where the
work contract contains an arbitration clause, the Act, 1996 would be
applicable and the MP Act, 1983 inapplicable.
8. Remarkably, the decision of this Court in VA Tech (supra) inadvertently failed
to take into consideration and refer to its earlier decision in Anshuman Shukla
(supra).
Special Leave Petition (C) No. 9740 of 2022 Page 20 of 64
9. However, interestingly in the subsequent decision of Ravikant Bansal v. M.P.
Rural Road Development Authority reported in (2012) 3 SCC 513 , a
coordinate bench of this Court comprising of one of the judges (Markandey
Katju J.) who had earlier delivered the decision of VA Tech (supra), held that
the ratio of VA Tech (supra) would not be applicable where the arbitration
clause itself expressly stipulates that the arbitration would take place before
the Madhya Pradesh Arbitration Tribunal in terms of the MP Act, 1983. In
other words, Ravikant Bansal (supra) held that where the arbitration clause
stipulates that the arbitration proceedings have to take place in terms of the
MP Act, 1983 or by the arbitral tribunal established thereunder, then the Act,
1996 would have no application. The relevant observations read as under: -
“2. This petition has been filed against the judgment and order
dated 11-3-2011 passed by the High Court of Madhya Pradesh
at Gwalior Bench in Ravikant Bansal v. M.P. Rural Road
Development Authority. The learned counsel for the petitioner
has relied on a decision of this Court in Va Tech Escher Wyass
Flovel Ltd. v. M.P. SEB2 decided on 14-1-2010.
3. We are of the opinion that the aforesaid decision is
distinguishable because in the present case the arbitration
clause itself mentions that the arbitration will be by the
Madhya Pradesh Arbitration Tribunal. Hence, in this case
arbitration has to be done by the Tribunal.”
10. In view of the conflict between Anshuman Shukla (supra) and VA Tech
(supra), and that between VA Tech (supra) and Ravikant Bansal (supra), the
issue as regards the applicability of the MP Act, 1983 viz- à-viz the Act, 1996
once again fell for the consideration of this Court in L.G. Chaudhary (I)
Special Leave Petition (C) No. 9740 of 2022 Page 21 of 64
(supra). In L.G. Chaudhary (I) (supra) the question before this Court was
whether the MP Act, 1983 and the arbitral tribunal statutorily established
thereunder, would continue to have jurisdiction over disputes pertaining to
work contracts as mentioned in Section(s) 2(d) and 2(i) thereunder, in view of
the subsequent enactment of the Act, 1996.
11. In L.G. Chaudhary (I) (supra), A.K. Ganguly J. (as he then was) held that the
MP Act, 1983 is a special law providing for statutory arbitration in the State
of Madhya Pradesh. The opinion of A.K. Ganguly J. is in two parts: -
(i) First, placing reliance on the decision of Anshuman Shukla (supra), it
was held that the MP Arbitral Tribunal established thereunder had
distinct features from an ordinary arbitral tribunal constituted in terms
of the Act, 1996. It observed that the structure of the M.P. State
Arbitration Tribunal, the manner of appointment and term of office of
its members was significantly at variance from that under the Act, 1996.
Unlike the Act, 1996, the MP Act, 1983 vests the MP Arbitral Tribunal
with inherent powers that may be necessary for the ends of justice or to
prevent abuse of the process of the Tribunal. Even the procedure for
making a reference to arbitration, for passing an award thereunder,
thereafter challenging it and the limitation period thereof, was in stark
contrast to the Act, 1996. Accordingly, it held that in view of the unique
Special Leave Petition (C) No. 9740 of 2022 Page 22 of 64
statutory provisions governing the framework of arbitration under the
MP Act, 1983 that are either absent or at variance with the Act, 1996,
shows that there is inconsistency between the two legislations, and that
the M.P. State Arbitration Tribunal as held in Anshuman Shukla
(supra) is akin to a statutory forum for adjudication of disputes in
contrast to an arbitral tribunal under the Act, 1996 whose edifice is party
autonomy. Accordingly, it held VA Tech (supra) to be per incuriam .
The relevant observations read as under: -
“18. If this Court compares the provisions of the M.P.
Act with the AC Act, 1996 then the Court finds that the
provisions of the M.P. Act are inconsistent with the
provisions of the AC Act, 1996. The M.P. Act is a special
law providing for statutory arbitration in the State of
Madhya Pradesh even in the absence of arbitration
agreement. Under the provisions of the AC Act, 1996 in
the absence of an arbitration agreement, arbitration is
not possible. There is also difference in the formation of
the Arbitration Tribunal as is clear from Section 2(1)(d)
of the AC Act, 1996. Again, under the AC Act, 1996,
“Arbitral Tribunal” is defined under Section 2(1)(d) as
a sole arbitrator or a panel of arbitrators. But under the
M.P. Act such a Tribunal is created under Sections 3 and
4 of the Act. And under the M.P. Act “dispute” has a
special meaning as defined under Section 2(d) of the Act
whereas “dispute” has not been defined under the AC
Act, 1996.
xxx xxx xxx
20. The structure of the Tribunal under the M.P. Act is
also different from the structure of a Tribunal under the
AC Act, 1996. It is clear from Section 4 of the M.P. Act
that the composition of the Tribunal and their
qualification is statutorily provided [...]
Special Leave Petition (C) No. 9740 of 2022 Page 23 of 64
21. The term of office and salaries and allowances are
also statutorily provided under Sections 5 and 6 of the
M.P. Act. Section 8 provides for the procedure to be
followed by the Tribunal on receipt of reference and
Section 9 provides for the constitution of Benches and
the Chairman's power of distribution of business. Under
Section 16(2) of the M.P. Act there is a time-limit for
giving the award which is absent in the AC Act, 1996.
22. Section 17-A of the M.P. Act confers inherent power
on the Arbitral Tribunal to make orders as may be
necessary for the ends of justice or to prevent abuse of
the process of the Tribunal. Section 17-B also provides
for power conferred on the Tribunal for correction of
clerical or arithmetical mistakes. No such power is given
to an Arbitral Tribunal under the AC Act, 1996. Section
19 of the M.P. Act gives the High Court the suo motu
power of revision. The High Court has also been given
the power of revision to be exercised on an application
made by an aggrieved party within three months of the
award. While doing so, the High Court is to act like a
Revisional Court under Section 115 CPC.
23. It is clear from the aforesaid enumeration of the
statutory provisions that under the M.P. Act the parties'
autonomy in the choice of Arbitral Tribunal is not there.
24. In State of M.P. v. Anshuman Shukla this Court
while referring to the M.P. Act and dealing with the
nature of the Arbitral Tribunal constituted under the
said Act held that the said Act is a special Act and
provides for compulsory arbitration. It provides for a
reference and the Tribunal has been given the power of
rejecting the reference at the threshold. It also held that
the M.P. Act provides for a special limitation and fixes
a time-limit for passing an award. It has also been held
that Section 14 of the M.P. Act provides that the award
can be challenged under special circumstances and
Section 17 provides for finality of the award,
notwithstanding anything to the contrary contained in
any other law relating to arbitration. All these features
of the Act were pointed out by this Court in Anshuman
Special Leave Petition (C) No. 9740 of 2022 Page 24 of 64
Shukla to show that there is inconsistency between the
provisions of the AC Act, 1996 and those of the M.P. Act.
xxx xxx xxx
26. It is clear, therefore, that in view of the aforesaid
finding of a coordinate Bench of this Court on the
distinct features of an Arbitral Tribunal under the said
5
M.P. Act in Anshuman Shukla case the provisions of the
M.P. Act are saved under Section 2(4) of the AC Act,
1996. This Court while rendering the decision in Va
Tech has not either noticed the previous decision of the
coordinate Bench of this Court in Anshuman Shukla or
the provisions of Section 2(4) of the AC Act, 1996.
Therefore, we are constrained to hold that the decision
of this Court in Va Tech was rendered per incuriam.”
