Non-reportable IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 1888-1889 OF 2011 [Arising out of SLP [C] No.23767-23768 of 2010]

M/s. A.P.S.Kushwaha (SSI Unit) … Appellant

Vs.

Municipal Corporation, Gwalior and others … Respondents

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted.

2. The  appellant  filed  an  application  under  section  11(6)  of  the  

Arbitration and Conciliation Act, 1996 (‘Act’ for short) before the Madhya  

Pradesh High Court alleging that on execution of an agreement in regard to  

“maintenance  of  water  supply  and  electrical  works  in  different  parts  of  

Gwalior Municipal Corporation area”, a work order was issued to him on  

1.5.2002 by the respondent; that as the bills submitted by the appellant were  

not  paid,  it  filed  a  writ  petition  and  that  petition  was  disposed  of  on  

15.2.2006 with a direction to seek reference to arbitration; that clause 29 of  

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the  General  Rules  and  directions  for  the  Guidance  of  the  contractor  

provided  for  settlement  of  disputes  by  arbitration;  and that  therefore  the  

appellant was filing the application under section 11(6) of the Act requesting  

the Chief Justice to appoint an independent arbitrator to arbitrate upon the  

disputes.  The  designate  of  the  Chief  Justice  by  order  dated  11.5.2007  

allowed the said application and appointed a retired Judge of the High Court  

as arbitrator.  

3. Before  the  Arbitrator,  the  appellant  made  claims  aggregating  to  

Rs.76,64,725 with interest at 18% per annum. The respondents contested the  

claims  contending  that  work  orders  were  issued  only  to  the  extent  of  

Rs.29,72,331 and there were some irregularities in the issue of work orders  

and therefore the appellant was not entitled to payment of any of the bills.  

The arbitrator made an award dated 30.1.2008 directing the respondents to  

pay a sum of Rs.76,64,725 to the appellant with interest at 9% per annum  

from the date of the award till date of payment.  

4. The respondents filed an application under section 34 of the Act for  

setting aside the award. In the said proceedings, the respondents made an  

application raising a preliminary objection that  the sole  arbitrator  had no  

jurisdiction as the dispute had to be decided by arbitration under the Madhya  

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Pradesh  Madhyastham  Adhikaran  Adhiniyam  1983.  The  District  Judge,  

Gwalior  before  whom  the  said  application  was  filed  rejected  the  said  

preliminary objection by order dated 9.2.2009. The review petition filed by  

the respondents seeking review of order dated 9.2.2009 was also dismissed  

by the learned District Judge, Gwalior, on 17.7.2009.  

5. In the meanwhile the appellant also filed a review application seeking  

review of the order dated 11.5.2007 by which the designate of the Chief  

Justice allowed the application under section 11(6) of the Act and appointed  

an arbitrator. The said review petition was dismissed by the High Court on  

8.7.2009.

6. The respondent challenged the orders dated 9.2.2009 and 17.7.2009  

before the High Court in an arbitration appeal. The High Court allowed the  

appeal by order dated 26.11.2009 and set aside the orders dated 9.2.2009 and  

17.7.2009 holding that the arbitral award dated 30.1.2008 passed by the sole  

arbitrator  was without  jurisdiction.  The High Court  held  that  the  dispute  

raised  by  the  appellant  could  only  be  decided  by  the  statutory  arbitral  

tribunal  constituted  under  the  1983  Adhiniyam  and  therefore  the  sole  

arbitrator appointed by the designate of Chief Justice under section 11(6) of  

the  Act  lacked  inherent  jurisdiction  to  decide  the  disputes.  The  review  

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petition  filed  by  the  appellant  contractor  was  dismissed  by  order  dated  

30.4.2010. Feeling aggrieved the appellant has challenged the orders dated  

26.11.2009 and 30.4.2010 of the Madhya Pradesh High Court.  

7. The  only  question  that  arises  for  consideration  in  this  appeal  by  

special  leave  is  whether  there  was  inherent  lack  of  jurisdiction  in  the  

Arbitrator, thereby nullifying the award.  

8. This court, in V.A.Tech Escher Wyass Flovel Ltd. vs. M.P. S.E.Board  

(C.A. No.3746/2005 decided on 14.1.2010) held that the provisions of the  

Act would apply where there was an Arbitration clause and the provisions of  

the 1983 Adhiniyam would apply where there was no Arbitration clause. In  

this case it is not in dispute that the contract between the parties contained an  

arbitration  clause  (clause  29).  The  decision  of  the  High  Court  that  the  

provisions of the 1983 Adhiniyam would apply and sole arbitrator appointed  

by the  designate  of  the  Chief  Justice  lacked inherent  jurisdiction,  cannot  

therefore  be  sustained.  Though  the  said  Arbitration  clause  provided  for  

reference of  disputes to a  three member  Arbitration Board,  the designate  

chose to appoint a sole arbitrator  and that order dated 11.5.2007 attained  

finality.  

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9. In  SBP  &  Co.  v.  Patel  Engineering  Ltd.  [2005  (8)  SCC  618],  a  

constitution  bench  of  this  Court  held  that  once  the  Chief  Justice  or  his  

designate appoints an Arbitrator in an application under section 11 of the  

Act,  after  satisfying himself  that  the  conditions  for  exercise  of  power  to  

appoint an arbitrator are present, the arbitral tribunal could not go behind  

such decision  and rule  on its  own jurisdiction  or  on the  existence  of  an  

arbitration  clause.  Therefore  the  contention  of  the  respondents  that  the  

arbitrator ought to have considered the objection relating to jurisdiction and  

held that he did not have jurisdiction, cannot be accepted.  

10. The appeals are therefore allowed and the impugned order of the High  

Court dated 26.11.2009 is set aside. As a consequence the learned District  

Judge, Gwalior will now proceed with the consideration of the application  

(Misc. Application (Arbitration) No.29/2008) under section 34 of the Act on  

merits in accordance with law.

…………………………..J. (R V Raveendran)

New Delhi; …………………………..J. February 17, 2011. (A K Patnaik)                          

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