Once Jurisdictional Challenge U/S 16 Arbitration & Conciliation Act Is Rejected, Party Has To Wait Till Stage Of S. 34 Proceedings: Madhya Pradesh HC

The Jabalpur Bench of the Madhya Pradesh High Court has reiterated that the Arbitration and Conciliation Act, 1996 is a "self contained code" dealing with every aspect of arbitration. It added that once an Arbitral Tribunal rejects an application disputing its competency in terms of jurisdiction, the same cannot be challenged immediately and the arbitral proceedings may continue till passing of the award. The remedy against such an order of rejection, the Court said, has been deferred till the stage of Section 34 (Application for setting aside arbitral award) of the Act of 1996 arises.Observing thus, a Bench of Chief Justice Mohammad Rafiq and Justice Vijay Kumar Shukla dismissed a plea challenging the order passed by an Arbitral Tribunal rejecting the application filed under Section 16 of the Act. The High Court observed,"intention of the legislature in not providing the appeal against the rejection of the application under Section 16(2) is also evident from sub-section (2) of Section 37, which, vide its sub-clause (a), while providing for an appeal to a Court from an order of the arbitral tribunal accepting the plea referred to in sub-section (2) or sub-section (3) of Section 16, purposely does not provide for an appeal against an order of the arbitral tribunal rejecting the plea referred to in sub-section (2) or sub-section (3) of Section 16."The Court made it clear that argument of the petitioner that the arbitral tribunal does not have the jurisdiction may only be available to it as ground of challenge to the award if eventually the same were to be passed against it.The reason for the same, the Court elucidated, is "speedy disposal".Reliance was placed on the Supreme Court's verdict in Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., (2011) 8 SCC 333, where it was held that since Section 37(2) of the Act explicitly interdicted second appeals, the appeals filed under Letters Patent would also be so interdicted, policy of the legislature being speedy disposal of the arbitration cases. BackgroundThe M.P. Road Development Corporation (petitioner) and the Ministry of Road, Transport and Highways (MORT & H) had entered into a concession agreement.Upon a dispute having been arisen between the parties, the Respondent- department invoked the Arbitration Clause No.44.3 of the said Concession Agreement and a panel of three arbitrators came to be appointed.The petitioner on the other hand raised a dispute that the matter was required to be adjudicated by the Arbitration Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983.It filed an application under Section 16 of the Act before the newly constituted Arbitral Tribunal, contending that it has no jurisdiction to decide the dispute between the parties and also contending that since the dispute between the parties under the Concession Agreement falls within the definition of 'works contract', therefore, in view of Clause 44.4 of the Concession Agreement, Madhya Pradesh Arbitration Tribunal constituted under the Adhiniyam of 1983 would have the exclusive jurisdiction to entertain the dispute.The Arbitral Tribunal rejected the said application. Aggrieved by this, the petitioner approached the High Court.FindingsThe court relied on Clause 44.3.1 of the agreement entered into between the parties which provided that any dispute, which could not be resolved amicably by conciliation, shall be finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with Clause 44.3.2, in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi, subject to the provisions of the Arbitration Act and that the venue of such arbitration shall be at Bhopal. "If despite existence of the Arbitration Tribunal under the Adhiniyam of 1983, the parties have agreed for arbitration under the aegis of ICADR in accordance with the ICADR Rules and the Arbitration Act and consciously did not mention about existence of the arbitration tribunal established under the Adhiniyam of 1983, which then was already in existence, the petitioner cannot be permitted now to raise this plea," it said.With this view, the Court refused to transfer the arbitral proceedings or interfere with the constitution of an arbitral tribunal formed in adherence to the provision of the Act of 1996. It held as under:"The legislative policy in consolidating all the laws relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards is aimed at ensuring not only speedy disposal of arbitration cases but also timely execution of the awards."A perusal of Section 16(2) of the Act shows that a plea alleging that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that it had appointed, or participated in the...

Once Jurisdictional Challenge U/S 16 Arbitration & Conciliation Act Is Rejected, Party Has To Wait Till Stage Of S. 34 Proceedings: Madhya Pradesh HC

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Once Jurisdictional Challenge U/S 16 Arbitration & Conciliation Act Is Rejected, Party Has To Wait Till Stage Of S. 34 Proceedings: Madhya Pradesh HC

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