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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL No.10778   OF 2014   [Arising out of SLP (Civil) No. 16539 of 2010]

M/S MSP INFRASTRUCTURE LTD.                .. APPELLANT(S)

VERSUS

M.P. ROAD DEVL. CORP. LTD.   .. RESPONDENT(S)

JUDGMENT

S. A. BOBDE, J.

  Leave granted.  

2.         The question that has arisen in this appeal is : whether  

a party to an arbitration proceeding may be permitted to raise  

objections under Section 34 of the Arbitration and Conciliation  

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Act, 1996 (for short “the Arbitration Act, 1996”), with regard to  

the jurisdiction of the Arbitral Tribunal (for short “the Tribunal”)  

after the stage of submission of the written statement.    

3.   M/s  M.S.P.  Infrastructure  (Appellant)  and  the  M.P.  

Road  Development  Corporation  (Respondent)  entered  into  a  

contract on 04-04-2002 for the development and upgradation of  

the Raisen-Rahatgarh road (a stretch of about 100 Kms.) in the  

State of Madhya Pradesh.  

4.    Upon  a  dispute  arising  between  the  parties  in  

respect  of  the  work  carried  out  by  the  Appellant,  the  

Respondent  Corporation  terminated  the  said  contract  and  

encashed the bank-guarantee. Thereafter, the Appellant filed a  

Civil-Suit being C.S. No. 63 of 2003 before the Calcutta High  

Court challenging the termination of the Agreement as well as  

the encashment.  

5. The Calcutta High Court disposed of the suit on 22-

05-2003  by  recording  “Terms  of  Settlement”  between  the  

parties,  whereby  it  was  decreed  that  the  dispute  would  be  

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referred  to  arbitration  in  terms  of  the  contract  dated  04-04-

2002 within a period of 30 days, under the provisions of the  

Arbitration Act, 1996.

6. The Tribunal made an award on 27-11-2006. By the  

said  award,  the  Tribunal  partly  allowed  the  claims  of  the  

Appellant and accordingly awarded a sum of approximately Rs.  

6.90 crores  as  well  as  the  release of  Fixed Deposit  Receipts  

which had been deposited as security with the Respondent.  

7. Aggrieved  by  the  award  dated  27-11-2006,  the  

Respondent filed a petition on 09-01-2007 for setting aside the  

award  under  Section  34  of  the  Arbitration  Act,  1996.  The  

Respondent  assailed  the  award  as  being  in  contravention  of  

clause (b) of sub-section (2) of Section 34 of the Arbitration Act,  

1996.

8. Subsequently,  on  28-02-2009  the  Respondent  

moved an application to amend the original  petition under  

Section  34  to  add  additional  grounds  of  objection.  The  

Additional  District  &  Sessions  Judge,  Bhopal  (Madhya  

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Pradesh)  vide  order  dated  26-08-2009  rejected  the  said  

amendment  application.  The learned Additional  District  &   

Sessions Judge observed that  it  was absolutely  unjust  and  

unfair to file such objections after two years of the filing of  

the petition under Section 34 of  the Arbitration Act,  1996.  

Aggrieved, the Respondent preferred a Petition under Article  

227 before the High Court of Madhya Pradesh at Jabalpur. The  

Madhya Pradesh High Court without going into the tenability  

of the amendment application at the stage at which it was  

moved, i.e., beyond the time permitted by Section 16 of the  

Arbitration  Act,  1996,  simply  allowed  the  amendment  by  

observing that they are not deciding the merits of the case  

and  that  they  were  simply  considering  the  amendment  

application.

9. On  18-02-2010,  the  High  Court  allowed  the  

Respondent’s petition and set aside the order of the District  

Court, thus allowing the amendment application.  

10. Aggrieved  by  the  allowing  of  the  amendment  

application, the Appellant has moved this Court.  We must at  

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once notice that the main challenge to the order allowing the  

amendment  is  that  it  allows  the  Respondent  to  raise  an  

objection  to  jurisdiction  contrary  to  Section  16  of  the  

Arbitration  Act,  1996,  which  provides  that  an  objection  to  

jurisdiction shall  not be raised later than the submission of  

the statement of defence. The grounds allowed to be raised  

by  the  order  allowing  the  amendment  application  are  as  

follows:

“I-A That the Indian Council of Arbitration, New  Delhi  had  no  jurisdiction  to  appoint  any  Arbitral   Tribunal of private persons to entertain and decide  the dispute between the parties as it related to a   works contract between a contractor and a/Govt.   Undertaking.

