Unilateral appointment of an arbitrator without a written agreement is a nullity and participation does not confer jurisdiction.

In March 1994, the Ambernath Municipal Council issued a tender for octroi collection with a reserve price of Rs. 6,74,00,000/-

The Petitioner was declared successful with a bid of Rs. 6,75,00,000/- and executed a contract on March 30, 1994

Post-execution, the Petitioner sought a reduction in the reserve price, which the Council rejected

After withdrawing a Writ Petition with liberty to pursue appropriate proceedings, the Petitioner requested the Maharashtra State Government to appoint an arbitrator

Invoking Section 143-A(3) of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965, the State unilaterally appointed the Commissioner, Konkan Division, as an Arbitrator

The Arbitrator, within 42 days, issued an award reducing the reserve price to Rs. 6,20,89,843/-

The Civil Court made the award a rule of the Court, but the High Court of Bombay set aside the award, finding no valid arbitration agreement

The Petitioner challenged this before the Supreme Court.

The Court applied Section 2(a) of the Arbitration Act, 1940, which defines an arbitration agreement as a written agreement to submit differences to arbitration, requiring consensus ad idem or mutuality

It interpreted Section 143-A(3) of the Maharashtra Municipal Councils Act, 1965, as a provision enabling the State to issue policy directions regarding octroi regulation, which does not encompass the power to appoint arbitrators

the Court applied the principle of coram non judice, holding that where there is a total lack of inherent jurisdiction due to the absence of an arbitration agreement, participation in proceedings does not operate as a waiver or confer jurisdiction

The Court held that Section 143-A(3) is restricted to regulating the "manner and procedure" of octroi collection and does not grant the State power to "foist" arbitration on parties to a concluded contract

Upon examining Clause 22, the Court determined it was a "departmental dispute-resolution mechanism" within the governmental hierarchy (Collector to Commissioner to State Government) and lacked the essential characteristics of an arbitration agreement

The Court emphasized the absence of mutuality, noting the State acted unilaterally at the Petitioner's request without the Council's concurrence

Regarding the plea of waiver, the Court noted that the Council was under an "Administrator" (a state-appointed officer) during the proceedings and had raised jurisdictional objections at the first opportunity before the Civil Court

Since the arbitrator lacked inherent jurisdiction, the entire proceedings were deemed a nullity

It held that there was no valid arbitration agreement under Section 2(a) of the 1940 Act

The State Government lacked the authority to appoint an arbitrator under the 1965 Act, and the resulting award was non-est and a nullity

The Court concluded that participation in such "perfunctory" proceedings does not confer jurisdiction or create estoppel when the statutory and contractual basis for arbitration is entirely absent