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SUPREME COURT OF INDIA
S.A. BOBDE, J. CHELAMESWAR, JJ.
M/S MSP INFRASTRUCTURE LTD. – APPELLANTS
VERSUS
M.P. ROAD DEVL. CORP. LTD. – RESPONDENTS
CIVIL APPEAL No.10778 OF 2014 [Arising out of SLP (Civil) No. 16539 of 2010]
Decided On : 5-12-2014
(b) Arbitration and Conciliation Act, 1996 – Section 16(2) and 34 – Civil disputes in courts and arbitration before Tribunal – Distinction – Objection as to jurisdiction of a court can be raised at any time – Arbitrations cannot be allowed 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 – Prohibition u/s 16(2) made consciously and knowingly and wisdom of Parliament cannot be doubted. (Para 14, 15)
(c) Arbitration and Conciliation Act, 1996 – Section 16(2) and 34 – Does not restrict nature of objection on jurisdiction – All objections to jurisdiction can be raised before Tribunal which has power to rule thereon – Secondly ‘subject matter’ used in section 34(2)(b) does not refer to ‘jurisdiction’. (Para 16)
(2011) 5 SCC 532 – Relied upon
(d) Arbitration Act, 1996 – Section 34 (2)(b)(ii) – Public policy of India – Not the same as question of applicability of Central Act or the State Act – Public policy referable to while of country, i.e., Union of India and not an individual State – Constitution of India – Article 1 – India – Its territories include those of the States. (Para 17)
Facts of the case:
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 in the State of Madhya Pradesh.
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.
The Calcutta High Court decreed that the dispute would be referred to arbitration in terms of the contract within a period of 30 days, under the provisions of the Arbitration Act, 1996.
The Tribunal made an award.
The Respondent filed a petition for setting aside the award as being in contravention of clause (b) of sub-section (2) of Section 34 of the Arbitration Act, 1996.
Subsequently 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 Pradesh) rejected the said amendment application because it was filed after two years of the filing of the petition under Section 34 of the Arbitration Act, 1996.
The Respondent preferred a Petition under Article 227 before the High Court of Madhya Pradesh at Jabalpur. The High Court without going into the tenability of the amendment application at the stage at which it was moved, 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.
Finding of the Court:
The amendment application raised a ground which was contrary to law and ought not to have been allowed by the High Court.
Result: Appeal allowed.
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 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 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 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 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
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