I-B That the dispute being a dispute between a   contractor and a Govt. Undertaking arising out of a   works  contract  of  more  than  Rs.50,000/-  the   Arbitration Tribunal Constituted by the State Govt.   of M.P. had the exclusive jurisdiction to decide the   said  dispute  on being submitted to  it  under  sub   section 1 of,  Section 7 of  the M.P.  Madhyastham  Adhikaran  Adhiniyam,  1983  and  none  else.   As   

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such, the impugned award passed by the Arbitral   Tribunal  constituted-by  the  Indian  Council  of   Arbitration,  New  Delhi  having  no  jurisdiction  to   entertain and/or decide the dispute, the impugned   award is a total nullity and non-est in the eye of   law.”

11. According to the Appellant, the Tribunal under the  

Arbitration Act, 1996 was fully empowered to enter into and  

decide  the  dispute  submitted  to  it,  since  the  dispute  was  

referred in  pursuance of an arbitration clause contained in  

the Concession Agreement, which reads as follows:

“39.1   Any dispute,  which is  not  resolved  amicably as provided in  Clause 39.1 and 39.2   shall  be  finally  decided  by  reference  to  arbitration by a Board of Arbitrators appointed   as  per  the  provision  of  the  Arbitration  and  Conciliation  Act,  1996  and  any  subsequent   amendment thereto.  Such Arbitration shall  be  held in accordance with the Rules of Arbitration   of the Indian Council of Arbitration and shall be   subject to the provisions of the Arbitration and   Conciliation  Act,  1996  and  as  amended  from  time to time thereafter.”

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12. The Appellant further contends that the aforesaid  

clause covers  any  dispute  which is  not  resolved amicably  

and is  intended to cover the present dispute which arises  

under the contract formed and concluded by the agreement  

which contains this very arbitration clause.  The Appellant  

further  contends that  this  agreement was entered into by  

the  parties  in  the  year  2002,  being  fully  aware  of  the  

existence of  the Madhya Pradesh Madhyastham Adhikaran  

Adhiniyam, 1983 (for short “the M.P. Act of 1983”).  Not only  

this,  the  parties  reiterated  this  agreement  before  the  

Calcutta  High  Court  when  they  specifically  agreed  vide  

Clause  ‘C’  of  the  consent  terms  that  if  the  Appointing  

Authority fails to appoint and constitute the Tribunal in terms  

of  the  Concession  Agreement  dated  04-04-2002  within  a  

period of 30 days, the parties shall be at liberty to apply to  

the  Madhya  Pradesh  High  Court  for  appointment  and  

constitution  of  the  Tribunal  under  the  provisions  of  the  

Arbitration Act, 1996.  Thus,  on two occasions, the parties  

asserted  and  consented  that  the  dispute  between  them  

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would be resolved by Arbitration under the provisions of the  

Arbitration Act, 1996. Therefore, according to the Appellant,  

there is no merit whatsoever in the ground introduced by the  

amendment  application.   Even  otherwise,  the  Appellant  

contended that the provisions of the Arbitration Act, 1996,  

being a Parliamentary Statute would have precedence over  

the  M.P.  Act  of  1983,  which  is  a  State  Act  on  the  same  

subject. Above all, it was contended that the introduction of  

the  ground  that  the  Tribunal  did  not  have  jurisdiction  is  

grossly belated and impermissible in view of Section 16(2) of  

the Arbitration Act, 1996.

13. It  is  clear  from  the  circumstances,  that  in  the  

event it is found that the newly added ground could not have  

been  raised  at  this  stage,  i.e.  the  stage  at  which  it  was  

allowed to be raised, it is not necessary to go into the wider  

question as to which Act will prevail, the Central Act or the  

State Act. Thus, the only question that falls for consideration  

at this stage is whether, having regard to Section 16 of the  

Arbitration  Act,  1996,  the  Respondent  was  entitled  to  

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introduce the ground that the Arbitration Tribunal constituted  

under the M.P. Act of 1983 would take precedence over the  

Tribunal constituted under the Arbitration Act, 1996, that too  

by way of an amendment to the petition under Section 34.  

14. Section 16(2) of the Arbitration Act, 1996 reads as  

follows:

“Section  16(2)  A  plea  that  the  arbitral   tribunal  does  not  have  jurisdiction  shall  be  raised not later  than the submission of  the   statement of defence; however, a party shall   not  be  precluded  from raising  such  a  plea   merely  because  that  he  has  appointed,  or   participated  in  the  appointment  of,  an   arbitrator.”   