(Emphasis supplied)
(ii) Secondly, A.K. Ganguly J. negativing the argument of there being a
repugnancy between the Act, 1996 and the MP Act, 1983, observed that
since the Act, 1996, more particularly Section 2 sub-section (4) clearly
stipulates that Part I of the Act, 1996 shall apply insofar as the
provisions thereunder are not inconsistent with the other enactment or
with any other rule made thereunder, the MP Act, 1983 respectively and
its provisions will have precedence and continue to apply over an above
the Act, 1996. It further observed that although the Act, 1996 came into
force after the MP Act, 1983 yet there is nothing to indicate that the Act,
1996 either expressly or impliedly has repealed the MP Act, 1983. The
aforesaid is reinforced from Section 2 sub-section (5) of the Act, 1996
which contains a saving clause for other laws being already in force in
Special Leave Petition (C) No. 9740 of 2022 Page 25 of 64
India. On the contrary, Section 85 of the Act, 1996 when read with
Section 2 sub-section(s) (4) and (5) shows that the legislature had no
such intention to repeal the MP Act, 1983. Even otherwise, the subject-
matter of the MP Act, 1983 falls within the concurrent list, and the said
Act had received the assent of the President while the erstwhile
Arbitration Act, 1940 was in force. Both the Acts operated in view of
Section 46 of the 1940 Act. The relevant observations read as under: -
“16. If this Court looks at Section 2(4) of the AC Act,
1996, it will appear that Part I of the AC Act, 1996 which
is from Section 2 to Section 43, shall, except sub-section
(1) of Section 40 and Sections 41 and 43, apply to every
arbitration under any other enactment for the time being
in force where the arbitration was pursuant to an
arbitration agreement except insofar as the provisions
of this Part i.e. Part I are inconsistent with the other
enactment or with any other rule made thereunder.
17. Similar provision relating to statutory arbitration
was also there in Section 46 of the Arbitration Act,
1940. [...]
xxx xxx xxx
36. In reply the learned counsel for the respondent only
submitted that the M.P. Act is repugnant to the AC Act,
1996 since the same is a later Act made by Parliament.
The learned counsel referred to the provisions of
Article 254 of the Constitution. The learned counsel
also urged that in view of the provision of Section 85 of
the AC Act, 1996, the M.P. Act stands impliedly
repealed.
37. The said argument cannot be accepted. The
provision for repeal under Section 85 of the AC Act,
1996 does not show that there is any express repeal of
the M.P. Act. Apart from that, the provision of Section
Special Leave Petition (C) No. 9740 of 2022 Page 26 of 64
2(4) of the AC Act clearly militates against the aforesaid
submissions.
38. The argument of repugnancy is also not tenable.
Entry 13 of the Concurrent List in the Seventh Schedule
of the Constitution runs as follows [...] In view of the
aforesaid entry, the State Government is competent to
enact laws in relation to arbitration.
39. The M.P. Act of 1983 was made when the previous
Arbitration Act of 1940 was in the field. That Act of 1940
was a Central law. Both the Acts operated in view of
Section 46 of the 1940 Act. The M.P. Act, 1983 was
reserved for the assent of the President and admittedly
received the same on 17-10-1983 which was published
in the Madhya Pradesh Gazette Extraordinary dated 12-
10-1983. Therefore, the requirement of Article 254(2) of
the Constitution was satisfied. Thus, the M.P. Act of
1983 prevails in the State of Madhya Pradesh.
Thereafter, the AC Act, 1996 was enacted by Parliament
repealing the earlier laws of arbitration of 1940. It has
also been noted that the AC Act, 1996 saves the
provisions of the M.P. Act, 1983 under Sections 2(4) and
2(5) thereof. Therefore, there cannot be any
repugnancy. [...]
xxx xxx xxx
41. It is clear from the aforesaid observations that in the
instant case the latter Act made by Parliament i.e. the
AC Act, 1996 clearly showed an intention to the effect
that the State law of arbitration i.e. the M.P. Act should
operate in the State of Madhya Pradesh in respect of
certain specified types of arbitrations which are under
the M.P. Act, 1983. This is clear from Sections 2(4) and
2(5) of the AC Act, 1996. Therefore, there is no
substance in the argument of repugnancy and is
accordingly rejected.”
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 27 of 64
12. However, Gyan Sudha Misra J. in her dissenting opinion in L.G. Chaudhary
(I) (supra) held that where the nature of the dispute does not fall within the
definition of work contract under Section 2(i) of the MP Act, 1983, such
disputes can be resolved by way of arbitration under the Act, 1996,
notwithstanding the fact that such work contract is otherwise governed by the
MP Act, 1983. She observed that a reference to arbitration under the MP Act,
1983 postulates two requirements, namely; (i) the existence of a ‘works
contract’ involving either the State Government or a Public Undertaking of
Madhya Pradesh and (ii) that such contract pertains to the execution of any of
the work enumerated in Section 2(i) thereof. Section 2(i) in turn lays down in
explicit terms as to the nature and scope of “works contract” by enumerating
the specific nature of disputes that would be covered, i.e., “ work relating to
construction, repair or maintenance ... supply of goods or material and all
other matters relating to the execution of any of the said works”. However,
since Section 2(i) of the MP Act, 1983 only covers specific and well-defined
‘works’ and is applicable only in respect of disputes pertaining to its
execution, and does not include disputes of repudiation, cancellation or
termination of such works, the legal and logical consequence of the aforesaid
would be that, insofar as the dispute is not of the nature enumerated in Section
2(i) of the MP Act, 1983, such dispute would be outside the jurisdiction of the
M.P. State Arbitration Tribunal, and can be decided by an arbitral tribunal in
terms of the Act, 1996, irrespective of whether arbitration clause requires the
Special Leave Petition (C) No. 9740 of 2022 Page 28 of 64
dispute to be referred to arbitration under the MP Act, 1983. The relevant
observations read as under: -
“46. On perusal of the aforesaid provision enumerated under
Section 7, it is explicitly clear that the matter in the event of
existence of a dispute between the parties in certain categories
of cases where the State of Madhya Pradesh is a contracting
party, the dispute shall be referred in writing to the Tribunal
irrespective of the fact whether the agreement contains an
arbitration clause or not. From this provision it is clearly
apparent that reference of any dispute to the Tribunal
postulates an existence of a works contract and in the definition
of “works contract” under Section 2(i) of the M.P. Arbitration
Tribunal Act, 1983, it has clearly and unequivocally been
specified as to what is a “works contract” in relation to which
the dispute is required to be referred in writing to the Tribunal.
xxx xxx xxx
48. Thus, on a perusal of the definition of “works contract”, it
is manifestly clear that while the “works contract” means an
agreement pertaining to matters relating to the execution of
any of the work enumerated in the definition of “works
contract”, the same does not include the dispute pertaining to
termination, cancellation or repudiation of works contract and
the entire nature of transaction laid down therein relates to
disputes which arise out of execution of the nature of work
specified in the “works contract”. However, the question
whether the “works contract” has been legally repudiated and
rightly cancelled or not is the question or dispute pertaining to
termination of works contract and has not been incorporated
even remotely within the definition of “works contract”.
49. In view of this, the legal and logical consequence which
can be reasonably drawn from the definition of “works
contract” would be, that if there is a dispute between the
contracting parties for any reason relating to works contract
which include execution of any work relating to construction,
repair or maintenance of any building or superstructure, dam,
weir, canal, reservoir, tank, lake, road, well, bridge, culvert,
factory, workshop, powerhouse, transformers or such other
works of the State Government or public undertaking including
Special Leave Petition (C) No. 9740 of 2022 Page 29 of 64
an agreement for the supply of goods or material and all other
matters relating to the execution of any of the said works, the
same would fall within the ambit of the definition of “works
contract” and hence all disputes pertaining to or arising out of
execution of the works contract will have to be referred to the
M.P. State Arbitration Tribunal as envisaged under Section 7
of the 1983 Act. Hence, in addition to the reasons assigned in
the judgment and order of learned Brother Ganguly, J.
disputes arising out of execution of works contract have to be
referred to the M.P. State Arbitration Tribunal and not under
the Arbitration and Conciliation Act, 1996.
xxx xxx xxx
51. [...] But the same cannot be allowed to be raised under the
M.P. Act of 1983 since the definition of “works contract”
unambiguously lays down in explicit terms as to what is the
nature and scope of “works contract” and further enumerates
the specific nature of disputes arising out of the execution of
works contract which would come within the definition of a
“works contract”. However, the same does not even vaguely
include the issue or dispute arising out of cancellation and
termination of contract due to which this question, in my
considered opinion, would not fall within the jurisdiction of the
M.P. State Arbitration Tribunal so as to be referred for
adjudication arising out of its termination.
