Back
SUPREME COURT OF INDIA
Sanjay Kishan Kaul, M.M. Sundresh, JJ.
M/s Sweta Construction – Appellant
Versus
Chhattisgarh State Power Generation Company Limited – Respondent
Civil Appeal No. 3736 of 2020
Decided On : 25-08-2022
Arbitration - Construction Contract - Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983 - [CONSTRUCTION CONTRACT] - [Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983] - The court discussed the jurisdiction of the Arbitrator in making the award and the applicability of the Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983. The court emphasized the importance of consent in arbitration proceedings and the need to consider the merits of the controversy dehors the issue of jurisdiction in accordance with the principles under Section 34 of the 1996 Act.
Fact of the Case:
The appellant, a partnership firm engaged in construction, entered into a contract with the respondent power generation company. Disputes arose during the execution of the contract, leading to termination by the respondent. The appellant invoked the arbitration clause, and the Arbitrator awarded a sum in favor of the appellant. The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, alleging lack of jurisdiction of the Arbitrator.
Finding of the Court:
The court set aside the judgment of the Commercial Court and the Division Bench, remitting the matter to the Commercial Court to be determined on the merits of the controversy, disregarding the issue of jurisdiction.
Issues: The main issue was whether the Arbitrator had jurisdiction to make the award, and whether the respondent's conduct in the arbitration proceedings should be considered.
Ratio Decidendi: The court emphasized the importance of consent in arbitration proceedings and the need to consider the merits of the controversy dehors the issue of jurisdiction in accordance with the principles under Section 34 of the 1996 Act.
Final Decision: The appeal was allowed, and the matter was remitted to the Commercial Court to be determined on the merits of the controversy, disregarding the issue of jurisdiction. The court refrained from imposing commercial costs due to the peculiar facts of the case.
Key Points: - The respondent's conduct in accepting arbitration and selecting an arbitrator bars later jurisdictional challenge (!) (!) . - Courts must consider the merits of the controversy, not just jurisdiction, under Section 34 of the Act (!) (!) . - Consent is fundamental; arbitration proceedings initiated by consent must be honored (!) (!) . - Awards already made are not automatically annulled for jurisdictional objections not raised timely (!) (!) . - The judiciary should avoid technical delays and promote expeditious resolution of commercial disputes (!) (!) .
ORDER
1. The appellant is the partnership firm stated to be inter alia engaged in business of construction of residential and commercial buildings. A contract was executed on 13.05.2010 between the parties for construction of 36 Unit 'D' type staff quarters including, internal water supply, sanitation, electrification and construction of road culverts and drain for all type of staff quarters at Janjgir, Champa for the benefit of the respondent power generation company. The total value of the contract was Rs.05,90,04,326/- and the stipulated time period for completion of work was fifteen months. Thus, the contract period was to end on 24.08.2011.
2. It is the say of the appellant that during the execution of work there occurred hindrances of several varying natures with the result there was no desired progress in execution of the works. The appellant thus sought extension of time to complete the works which was granted upto 31.07.2012. In fact, the work continued even after that time period expired. However, on 11.04.2013, the respondent terminated/ closed the contract for a total amount of Rs.02,74,50,407/- and assigned it to another agency. The aforesaid, as per the appellant was done wrongfully and the last running bill was raised by the appellant on 22.08.2013.
3. It appears that endeavours to settle the differences between the parties were not fulfilled as it is almost after 21/2 years that the appellant invoked the arbitration clause 27 of General Conditions of Contract (GCC) and requested the respondent to appoint an Arbitrator for resolution of disputes between the parties on 12.02.2016. This was acknowledged by the respondent who intimated that the request was under progress in terms of letter dated 11.03.2016. It was finally on 06.04.2016 that the respondent intimated a panel of two Arbitrators to the appellant and requested the appellant to give a consent to one of the Arbitrators. After some communication about the qualifications of the Arbitrators, the appellant consented to the appointment of one S.M. Khare, former General Manager (Project; Engineering-Civil), NTPC Limited, Delhi as the sole Arbitrator.
4. There were certain other communications also exchanged about the fee to be paid, the venue of the proceedings etc, but which are not germane in the present controversy.
5. The appellant preferred a claim petition and there was no counter claim filed. The reply to the claim petition was filed and fast track arbitration proceedings were adopted whereby documents were taken on record as agreed upon and finally the learned Arbitrator passed an award in favour of the appellant on 09.06.2017 awarding a sum of Rs. 02,65,87,583/-, inclusive of interest upto the date of the award to be paid within sixty days of the publication of the award, failing which simple interest @ 13.85% per annum would accrue. Once again it is not necessary for us to look into the merits of the award in the present proceedings.
6. The respondent assailed the arbitral award by preferring a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, 'the 1996 Act') on 29.08.2017. Apart from the merits of the award, it was alleged that the sole Arbitrator had no jurisdiction to adjudicate the disputes inter se the parties on account of the existence of the Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983 (for short, 'the Adhiniyam') and that the appointment process for the Arbitrator had gone through by the respondent under a misconception/misconceived legal opinion. This petition was contested by the appellant. However, the Commercial Court, Atal Nagar, Naya Raipur accepted this plea and set aside the award vide judgment dated 31.08.2018 solely on the ground of the Arbitrator having no jurisdiction.
7. The appeal preferred by the appellant under Section 37 of the 1996 Act inter alia raised the plea that the respondent was barred from taking the plea in respect of the jurisdiction in view of the own conduct of the respondent. Ho
The importance of consent in arbitration proceedings and the need to consider the merits of the controversy dehors the issue of jurisdiction in accordance with the principles under Section 34 of the ....
Jurisdictional objections to arbitration awards must be raised during proceedings, not at execution; failure to do so leads to unenforceable awards.
The main legal point established in the judgment is the jurisdiction of the arbitrator under the Act, 1996, and the applicability of the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 to the di....
The court's decision highlighted the limited scope of proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, and the grounds that can be raised under this section.
The Arbitration and Conciliation Act, 1996 applies despite the existence of the C.G. Madhyastam Adhikaran Adhiniyam, 1983 due to an arbitration clause in the contract.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
