Bombay High Court
Morya Infrastructure Pvt Ltd Through … vs The State Of Maharashtra Public Work … on 16 February, 2026
2026:BHC-AUG:6714-DB
IN THE JUDICATURE OF HIGH COURT AT BOMBAY
BENCH AT AURANGABAD
COMMERCIAL ARBITRATION APPEAL NO. 01 OF 2023
State of Maharashtra,
Through Public Works Department,
Through its Executive Engineer,
Public Division, Beed, Tq. and Dist. Beed. ...Appellant
VERSUS
Morya Infrastructure Pvt.Ltd Beed
Through Its Director,
Bhaskar Tukaram Waghmare,
R/o Head Office At Shahunagar, Beed,
Tq. and Dist. Beed. ...Respondent
...
AGP Appellant : Mr. M. K. Goyanka and Mr. P. K. Lakhotiya
Advocate for Respondent : Mr. J. N. Singh a/w/ Mr. Sunil L. Sange
...
WITH CIVIL APPLICATION NO. 9207 OF 2023
IN CARBA/1/2023
WITH CIVIL APPLICATION NO. 12453 OF 2023
IN CARBA/1/2023
...
CORAM : ARUN R. PEDNEKER AND
VAISHALI PATIL-JADHAV, JJ.
Date of Reserving the Judgment : 11/02/2026
Date of Pronouncing the Judgment : 16/02/2026
JUDGMENT :
( Per ARUN R. PEDNEKER, J. )
1. By the present Commercial Arbitration Appeal filed under Section 13 of
the Commercial Courts Act, read with Section 37 of the Arbitration and
Conciliation Act, 1996, the appellant has challenged the order dated
06/05/2022 passed by the Commercial Court, District Beed, in Civil M.A.
(Arbitration) No. 87 of 2018, whereby the Commercial Court was pleased to
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dismiss the application filed by the Appellant under Section 34 of the
Arbitration and Conciliation Act, 1996, and maintained the arbitral award
dated 11/02/2018 passed by the Sole Arbitrator.
2. The facts of the appeal, in brief, are as follows :
Pursuant to a tender notice dated 31/05/2002, tenders were invited
by the Appellant for the work of improvement and development of the road
Chumbli Phata-Patoda-Manjarsumba, i.e. SH/155 and SH/156, from Km.
80/00 to 84/500 and Km. 18/60 to 46/300 in District Beed (Maharashtra)
under the B.O.T. scheme. The concession period was 13 years and 6
months. The respondent was found to be the lowest bidder, and the work
was accordingly allotted to him. An agreement was executed between the
parties.
3. The work was completed on 24/05/2004, and the respondent was
permitted to collect toll from 01/07/2004 to 30/06/2016, with the obligation
to maintain the road during the said period. It is the case of the Appellant
that the condition of the road deteriorated and that the respondent failed
to carry out necessary repairs despite repeated complaints received by the
Appellant. The respondent was informed accordingly but failed to take
corrective measures. Consequently, the Appellant was constrained to stop
toll collection and passed an order to that effect.
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4. A notice to stop toll collection was issued on 30/06/2014, and toll
collection was stopped on 17/07/2014. On 26/06/2014, the claim was
settled by the Appellant for an amount of Rs. 67.79 lakhs, and on
27/06/2014, the said amount was paid to the respondent by way of buy-
back price.
5. Being dissatisfied with the buy-back price, the respondent issued a
notice for settlement of disputes on 30/06/2014 and thereafter sent a
reminder on 19/08/2014 to the Chief Engineer. As the dues were not
settled, the respondent issued a notice dated 25/09/2014 under Clause
3.4.17 of the tender agreement, requesting the Chief Engineer to refer the
disputes to arbitration. Upon failure to do so, the respondent issued
another notice dated 28/10/2014 to the Secretary, P.W.D., Government of
Maharashtra, seeking reference of disputes to arbitration.
6. Since the disputes were not referred to Arbitration, the respondent
approached this Court by filing Arbitration Application No. 2 of 2015 under
Section 11 of the Arbitration and Conciliation Act, 1996, seeking
appointment of an Arbitrator. It is the case of the respondent that with the
consent of both parties, a sole Arbitrator was appointed, and by order
dated 02/03/2015, the said Arbitration Application was disposed of. As the
fact of appointment of the Sole Arbitrator by the High Court is disputed,
we will deal with this aspect little later in the Judgment.