52. As already stated, fallout certainly would be otherwise if
the matter were to be adjudicated by an arbitrator appointed
under the Arbitration and Conciliation Act, 1996 and that
would be in view of the ratio of the decisions of the Supreme
Court referred to hereinbefore which has held it permissible
for the arbitrator to adjudicate even the dispute arising out of
cancellation or termination of an agreement or contract. This
however, cannot be allowed to broaden or expand the ambit
and scope of the M.P. Act of 1983 where the State Legislature
has passed a specific legislation in respect of certain specified
types of arbitration determining as to what is the nature of
disputes to be referred to the M.P. State Arbitration Tribunal
and that specifically permits the reference of dispute arising
out of execution of contract but clearly leaves out any dispute
arising out of termination, cancellation or repudiation of
“works contract”.
Special Leave Petition (C) No. 9740 of 2022 Page 30 of 64
53. In order to clarify the point further, what needs to be
emphasised is that if the nature of dispute referred to the
arbitrator like the instant matter, related to a dispute
pertaining to construction, repair, maintenance of any building
or superstructure, dam or for the reasons stated within the
definition of “works contract”, the matter may be referred to
the M.P. Tribunal in view of the fact that if there is a dispute in
relation to execution of a works contract, then irrespective of
the fact whether the agreement contains an arbitration clause
or not, the dispute is required to be referred to the M.P. State
Arbitration Tribunal for adjudication. But when the contract
itself has been terminated, cancelled or repudiated as it has
happened in the instant case, then the nature of dispute does
not fall within the definition of “works contract” for the sole
reason that it does not include any dispute pertaining to
cancellation of a works contract implying that when the works
contract itself is not in existence by virtue of its cancellation,
the dispute cannot be referred to the M.P. State Arbitration
Tribunal but may have to be decided by an arbitrator
appointed under the Arbitration and Conciliation Act, 1996.
54. Hence, if the nature of the dispute is such which falls within
the definition of “works contract” under Section 2(i) of the
M.P. Act, 1983 and one of the contracting parties to the
agreement is the State of M.P., then irrespective of an
arbitration agreement the dispute will have to be referred to
the Tribunal in terms of Section 7 of the Act of 1983. But if the
works contract itself has been repudiated and hence not in
existence at all by virtue of its cancellation/termination, then
in my considered view, the dispute will have to be referred to
an independent arbitrator to be appointed under the
Arbitration and Conciliation Act, 1996 since the M.P. Act,
1983 envisages reference of a dispute to the State Tribunal only
in respect of certain specified types of arbitration enumerated
under Section 2(i) of the M.P. Act, 1983.
xxx xxx xxx
57. Thus, the sum and substance of what I wish to emphasise is
that the question as to whether the dispute would be referred
to the M.P. Tribunal in terms of Section 7 of the M.P. Act of
1983 or to an independent arbitrator under the Arbitration and
Special Leave Petition (C) No. 9740 of 2022 Page 31 of 64
Conciliation Act, 1996 will depend upon the factum whether
the works contract is existing between the parties or not out of
which the dispute has arisen. In case, the works contract itself
has been repudiated/cancelled, then, in view of its non-
existence, Section 7 of the M.P. Act pertaining to reference of
dispute to the Tribunal would not come into play at all by virtue
of the fact that the dispute relating to execution of works
contract alone can be referred to the Tribunal in view of the
specific nature of works contract enumerated within the
definition of works contract under the Act of 1983. However,
when the works contract itself becomes non-existent as a
consequence of its cancellation, the matter will have to be
referred to an independent arbitrator under the Arbitration
and Conciliation Act, 1996 and not to the M.P. State
Arbitration Tribunal.
58. Thus, while holding that the M.P. Act, 1983 should operate
in the State of M.P. in respect of certain specified types of
arbitration, the appointment of an independent arbitrator by
the High Court under the Arbitration and Conciliation Act,
1996 needs to be sustained since the works contract itself is not
in existence by virtue of its cancellation and hence this part of
the dispute could not have been referred to the M.P. State
Tribunal.”
(Emphasis supplied)
13. In view of the cleavage of opinion expressed by this Court in L.G. Chaudhary
(I) (supra), the issue of applicability of the MP Act, 1983 viz- à-viz the Act,
1996 came to be referred to a three-Judge Bench of this Court, culminating
into the decision of L.G. Chaudhary (II) (supra). Answering the aforesaid
reference, L.G. Chaudhary (II) (supra) held that the definition of “dispute”
under Section 2(d) of the sic Act, 1996 (which due to an inadvertent
typographical error in para 5 of L.G. Chaudhary (II) (supra) was written as
the Act, 1996 instead of MP Act, 1983) would cover and include any dispute
Special Leave Petition (C) No. 9740 of 2022 Page 32 of 64
that arises after the termination, repudiation or cancellation of the contract or
pertains thereto. It observed that the dissenting opinion of Gyan Sudha Misra
J. in L.G. Chaudhary (I) (supra) failed to notice the said provision i.e. Section
2(d) of the MP Act, 1983, and accordingly, it held that the view expressed by
A.K. Ganguly J. in L.G. Chaudhary (I) (supra) that reference to arbitration
for disputes covered under the MP Act, 1983 would mandatorily lie before the
M.P. State Arbitration Tribunal in terms of the said Act and would not be
governed the provisions of the Act, 1996, is the correct interpretation, and the
law laid down by VA Tech (supra) was held to be per incuriam . The relevant
observations read as under: -
“4. When the matter was considered by a Bench of this Court
on 24-1-2012 (order in M.P. Rural Road Development
Authority v. L.G. Chaudhary Engineers and Contractors), this
Court held that the judgment in VA Tech Escher Wyass Flovel
Ltd. was per incuriam insofar as it held that the M.P. Act
stands impliedly repealed by the Central Act. While Hon'ble
Ganguly, J., held that the State Act will cover a dispute even
after termination of the “works contract”, Hon'ble Gyan
Sudha Mishra, J. took a different view [...]
5. We find from the definition under Section 2(d) of the
Arbitration and Conciliation Act, 1996 that even after a
contract is terminated, the subject-matter of dispute is covered
by the said definition. The said provision has not been even
referred to in the judgment rendered by Hon'ble Gyan Sudha
Mishra, J.
6. In view of the above, we are of the opinion that the view
expressed by Hon'ble Ganguly, J. is the correct interpretation
and not the contra view of Hon'ble Gyan Sudha Mishra, J.
Reference stands answered accordingly.
Special Leave Petition (C) No. 9740 of 2022 Page 33 of 64
7. Taking up appeal on merits, we find that the High Court
proceeded on the basis of the judgment of this Court in VA
Tech Escher Wyass Flovel Ltd. which has been held to be per
incuriam. The M.P. Act cannot be held to be impliedly
repealed.
8. We are, thus, in agreement with the proposed opinion of
Hon'ble Ganguly, J. [...]”
(Emphasis supplied)
i. Can an Award passed under the Act, 1996 be annulled on the ground
of lack of jurisdiction where no plea of applicability of MP Act, 1993
was raised before the Arbitral Tribunal?
14. It is worthwhile to note, that the decision of L.G. Chaudhary (II) (supra) did
not merely decide the aforesaid reference arising from L.G. Chaudhary (I)
(supra), but also elucidated how, the courts are expected to deal with the
various issues that may arise therefrom insofar as the pending proceedings that
were inadvertently initiated under the Act, 1996 and any awards already
passed thereunder are concerned.
