Failure to decide whether parties validly executed the agreement vitiates the arbitral award for jurisdictional reasons.

The petitioner-society invited tenders for construction work, which was awarded to the respondent through a Letter of Award dated 16 December 2020, signed by the Society’s President and Secretary.

The agreement and tender document contained arbitration clauses.

The respondent invoked arbitration, and the arbitrator was appointed by the High Court on 26 April 2022.

Before the arbitrator, the Society challenged the validity of the agreement and the tribunal’s jurisdiction, alleging, inter alia, that the contract was unregistered, lacked General Body approval, had been executed without authority, and was collusive.

The arbitrator held that the award of work and the agreement, insofar as they concerned additions/extensions to flats, violated Rule 105 of the Delhi Cooperative Societies Rules, 2007 and were null and void.

Nevertheless, relying on Sections 65 and 70 of the Indian Contract Act, 1872, the arbitrator partly allowed the respondent’s claims and awarded ₹97,71,174 with interest at 10% per annum.

The respondent did not challenge the award.

The Society challenged it under Section 34 of the Arbitration and Conciliation Act, 1996.

1. Whether the arbitrator could adjudicate and partly allow the respondent’s claims after holding the underlying agreement to be null and void.

2. Whether the arbitrator failed to determine the jurisdictional objection that the agreement was not executed by an authorised person and was not in fact an agreement between the parties, thereby violating the requirement of a reasoned award under Section 31(3) of the Arbitration and Conciliation Act, 1996.

3. Whether the arbitration clause could independently survive under Section 16 of the Arbitration and Conciliation Act, 1996 despite the agreement being declared void.

Section 31(3) of the Arbitration and Conciliation Act, 1996 requires an arbitral award to contain intelligible and adequate reasons, particularly on issues going to the tribunal’s jurisdiction.

In Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1, the Supreme Court held that the reasons must be intelligible and adequate, although an arbitral award need not resemble a detailed court judgment.

In Som Datt Builders Ltd. v. State of Kerala, (2009) 10 SCC 259, it was held that merely recording submissions or referring to documents is not a substitute for reasons.

Section 16 provides that an arbitration clause is independent of the other contractual terms and that a finding that the contract is null and void does not, by itself, invalidate the arbitration clause.

However, the existence of an agreement between the parties and the authority of the person who executed it are foundational jurisdictional questions.

Sections 65 and 70 of the Indian Contract Act, 1872 may govern restitution or compensation in appropriate cases, but they do not independently confer arbitral jurisdiction.

Violation of these jurisdictional and reasoning requirements may constitute patent illegality warranting interference under Section 34.

The arbitrator found that the contract was void for want of compliance with Rule 105 of the Delhi Cooperative Societies Rules, 2007, but nevertheless proceeded to adjudicate the respondent’s claims under Sections 65 and 70 of the Contract Act.

The High Court held that those provisions could not confer jurisdiction on the arbitrator once the contractual basis of the claims had been declared void.

Although Section 16 permits an arbitration clause to survive the invalidity of the substantive contract, the Society’s specific objection was not merely that the contract was void; it was that the document had not been executed by an authorised person and was not an agreement between the Society and the respondent at all.

That question directly affected whether an arbitration agreement existed and whether Section 16 could be invoked.

Since the arbitrator did not decide this foundational jurisdictional objection or provide reasons on it, the award failed to satisfy Section 31(3) and was vitiated by patent illegality.

The Court found it unnecessary to examine the other issues.

All pending applications were disposed of, and the parties were left at liberty to pursue remedies available in law for any surviving grievance.