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7. Thereafter, a preliminary meeting was held by the Arbitrator on
19/02/2017, which was attended by both parties. No objections were raised
either under Section 12, Section 13, or Section 16 of the Arbitration and
Conciliation Act, 1996.
8. On 06/04/2017, the respondent raised the following claims :
Claim No.1 : Compensation on account of illegal termination of
contract and unilateral closer of the Toll Collection an
amount of Rs.558.78 Lacs.
Claim No.2 : Compensation due to idleness of toll staff and
maintenance labourers an amount of Rs.46.84 Lacs.
Claim No.3 : Loss of Business Profit @ 15% at Rs.86.88 Lacs.
Claim No.4 : Non-payment of price escalation as per agreement
an amount of Rs.187.42 Lacs.
Claim No.5 : Non-payment of bill in respect of special repairs done
an amount of Rs.52.60 Lacs.
Claim No.6 : Interest @ 14.50 % on all amount due and payable.
Claim No.7 : Cost towards Arbitration at Rs.15 Lacs.
9. On 18/05/2017, the claimant led evidence by way of affidavit. In July
2017, the Appellant appeared and filed its written statement of defence.
The appellant filed its counter-claim on 14/07/2017. Statements of
admission and denial were submitted on 20/07/2017, and the respondent
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filed closing pursis on 28/10/2017.
10. Applications seeking adjournments were filed by the appellant on
07/06/2017 and 11/06/2017. Various internal communications were
exchanged between the Executive Engineer, Superintendent Engineer,
Chief Engineer, and Secretary (Desk-9), P.W.D., Mantralaya, Mumbai,
between July and October 2017, including a request to file a review petition
before the High Court.
11. In the 5th meeting held of the Arbitral proceedings on 22/07/2017,
the Executive Engineer submitted an application objecting to the
continuation of arbitral proceedings on the ground that the Tribunal was
constituted contrary to Clause 3.4.17(iii) of the contract. The said objection
was rejected by the Tribunal. Similar objections were again raised during
the 7th meeting held on 10/09/2017 and were overruled.
12. On 10/12/2017, the learned counsel for the Appellant filed a pursis
before the Arbitrator stating that the respondent had filed a review petition
seeking review of the order dated 02/03/2015 of the High Court in
Arbitration Application No.02 of 2015, and requested that the arbitration
proceedings be stayed. However, the Arbitrator proceeded with the matter
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and passed an award directing the Appellant to pay an amount of Rs.
596.60 lakhs along with interest @ 12.10% per annum from the date of
award till realization.
13. The Appellant challenged the said award by filing an application
under Section 34 of the Arbitration and Conciliation Act, 1996. The
Commercial Court dismissed the application, and hence, the present
appeal has been filed under Section 13 of the Commercial Courts Act read
with Section 37 of the Arbitration and Conciliation Act, 1996.
14. The learned counsel for the appellant contended that as per Clause
3.4.17 (iii) of the agreement, disputes were required to be resolved by a
panel of three Arbitrators. It is submitted that the communication sent by
the Executive Engineer to learned APP was misinterpreted and that the
Arbitrator was not appointed by the High Court under Section 11(6) of the
Act. According to the appellant, the right to appoint one Arbitrator from the
side of appellant vested only with the Secretary under the terms of the
agreement.
15. It is further submitted that Mr. C. D. Fakir, the sole Arbitrator, was
appointed by the respondent from the respondent’s side and had earlier
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been associated with the project, thereby attracting disqualification under
Schedule V read with Section 12 (2) of the Arbitration Act and also
Schedule VII read with Section 12 (5) of the Arbitration Act. In the absence
of a written agreement post-dispute, the Arbitrator’s continuance of the
proceedings were without jurisdiction.
16. Per contra, the learned counsel for the respondent submitted that no
objections were raised at the earliest stage under Sections 12, 13, or 16 of
the Act and, therefore, the appellant is deemed to have waived its right to
challenge the constitution of arbitral tribunal and the disqualification of the
sole arbitrator under Section 4 of the Arbitration Act. It is contended that
the appellant had consented to the appointment of the Arbitrator before
the High Court and actively participated in the proceedings by filing written
statements and counter-claims. Hence, it is not open to the appellant to
challenge the constitution of the Tribunal at the belated stage. It is
submitted that Section 16 (5) read with Schedule VII would not apply to the
instant case as the arbitration was invoked much prior to the amended Act
of 2015 being enacted.