15. In the entire batch of matters that had been referred to this Court in L.G.
Chaudhary (II) (supra), this Court in few of the civil appeals where the
reference to arbitration under the Act, 1996 had been challenged, while the
matters were still at the pre-award stage, however the statement of defence
had already been filed without raising a plea of lack of jurisdiction, held that
in such instances, the plea of lack of jurisdiction cannot be allowed to be now
Special Leave Petition (C) No. 9740 of 2022 Page 34 of 64
raised in terms of Section 16 sub-section (2) of the Act, 1996 and as such the
award cannot be annulled only on such ground. Similarly, in a batch of matters
where the award had already been passed but no objection of jurisdiction was
raised in terms of Section 16(2) of the Act, 1996, there L.G. Chaudhary (II)
(supra) whilst restoring the award again reiterated that the award could not
have been annulled only on the ground of jurisdiction, but clarified that, all
other challenges to the award may be made in appropriate proceedings under
Section 34 of the Act, 1996. Lastly, in one of the civil appeals, where the
execution proceedings for the award passed were pending, this Court in view
of the prolonged nature of the litigation, directed that the award be treated to
have been rendered under the MP Act, 1983 and transferred the execution
proceedings to the High Court of Madhya Pradesh at Jabalpur. The relevant
observations read as under: -
“ CA No. 2751 of 2018 arising out of SLP (C) No. 11615 of 2012,
CA No. 2753 of 2018 arising out of SLP (C) No. 11617 of 2012, CA
No. 2754 of 2018 arising out of SLP (C) No. 11618 of 2012, CA No.
2755 of 2018 arising out of SLP (C) No. 11619 of 2012, CAs Nos.
2756-57 of 2018 arising out of SLPs (C) Nos. 11633-34 of 2012,
CAs Nos. 2758-59 of 2018 arising out of SLPs (C) Nos. 11631-32
of 2012 & CAs Nos. 2760-61 of 2018 arising out of SLPs (C) Nos.
11628-29 of 2012
15. Leave granted. In view of order passed in Civil Appeal No.
2615 of 2018 [arising out of SLP (C) No. 16889 of 2012], the
impugned order is set aside and the application(s) filed by the
respondent(s) under Section 11 of the Arbitration and
Conciliation Act, 1996 are dismissed.
16. However, since it is stated that proceedings are pending
before the arbitrator in pursuance of the impugned order, the
Special Leave Petition (C) No. 9740 of 2022 Page 35 of 64
same will stand transferred to the State Tribunal and the State
Tribunal may proceed further taking into account the
proceedings which have already been taken. The learned
counsel for the respondent(s) pointed out that in view of
Section 16(2), the objection to the jurisdiction could not be
raised after statement of defence was filed. This contention
cannot be accepted in view of the fact that the SLP was filed
prior to the filing of statement of defence wherein this objection
was raised.
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.
xxx xxx xxx
CA No. 2616 arising out of SLP (C) No. 35641 of 2011
19. Leave granted. In view of the order passed in CA No. 2751
of 2018 arising out of SLP (C) No. 16615 of 2012, no objection
having been raised by the respondents in terms of Section 16(2)
of the Arbitration and Conciliation Act, 1996 at appropriate
stage within the time stipulated, the award could not have been
annulled.
20. Accordingly, this appeal is allowed, the impugned
judgment is set aside and the award is restored. It is, however,
made clear that this order will not debar proceedings under
Section 34 of the Arbitration and Conciliation Act, 1996.
xxx xxx xxx
Civil Appeal No. 4261 of 2018
34. The Division Bench vide order dated 5-7-2012 directed
that the enforceability of the decree will depend upon the fate
of another appeal which was pending between the parties. The
said appeal, FAO (OS) No. 23 of 1998, is still pending but the
High Court has deferred the same pending decision of the
larger Bench of this Court in pursuance of the judgment of this
Court in M.P. Rural Road Development Authority v. L.G.
Special Leave Petition (C) No. 9740 of 2022 Page 36 of 64
Chaudhary Engineers and Contractors. It may be noted that
the larger Bench has decided the matter on 8-3-2018. In terms
of the said decision, the dispute between the parties has to be
settled in accordance with the provisions of the M.P.
Madhyastham Adhikaran Adhiniyam, 1983 (the M.P. Act).
However, since in the present case the award has been
rendered long back which was not challenged by the
respondents and the matter is pending at the stage of execution,
we direct that the award to be treated to have been rendered
under the M.P. Act.
35. In view of the above, we transfer pending proceedings
before the Delhi High Court being FAO (OS) No. 23 of 1998
and connected matters to the High Court of Madhya Pradesh
at Jabalpur to be treated as revision petition under the M.P.
Act.
(Emphasis supplied)
a. Is there a conflict between the decisions of L.G. Chaudhary (II) and
Lion Engineering ?
16. At this stage, it is apposite to note, that prior to the decision of L.G.
Chaudhary (II) (supra), this Court in one another decision of Lion
Engineering (supra) had looked into the issue as to at what stage a plea of
lack of jurisdiction or applicability of any State Act may be raised. The facts
of Lion Engineering (supra) were that the respondent State therein had sought
to amend its pleadings in the proceedings under Section 34 of the Act, 1996
to raise the objection of a lack of jurisdiction on the ground of applicability of
the MP Act, 1983. The said amendment application was rejected by the trial
court as being barred by limitation. The High Court however, in exercise of
Special Leave Petition (C) No. 9740 of 2022 Page 37 of 64
its supervisory jurisdiction under Article 227 of the Constitution allowed the
said amendment. In appeal, before this Court it was inter-alia contended by
the appellant therein, that the amendment ought not to have been allowed,
since the objection of lack of jurisdiction had never been raised before the
arbitral tribunal and hence was barred by Section 16 sub-section (2) of the Act,
1996. This Court held that any legal plea arising on undisputed facts can be
raised in the proceedings under Section 34 of the Act, 1996 even if they were
never raised under Section 16. It further held that, such plea being a question
of law arising from admitted facts, can be raised without seeking any
amendment of the pleadings. Accordingly, it held that there is no bar to plea
of jurisdiction being raised by way of an objection under Section 34 of the Act
even if no such objection was raised under Section 16. The relevant
observations read as under: -
“3. The learned Advocate General for the State of M.P.
submitted that the amendment sought is formal. Legal plea
arising on undisputed facts is not precluded by Section
34(2)(b) of the Act. Even if an objection to jurisdiction is not
raised under Section 16 of the Act, the same can be raised
under Section 34 of the Act. It is not even necessary to consider
the application for amendment as it is a legal plea, on admitted
facts, which can be raised in any case. He thus submits the
amendment being unnecessary is not pressed. The learned
Advocate General also submitted that observations in MSP
Infrastructure Ltd., particularly in paras 16 and 17 do not lay
down correct law.
4. We find merit in the contentions raised on behalf of the State.
We proceed on the footing that the amendment being beyond
limitation is not to be allowed as the amendment is not
pressed. We do not see any bar to plea of jurisdiction being
Special Leave Petition (C) No. 9740 of 2022 Page 38 of 64
raised by way of an objection under Section 34 of the Act even
if no such objection was raised under Section 16.
(Emphasis supplied)
17. Lion Engineering (supra) expressing disagreement with the view taken in
MSP Infrastructure Ltd. v. M.P. Road Development Corpn. Ltd. , reported
in (2015) 13 SCC 713 , further held that the ground of ‘public policy of India’
in Section 34 of the Act, 1996 would include violation of not only a Central
law but also a State law, and hence, it would be open for the parties to argue
the aspect of applicability of the MP Act, 1983 even without a formal pleading,
being purely a legal plea in the proceedings under Section 34 of the Act, 1996.
The relevant observations read as under: -
“6. Both stages are independent. Observations in paras 16 and
17 in MSP Infrastructure Ltd. do not, in our view, lay down
correct law. We also do not agree with the observation that the
public policy of India does not refer to a State law and refers
only to an all-India law.
7. In our considered view, the public policy of India refers to
law in force in India whether State law or Central law.
Accordingly, we overrule the observations to the contrary in
paras 16 and 17 of the judgment in MSP Infrastructure Ltd.
9. The matter may now be taken up by the trial court for
consideration of objections under Section 34 of the Central
Act. It will be open for the respondents to argue that its
objection that the Act stands excluded by the M.P.
