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REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 8984-8985 OF 2017

M/S LION ENGINEERING CONSULTANTS             APPELLANT(S)

                               VERSUS

STATE OF M.P. & ORS.                        RESPONDENT(S)

O R D E R

1. We have heard learned counsel for the parties.

2. The matter arising out of a dispute in execution of

a works contract was referred to the Arbitrator by the High

Court on 4.09.2008. The Arbitrator made his Award dated

10.07.2010 in favour of the appellant. It was challenged

under Section 34 of the Arbitration and Conciliation Act,

1996  (“the  Act”)  before  the  Seventh  Additional  District

Judge,  Bhopal  by  the  respondent-State  of  M.P.  The

respondent sought to amend its objections after three years

which was rejected by the trial Court. On a petition under

Article 227 of the Constitution of India, the High Court

has allowed the said amendment.

3. Learned counsel for the appellant submitted that the

amendment  could  not  be  allowed  beyond  the  period  of

limitation which affected the vested rights of a party. It

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was  also  submitted  that  the  objection  having  not  been

raised  under  Section  16(2)  of  the  Act  before  the

Arbitrator, could not be raised under Section 34 of the

Act. In support of this submission reliance has been placed

on  MSP  Infrastructure  Ltd.  vs.   Madhya  Pradesh  Road

Development Corporation Ltd. reported in (2015) 13 SCC 713.

4. Learned  Advocate  General  for  the  State  of  M.P.

submitted that the amendment sought is formal. Legal plea

arising on undisputed facts is not precluded by Section

34(2)(b) of the Act. Even if an objection to jurisdiction

is not raised under Section 16 of the Act, the same can be

raised   under  Section  34  of  the  Act.  It  is  not  even

necessary to consider the application for amendment as it

is  a legal plea, on admitted facts, which can be raised in

any case. He thus submits the amendment being unnecessary

is  not  pressed.  Learned  Advocate  General  also  submitted

that observations in M/s MSP Infrastructure Ltd. (supra),

particularly  in  Paragraphs  16  and  17  do  not  laid  down

correct law.

5. We find merit in the contentions raised on behalf of

the State. We proceed on the footing that the amendment

being  beyond  limitation  is  not  to  be  allowed  as  the

amendment is not pressed.

6. We do not see any bar to plea of jurisdiction being

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raised by way of an objection under Section 34 of the Act

even if no such objection was raised under Section 16.

7. We  may  quote  the  observations  from  M/s  MSP

Infrastructure (supra):

“16. 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  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 Booz Allen and Hamilton Inc. V/s. SBI  Home  Finance  Limited  (2011)  5  SCC  532.  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."  

The  scheme  of  the  Act  is  thus  clear.  All

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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  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 India and not merely the policy

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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  be  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.”

8. Both  stages  are  independent.  Observations  in

Paragraphs 16 and 17 in MSP Infrastructure (supra) do not,

in our view, lay  down correct law. We also do not agree

with the observation that the Public policy of India does

not refer to a State law and refers only to an All India

law.

9. In our considered view, the public policy of India

refers  to  law  in  force  in  India  whether  State  law  or

Central law. Accordingly, we overrule the observations to

the contrary in Paragraphs 16 and 17 of the judgment in MSP

Infrastructures Ltd.  (supra).

10. Since  amendment  application  is  not  pressed,  the

appeal is rendered infructuous. The impugned order is set

aside.

11. The matter may now be taken up by the trial court

for consideration of objections under Section 34 of the

Central Act. It will be open for the respondents to argue

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that  its  objection  that  the  Act  stands  excluded  by  the

M.P. Madhyastham Adhikaran Adhiniyam, 1983  could be raised

even without a formal pleading, being purely a legal plea.

It  will also  be open  to the  appellant to  argue to  the

contrary. We leave the question to be gone into by the

concerned court.

The appeals are disposed of accordingly.

