SupremeToday Landscape Ad
Back
Next
Judicial Analysis Court Copy Headnote Facts Arguments Court observation
Listen Audio Icon Pause Audio Icon
judgment-img

2025 Supreme(SC) 2063

SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, ATUL S. CHANDURKAR, JJ.
M/s Andhra Pradesh Power Generation Corporation Limited (APGENCO) – Appellant
Versus
M/s Tecpro Systems Limited & Ors. – Respondent
Civil Appeal No. 14836 of 2025 Arising out of SLP (C) No. 8998 of 2023 With
Civil Appeal No. 14837 of 2025 Arising out Of SLP (C) No. 13200 of 2023
Decided On : 17-12-2025

The arbitration agreement allows individual consortium members to invoke arbitration under certain conditions; the referral court's role is limited to determining the existence of the arbitration agreement.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11(6) - Constitution of an Arbitral Tribunal - High Court justified in appointing Arbitral Tribunal based on prima facie test of arbitrability; individual member of a consortium can invoke arbitration if covered by the arbitration agreement - Appellant contested first respondent's capacity to invoke arbitration independently, but High Court upheld referral to Arbitral Tribunal for a detailed examination. (Paras 1, 11, 18, 21)

(B) Judicial Intervention - Minimal intervention at the pre-arbitration stage is mandated; the referral court's role confined to establishing the existence of the arbitration agreement - Issues regarding jurisdiction or the merits of the claims are to be adjudicated by the Arbitral Tribunal. (Paras 12, 19, 20)

Facts of the case:
The appellant APGENCO challenged the High Court's referral of arbitration, arguing that the first respondent could not invoke the arbitration individually as the agreement was between the consortium and the purchaser. Execution commenced on the contract, but disputes arose when the first respondent faced financial difficulties and was later admitted into insolvency. The first respondent claimed losses and invoked arbitration, which the appellant opposed as unauthorized.

Findings of Court:
The High Court constitutionally referred the matter to the Arbitral Tribunal, emphasizing minimal judicial intervention and allowing the Tribunal to decide on jurisdictional questions.

Issues: Main issues included whether an individual member of a consortium could invoke arbitration without the consent of other members and whether the referral court had the jurisdiction to entertain such objections.

Ratio Decidendi: The court ruled that a prima facie existence of an arbitration agreement warranted the referral to the Tribunal, which must address jurisdictional issues surrounding the capacity of consortium members to invoke arbitration.

Result: Appeals dismissed.

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

  1. The arbitration agreement in this case permits individual members of a consortium to invoke arbitration under certain conditions, with the referral court's role limited to establishing the existence of the arbitration agreement (!) (!) .

  2. The jurisdiction of the referral court under Section 11 is confined to a prima facie determination of whether an arbitration agreement exists; it is not authorized to conduct a detailed inquiry into the validity or capacity of the parties to invoke arbitration (!) (!) .

  3. The legislative framework emphasizes minimal judicial intervention at the pre-arbitration stage, restricting the court’s inquiry to whether a prima facie arbitration agreement exists, leaving substantive issues to be resolved by the arbitral tribunal (!) (!) .

  4. The question of whether an individual consortium member can invoke arbitration independently depends on the specific contractual terms, including the scope and nature of the arbitration clause, as well as the provisions of the consortium agreement (!) .

  5. The scope of the referral court’s inquiry is limited to a prima facie assessment of whether the party invoking arbitration is a "party" to the arbitration agreement, with the detailed determination of jurisdiction and capacity reserved for the arbitral tribunal (!) (!) .

  6. The existence of an arbitration agreement is generally presumed to be valid, and the burden of proof lies with the party asserting its existence; the court should not delve into detailed evidence or conduct a mini-trial at this stage (!) .

  7. The arbitration agreement, as incorporated into the contractual framework through specific clauses and purchase orders, can be invoked by individual consortium members if they are deemed to be veritable parties to the agreement, based on their involvement and conduct (!) (!) .

  8. The legal status of a consortium, unless expressly incorporated as a separate legal entity, does not confer independent legal personality, and individual members' capacity to invoke arbitration must be assessed based on contractual terms and their conduct (!) .

  9. The arbitral tribunal has the authority to examine questions related to the validity, scope, and capacity to invoke arbitration, including whether a non-signatory party is bound by the arbitration agreement, based on factual and legal considerations (!) (!) .

  10. Once the court is satisfied that a prima facie arbitration agreement exists, it should refrain from further inquiry and proceed to refer the dispute to arbitration, leaving all substantive and jurisdictional questions to be decided by the arbitral tribunal (!) (!) .