Madhyastham Adhikaran Adhiniyam, 1983 could be raised
even without a formal pleading, being purely a legal plea. It
will also be open to the appellant to argue to the contrary. We
leave the question to be gone into by the court concerned.
(Emphasis supplied)
Special Leave Petition (C) No. 9740 of 2022 Page 39 of 64
18. It is in this aforesaid context, that the respondent herein has contended before
us that there exists a conflict between the decisions of this Court in Lion
Engineering (supra) and L.G. Chaudhary (II) (supra), insofar as the issue of
when a plea of lack of jurisdiction on the basis of applicability of a State law
can be raised. It was submitted that Lion Engineering (supra) clearly holds
that an objection of lack of jurisdiction is a legal plea that may be raised for
the first time in the proceedings under Section 34 of the Act, 1996, even if the
same was never raised before the arbitral tribunal, and being a question of law,
Section 16 sub-section (2) of the Act, 1996 would have no application. It was
further canvassed on behalf of the respondents herein that the decision of L.G.
Chaudhary (II) (supra) to the extent that it holds that no plea of lack of
jurisdiction can be raised in the proceedings under Section 34, if it was never
raised before the arbitral tribunal, could be said to be per incuriam, as it failed
to refer and advert to the earlier binding decision of Lion Engineering (supra),
which as per the respondents herein, lays down a contradictory view.
19. We are however, not impressed by the aforesaid submission that has been
canvassed on behalf of the respondents herein, primarily for the following
three reasons: -
(i) First, that merely because L.G. Chaudhary (II) (supra) does not refer
to the decision of Lion Engineering (supra), would not render it per
Special Leave Petition (C) No. 9740 of 2022 Page 40 of 64
incuriam, if either such omission in referring does not amount to a non-
consideration of the ratio of an earlier decision or where there is no
palpable conflict or contradiction in the ratio of both decisions. Lion
Engineering (supra) holds that a plea of lack of jurisdiction being a
question of law may be raised for the first time under Section 34 of the
Act, 1996 even if it was never raised before the arbitral tribunal.
Whereas, L.G. Chaudhary (II) (supra) holds that where such plea of
lack of jurisdiction was not taken before the arbitral tribunal, then an
award that has been so passed by the tribunal will not be annulled only
on the ground of lack of jurisdiction. If L.G. Chaudhary (II) (supra)
was not conscious of the position of law laid in Lion Engineering
(supra), then there was no need for it to clarify that an award would not
be annulled only on the ground of lack of jurisdiction. As even without
the aforesaid clarification, such awards would not have been susceptible
to annulment, if not for the ratio of Lion Engineering (supra). Thus, in
our opinion, even if L.G. Chaudhary (II) (supra) does not refer to the
decision of Lion Engineering (supra), it cannot be termed to be per
incuriam, as the very factum that the aforesaid observations were made
by L.G. Chaudhary (II) (supra) in paras 16, 17 and 19, shows that this
Court was well aware of the decision of Lion Engineering (supra), and
accordingly chose to carve out an exception to the ratio of Lion
Special Leave Petition (C) No. 9740 of 2022 Page 41 of 64
Engineering (supra) keeping in mind the cleavage of judicial view that
was prevailing earlier.
(ii) Secondly, the decision of Lion Engineering (supra) only dealt with the
question whether an amendment of pleadings was required or not, to
raise a plea of jurisdiction. It was in this aforesaid context, that this
Court held that such objection being a question of law can be raised by
way of an objection in the proceedings under Section 34 of the Act,
1996 even if no such objection was raised under Section 16 of the Act,
1996. Thus, the aforesaid observations could be said to be confined only
to the issue of requirement to amend the pleadings for raising such an
objection, and cannot be stretched to apply blanketly in all cases.
(iii) Thirdly, even otherwise, the ratio of Lion Engineering (supra) in paras
6 to 9 only goes so far as to hold that where a plea of jurisdiction
involves purely a question of law and is based on undisputed facts, then
such a plea may be raised for the first time in the proceedings under
Section 34 of the Act, 1996, notwithstanding the bar of Section 16 sub-
section (2) or whether, such plea was taken before the arbitral tribunal
or not. However, Lion Engineering (supra) does not address the
question whether an award may be annulled only on the ground of lack
of jurisdiction or not. It does not disturb the settled position of law as
regards the scope of Section 34 of the Act, 1996 i.e., an award may be
set aside only if such lack of jurisdiction goes to the root of the matter
Special Leave Petition (C) No. 9740 of 2022 Page 42 of 64
and results in a patent illegality. On the contrary, L.G. Chaudhary (II)
(supra) specifically addresses this question in the context of the issue of
applicability of MP Act, 1983 and explicitly states that any award
already passed shall not be annulled only on the ground of lack of
jurisdiction where such plea was not raised at the relevant stage. Thus,
the aforesaid ratio of Lion Engineering (supra) by no stretch can be
construed to mean that such a plea of jurisdiction would automatically
result in annulment of an award, de hors the fact whether such lack of
jurisdiction goes to the root of the award rendered or not. The ratio of
L.G. Chaudhary (II) (supra) unlike Lion Engineering (supra) does not
deal with whether it is permissible for such plea of jurisdiction to be
raised under Section 34 or not, and only deals with the issue whether an
award may be annulled only on the ground of jurisdiction or not, which
was never an issue before Lion Engineering (supra), hence there is no
conflict or contradiction between the ratios of the aforesaid two
decisions.
20. What can be discerned from the aforesaid is that L.G. Chaudhary (II) (supra)
carved out an exception to the general rule that was laid in Lion Engineering
(supra), that although a plea of lack of jurisdiction being a question of law can
be raised for the first time in the proceedings under Section 34 of the Act,
1996, yet insofar as the MP Act, 1983 is concerned, particularly the state of
Special Leave Petition (C) No. 9740 of 2022 Page 43 of 64
flux in which the position of law regarding its applicability stood, in cases
where either the award has already been passed or where the statement of
defence is already been filed, and no plea of lack of jurisdiction or
applicability of the MP Act, 1983, has been raised before the arbitral tribunal,
then such a plea of jurisdiction will no longer be available, and the award
cannot be annulled solely on such ground.
21. In JMC Projects (supra) this Court reiterated the aforesaid exception carved
out in L.G. Chaudhary (II) (supra) and held that since the award had already
been passed, all objections except the plea of lack of jurisdiction and the
applicability of the MP Act, 1983 may be raised in the proceedings under
Section 34 of the Act, 1996.
22. In Sweta Construction v. Chhattisgarh State Power Generation Company
Ltd. reported in (2022) SCC OnLine SC 1447 , while dealing with an issue
pertaining to the applicability of the Chhattisgarh Madhyastham Adhikaran
Adhiniyam, 1983, which is pari materia to the MP Act, 1983, this Court
followed the ratio laid down in L.G. Chaudhary (II) (supra), and reiterated
that where awards have already been made and if no objection to the
jurisdiction was taken at the relevant stage, then the award may not be
annulled “only” on that ground. The relevant observations read as under: -
12. [...] Thus what was opined was that where awards have
already been made and if no objection to the jurisdiction was
Special Leave Petition (C) No. 9740 of 2022 Page 44 of 64
taken at the relevant stage, the award may not be annulled
“only” on that ground and the appeals dealing with those
aspects were granted a favourable consideration.
13. [...] It was however, clarified in the very next paragraph
that the order would not debar proceedings under Section 34
of the 1996 Act.
23. Furthermore, this Court in Sweta Construction (supra), taking note of the
ostensible conflict between the decisions of L.G. Chaudhary (II) (supra) and
Lion Engineering (supra), made the following pertinent observations: -
(i) First, that, in Lion Engineering (supra) the controversy before the
court was different inasmuch as it was dealing with the issue of an
amendment in pleadings being sought beyond the period of limitation.