17. Having considered the rival submissions, the following issues arise
for consideration in the present appeal :
(a) Whether the Arbitrator, Mr. C. D. Fakir, was appointed by the
High Court in exercise of powers under Section 11(6) of thePage 7 of 29
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(b) Whether there is a deemed waiver of objection to the
constitution of the Arbitral Tribunal under Section 4 of the Arbitration
and Conciliation Act, 1996, and alternatively, whether Section 10 is a
non-derogable provision such that there can be no waiver regarding
the constitution of the Arbitral Tribunal ?
(c) Whether the Arbitrator is disqualified to act in view of
disqualification under Section 12 (1) read with Schedule V of the
Arbitration Act ?
(d) Whether the Sole Arbitrator lacked jurisdiction in the absence
of a written consent, post-dispute, under Section 12(5) read with the
Seventh Schedule to the Arbitration and Conciliation Act, 1996 ?
(e) Whether the amended provision of Section 12 (1) and Section
12 (5) read with Schedule V and Schedule VII would apply to the
instant case ?
18. The first issue that arises for consideration is whether the High Court
appointed the Arbitrator in terms of its order dated 02/03/2015 passed in
the proceedings under Section 11(6) of the Arbitration and Conciliation Act,
1996.
19. Before deciding the above issue, it is necessary to first note certain
undisputed facts. It is an admitted position that a notice dated 30/06/2014
was issued directing stoppage of toll collection, and the toll collection was
actually stopped on 17/07/2014. The agreement between the parties for
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toll collection and maintenance of road was for a period of 13 years and 6
months, i.e., from 15/12/2004 to 05/06/2017. On 26/06/2014, the claim was
settled by the appellant for an amount of Rs. 67.79 lakhs as buy back price,
and on 27/06/2014, the said amount was paid to the respondent.
Thereafter, a notice invoking arbitration was issued on 30/06/2014. An
application under Section 11(6) of the Arbitration and Conciliation Act,
1996 was subsequently filed before this Court which was disposed on
02/03/2015.
20. The relevant Clause 3.4.17 of the agreement, governs the arbitration
mechanism between the parties and reads as under:
“3.4.17 SETTLEMENT OF DISPUTES :
Under no circumstances whatever shall be Entrepreneur be entitled
to submit any claim for consideration of the Government on any
account unless the Entrepreneur shall have given sufficient prior
intimation and shall have submitted the details in writing to the
Engineer within one month of the cause of such claim.
(i) Except where otherwise specified in the contract documents
and subject to the powers delegated to him by the Government
under the codes / rules then in force, the decision of the
Superintending Engineer of the Circle for the time being shall be
final, conclusive and binding on all parties to the contract, upon all
questions, relating to meaning of the Specifications, designs,
drawings, and instructions herein before mentioned and as to quality
or workmanship or materials used on the work or as to any other
question, claim, right matter or thing whatsoever if in any way
arising out of or relating to the contract, designs, drawings,Page 9 of 29
Com Arb Appeal 1-2023specifications, estimates, instructions, order or these conditions or
otherwise concerning the works or the execution or failure to
execute the same whether arising during the progress of the work or
after the completion or abandonment there of or during operation or
maintenance. The Superintending Engineer, shall give his orders on
the claim within 45 days of receipt of claim by the Engineer, failing
which the Entrepreneur may submit the claim directly to Chief
Engineer irrespective of the amount of claim.
(ii) The Entrepreneur may within thirty days of receipt by any
order by the Superintending Engineer of the Circle as aforesaid,
appeal against it to the Chief Engineer concerned with the work/
project. The Chief Engineer shall give his orders on all claims
referred to him within 30 days of receipt of claims. Where any
dispute is not resolved as above or the Entrepreneur is not satisfied
with the decision of Chief Engineer, the following provisions shall
apply.
