The Supreme Court, in an appeal filed by M/s.
MSP Infrastructure Ltd. against Madhya Pradesh Road Development Corporation
Ltd.1, while answering
the question, whether a party to an arbitration proceeding may be permitted to
raise objections under Section 34 of the Arbitration and Conciliation Act, 1996
(for short "the Arbitration Act, 1996"), with regard to the jurisdiction
of the Arbitral Tribunal (for short "the Tribunal") after the stage
of submission of the written statement, has held that all objections to
jurisdiction of whatever nature must be taken at the stage of the submission of
the statement of defence, and must be dealt with under Section 16 of the
Arbitration Act, 1996. However, the Court added, “if one of the parties seeks to contend that the subject matter of the
dispute is such as cannot be dealt with by arbitration, it may be dealt under
Section 34 by the Court”.
A commercial dispute between M/s. M.S.P.
Infrastructure (Appellant), a contractor, and the Madhya Pradesh Road
Development Corporation (Respondent) was referred to arbitration by the
Calcutta High Court in terms of the contract between the parties under the provisions
of the Arbitration Act, 1996.
The Arbitral Tribunal made an award on 27-11-2006. Aggrieved
by the said award, the Respondent filed a petition on 09-01-2007 for setting
aside the award under Section 34 of the Arbitration Act, 1996. The Respondent
assailed the award as being in contravention of clause (b) of sub-section (2)
of Section 34 of the Arbitration Act, 1996.
Subsequently, on 28-02-2009 the Respondent moved an
application to amend the original petition under Section 34 to add additional
grounds of objection. The Additional District & Sessions Judge, Bhopal
(Madhya Pradesh) vide order dated 26-08-2009 rejected the said amendment
application. The learned Additional District & Sessions Judge observed that
it was absolutely unjust and unfair to file such objections after two years of
the filing of the petition under Section 34 of the Arbitration Act, 1996.
Aggrieved, the Respondent preferred a Petition under Article 227 before the
High Court of Madhya Pradesh at Jabalpur. The Madhya Pradesh High Court without
going into the tenability of the amendment application at the stage at which it
was moved, i.e., beyond the time permitted by Section 16 of the Arbitration
Act, 1996, simply allowed the amendment by observing that they are not deciding
the merits of the case and that they were simply considering the amendment
application.
On 18-02-2010, the High Court allowed the
Respondent's petition and set aside the order of the District Court, thus
allowing the amendment application.
Aggrieved by the allowing of the amendment
application, the Appellant has moved this Court. The main challenge to the
order allowing the amendment, raised by the appellant was that it allows the
Respondent to raise an objection to jurisdiction contrary to Section 16 of the
Arbitration Act, 1996, which provides that an objection to jurisdiction shall
not be raised later than the submission of the statement of defence.
The ground sought to be added vide the amendment
application was that only the Arbitration Tribunal Constituted by the State
Govt. of M.P. had the exclusive jurisdiction to decide the said dispute on
being submitted to it under sub section 1 of, Section 7 of the M.P. Madhyastham
Adhikaran Adhiniyam, 1983 and none else, and as such the Arbitral Tribunal earlier
constituted-by the Indian Council of Arbitration, New Delhi has no jurisdiction
to entertain and/or decide the dispute, and “the impugned award is a total
nullity and non-est in the eye of law.”
The Appellant contended that (i) the Tribunal under
the Arbitration Act, 1996 was fully empowered to enter into and decide the dispute
submitted to it, since the dispute was referred in pursuance of an arbitration
clause contained in the Concession Agreement, (ii) this agreement was entered
into by the parties in the year 2002, being fully aware of the existence of the
Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (for short "the M.P.
Act of 1983"), (iii) the parties reiterated this agreement before the
Calcutta High Court when they specifically agreed vide Clause 'C' of the
consent terms that if the Appointing Authority fails to appoint and constitute
the Tribunal in terms of the Concession Agreement dated 04-04-2002 within a
period of 30 days, the parties shall be at liberty to apply to the Madhya
Pradesh High Court for appointment and constitution of the Tribunal under the
provisions of the Arbitration Act, 1996. Thus, on two occasions, the parties
asserted and consented that the dispute between them would be resolved by
Arbitration under the provisions of the Arbitration Act, 1996.
The Appellant therefore contended that there is no
merit whatsoever in the ground introduced by the amendment application. Even
otherwise, the Appellant contended that the provisions of the Arbitration Act,
1996, being a Parliamentary Statute would have precedence over the M.P. Act of
1983, which is a State Act on the same subject. Above all, it was contended
that the introduction of the ground that the Tribunal did not have jurisdiction
is grossly belated and impermissible in view of Section 16(2) of the
Arbitration Act, 1996.
