Arbitration | Belated Jurisdictional Challenge Impermissible After Active Participation In Arbitration Proceedings: Supreme Court

The Supreme Court has observed that a party which participates in arbitration proceedings without raising a jurisdictional objection at the appropriate stage cannot subsequently raise a technical plea of jurisdiction of the arbitral tribunal upon passing of an adverse award. “A party cannot keep a 'jurisdictional ace' up their sleeve and then claim that filing of the jurisdictional challenge under Section 16 would go back in time and wipe out the past conduct and acquiescence of the party which would clearly evince how the contractual terms were viewed by the parties. If the same is permitted, it will erode the basic principles of alternative dispute resolution and ethos of arbitration.”, observed a bench of Justices JK Maheshwari and Atul S. Chandurkar, while upholding an arbitral award, which was sought to be challenged by the Appellant by raising a technical plea of jurisdiction of the arbitral tribunal, when an adverse award was passed against it. “A party who has actively participated or consented to continuation of the proceedings cannot later challenge the same process merely because the result is adverse.”, the court quoted the observation from the latest case of Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd, 2025 LiveLaw (SC) 1153. The dispute arose from a consultancy agreement between the Municipal Corporation of Greater Mumbai (MCGM) and R.V. Anderson Associates Limited for upgrading Mumbai's sewerage operations under a World Bank-funded project. After the consultancy work concluded in 2001, disputes arose over outstanding payments, prompting the respondent to invoke arbitration in 2005. Both parties appointed their nominee arbitrators, who were to jointly appoint a presiding arbitrator. Several presiding arbitrators were appointed during the proceedings after earlier nominees stepped down, and the Appellant-MCGM participated in the process without raising any objection to the composition of the arbitral tribunal, including attending the tribunal's preliminary meeting in January 2009. In February 2009, however, MCGM challenged the tribunal's jurisdiction, arguing that the presiding arbitrator had been appointed beyond the 30-day period specified in the arbitration clause and that the power of appointment had shifted to the International Centre for Settlement of Investment Disputes (ICSID). The arbitral tribunal rejected the objection and passed an award in favour of the respondent. MCGM's challenge to an award under Sections 34 and 37 before the Bombay High Court was dismissed, leading to a filing of an appeal before the Supreme Court. Affirming the impugned findings, the judgment authored by Justice J.K. Maheshwari upheld the arbitral award and rejected the corporation's belated jurisdictional challenge. The Court observed that the conduct of the appellant throughout the arbitration proceedings was significant, noting that it raised a technical objection to the tribunal's jurisdiction only after participating in multiple hearings. “…the conduct of the party right from the stage of invocation of arbitration becomes a relevant consideration. While examining the alleged departure from the contractual scheme, acquiescence by the party in its conduct, its actions pursuant to the contractual terms and how it has understood and acted as per the terms of the contract, are all crucial aid in comprehending the contractual scheme.”, the court observed, pointing out that by remaining silent during multiple appointments of presiding arbitrators and participating in the proceedings without protest, Appellant had demonstrated its acceptance of the process. “In the present case, even though the MCGM argues with vehemence that the Co-Arbitrators had no power to appoint the third arbitrator, the admitted case is that neither party triggered the contingency by approaching the ICSID. Additionally, the MCGM was put to notice by the Co-Arbitrators and the Respondent about the appointment of the third arbitrator, not only once, but on three different occasions. In response to communication where the Respondent has requested the Co-Arbitrators to appoint the third arbitrator, the MCGM has not taken a view that the Secretary General, ICSID is the only authority who could appoint the third arbitrator. The MCGM seems to have conveniently turned a blind eye to the communication which was marked to it and then at the stage prior to filing of the statement of defence, for the first time, raised this issue which relates to alleged non-compliance of terms of the agreement in respect of appointment of arbitrators. In such a fact situation, no party can be permitted to take the dispute resolution process, the nominee arbitrators or the opposite party for a ride.”, the court observed. Accordingly, finding no merit, the appeal was dismissed.HeadnoteArbitration and Conciliation Act, 1996 – Section 16, Section 4, and Section 34 – Appointment of Presiding Arbitrator – Improper Constitution of Tribunal ...

Arbitration | Belated Jurisdictional Challenge Impermissible After Active Participation In Arbitration Proceedings: Supreme Court

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Arbitration | Belated Jurisdictional Challenge Impermissible After Active Participation In Arbitration Proceedings: Supreme Court

Yash Mittal

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