(iii) Arbitration : Where any dispute is not resolved as above, the
following provisions shall apply.
a) At the request of either party by a written notice to that effect
to the other party (a notice of Reference) the dispute shall be
submitted to arbitration in accordance with provisions of the
Arbitration and Conciliation Act, 1996 (No. 26 of 1996).
b) the place of Arbitration shall be the city of head quarter of the
Chief Engineer.
c) The arbitration shall take place before a panel of three
arbitrator.
d) The parties shall agree upon the identity of the Arbitrator (s)
within thirty days of the receipt of the Notice of Reference by the
relevant party. If the parties are unable to so agree upon the identity
of the Arbitrator (s) then :
(i) The parties shall use their best endeavor to agree on to an
Page 10 of 29
Com Arb Appeal 1-2023appointing authority within thirty days of the receipt of the Notice of
Reference by the relevant party, and
(ii) In the event that the parties are unable to agree as aforesaid
upon an appointing, authority, the Arbitrator (s) shall be appointed
on the application of either party by the Secretary, Public Works
Department, Government of Maharashtra whose decision as to the
identity of the Arbitrator (s) shall be final.”
21. In the present case, it is evident that a notice under Clause 3.4.17 of
the agreement was issued on 30/06/2014 invoking the arbitration clause.
However, there was no response from the appellant. Consequently, the
respondent was constrained to file an application No.02/2015 before the
High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996
for appointment of an Arbitrator.. The High Court thereafter passed the
following order in the said application :
“1]……..
2] Learned A.G.P. files on record the communication received by
him from the respondents dated 18 th February 2015. The same is
accepted on record and marked as “X” for the purpose of
identification.
3] The communication would show that now, the respondents
have appointed an Arbitrator. Though it was desirable that the
respondents should have appointed an Arbitrator in view of the
agreement, it is only after filing of the present application, the
Arbitrator is appointed.
4] In the circumstances, by recording displeasure of this Court,
present application is disposed, as the Arbitrator is appointed….”
22. For ready reference, the communication/ instructions issued by the
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Executive Engineer to the learned A.G.P., which was produced and taken on
record by the High Court, is reproduced hereinbelow :
“mijksDr fo”k;h vki.kkl lknj dj.;kr ;srs dh] lanHkhZ; i=kP;k
vuq”kaxkus [kktxhdj.kkarxZr cka/kk] okijk o gLrkarjhr djk ;k rRRokoj]
pqacGh QkVk ikVksnk ekatjlqack jLrk jkT; ekxZ dz-155 o 156 fd-eh-
84@00 rs 84@500 o 18@600 rs 46@300 rk- ikVksnk ft- chM
varxZr m|kstd eksj;k bUQzkLVªDpj izk- fy- chM ;kauk vf/klqpuk
lkoZtfud cka/kdke foHkkx] ea=ky; eqacbZ [kk{kl & 2004@iz-dz-58@
jLrs&9 fn- 29@07@2004 uqlkj ;kauk fnysys gksrs-
ijarq laca/khr m|kstdkaus fufonsrhy ‘krhZ o vVhuqlkj jLR;kph
ns[kHkky o nq#Lrh dj.;kr dlwj dsY;kcn~ny okjaokj lqpuk @ ys[kh
dGowu lq/nk jLR;kph ns[kHkky nq#Lrh u dsY;keqGs dk;Zdkjh vfHk;ark]
lk- cka- foHkkx] chM ;kauh m|kstdkleosr cSBd ?ksowu fn-
11@09@2011 jksth ldkGh 8-00 ok- iklwu iFkdj olqyh rkRiqjR;k
Lo#ikr can d#u tksi;Zar jLrk fufonsrhy ‘krhZ o vVhuqlkj
lek/kkudkjd nq#Lr d#u nsbZi;Zar rkRiqjR;k Lo#ikr can dj.;kr vkys-
ijarw laca/khr m|kstdkus lek/kkudkjd nq#Lrh d#u lq/kkj.kk u
dsY;kus o ‘kklu vkns’kkuqlkj fn- 1@07@2014 iklqu olqyh ukdk
dk;eLo#ih can dj.;kr vkysyk vkgs-
‘kklu vkns’kkuqlkj Vksyukdk (Take Over) d#u R;kph uqdlku
HkjikbZ Eg.kwu #-67-78 y{k m|kstdkl iznku dsysys vkgs o m|kstdkus
rs fLodkjysys vkgs- ijarq m|kstdkus lnj jDde vekU; vlY;kus
U;k;ky;kr vkOgku fnysys vkgs- rjh ;koj fufonsrhy ‘krhZ o vVh
lc[kaM (iii)(v) o [kaM 3-4-17 vUo;s f}i{kkP;k learhus vkchZVs ªVj
use.;kph rjrwn vkgs- R;kuqlkj m|kstd o ‘kklu nks?kkaP;k laerhus
vkchZVªsVj Eg.kwu Jh- fl- Mh- Qdhj] lsokfuo`Rr eq[; vfHk;ark ;kaph
Page 12 of 29
Com Arb Appeal 1-2023fu;qDrh dj.;kps Bjys vkgs-…..”
