Case Note & Summary
The appellant, M/s. Modern Builders, was appointed as a contractor by the State of Madhya Pradesh to construct a minor bridge. The contract was rescinded by the Executive Engineer on 9 November 2001. The work order contained an arbitration clause (Clause 29). The appellant requested constitution of an Arbitral Board, which was rejected. The appellant then applied to the Madhya Pradesh Arbitration Tribunal under Section 7 of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983. On 19 April 2010, the Arbitration Tribunal held that since there was an arbitration clause, the Arbitration and Conciliation Act, 1996 would apply. Consequently, the appellant filed a petition under Section 11(6) of the 1996 Act before the Madhya Pradesh High Court, which allowed the petition and appointed a retired District Judge as arbitrator. The arbitrator made an award on 25 April 2014. The respondents challenged the award under Section 34 of the 1996 Act before the District Judge, who dismissed the petition. The respondents then appealed under Section 37 before the High Court. The High Court set aside the award solely on the ground that, as held by the Supreme Court in Madhya Pradesh Rural Road Development Authority v. L.G. Chaudhary Engineers and Contractors (2018) 10 SCC 826, the 1983 Act applied. The appellant appealed to the Supreme Court. The Supreme Court noted that the respondents did not object to the applicability of the 1983 Act when the High Court appointed the arbitrator under Section 11(6), nor did they raise the issue under Section 16(1) before the arbitrator. The objection was only raised in the written statement. The Supreme Court held that in the facts of the case, it would be unjust to set aside the award on that ground, especially since the appellant had initially invoked the 1983 Act. The Court restored the Section 37 appeal to the High Court for hearing on merits, with a direction that the award shall not be set aside on the ground of applicability of the 1983 Act. The Court also directed that if the appellant had withdrawn the award amount, it must be deposited with the High Court within two months and invested in a fixed deposit until disposal of the appeal.
Headnote
A) Arbitration Law - Jurisdiction of Arbitrator - Applicability of State Act - Section 11(6), Section 34, Section 37, Section 16(1) of Arbitration and Conciliation Act, 1996; Section 7 of Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 - The appellant contractor invoked the 1983 Act after contract rescission; the Arbitration Tribunal held the 1996 Act applied due to arbitration clause. The High Court appointed an arbitrator under Section 11(6) without objection from the State on jurisdiction. The award was made in 2014. In 2018, this Court in Madhya Pradesh Rural Road Development Authority held the 1983 Act applies despite arbitration clause. The High Court set aside the award solely on that ground. The Supreme Court held that since the State did not object at the Section 11(6) stage and the jurisdictional objection was not raised under Section 16(1), it would be unjust to annul the award. The appeal under Section 37 was restored for hearing on merits, with a direction that the award shall not be set aside on the ground of applicability of the 1983 Act. (Paras 5-8) B) Constitutional Law - Article 142 - Complete Justice - The Supreme Court exercised its power under Article 142 to restore the appeal and direct that the award not be set aside on the jurisdictional ground, to ensure complete justice in the facts of the case. (Para 7)
Issue of Consideration
Whether the High Court was justified in setting aside an arbitral award solely on the ground that the dispute ought to have been referred under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983, despite the appellant having initially invoked the 1983 Act and the respondents not raising the jurisdictional objection at the appropriate stage.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned judgment and order of the High Court, and restored Arbitration Appeal No.45 of 2019 to the file of the High Court of Madhya Pradesh, Principal Seat at Jabalpur, for hearing on merits. The High Court was directed not to set aside the award on the ground of applicability of the 1983 Act. The appellant was directed to deposit any amount withdrawn from the award with the High Court within two months, to be invested in a fixed deposit until disposal of the appeal.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 11(6)
- Section 34
- Section 37
- Section 16(1)
- Madhya Pradesh Madhyastham Adhikaran Adhiniyam
- 1983
- Section 7
- Jurisdiction of Arbitrator
- Applicability of State Act vis-à-vis Arbitration Act
- Waiver of jurisdictional objection
- Article 142 of Constitution of India