This Court observed that, it was in this context that Lion Engineering
(supra) held that no amendment of pleadings was required to raise a plea
of jurisdiction, and such objection being a question of law can be raised
by way of an objection in the proceedings under Section 34 of the Act,
1996 even if no such objection was raised under Section 16 of the Act,
1996. The relevant observations read as under: -
“15. However, as pointed by the learned counsel for the
respondent, there appears to be some lack of clarity on
the issue raised in the present petition on account of the
same three-Judge Bench having opined in another order
passed in Lion Engg. Consultants v. State of M.P. on 22-
3-2018 i.e. about three weeks after that. The issue
however, raised was whether there was any bar to the
plea of jurisdiction being raised by way of an objection
under Section 34 of the 1996 Act even if no objection
was raised under Section 16 of that Act. It was opined
Special Leave Petition (C) No. 9740 of 2022 Page 45 of 64
that public policy of India refers to law enforced in India
i.e. both Central law as well as the State law. The
respondent State was given liberty to argue before the
trial court its objections that the 1996 Act stood
excluded by the State Adhiniyam even without formal
pleadings being a pure legal plea. This was in the
context of an amendment sought being beyond
limitation. In that context there is an observation in one
sentence, “we do not see any bar to plea of jurisdiction
being raised by way of an objection under Section 34 of
the Act even if no objection was raised under Section 16
of that Act”.”
(Emphasis supplied)
(ii) Secondly, that the decision of Lion Engineering (supra) was only an
order unlike the decision of L.G. Chaudhary (II) (supra) which was a
substantive judgment, and thus, the observations of Lion Engineering
(supra) would by no means detract or take away the law laid down in
L.G. Chaudhary (II) (supra) as regards the maintainability of the plea
of jurisdiction where awards have already been passed, and no such
objection was raised before the arbitral tribunal at the relevant stage.
The relevant observations read as under: -
“16. If we appreciate the aforesaid observation in Lion
Engg. Consultants and that too emerging from identical
Bench in the two matters, we would have to construe as
what is meant by this sentence extracted aforesaid. We
take note of the fact that this is an order and not a
judgment. The controversy before the Court was
something different as noticed by us aforesaid. In that
context, this sentence has been inserted, but that does
not take away the law laid down in the substantive
judgment (in M.P. Rural Road Development Authority)
Special Leave Petition (C) No. 9740 of 2022 Page 46 of 64
dealing with the issue at hand in respect of awards
already made where petitions were pending before the
competent Court under Section 34 of the said Act.”
(Emphasis supplied)
(iii) Thirdly, that the law expounded in L.G. Chaudhary (II) (supra) insofar
as those awards which have already been passed are concerned, should
be read as one made by this Court under Article 142 of the Constitution
to do substantive justice inter se the parties, keeping in mind the
cleavage of judicial view earlier and to ensure that the objective of
arbitration as an expeditious and effective alternative dispute resolution
mechanism is not defeated. The relevant observations read as under: -
“17. This Court (in M.P. Rural Road Development
Authority) in the context of the 1996 Act and the 1983
Adhiniyam, keeping in mind the cleavage of judicial
view earlier and expounding on the law in that judgment
has in succinct terms set out that the objections under
Section 34 of the said Act, where no such plea of
jurisdiction was raised in proceedings before the
arbitrator, should not be dealt with “alone” on the plea
of jurisdiction i.e. it should be considered on merits. One
can say that possibly this part of the order can also be
read as one made under Article 142 of the Constitution
of India to do substantive justice inter se the parties,
more so, when arbitration as an alternative dispute
resolution mechanism presupposes an expeditious
disposal of commercial disputes and that objective
would stand nullified if a contrary view was taken.”
(Emphasis supplied)
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(iv) Lastly, it observed that even otherwise, the conduct of the respondent
therein of accepting the notice of invocation and commencing
arbitration under the Act, 1996 on their own volition amounts to a
waiver of their right to claim initiation of arbitration under the State
Act. In such circumstances it was held that the respondent therein
cannot be now permitted to approbate and reprobate a right it failed to
exercise on it own, and that too in a manner which would defeat the
entire object of arbitration. The relevant observations read as under: -
“18. We are also of the view that in particular facts of
the present case, the position is even more gross
because when the appellant claimed arbitration, the
respondent accepted invocation of arbitration,
suggested a panel of arbitrators, the appellant chose one
of the arbitrators out of the two suggested and the
arbitrator was so appointed as the sole arbitrator. Thus,
the arbitration proceedings commenced in pursuance to
the acts of the respondent and it cannot be permitted to
get away to say that the whole process was gone through
because of some misconception or inappropriate legal
advice. Arbitration by consent is always possible. The
mode and manner of conduct of arbitration is possible
and how those arbitration proceedings would be
governed is also a matter of consent. If at all there were
any rights of the respondent to have claimed arbitration
under the 1983 Adhiniyam, that right was never
exercised or waived. The respondent cannot be
permitted to approbate and reprobate and that too in
arbitration proceedings and that too in dispute or
resolution through the method of arbitration defeating
the very purpose of an alternative dispute resolution to
arbitration as an expeditious remedy.”
(Emphasis supplied)
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24. In yet another decision of this Court in Modern Builders v. State of Madhya
Pradesh & Anr. reported in (2024) 10 SCC 637 , the appellant contractor
therein had approached the M.P. State Arbitration Tribunal for initiation of
arbitration in respect of certain disputes, however the reference was rejected
by the State Tribunal in view of the law laid down by VA Tech (supra) that
held field at that time. Accordingly, the appellant therein initiated arbitration
under the Act, 1996, and consequently an award was passed. The aforesaid
award came to be challenged, wherein the High Court under Section 37 of the
Act, 1996 set-aside the award only on the ground that the arbitral tribunal had
no jurisdiction in view of the MP Act, 1983. In appeal, this Court setting aside
the order of the High Court, held that even though the objection based on
applicability of the MP Act, 1983 had been raised by the respondent therein
in its written statement filed before the arbitrator, nevertheless, in view of the
fact that the respondents therein neither raised this objection when the Section
11 petition was filed by the appellant, nor did it take recourse of Section 16 of
the Act, 1996 to challenge the jurisdiction of the arbitral tribunal, it would be
unjust to set aside the award only on the ground of the failure of the appellant
to take recourse to the MP Act, 1983. Furthermore, in light of the fact that the
only reason the appellant took recourse to the Act, 1996 was because its earlier
reference to the M.P. State Arbitration Tribunal had been rejected in terms of
the decision of VA Tech (supra), this Court held that it is a fit case to exercise
Special Leave Petition (C) No. 9740 of 2022 Page 49 of 64
its jurisdiction under Article 142 of the Constitution and restore the award to
ensure complete justice. The relevant observations read as under: -
“6. 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
Arbitration Tribunal. By the order dated 19-4-2010, the
Arbitration Tribunal held that in view of the arbitration clause
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.
7. The order dated 22-7-2011 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.
9. 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 was
made on 25-4-2014. 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.
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10. 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 para 17 of the
decision in M.P. 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.
(Emphasis supplied)
25. What can be discerned from the above is that, this Court has consistently held
that an exception has been carved out in L.G. Chaudhary (II) (supra) whereby
any awards that have already been made and if no objection to the jurisdiction
was taken at the relevant stage, then the award may not be annulled “only” on
that ground.
b. Whether a plea of lack of jurisdiction may be raised for the first time
under Section 34 of the Act, 1996 if no such objection was taken before
the arbitral tribunal?
26. The aforesaid may be looked at from one another angle, with a view to obviate
the possibility of any confusion. The respondent herein placed much emphasis
on the observations made in Lion Engineering (supra) to canvass that a plea
of lack of jurisdiction being a question of law may be raised at any stage. Even
where no such plea was raised at the time of filing of written submissions, the
same can be validly raised for the first time in the proceedings under Section
Special Leave Petition (C) No. 9740 of 2022 Page 51 of 64
34 of the Act, 1996, and the bar under Section 16 sub-section (2), would not
come in the way.
27. Before adverting to the aforesaid submission, it would be apposite to first look
into the interplay between Section(s) 16 and 34 of the Act, 1996, respectively.
These two provisions, although distinct in form and function, yet are
intrinsically linked in the broader scheme of the Act, insofar as the stage at
which issues pertaining to the jurisdiction of the arbitral tribunal may be
validly raised.