23. It is evident from the record that an application under Section 11(6)
of the Act was filed before the High Court seeking appointment of an
Arbitrator. During the hearing of the said application, the learned A.G.P.
placed on record the instructions received from the Executive Engineer
indicating that decision is taken to jointly accept Mr. C. D. Fakir as an
Arbitrator. Taking note of the said communication, the High Court disposed
of the application. However, a careful reading of the order makes it clear
that the High Court, in exercise of its powers under Section 11(6) of the
Act, did not itself appoint the Arbitrator. The Court merely recorded that the
respondents has decided to jointly appoint Mr. C. D. Fakir as an Arbitrator
and, in view of the same, disposed of the application. Thus, it cannot be
said that the Arbitrator was appointed by the High Court under Section
11(6) of the Arbitration and Conciliation Act, 1996.
24. The next issue that arises for consideration is whether Mr. C. D. Fakir
could have proceeded with the arbitration and whether the constitution of
the Arbitral Tribunal was contrary to Clause 3.4.17 of the agreement. In
other words, whether the appointment of a sole Arbitrator was in deviation
of the agreed procedure and whether, in such circumstances, Mr. C. D. Fakir
could validly continue with the arbitral proceedings. This Court is called
upon to determine whether there is a deemed waiver of objection to the
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constitution of the Arbitral Tribunal under Section 4 of the Arbitration and
Conciliation Act, 1996, and, alternatively, whether Section 10 of the said
Act is a non-derogable provision, such that no waiver is permissible with
respect to the constitution of the Arbitral Tribunal.
25. As discussed earlier, in the proceedings before the High Court under
Section 11(6) of the Arbitration and Conciliation Act, 1996, the learned
A.G.P. placed on record the communication received from the Executive
Engineer indicating that joint decision is taken to appoint Mr. C. D. Fakir as
Arbitrator. The High Court disposed of the application on that basis. Though
the High Court did not itself appoint the Arbitrator, the order recorded that
it has been jointly decided to appoint Mr. C. D. Fakir as the Arbitrator.
26. It appears that Mr. C. D. Fakir proceeded on the understanding that,
in view of the communication placed before the High Court and the
disposal of the Section 11 application, he was duly appointed and had the
authority to conduct the arbitral proceedings. There is also a prior
communication dated 25/04/2015 whereby Mr. C. D. Fakir had asked the
Appellant to appoint its arbitrator. However, subsequently he has
proceeded on the basis of High Court’s observations i.e. consent to appoint
him as an arbitrator. It is the contention of the appellant that, in terms of
Clause 3.4.17 of the agreement, a panel of three Arbitrators was
contemplated and that, therefore, the learned sole Arbitrator ought not to
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have proceeded without calling upon the respondent to appoint its
nominee Arbitrator.
27. However, it is significant to note that the appellant initially before
the High Court had expressed joint consent to appoint Mr. C.D. Fakir as
Arbitrator and also at the stage of commencement of Arbitral proceeding
did not raise any objection to the constitution of the Tribunal. The appellant
appeared before the learned Arbitrator, filed its written statement of
defence, raised a counter-claim, and participated in the proceedings. The
respondent also led evidence by affidavit, and written submissions were
filed.
28. It was only at the 5th meeting of the Arbitral Tribunal on 22/07/2017
that an objection was raised regarding the constitution of the Arbitral
Tribunal and the continuation of proceedings. The question, therefore, is
whether such an objection, raised at that stage, can be said to be in
accordance with the statutory requirements.