…...…................J. (ADARSH KUMAR GOEL)

...….…................J. (ROHINTON FALI NARIMAN)

...….…................J. (UDAY UMESH LALIT)

NEW DELHI, MARCH 22, 2018

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IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

SPECIAL LEAVE PETITION (C) NO. 15059 OF 2011

M/S MMC PROJECTS INDIA PVT. LTD.              PETITIONER(S)

                               VERSUS

GUJARAT STATE ELECTRICITY CORPORATION LTD. & ANR.                               RESPONDENT(S)

O R D E R

It is not disputed that for purposes of decision of

the question arising in the present case the provisions of

Gujarat  Public  Works  Contracts  Disputes  Arbitration

Tribunal Act, 1992 are in pari materia to the provisions of

M.P. Madhyastham Adhikaran Adhiniyam, 1983 which have been

considered  by  this  Court  vide  Order  dated  8.03.2018  in

Civil Appeal No. 974/2012 titled as “Madhya Pradesh Rural

Road Development Authority & Anr.  vs.  M/s L.G. Chaudhary

Engineers and Contractors.”

In view of above, this petition is dismissed.

…...…................J. (ADARSH KUMAR GOEL)

...….…................J. (ROHINTON FALI NARIMAN)

...….…................J. (UDAY UMESH LALIT)

NEW DELHI, MARCH 22, 2018

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REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.3344 OF 2018 (Arising out of SLP (C) No(s). 18212 OF 2017

THE STATE OF BIHAR & ORS.                 Appellant(s)

                               VERSUS

M/S. BRAHMAPUTRA INFRASTRUCTURE LIMITED  Respondent(s)

WITH

CIVIL APPEAL NO.3345 OF 2018 (Arising out of SLP (C) No(s). 21434 OF 2017)

THE STATE OF BIHAR & ORS.                 Appellant(s)

                               VERSUS

M/S. SUPREME BRAHMAPUTRA (JV)  Respondent(s)

O R D E R

(1) Leave granted.  We have heard learned counsel for the

parties.

(2) The State is aggrieved by the appointment of arbitrator

under Section 11(6) of the Arbitration and Conciliation Act,

1996 (the Central Act) on the ground that the said Act is

excluded  by  the  Bihar  Public  Works  Contracts  Arbitration

Tribunal Act, 2008 (Bihar Act 21 of 2008) (the State Act).

(3) To appreciate the plea raised, it is necessary to refer

to the scheme of the State Act as reflected in some of the key

provisions.  Sections 8, 9 and 22 of the State Act are as

follows:

“8. Act  to  be  in  addition  to  Arbitration  & Conciliation  Act,  1996.  -  Notwithstanding anything  contained  in  this  Act,  and  of  the

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provisions  shall  be  in  addition  to  and supplemental to Arbitration & Conciliation Act, 1996 and in case any of the provision contained herein  is  construed  to  be  in  conflict  with Arbitration  Act,  then  the  latter  Act  shall prevail to the extent of conflict.

9. Reference to Tribunal and making of award.-- (1)  Where  any  dispute  arises  between  the parties to the contract, either party shall, irrespective of whether such contract contains an arbitration clause or not refer, within one year from the date on which the dispute has arisen, such dispute in writing to the Tribunal for arbitration in such form and accompanied by such documents or other evidence and by such fees, as may be prescribed.

(2)  On  receipt  of  a  reference  under  sub- section  (10,  the  Tribunal  may,  if  satisfied after such inquiry as it may deem fit to make, that  the  requirements  under  this  Act  in relation to the reference are complied with, admit such reference and where the Tribunal is not so satisfied, it may reject the reference summarily.

(3) Where the Tribunal admits the reference under  sub-section  (2),  it  shall,  after recording  evidence  if  necessary,  and  after perusal  of  the  material  on  record  and  on affording  and  opportunity  to  the  parties  to submit  their  argument,  make  an  award  or  an interim award, giving  its reasons therefor.