28. In Union of India v. Pam Development (P) Ltd. reported in (2014) 11 SCC
366 this Court held that where a party does not raise a plea of jurisdiction
before the arbitral tribunal, then such a plea is deemed to have been waived in
view of the provisions contained in Section 4 read with Section
16 of the Arbitration Act, 1996, and in consequence cannot be raised for the
first time in the proceedings under Section 34. The relevant observations read
as under: -
“16. As noticed above, the appellant not only filed the
statement of defence but also raised a counterclaim against the
respondent. Since the appellant has not raised the objection
with regard to the competence/jurisdiction of the Arbitral
Tribunal before the learned arbitrator, the same is deemed to
have been waived in view of the provisions contained in Section
4 read with Section 16 of the Arbitration Act, 1996.
17. Section 16 of the Arbitration Act, 1996 provides that the
Arbitral Tribunal may rule on its own jurisdiction. Section 16
clearly recognises the principle of kompetenz-kompetenz.
Special Leave Petition (C) No. 9740 of 2022 Page 52 of 64
Section 16(2) mandates that a plea that the Arbitral Tribunal
does not have jurisdiction shall be raised not later than the
submission of the statement of defence. Section 4 provides that
a party who knows that any requirement under the arbitration
agreement has not been complied with and yet proceeds with
the arbitration without stating his objection to such non-
compliance without undue delay shall be deemed to have
waived his right to so object.
8. In our opinion, the High Court has correctly come to the
conclusion that the appellant having failed to raise the plea of
jurisdiction before the Arbitral Tribunal cannot be permitted
to raise for the first time in the Court. [...]
(Emphasis supplied)
29. In Gas Authority of India Ltd. v. Keti Construction (I) Ltd. reported in (2007)
5 SCC 38 this Court held that where a party does not raise
a plea of lack of jurisdiction before the arbitral tribunal, he must make out a
strong case why he did not do so if he chooses to move a petition for setting
aside the award under Section 34 of the Act, 1996 on such ground. The
relevant observations read as under: -
“25. Where a party has received notice and he does not raise
a plea of lack of jurisdiction before the Arbitral Tribunal, he
must make out a strong case why he did not do so if he chooses
to move a petition for setting aside the award under Section
34(2)(a)(v) of the Act on the ground that the composition of the
Arbitral Tribunal was not in accordance with the agreement of
the parties. If plea of jurisdiction is not taken before the
arbitrator as provided in Section 16 of the Act, such a plea
cannot be permitted to be raised in proceedings under Section
34 of the Act for setting aside the award, unless good reasons
are shown.”
(Emphasis supplied)
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30. A similar view was reiterated in AC Chokshi Share Broker (P) Ltd. v. Jatin
Pratap Desai reported in (2025) SCC OnLine SC 281 wherein it was held
that when the jurisdictional issue has not been raised in accordance with
Section 16 of the Act, 1996, it is deemed that the objecting party has waived
his right, in terms of Section 4, and the same cannot be raised at a later stage
such as under Section 34 or 37 of the Act. The relevant observations read as
under: -
“20. The High Court in the impugned order relied on this
rationale of a “private” transaction to hold that the arbitral
tribunal lacked inherent jurisdiction to decide the claim
against respondent no. 1, and such a jurisdictional plea could
be raised at any stage even if it was not raised before the
arbitral tribunal. From the above reasons, it is clear that there
is no inherent lack of jurisdiction. Consequently, any issue
regarding the scope of Bye-law 248(a) ought to have been
raised in accordance with Section 16 of the Act, i.e. during the
arbitration, not later than the submission of statement of
defence. Neither respondent has, in their statements of defence
or Section 34 petitions, raised an objection to the arbitral
tribunal's jurisdiction in clear terms beyond stating that there
is a misjoinder of parties as they are not jointly and severally
liable. A clear jurisdictional issue was only raised at the
Section 37 appeal stage, as has also been noted by the High
Court in the impugned order.
21. This Court has held, in several judgments, that when the
jurisdictional issue has not been raised in accordance with
Section 16, it is deemed that the objecting party has waived his
right, in terms of Section 4 of the Act to raise the same at a
later stage. Such objection cannot be raised for the first time
when the party is challenging the award under Section
34. Here, respondent no. 1 not only filed his statement of
defence and participated in the arbitral proceedings but also
filed a counter-claim, thereby submitting to the arbitral
tribunal's jurisdiction. Hence, any jurisdictional objection
must be rejected on this ground as well.”
Special Leave Petition (C) No. 9740 of 2022 Page 54 of 64
(Emphasis supplied)
31. The fallacy of the aforesaid argument of the respondent herein lies in the very
fact, that it has misconstrued the observations of this Court in Lion
Engineering (supra) by ignoring the very settled position of law as regards
the interplay between Section(s) 16 and 34 of the Act, 1996, respectively.
32. The observations made by this Court in Lion Engineering (supra) that “ We
do not see any bar to plea of jurisdiction being raised by way of an objection
under Section 34 of the Act even if no such objection was raised under Section
16 ” cannot be singled out and construed devoid of its context. The aforesaid
observations have to be construed in light of the settled position of law by a
catena of decisions of this Court. The decision of this Court in Pam
Development (supra) has held that where a plea of lack of jurisdiction is not
raised before the arbitral tribunal, such a plea cannot be raised later in the
proceedings under Section 34. Pam Development (supra) says this, not
because such a plea is barred from being raised only by virtue of Section 16
sub-section (2), but rather says this, because such a plea is deemed to have
been waived on account of the failure of the party in raising such a plea. Thus,
Pam Development (supra) in no manner lays down that a plea of lack of
jurisdiction cannot be raised in the proceedings under Section 34 due to the
bar of Section 16 sub-section (2) of the Act, 1996, and thus to this extent both
Special Leave Petition (C) No. 9740 of 2022 Page 55 of 64
the decisions of Pam Development (supra) and Lion Engineering (supra) are
in tune with each other. The variance between the decisions of Pam
Development (supra) and Lion Engineering (supra) is only in respect of
whether a failure to raise such a plea at the relevant stage in terms of Section
16 sub-section (2) of the Act, 1996 would amount to a ‘waiver’ or not, and
this issue was never examined or looked into by Lion Engineering (supra).
33. On the contrary Lion Engineering (supra) specifically observed in para 9 that
“ It will be open for the respondents to argue that its objection that the Act
stands excluded by the M.P. Madhyastham Adhikaran Adhiniyam, 1983 could
be raised even without a formal pleading, being purely a legal plea. It will
also be open to the appellant to argue to the contrary. We leave the question
to be gone into by the court concerned .” The observations that it will be open
for the respondents therein to argue that such an object could be raised even
without a formal pleading AND that it will be open for the appellants therein
to argue the contrary, clearly shows that the very issue of whether such a plea
can be allowed to be raised or not i.e., issues such as whether it is a purely
legal plea or whether there was any waiver or not etc. were never decided by
this Court in Lion Engineering (supra) and rather was left to be gone into by
the court under Section 34 of the Act, 1996. The aforesaid observations clearly
show, that although such a plea may be raised for the first time in the
proceedings under Section 34 of the Act, 1996, it may still nevertheless be
Special Leave Petition (C) No. 9740 of 2022 Page 56 of 64
rejected if it is found that such a plea is not purely a question of law or that the
party raising the plea had waived it in terms of Pam Development (supra).
Whereas Gas Authority of India (supra) goes one step ahead of Pam
Development (supra) and lays down that where a party makes out a strong and
good reason for its failure to take a plea of lack of jurisdiction before the
arbitral tribunal, then there would be no deemed waiver of such a plea, and the
same may then be looked into by the courts under Section 34 of the Act, 1996.
34. Thus, insofar as the manner in which the question of whether a plea of lack of
jurisdiction being raised for the first time under Section 34 of the Act, 1996
has to be decided, the decision of this Court in Pam Development (supra) and
Gas Authority of India (supra) would be applicable, as Lion Engineering
(supra) only decided the limited issue of whether the bar under Section 16 sub-
section (2) would preclude raising of such a plea i.e., whether such a plea is
maintainable or not, and never decided or laid down when the courts would
entertain such a plea. It is in this aforesaid context that the observations of this
Court in L.G. Chaudhary (II) (supra), more particularly at para 17 that “ 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” assumes significance. What has been conveyed, in so many
words, by this Court in L.G. Chaudhary (II) (supra) is that any failure to raise
Special Leave Petition (C) No. 9740 of 2022 Page 57 of 64
the issue of applicability of the MP Act, 1983 before the arbitral tribunal is not
a strong and good reason in terms of Gas Authority of India (supra) to permit
raising such a plea in the proceedings under Section 34 of the Act, 1996.