29. The Hon’ble Supreme Court in Quippo Construction Equipment
Limited v. Janardan Nirman Private Limited, (2020) 18 SCC 277,
while affirming the legal position in Narayan Prasad Lohia v. Nikunj
Kumar Lohia, (2002) 3 SCC 572, has held that Sections 10 and 16 of the
Arbitration and Conciliation Act, 1996 are required to be read conjointly. It
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has been held that if a party does not raise an objection under Section 16
with regard to the constitution of the arbitral tribunal, such party shall be
deemed to have waived its right to object under Section 4 of the Act.
30. The Supreme Court observed that though Section 10 provides that
the arbitral tribunal shall not consist of an even number of arbitrators, the
provision is derogable in nature. The Court further considered the question
whether non-compliance with Section 10 would render the constitution of
the tribunal void. Answering the said question, it was held that the real
issue is whether the party has exercised its right to object to the
composition of the arbitral tribunal in accordance with Section 16. If such
objection is not raised within the time prescribed, the right stands waived.
31. It has been observed that arbitration is a creature of agreement and
there can be no arbitration in the absence of an agreement between the
parties. However, once parties have agreed to arbitrate and have
participated in the proceedings without objection, they cannot
subsequently challenge the composition of the tribunal at a later stage.
32. The Supreme Court also relied upon the judgment in Konkan
Railway Corporation Ltd. v. Rani Construction (P) Ltd., (2002) 2
SCC 388, and observed that Section 16 embodies the principle that the
arbitral tribunal is competent to rule on its own jurisdiction, including
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objections with respect to the existence or validity of the arbitration
agreement and the constitution of the tribunal. The arbitral tribunal is
empowered not only to decide jurisdictional issues but also to examine
issues which go to the root of its authority.
33. It has thus been clarified that a challenge to the composition of the
arbitral tribunal must be raised before the tribunal itself under Section
16(2), not later than the submission of the statement of defence. Section
16 further makes it clear that such a plea can be raised even by a party
who has appointed or participated in the appointment of an arbitrator.
However, if no objection is raised within the prescribed time, Section 4
operates as a deemed waiver of the right to object.
34. Thus, from conjoint reading of Sections 10, 16 and 4, it is evident
that an objection to the composition of the arbitral tribunal is a matter
which is derogable and must be raised in the manner and within the time
prescribed under Section 16(2), failing which the party is precluded from
raising such objection at a subsequent stage.
35. In the instant case, we find that the appellant had made a statement
before this Court that it would jointly consider to the appointment of Mr. C.
D. Fakir as the Arbitrator on 18/02/2015. Pursuant thereto, after some
initial hesitation as seen from above noted letter dated 25/04/2015, the
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arbitral proceedings commenced and were conducted from time to time.
36. It is further evident that even up to the fourth meeting dated
08/07/2017 of the arbitral tribunal, no objection whatsoever was raised by
the appellant with regard to the constitution of the arbitral tribunal. On the
contrary, the appellant participated in the proceedings, filed its written
statement as well as counter-claim, and the claimant also filed its affidavit
of evidence. The matter thereafter proceeded substantially.
37. It is significant to note that for a period of nearly two years, the
appellant did not take any steps either to seek recall of the order passed by
the High Court or to raise any objection to the constitution of the tribunal in
accordance with law.
38. In such circumstances, the objection raised at a belated stage, after
filing of the written statement, counter-claim and after commencement of
evidence, is clearly not in consonance with Section 16(2) of the Arbitration
and Conciliation Act, 1996, which mandates that a plea as to the lack of
jurisdiction or improper constitution of the arbitral tribunal shall be raised
not later than the submission of the statement of defence.
39. Accordingly, the appellant, having failed to raise a timely objection
and having participated in the proceedings without protest, is deemed to
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have waived its right under Section 4 of the Act and is therefore precluded
from challenging the constitution of the arbitral tribunal at a belated stage.
40. The objection raised by the appellant that the consent was not taken
from the Secretary, who alone was entitled to appoint the Arbitrator on
behalf of the appellant, and that the consent was given by the Executive
Engineer, and therefore there was no valid consent for the appointment of
the Sole Arbitrator, cannot be accepted. The appellant was represented
before the High Court through the learned A.G.P., and it was not for the
claimant to verify the validity of such consent.
