Case Note & Summary
The appeal arises from a judgment of the Madhya Pradesh High Court affirming the setting aside of an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. The appellant, M/S Gayatri Project Limited, executed a works contract with the respondent, Madhya Pradesh Road Development Corporation Limited, on 12.12.2005 for road rehabilitation projects. The contract contained an arbitration clause under Clause 67.4. Disputes arose regarding reimbursement of additional costs due to entry tax on diesel, and the appellant invoked arbitration on 06.08.2010. The Arbitral Tribunal passed a unanimous award on 08.07.2011 in favor of the appellant for Rs. 1,03,55,187 plus interest. The respondent challenged the award under Section 34 before the Commercial Court, Bhopal, which allowed the petition on the ground that the Tribunal lacked jurisdiction under the MP Madhyastham Adhikaran Adhiniyam, 1983. The High Court upheld this decision in appeal under Section 37. The Supreme Court examined whether the MP Act, 1983 applies to contracts with arbitration clauses, relying on its earlier decision in VA Tech Escher Wyass Flovel Limited v. M.P. State Electricity Board, which held that the 1983 Act applies only where there is no arbitration clause. The Court also considered whether a jurisdictional objection can be raised for the first time under Section 34. It held that since the respondent did not raise any objection to jurisdiction before the Arbitral Tribunal, it was barred from doing so under Section 4 of the 1996 Act. The Court allowed the appeal, set aside the High Court's order, and restored the arbitral award.
Headnote
A) Arbitration Law - Jurisdiction of Arbitral Tribunal - Applicability of State Act - Sections 34, 37 of Arbitration and Conciliation Act, 1996 - The issue was whether the MP Madhyastham Adhikaran Adhiniyam, 1983 applies to works contracts containing an arbitration clause - Held that the 1996 Act prevails where an arbitration clause exists, and the 1983 Act applies only where there is no arbitration clause (Paras 4-6). B) Arbitration Law - Challenge to Award - Jurisdictional Objection - Section 34 of Arbitration and Conciliation Act, 1996 - Whether a plea of lack of jurisdiction can be raised for the first time under Section 34 if not raised before the arbitral tribunal - Held that such objection cannot be raised for the first time in Section 34 proceedings as it would be barred by waiver under Section 4 of the 1996 Act (Paras 34-51).
Issue of Consideration
Whether an award under the Arbitration and Conciliation Act, 1996 can be annulled on the ground of lack of jurisdiction under the MP Madhyastham Adhikaran Adhiniyam, 1983 when no such plea was raised before the Arbitral Tribunal
Final Decision
Supreme Court allowed the appeal, set aside the High Court's order dated 07.01.2022 and the Commercial Court's order dated 20.12.2019, and restored the arbitral award dated 08.07.2011
Law Points
- Arbitration and Conciliation Act
- 1996 prevails over state arbitration act where arbitration clause exists
- Jurisdictional objection cannot be raised for first time under Section 34 if not raised before arbitral tribunal