The Court proceeding to answer the question
whether, having regard to Section 16 of the Arbitration Act, 1996, the
Respondent was entitled to introduce the ground that the Arbitration Tribunal
constituted under the M.P. Act of 1983 would take precedence over the Tribunal
constituted under the Arbitration Act, 1996, that too by way of an amendment to
the petition under Section 34, held after referring to the provisions of Section
16(2) of the Arbitration Act, 1996 that .there is a prohibition on the party
from raising a plea that the Tribunal does not have jurisdiction after the
party has submitted its statement of defence. The intention is very clear. “This provision (Section 16(2)) disables a
party from petitioning an Tribunal to challenge its jurisdiction belatedly,
having submitted to the jurisdiction of the Tribunal, filed the statement of
defence, led evidence, made arguments and ultimately challenged the award under
Section 34 of the Arbitration Act, 1996. This is exactly what has been done by
the Respondent Corporation. They did not raise the question of jurisdiction at
any stage. They did not raise it in their statement of defence; they did not
raise it at any time before the Tribunal; they suffered the award; they
preferred a petition under Section 34 and after two years raised the question
of jurisdiction of the Tribunal. In our view, the mandate of Section 34 clearly
prohibits such a cause. A party is bound, by virtue of sub-section (2) of
Section 16, to raise any objection it may have to the jurisdiction of the
Tribunal before or at the time of submission of its statement of defence, and
at any time thereafter it is expressly prohibited. Suddenly, it cannot raise
the question after it has submitted to the jurisdiction of the Tribunal and
invited an unfavourable award. It would be quite undesirable to allow
arbitrations to proceed in the same manner as civil suits with all the
well-known drawbacks of delay and endless objections even after the passing of
a decree.”
The Respondent took the contention that a party is
entitled under the law to raise an objection at any stage as to the absence of
jurisdiction of the Court which decided the matter, since the order of such a
Court is a nullity. Meeting this contention, the Court said
that it must be remembered that this position of law has been well settled in
relation to civil disputes in Courts and not in relation to arbitrations under
the Arbitration Act, 1996. Parliament has the undoubted power to enact a
special rule of law to deal with arbitrations and in fact, has done so.
Parliament, in its wisdom, must be deemed to have had knowledge of the entire
existing law on the subject and if it chose to enact a provision contrary to
the general law on the subject, its wisdom cannot be doubted. Accordingly, the
Bench rejected the said submission of the Respondent.
It was next contended on behalf of the Respondent
by placing reliance on clause (b) of sub-section (2) of Section 34 that
objections to the jurisdiction of a Tribunal may be of several kinds as is
well-known, and Section 16 does not cover them all. It was further contended
that where the objection was of such a nature that it would go to the
competence of the Arbitral Tribunal to deal with the subject matter of
arbitration itself and the consequence would be the nullity of the award, such
objection may be raised even at the hearing of the petition under Section 34 of
the Act.
This argument also did not favour with the Court which
said that there is nothing to warrant the inference that all objections to the
jurisdiction of the Tribunal cannot be raised under Section 16 and that the
Tribunal does not have power to rule on its own jurisdiction.The Court said
that Parliament has employed a different phraseology in Clause (b) of Section
34. That phraseology is "the subject
matter of the dispute is not capable of settlement by arbitration." The
Coirt held that this phrase does not necessarily refer to an objection to
'jurisdiction' as the term is well known. “In
fact, it refers to a situation where the dispute referred for arbitration, by
reason of its subject matter is not capable of settlement by arbitration at
all. Examples of such cases have been referred to by the Supreme Court in the
case of Booz Allen and Hamilton Inc. Vs.
SBI Home Finance Limited and Ors.2This Court observed as
follows:-
"36. The well-recognised examples of non-arbitrable disputes are:
(i) disputes relating to rights and liabilities which give rise to or
arise out of criminal offences;
(ii) matrimonial disputes relating to divorce, judicial separation,
restitution of conjugal rights, child custody;
(iii) guardianship matters;
(iv) insolvency and winding-up matters;
(v) testamentary matters (grants of probate, letters of administration
and succession certificate); and
(vi) eviction or tenancy matters governed by special statutes where the
tenant enjoys statutory protection against eviction and only the specified
courts are conferred jurisdiction to grant eviction or decide the
disputes."
Accordingly the Bench of the Supreme Court comprising
of Justices Mr. J. Chelameswar and Mr. S.A. Bobde held that all objections to
jurisdiction of whatever nature must be taken at the stage of the submission of
the statement of defence, and must be dealt with under Section 16 of the
Arbitration Act, 1996. “However, if one
of the parties seeks to contend that the subject matter of the dispute is such
as cannot be dealt with by arbitration, it may be dealt under Section 34 by the
Court.”
The Apex Court holding that the amendment application
raised a ground which was contrary to law and ought not to have been allowed by
the High Court, accordingly, set aside the judgment and order of the High
Court.
_____________
1.
Civil Appeal No.10778 of 2014 arising out of
SLP (Civil) No. 16539 of 2010 decided on 05.12.2014
2. (2011) 5 SCC 532
No comments:
Post a Comment