Institute of Legal and Management Studies

The Supreme Court on May 15 reiterated that arbitral awards made under the Arbitration and Conciliation Act, 1996, cannot be set aside merely because the disputes should have been adjudicated under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (“MP Act”), and no jurisdictional objections were raised at the proper stage of the proceedings.

The Court held that any challenge to the arbitral tribunal's jurisdiction over disputes arising under the MP Act must be raised before the tribunal itself. If a party fails to do so, it may still invoke Section 34 of the Arbitration and Conciliation Act to raise a jurisdictional objection after the award is issued, but the award cannot be set aside solely on that ground, the court clarified.

“Once an arbitral award is 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 only on the ground of lack of jurisdiction.”, the court observed.

The aforesaid observation was made by a bench of Justices JB Pardiwala and R Mahadevan while hearing the case where the Respondent- MP Road Development Corporation (“MPRDC”) had initially participated in arbitration proceedings under the 1996 Act without raising any objection as to jurisdiction. However, after the award was passed against it, MPRDC challenged the award under Section 34 of the 1996 Act, contending that the tribunal lacked jurisdiction and that the dispute should have been referred under the MP Act, 1983.

The High Court accepted this argument and set aside the award purely on jurisdictional grounds, prompting the Appellant-contractor to approach the Supreme Court.

Setting aside the High Court's decision, the judgment authored by Justice Pardiwala stated that arbitral awards rendered under the 1996 Act cannot be set aside solely for lack of jurisdiction if the objecting party failed to raise the issue at the relevant time particularly before the arbitral tribunal under Section 16 of the 1996 Act.

Relying on the dictum of M.P. Rural Road Development Authority v. L.G. Chaudhary (II), (2018) 10 SCC 826 the Court emphasized that even if the MP Act, 1983 was the correct governing law, awards already passed under the 1996 Act should not be set aside purely on jurisdictional grounds if no objection was raised earlier.

Since the respondent-MPRDC did not raise jurisdictional objections before the arbitral tribunal or initially in its Section 34 petition, the award could not be annulled solely on jurisdictional grounds.

Given the above exposition of law, the Court, relying upon L.G. Chaudhary (II)'s case, stated 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 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 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.”

In terms of the aforesaid, the appeal was allowed.

Case Title: M/S GAYATRI PROJECT LIMITED VERSUS MADHYA PRADESH ROAD DEVELOPMENT CORPORATION LIMITED

Click here to read/download the judgment

Appearance:

For Petitioner(s) Mr. Kaushik Laik, AOR Mr. Ashay Kaushik, Adv. Mr. Shashank Tiwari, Adv.

For Respondent(s) Mr. Saurabh Mishra, Sr. Adv. Mr. Harmeet Singh Ruprah, AOR Mr. Kanishk Sharma, Adv. Mr. Paras Bajpai, Adv.