On a plain reading, this provision mandates that a plea  

that  the  Tribunal  does  not  have  jurisdiction  shall  not  be  

raised later than the submission of the statement of defence.  

There is  no doubt about either  the meaning of the words  

used in the Section nor the intention.  Simply put, there is a  

prohibition on the party from raising a plea that the Tribunal  

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does not have jurisdiction after the party has submitted its  

statement of defence. The intention is very clear.  So is the  

mischief that it seeks to prevent.  This provision disables a  

party from petitioning an Tribunal to challenge its jurisdiction  

belatedly,  having  submitted  to  the  jurisdiction  of  the  

Tribunal, filed the statement of defence, led evidence, made  

arguments  and  ultimately  challenged  the  award  under  

Section 34 of the Arbitration Act, 1996.  This is exactly what  

has been done by the Respondent Corporation.  They did not  

raise the question of jurisdiction at any stage.  They did not  

raise it in their statement of defence; they did not raise it at  

any time before the Tribunal; they suffered the award; they  

preferred a petition under Section 34 and after two years  

raised  the  question  of  jurisdiction  of  the  Tribunal.   In  our  

view,  the  mandate  of  Section  34  clearly  prohibits  such  a  

cause.   A  party  is  bound,  by  virtue  of  sub-section  (2)  of  

Section  16,  to  raise  any  objection  it  may  have  to  the  

jurisdiction  of  the  Tribunal  before  or  at  the  time  of  

submission  of  its  statement  of  defence,  and  at  any  time  

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thereafter  it  is  expressly  prohibited.   Suddenly,  it  cannot  

raise the question after it has submitted to the jurisdiction of  

the Tribunal and invited an unfavourable award. It would be  

quite  undesirable  to  allow  arbitrations  to  proceed  in  the  

same manner as civil suits with all the well-known drawbacks  

of delay and endless objections even after the passing of a  

decree.

15. Shri  Divan,  the  learned  senior  counsel  for  the  

Respondent vehemently submitted that  a party is  entitled  

under the law to raise an objection at any stage as to the  

absence  of  jurisdiction  of  the  Court  which  decided  the  

matter, since the order of such a Court is a nullity.  It is not  

necessary to refer to the long line of cases in this regard  

since, that is the law.  But, it must be remembered that this  

position  of  law  has  been  well  settled  in  relation  to  civil  

disputes in Courts and not in relation to arbitrations under  

the  Arbitration  Act,  1996.   Parliament  has  the  undoubted  

power to enact a special rule of law to deal with arbitrations  

and in fact, has done so. Parliament, in its wisdom, must be  

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deemed to have had knowledge of the entire existing law on  

the subject and if it chose to enact a provision contrary to  

the  general  law  on  the  subject,  its  wisdom  cannot  be  

doubted.  In the circumstances, we reject the submission on  

behalf of the Respondent.

16. It was next contended on behalf of the Respondent  

by Shri  Divan, that Section 16 undoubtedly empowers the  

Tribunal to rule on its own jurisdiction and any objections to  

it  must  be  raised  not  later  than  the  submission  of  the  

statement  of  defence.  However,  according  to  the  learned  

senior  counsel,  objections  to  the  jurisdiction  of  a  Tribunal  

may be of several kinds as is well-known, and Section 16  

does  not  cover  them  all.   It  was  further  contended  that  

where the objection was of such a nature that it would go to  

the  competence  of  the  Arbitral  Tribunal  to  deal  with  the  

subject  matter  of  arbitration  itself  and  the  consequence  

would be the nullity  of the award,  such objection may be  

raised even at the hearing of the petition under Section 34 of  

the Act.   In  support,  the  learned senior  counsel  relied on  

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clause (b) of sub-section (2) of Section 34 which reads as  

follows:-   

“34(2) An arbitral award may be set aside by the  Court only if –

(a) ……….. (b) the Court finds that –

(i) the subject-matter of the dispute is not   capable  of  settlement  by  arbitration   under  the  law  for  the  time  being  in   force, or

(ii) the arbitral award is in conflict with the   public policy of India.