41. We may also refer to the judgment of the Hon’ble Supreme Court in
M.K. Shah Engineers & Contractors v. State of M.P., (1999) 2 SCC
594, wherein the Supreme Court considered a similar objection regarding
non-compliance with a contractual pre-condition requiring a decision of the
Superintending Engineer prior to invocation of arbitration.
42. In the said case, the communication rejecting the claim of the
contractor was issued by the Executive Engineer. The Superintending
Engineer never expressly stated that the rejection was not his decision. The
Supreme Court held that, in such circumstances, the contractor was
justified in treating the communication as a decision and in invoking
arbitration. The Court further observed that if the Appellant had, through
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its own officers, created ambiguity or failed to act in accordance with the
contractual mechanism, it could not take advantage of its own wrong to
defeat the claim of the contractor.
43. The Hon’ble Supreme Court categorically held that no party can be
permitted to take advantage of its own wrong, and that where the
procedural pre-requisite is frustrated by the conduct of the respondent
itself, such party cannot subsequently rely upon that very non-compliance
to invalidate the arbitration.
44. Similarly, in the present case, the Executive Engineer, who executed
the contract on behalf of the Appellant and defended the proceedings
before the Tribunal, acted as an authorized representative of the appellant.
Any internal miscommunication, procedural lapse, or failure of coordination
between the Executive Engineer, the Superintending Engineer, or the
concerned Departmental authorities is a matter internal to the appellant.
The claimant cannot be made to suffer on account of such internal
administrative lapses.
45. Therefore, the appellant cannot now contend that any alleged defect
in the pre-arbitral procedure, arising from its own internal functioning,
would render the arbitral proceedings invalid. The claimant cannot be
made the victim of the appellant’s own procedural lapses.
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46. The Hon’ble Supreme Court has consistently held that an objection
to the constitution of the Arbitral Tribunal must be raised at the earliest
opportunity, as contemplated under Section 16(2) of the Arbitration and
Conciliation Act, 1996. Such objection is required to be made within the
prescribed time, ordinarily before or along with the filing of the first
statement of defence. If a party proceeds with the arbitration without
raising a timely objection, the consequence under Section 4 of the Act
follows, namely, deemed waiver.
47. The next issue that arises for consideration is whether the mandate
of the arbitral tribunal stands vitiated in view of the alleged disqualification
under Schedule V read with Section 12(1) of the Arbitration and
Conciliation Act, 1996, and whether the arbitrator has become ineligible to
act as an arbitrator unless there is express written consent after the
dispute has arisen in view of the statutory bar contained in Schedule VII
read with Section 12 (5) of the Act.
48. The learned Counsel appearing for the appellant submits that the
learned Arbitrator appointed in the present matter is a former employee of
the appellant and was allegedly responsible for sanctioning the project
which was subsequently tendered to the sister concern of the respondent.
It is contended that the Chief Engineer who had dealt with the sanctioning
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of the project was nominated as Arbitrator of the respondent / contractor
under Clause 3.4.17 of the agreement, and thus the Arbitrator had live
nexus with the respondent. According to the appellant, such relationship
gives rise to justifiable doubts as to independence and impartiality, thereby
attracting disqualification under the Fifth Schedule read with Section 12(1)
of the Arbitration and Conciliation Act, 1996.
49. The learned Counsel submits that though the objection was raised in
the fifth meeting of the arbitral tribunal, it was raised immediately upon
the appellant becoming aware of the circumstances giving rise to such
ineligibility. According to him, such an objection can be raised even after
filing of the statement of claim or defence, particularly when the ground
pertains to statutory ineligibility.
50. The learned Counsel further contends that by virtue of the Arbitrator
being a nominee of the respondent, he suffered disqualification under the
Seventh Schedule read with Section 12(5). It is urged that Section 12(5) is
a substantive provision which relates to the de jure inability of an arbitrator
to act. By virtue of the non obstante clause contained therein, any prior
agreement between the parties stands overridden the moment it is found
that the relationship of the arbitrator with the parties or the subject matter
of the dispute falls within any of the categories specified in the Seventh
Schedule. In such circumstances, the person becomes ineligible, as a
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matter of law, to be appointed as an arbitrator.
51. It is further submitted that such ineligibility can be cured only by an
express agreement in writing entered into between the parties after the
disputes have arisen, whereby they waive the applicability of Section 12(5).