(4)  The Tribunal shall use all reasonable dispatch in entering on and proceeding with the reference admitted by it and making the award, and an endeavour shall be made to make an award within four months from the date on which the Tribunal had admitted the reference.

(5)  The  award  including  the  interim  award made  by  the  Tribunal  shall,  subject   to  an order, if any made under Section – 12 or 13, be final  and  binding  on  the  parties  to  the dispute.

(6) An award including an interim award as confirmed or varied by an order, if any, made under Section- 12 or 13 shall be deemed to be a decree within the meaning of section-2 of the

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Code of Civil Procedure, 1908 of the principal Court of original jurisdiction within the local limits whereof the award or the interim award has  been  made  and  shall  be  executed accordingly.

22. Overriding  effect   of  this  Act.- Notwithstanding  any  thing  contained  in  any other  Law,  Rule,  Order,  Scheme,  or  Contract Agreement  entered  into  before  or  after commencement  of  this  Act,  any  dispute  as defined in Section 2(e) of this Act shall be regulated  under  the  provisions  of  this  Act, Rules  and  Regulations  framed  thereunder,  and absence of arbitration clause in any contract agreement shall not have effect excluding any dispute from the purview of this Act.”

(4) It  is  not  in  dispute  that  the  parties  have  executed

agreement dated 22nd June, 2012, providing for appointment of

an  arbitrator  as  per  provisions  of  the  Central  Act.

Relevant portion of Clause 25 of the said Agreement is as

follows:

“The  arbitration  shall  be  conducted  in

accordance with provisions of the Arbitration

and Conciliation Act, 1996 (26 of 1996) or any

statutory modification or re-enactment thereof

and the rules made there under and for the time

being in force shall apply to the arbitration

proceeding under the clause.”

(5) The scheme of Sections 8, 9 and 22 of the State Act shows

that  in  the  absence  of  an  agreement  stipulating  the

applicability of the Central Act, the State Act applies to

works contracts. Since in the present cases, an arbitration

agreement exists and stipulates applicability of the Central

Act, the State Act will not apply.  We, thus, do not find any

ground to interfere with the impugned order.

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(6) The appeals are dismissed. It will, however, be open to

the  appellant-State  to  move  the  High  Court  for  change  of

Arbitrator,  if  a  case  to  this  effect  is  made  out  on  an

objection of neutrality, as submitted by learned counsel for

the State.

(7) Before  parting  with  this  order,  we  consider  it

appropriate  to  deal  with  the  submission  raised  by  learned

counsel  for  the  respondent(s)  that  Section  4(3)(b)  of  the

State Act is patently unconstitutional.  The said section is

as follows:

“Section 4. Terms and conditions of service of

the Chairman and other members of Tribunal.-  

(3) (b) The Chairman and any other member shall hold the office at the pleasure of the Government, provided that; in case of premature termination; they  shall  be  entitled  to  three  months  pay  & allowances in lieu of compensation.”

(8) We are of the view that a provision that the tenure of

the Chairman and other members of the Arbitration Tribunal at

the  pleasure  of  the  Government  is  inconsistent  with  the

constitutional  scheme,  particularly  Article  14  of  the

Constitution of India.  Section 4(1) of the State Act provides

for a three year tenure or till the age of 70 years whichever

is  earlier.   Termination  of  the  said  tenure  cannot  be  at

pleasure   within  the  term  stipulated  as  the  arbitration

tribunal  has  quasi  judicial  functions  to  perform.  Any

termination of the service of such member by a party to the

dispute  would  interfere  directly  with  the  impartiality  and

independence expected from such member. The said provision is,

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thus, manifestly arbitrary and contrary to the Rule of Law.

Accordingly,  we  declare  the  said  provision  to  be

unconstitutional.

..........................J.                 (ADARSH KUMAR GOEL)

..........................J.         (ROHINTON FALI NARIMAN)

..........................J.         (UDAY UMESH LALIT)

New Delhi, March 22, 2018.