  11. The arbitration process can encompass claims arising from the same contractual framework, even if the contractual relationship has bifurcated or changed due to insolvency or other circumstances, provided the arbitration agreement remains applicable (!) .

  12. The decision to constitute an arbitral tribunal under the relevant statutory provisions is within the court's jurisdiction once a prima facie case for arbitration is established, and the tribunal will handle all objections related to the validity and maintainability of the arbitration (!) .

  13. The appeals in this case were dismissed, affirming that the High Court did not err in referring the matter to arbitration, and emphasizing that the role of the court is limited to a preliminary assessment of the arbitration agreement's existence (!) .

These points collectively highlight the legal principles governing the scope of judicial intervention at the pre-arbitration stage, the criteria for invoking arbitration by consortium members, and the delineation of roles between courts and arbitral tribunals.


Table of Content
1. background of dispute arising from tender. (Para 3 , 4 , 5 , 6 , 7 , 8)
2. arguments regarding arbitration agreement validity. (Para 10 , 11)
3. court's observations on jurisdiction under section 11. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 20)
4. decision on high court's order for arbitral tribunal constitution. (Para 19)
5. conclusion on the dismissal of civil appeals. (Para 21 , 22)

JUDGMENT :

I. Introduction :

1. Leave granted.

2. These two civil appeals arise from an order passed by the High Court for the State of Telangana at Hyderabad1[In Arbitration Application No. 81 of 2019 dated 17.02.2023.] under Section 11 (6) of the Arbitration and Conciliation Act, 19962[Hereinafter, “Act, 1996”] constituting an Arbitral Tribunal (AT) for resolution of dispute as per the arbitration clause 22.2 in General Conditions of Contract (GCC). The contest by the two appellants is on the ground that first respondent, being one of the members of the Consortium, could not have invoked arbitration in its individual capacity. This is based on the simple plea that the arbitration agreement is only between the appellant APGENCO, the purchaser and the “Consortium”. While considering an application under Section 11 , we are of the opinion that the High Court was justified in constituting the AT on the basis of a prima facie test of arbitrability. We have further held that it is for the AT to examine the preliminary issue in detail by considering the contractual provisions and the surrounding evidence. We have thus upheld the order passed by the High Court constituting the AT.

II. Facts:

3. Facts that are necessary for disposal of these appeals are that the appellant APGENCO, floated a tender inviting bids from a Consortium of companies for an EPC contract pertaining to works for their Rayalseema Thermal Power Plant. The tender specifications incorporated the Instructions to Bidders (IB) and the General Conditions of Contract (GCC), comprising of dispute resolution through arbitration under Clause 22.2.

4. A Consortium comprising respondent nos. 1, 2 and 3 namely M/s Tecpro Systems Ltd., M/s VA Tech Wabag Ltd., and M/s Gammon India Ltd. was constituted on 17.08.2010 for exclusively participating in the tender process, with Tecpro Systems Ltd., the first respondent designated as the Leader of the Consortium. The Consortium emerged successful, and a Letter of Intent (LOI) dated 30.10.2010 was issued to the Consortium through the first respondent, being the lead member. Thereafter, three Purchase Orders, dated 15.12.2010 were issued in favour of the Consortium and execution commenced, each member undertaking its respective scope of work.

5. During execution, first respondent encountered severe financial distress, resulting in project delays. Consequently, VA Tech, being jointly and severally liable as a consortium member, undertook first respondent’s scope of work and was subsequently recognised as the Lead Member vide correspondence dated 04.04.2014, resulting in amendment of the Consortium Agreement. Billing continued to be raised in the name of first respondent for administrative purposes, while payments flowed directly to each member in agreed proportions. Later, the first respondent was admitted into Corporate Insolvency Resolution Process (CIRP) on 07.08.2017, followed thereafter by an order initiating liquidation.

6. After the first respondent ceased to be the lead member, the appellant, APGENCO issued a letter dated 04.10.2017 to first respondent that it was responsible for substantial delays in execution of the project. In reply, first respondent denied the allegations and asserted that the appellant had committed various breaches, because of which the company suffered losses, amounting to approximately Rs. 1951.59 crores. By letter dated 11.12.2017 the first respondent demanded payment of the said amount and also indicated that, if the claim is disputed, the letter should be treated as a notice invoking the arbitration clause under

    Click Here to Read the rest of this document
    1
    2
    3
    4
    5
    6
    7
    8
    9
    10
    11
    SupremeToday Portrait Ad
    supreme today icon
    logo-black

    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

    qr

    Scan Me!

    India’s Legal research and Law Firm App, Download now!

    For Daily Legal Updates, Join us on :

    whatsapp-icon telegram-icon
    whatsapp-icon Back to top