35. Thus, what can be discerned from the aforesaid is that although a plea of lack
of jurisdiction, being a question of law, can be raised even for the first time in
the proceedings under Section 34 as held in Lion Engineering (supra), yet
such a plea ought not to be allowed to be raised as it is deemed to have been
waived in view of Section 4 of the Act, 1996 as per Pam Development (supra),
unless the party makes out a strong and good reason for its failure to take such
a plea before the arbitral tribunal as per Gas Authority of India (supra), and
as per the dictum of L.G. Chaudhary (II) (supra) any failure to raise the issue
of applicability of the MP Act, 1983 before the arbitral tribunal is not a strong
and good reason to permit raising such a plea in the proceedings under Section
34 of the Act, 1996.
D. CONCLUSION
36. What emerges from the foregoing is that although Lion Engineering (supra)
affirms that a plea of lack of jurisdiction, being a question of law, may be
raised for the first time under Section 34 of the Act, 1996, yet such a plea is
nevertheless subject to the waiver as held in Pam Development (supra).
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Furthermore, as per Gas Authority of India (supra), such a plea may only be
entertained if the party demonstrates a strong and sufficient reason for not
raising it before the arbitral tribunal. However, L.G. Chaudhary (II) (supra)
makes it clear that a failure to raise the issue of applicability of the MP Act,
1983 at the appropriate stage cannot be regarded as a sufficient reason, and
therefore the plea cannot be permitted at the stage of Section 34 proceedings.
37. L.G. Chaudhary (II) (supra) carved out the aforesaid limited exception to the
general rule laid down in Lion Engineering (supra) that a plea of lack of
jurisdiction, being a pure question of law, may be raised for the first time under
Section 34 of the Act, 1996. The failure of L.G. Chaudhary (II) (supra) to
take into consideration the decision of this Court in Lion Engineering (supra)
does not render the former per incuriam , as there exists no direct conflict
between the two. While Lion Engineering (supra) permits a jurisdictional
plea to be raised under Section 34 of the Act, 1996 even if not urged under
Section 16, L.G. Chaudhary (II) (supra) merely clarifies that an arbitral award
will not be annulled solely on that ground, particularly where the issue was
not raised before the tribunal. On the contrary, the aforesaid observations of
L.G. Chaudhary (II) (supra) had been consciously made by this Court keeping
in mind the ratio of Lion Engineering (supra), even though the latter was
never explicitly referred to. L.G. Chaudhary (II) (supra) cannot be termed to
be per incuriam, as the very factum that the aforesaid observations were made
Special Leave Petition (C) No. 9740 of 2022 Page 59 of 64
by L.G. Chaudhary (II) (supra) in paras 16, 17 and 19 respectively shows that
this Court was well aware of the decision of this Court in Lion Engineering
(supra), and accordingly chose to carve out an exception to the ratio of Lion
Engineering (supra) keeping in mind the cleavage of judicial view that was
prevailing earlier.
38. In view of the above exposition of law, what has been conveyed by this Court
in L.G. Chaudhary (II) (supra) in so many words is that: -
i. Where the arbitration proceedings are still underway, but no statement
of defence has been filed, there it would be open for the parties to raise
an objection of lack of jurisdiction in view of the applicability of MP
Act, 1983. The parties will also be at liberty to approach the High Court
by way of a petition under Article 227 of the Constitution for seeking a
transfer of the arbitration proceedings to the M.P. State Arbitration
Tribunal under the MP Act, 1983.
ii. Where the arbitration proceedings are still underway, but statement of
defence has already been filed i.e., the relevant stage for raising an issue
of jurisdiction is already crossed, there it would not be open for the
parties to raise an objection of lack of jurisdiction in view of the
applicability of MP Act, 1983. Furthermore, in such scenarios since the
arbitration proceedings have already commenced and made substantial
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progress, it would not be appropriate to transfer such proceedings to the
M.P. State Arbitration Tribunal under the MP Act, 1983, and the better
course of action would be to let the arbitration proceedings conclude.
iii. As per L.G. Chaudhary (II) (supra) where the arbitration proceedings
have concluded and an award has been passed, and if no objection to
the jurisdiction in view of the applicability of MP Act, 1983 was taken
at the relevant stage then such an award cannot be annulled only on the
ground of lack of jurisdiction.
iv. Any award passed by an arbitral tribunal under the Act, 1996, where
otherwise the MP Act, 1983 was applicable, such an award may be
challenged or assailed in terms of Section 34 and thereafter Section 37
of the Act, 1996 and other relevant provisions thereunder.
v. Any award passed by an arbitral tribunal under the Act, 1996, where
otherwise the MP Act, 1983 was applicable, such an award must be
executed in terms of the MP Act, 1983 and the relevant provisions
thereunder.
vi. Where the objection based on applicability of the MP Act, 1983 had
been raised in the written statement or statement of defence, but the
parties never took steps towards challenging the jurisdiction of the
arbitral tribunal under Section 16 of the Act, 1996 or where such plea
of jurisdiction was turned down in view of the position of law that was
prevailing prior to L.G. Chaudhary (II) (supra) i.e., such challenge to
Special Leave Petition (C) No. 9740 of 2022 Page 61 of 64
the jurisdiction was decided prior to the date of pronouncement of L.G.
Chaudhary (II) (supra), then even in such cases, as per the decision of
this Court in Modern Builders (supra), the award should not be
disturbed or set-aside only on the ground of lack of jurisdiction.
39. In the present case at hand, we take note of the following circumstances
emerging from the facts on record: -
a. It is an admitted fact that at the time of constitution of the arbitral tribunal,
the respondent never objected to the invocation of arbitration under the
Act, 1996 and both the parties proceeded to nominated their respective co-
arbitrators.
b. On the date of invocation of the Act, 1996, and commencement of
arbitration proceedings, as well as of the date when the arbitration
proceeding concluded and the award in question passed, the erstwhile
decision of this Court in VA Tech (supra) held the field.
c. The respondent herein never raised any objection to the arbitral tribunal’s
lack of jurisdiction during the arbitration proceedings either in its statement
of defence or by way of an application under Section 16 of the Act, 1996.
d. Even when the award was challenged by the respondents, the initial
petition filed by them under Section 34 of the Act, 1996 also did not contain
any objection as regards the lack of jurisdiction of the arbitral tribunal.
Special Leave Petition (C) No. 9740 of 2022 Page 62 of 64
e. The ground of lack of jurisdiction was introduced by the respondents
herein only after the decision of L.G. Chaudhary (II) (supra) by way of an
application for amending the grounds of its petition under Section 34 of the
Act, 1996, i.e., after the award had been passed.
40. Thus, the present case is squarely covered by the decision of this Court in L.G.
Chaudhary (II) (supra), more particularly the observations made in paras 6 to
9 thereunder, and as such once the award had been passed and no objection as
to the jurisdiction of the arbitral tribunal had been taken at the relevant stage,
then the award could not have been annulled by the High Court only on the
ground of lack of jurisdiction.
41. For all the foregoing reasons, we have reached the conclusion that the High
Court committed an egregious error in passing the impugned judgment. We
are left with no other option but to set aside the impugned judgment and order
passed by the High Court, and restore the proceedings in Arbitration Case No.
th
48 of 2011 to the court of Commercial Court and 19 Upper District Judge,
Bhopal (M.P.), for deciding all other issues on merit that may have been raised
by the respondent in its petition under Section 34 of the Act, 1996. We
accordingly pass such order. Thus, the appeal is disposed of in the above
terms.
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42. Pending application(s) if any, also stand disposed of.
43. We direct the Registry to circulate a copy of this judgment to all High Courts.
.......................................................... J.
(J.B. Pardiwala)
.......................................................... J.
(R. Mahadevan)
New Delhi;
th
15 May, 2025.
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