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SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, ALOK ARADHE, JJ.
M/s Bharat Udyog Ltd. (Formerly Known As M/s jai hind Contractors Pvt. Ltd.) – Petitioner
Versus
Ambernath Municipal Council Through Commissioner & Anr. – Respondents
Special Leave Petition (C) No. 1127 of 2017
Decided On : 24-03-2026
Key Points: - The absence of a valid arbitration agreement nullifies the arbitral award (!) . - Participation in arbitral proceedings does not confer jurisdiction where consent is absent (!) . - The Supreme Court upheld the High Court's ruling that no valid arbitration agreement existed because the State Government lacked the authority to appoint an arbitrator in a concluded contract (!) . - The petitioner's claim of waiver was dismissed, emphasizing the importance of mutual consent in arbitration agreements (!) . - The Municipal Council could not be estopped from challenging the arbitral award due to its participation in the proceedings, as it was compelled without true consent (!) . - The entire arbitral proceedings were deemed a nullity and unenforceable due to a lack of jurisdiction and absence of mutual consent (!) . - The Municipal Council is a statutory authority and makes its own decisions within its powers and jurisdiction (!) . - Section 143A(3) of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965, allows the State Government to issue policy directions regarding the regulation of octroi collection but does not grant the power to unilaterally appoint an arbitrator (!) . - Clause 22 of the contract did not constitute a valid arbitration agreement, as it provided for a departmental dispute-resolution mechanism, not arbitration (!) (!) (!) . - The State Government had no jurisdiction under Section 143-A(3) of the Act to appoint an arbitrator for the agent and the Municipal Council (!) .
| Table of Content |
|---|
| 1. final decision and dismissal of petition (Para 1 , 27) |
| 2. tender process and initial challenges (Para 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 3. arbitrator's award and objections (Para 9 , 10 , 11) |
| 4. high court's reversal of arbitral award (Para 12 , 13 , 14) |
| 5. arguments and positions of the parties (Para 15 , 16) |
| 6. court's evaluation of arbitration agreement validity (Para 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26) |
JUDGMENT : :
1. This special leave petition arises out of the final judgment and order1[ First Appeal No. 94 of 2001 dated August 4, 2016.] passed by the High Court of Judicature at Bombay in exercise of jurisdiction under Section 39 of the Arbitration Act, 1940. By the said order, the High Court allowed the appeal filed by the respondent no. 1, Ambernath Municipal Council (hereinafter ‘Municipal Council’) and quashed and set aside the award as well as the judgment of the Civil Court2[Judgment of the Joint Civil Judge, Senior Division, Kalyan, dated September 22, 2000, in Misc. Application No. 196/1996.], making the award a rule of the Court and dismissing the objections of the Municipal Council. For the reasons to follow, we have held that there is neither an arbitration agreement between the parties nor an informed consent of the Municipal Council for resolution of the dispute through arbitration. We have therefore upheld the decision of the High Court and dismissed the special leave petition.
2. Facts relevant to the present special leave petition are that the Municipal Council is constituted under the provisions of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965. In March 1994, while exercising powers conferred under Section 143-A of the 1965 Act, the Municipal Council issued a tender for the collection of octroi for a period of one year, beginning on 1 April 1994 and ending on 31 March 1995. The tender notification provided for a reserve price with the term that any offer lower than Rs. 6,74,00,000/-may not be considered and would be rejected. The other tender conditions were of earnest money of Rs. 1,00,000/- in the form of call deposit and a security deposit in the form of bank guarantee of a nationalized or scheduled bank for Rs. 1,07,92,000/-.
3. The petitioner participated in the tender along with other bidders and was declared successful, having submitted its bid for an amount of Rs. 6,75,00,000/-. The Municipal Council accepted the petitioner’s bid and entered into an agreement with the petitioner, dated 30 March 1994, for the said octroi collection contract.
4. The petitioner, after execution of the agreement, commenced the work with effect from 1 April 1994. However, on 2 May 1994 petitioner addressed a letter to the Chief Officer of the Municipal Council requesting that the amount of Rs. 6,74,00,000/- fixed as a minimum reserve price/ bid amount be reduced by Rs. 40,78,517/- on the ground that the same was contrary to the norms to determine the minimum reserve price. This representation of the petitioner was rejected by the Chief Officer of the Municipal Council in his letter dated 27 May 1994, informing that the minimum reserve price for the said tender was fixed as per the guidelines issued by the Government of Maharashtra.
5. Being aggrieved by this decision, the petitioner approached the High Court in Writ Petition No. 3598 of 1994. However, the petitioner later sought leave to withdraw the Petition, with liberty to adopt appropriate proceedings. By an order dated 26 September 1994, the High Court disposed of the writ petition as withdrawn to enable the petitioner to adopt appropriate proceedings.
6. After withdrawing the writ petition, the petitioner approached the Urban Development Department of the Government of Maharashtra by its letter dated 5 October 1994, purportedly on the basis of the leave granted by the High Court to avail alternative remedy, requesting the State Government to appoint an arbitrator to resolve the dispute as raised by petitio
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