Objections To Jurisdiction Of Arbitrator Raised U/S. 34 Must Not Be Rejected Only On Jurisdiction Without Touching Merits Of Case: Madhya Pradesh High Court

The Madhya Pradesh High Court bench comprising Justice Vivek Rusia and Justice Avanindra Kumar Singh has held that objections to the jurisdiction of the Arbitrator, which are raised in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996 must not be rejected only on the ground of jurisdiction, without touching the merit of the case. Brief Facts: M/s Lion Engineering Consultants Pvt. Ltd. (the Appellant) submitted its bid pursuant to a tender by the State of Madhya Pradesh (the Respondent) for providing consultancy services valued at Rs. 19.67 crores for construction projects. After starting the work, Rs. 232.09 crores worth of work was verified and bills were submitted to the Manager Civil. However, some disputes arose between the parties and further bills were withheld. Subsequently, the respondent terminated the contract. Thereafter, the appellant filed an application under Section 11(6) of the Arbitration and Conciliation Act to appoint a sole arbitrator. The M.P. High Court appointed a sole arbitrator. The arbitrator passed an award dated 10.07.2010 in favour of the appellant. Aggrieved by the award dated 10.07.2010, the Respondents approached the District Court Bhopal by way of a Section 34 application. During the pendency of this proceeding, the respondent filed an application seeking amendment in the application, raising the ground of lack of jurisdiction of the Arbitrator for entertaining the dispute. The District Court vide order dated 14.02.2014 rejected the application. The respondents then approached the M.P. High Court by way of a Writ Petition, which was allowed on 25.11.2014. The amendment sought by the respondent was allowed to be incorporated in the Section 34 application. Aggrieved by the order dated 25.11.2014, the appellant approached the Supreme Court. By the order dated 22.03.2018 in Lion Engineering Consultants Pvt. Ltd. vs. State of Madhya Pradesh [(2018) 16 SCC 758], the respondent was allowed to argue that the Arbitration and Conciliation Act stands excluded by the M.P. Madhyastham Adhikaran Adhiniyam, 1983. The respondents were permitted to raise objection about the jurisdiction of the Arbitrator without formal amendment in the 34 application. In compliance with the Supreme Court's order, the District Judge permitted the respondent to raise the plea. The Commercial Court set aside the award dated 10.07.2010 and held it to be without jurisdiction in its order dated 20.12.2019 (impugned order). Hence, the Appellant filed the appeal under Section 37 of the Arbitration and Conciliation Act, challenging the impugned order, whereby the Section 34 application had been allowed and the award had been set aside for want of jurisdiction. Contentions of the Parties: Appellant's Contentions:The respondents had not raised any objection regarding jurisdiction in earlier proceedings before the court u/s. 11(6) of the Act and therefore, the appointment of the sole arbitrator has attained finality.The plea of jurisdiction in the proceedings u/s. 34 of the Act was time-barred and could not be raised by way of amendment. Reliance was placed on the matter of MPRRDA vs. L.G. Choudhary [(2018) 10 SCC 826], where the Supreme Court declined to express any opinion on the applicability of the State Act i.e. Adhiniyam, where the award has already been made because no such objection to the jurisdiction of the arbitration was taken at the relevant stage. Hence, the award may not be annulled on that ground. It was made clear that this order will not debar the proceeding under Section 34 of the Act. Therefore, the District Judge should have entertained the Section 34 application on merit instead of dismissing it as not maintainable.In the case of M/s JMC Projects Ltd. vs. MPRRDA [Civil Appeal No.204/2020], the Apex Court has held that the plea of jurisdiction, if not raised as per Section 16(2) of the Arbitration & Conciliation Act 1996 cannot be subsequently raised by the parties.In Shweta Construction V/s Chhattisgarh State Power Generation Company Ltd. [(2024) 4 SCC 722], it was held that the decision in Lion Engineering Consultants Pvt. Ltd. vs. State of Madhya Pradesh [(2018) 16 SCC 758] is an order and not a judgment. The respondent never claimed any right to arbitration under the Adhiniyam, 1983. The respondent cannot be permitted to approbate or reprobate in an arbitration proceeding and finally relegate the matter to the Commercial Court to decide the matter under Section 34 of the Act on merit dehors the issue of jurisdiction. The impugned order must be set aside and the matter be remitted back to the Commercial Court for deciding the application under Section 34 of the Act on its merit.Respondent's Contentions:The lis between the parties has been settled in Lion Engineering, where the respondent was permitted to raise the plea of jurisdiction in the Section 34 application. ...

Objections To Jurisdiction Of Arbitrator Raised U/S. 34 Must Not Be Rejected Only On Jurisdiction Without Touching Merits Of Case: Madhya Pradesh High Court

Tazeen Ahmed

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