It is not possible to accept this submission. In the first place,  

there is nothing to warrant the inference that all objections  

to  the  jurisdiction  of  the  Tribunal  cannot  be  raised  under  

Section 16 and that the Tribunal does not have power to rule  

on its own jurisdiction. Secondly, Parliament has employed a  

different  phraseology  in  Clause  (b)  of  Section  34.   That  

phraseology  is  “the  subject  matter  of  the  dispute  is  not  

capable of settlement by arbitration.” This phrase does not  

necessarily refer to an objection to ‘jurisdiction’ as the term  

is  well  known.   In  fact,  it  refers  to  a  situation where the  

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dispute  referred  for  arbitration,  by  reason  of  its  subject  

matter  is  not  capable  of  settlement  by  arbitration  at  all.  

Examples  of  such  cases  have  been  referred  to  by  the  

Supreme Court in the case of  Booz Allen and Hamilton  

Inc. Vs. SBI Home Finance Limited and Ors.1 This Court  

observed as follows:-

“36. The  well-recognised  examples  of  non- arbitrable  disputes  are:  (i)  disputes  relating  to   rights and liabilities which give rise to or arise out   of  criminal  offences;  (ii)  matrimonial  disputes   relating to divorce, judicial separation, restitution   of conjugal rights, child custody; (iii) guardianship   matters;  (iv)  insolvency and winding-up matters;   (v)  testamentary  matters  (grants  of  probate,   letters  of  administration  and  succession   certificate);  and (vi)  eviction or tenancy matters   governed  by special  statutes  where the tenant   enjoys  statutory  protection  against  eviction  and  only the specified courts are conferred jurisdiction   to grant eviction or decide the disputes.”

1

(2011) 5 SCC 532

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The  scheme  of  the  Act  is  thus  clear.   All  objections  to  

jurisdiction of whatever nature must be taken at the stage of  

the submission of the statement of defence, and must be  

dealt  with  under  Section  16  of  the  Arbitration  Act,  1996.  

However,  if  one of  the  parties  seeks  to  contend that  the  

subject matter of the dispute is such as cannot be dealt with  

by arbitration, it may be dealt under Section 34 by the Court.  

17.  It  was  also  contended  by  Shri  Divan,  that  the  

newly added ground that the Tribunal under the Arbitration  

Act,  1996  had  no  jurisdiction  to  decide  the  dispute  in  

question because the jurisdiction lay with the Tribunal under  

the M.P. Act of 1983, was a question which can be agitated  

under  sub-clause  (ii)  of  clause  (b)  of  sub-section  (2)  of  

Section  34  of  the  Arbitration  Act,  1996.   This  provision  

enables the court to set-aside an award which is in conflict  

with the public policy of India.   Therefore,  it  is  contended  

that the amendment had been rightly allowed and it cannot  

be  said  that  what  was  raised  was  only  a  question  which  

pertained  to  jurisdiction  and  ought  to  have  been  raised  

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exclusively under Section 16 of the Arbitration Act, 1996, but  

in fact was a question which could also have been raised  

under Section 34 before the Court, as has been done by the  

Respondent.  This  submission  must  be  rejected.  The  

contention that an award is in conflict with the public policy  

of India cannot be equated with the contention that Tribunal  

under  the  Central  Act  does  not  have  jurisdiction  and  the  

Tribunal under the State Act, has jurisdiction to decide upon  

the dispute.  Furthermore, it was stated that this contention  

might  have  been  raised  under  the  head  that  the  Arbitral  

Award is in conflict with the public policy of India.  In other  

words, it was submitted that it is the public policy of India  

that arbitrations should be held under the appropriate law. It  

was contended that unless the arbitration was held under  

the State Law i.e. the M.P. Act that it would be a violation of  

the public  policy of  India.  This contention is  misconceived  

since the intention of providing that the award should not be  

in conflict with the public policy of India is referable to the  

public policy of India as a whole i.e. the policy of the Union of  

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India  and  not  merely  the  policy  of  an  individual  state.  

Though, it cannot be said that the upholding of a state law  

would not be part of the public policy of India, much depends  

on the context.  Where the question arises out of a conflict  

between an action under a State Law and an action under a  

Central Law, the term public policy of India must necessarily  

understood as being referable to the policy of the Union.  It  

is well known, vide Article 1 of the Constitution, the name  

‘India’ is the name of the Union of States and its territories  

include those of the States.   

18. We  have  thus  no  hesitation  in  coming  to  the  

conclusion that the amendment application raised a ground  

which  was  contrary  to  law  and  ought  not  to  have  been  

allowed  by  the  High  Court.  We  accordingly  set  aside  the  

judgment and order of the High Court.   There shall be no  

order as to costs.  

…….................………..J.  [J. CHELAMESWAR]

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       ..........………………………J.                [S.A. BOBDE]

New Delhi, December 5th, 2014

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