In the absence of such an express written waiver, the ineligibility operates
automatically. In support of these submissions, reliance is placed upon the
judgment of the Hon’ble Supreme Court in Bharat Broadband Network
Limited v. United Telecoms Limited, AIR 2019 SC 2434.
52. The learned Counsel for the appellant submits that the aforesaid
objections raise serious and substantial issues concerning the impartiality
and independence of the Arbitrator, and therefore prays that the arbitral
award be set aside. The issues raised herein are prima facie serious and
may require examination by this Court. However, before examining the
question of disqualification of the Arbitrator under Schedule V read with
Section 12(1) of the Arbitration and Conciliation Act, 1996, and the Seventh
Schedule read with Section 12(5) of the Act, it becomes necessary to
determine whether the said provisions are applicable to the arbitral
proceedings in question, having regard to the date of commencement of
the arbitration proceedings.
53. The Hon’ble Supreme Court in Bhadra International (India) Pvt.
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Ltd. and Ors. v. Airports Authority of India, 2026 INSC 6, while
considering the applicability of the Arbitration and Conciliation
(Amendment) Act, 2015, has held that Section 26 of the Amendment Act,
2015 makes it clear that the amended provisions shall apply only to arbitral
proceedings commenced on or after 23/10/2015, unless the parties
otherwise agree. Section 26 of the Amendment Act 2015 reads as under :
“Nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the provisions of
Section 21 of the principal Act, before the commencement of
this Act unless the parties otherwise agree but this Act shall
apply in relation to arbitral proceedings commenced on or after
the date of commencement of this Act.”
54. The Supreme Court reiterated that, in view of Section 21 of the
Arbitration and Conciliation Act, 1996, arbitral proceedings commence on
the date on which a notice invoking arbitration is received by the
respondent, unless there is a contrary agreement between the parties.
55. Reliance was placed upon the judgment in Board of Control for
Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors., (2018) 6 SCC
287, wherein the Supreme Court has observed as under :
“37. What will be noticed, so far as the first part is
concerned, which states, –
“26. Act not to apply to pending arbitral proceedings .
– Nothing contained in this Act shall apply to the arbitral
Page 24 of 29
Com Arb Appeal 1-2023proceedings commenced, in accordance with the provisions of
section 21 of the principal Act, before the commencement of
this Act unless the parties otherwise agree…”
is that: (1) “the arbitral proceedings” and their commencement
is mentioned in the context of Section 21 of the principal Act ;
(2) the expression used is “to” and not “in relation to”; and (3)
parties may otherwise agree. So far as the second part of
Section 26 is concerned, namely, the part which reads, “…but
this Act shall apply in relation to arbitral proceedings
commenced on or after the date of commencement of this Act”
makes it clear that the expression “in relation to” is used; and
the expression “the” arbitral proceedings and “in accordance
with the provisions of Section 21 of the principal Act” is
conspicuous by its absence.”
“38. That the expression “the arbitral proceedings” refers to
proceedings before an arbitral tribunal is clear from the
heading of Chapter V of the 1996 Act, which reads as follows:
“Conduct of Arbitral Proceedings”
The entire chapter consists of Sections 18 to 27 dealing with
the conduct of arbitral proceedings before an arbitral tribunal.
What is also important to notice is that these proceedings
alone are referred to, the expression “to” as contrasted with
the expression “in relation to” making this clear. Also, the
reference to Section 21 of the 1996 Act, which appears in
Chapter V, and which speaks of the arbitral proceedings
commencing on the date on which a request for a dispute to be
referred to arbitration is received by the respondent, would
also make it clear that it is these proceedings, and no others,
that form the subject-matter of the first part of Section 26.
Also, since the conduct of arbitral proceedings is largely
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procedural in nature, parties may “otherwise agree” and apply
the Amendment Act to arbitral proceedings that have
commenced before the Amendment Act came into force In
stark contrast to the first part of Section 26 is the second part,
where the Amendment Act is made applicable “in relation to”
arbitral proceedings which commenced on or after the date of
commencement of the Amendment Act. What is conspicuous
by its absence in the second part is any reference to Section 21
of the 1996 Act. Whereas the first part refers only to arbitral
proceedings before an arbitral tribunal, the second part refers
to Court proceedings “in relation to” arbitral proceedings, and
it is the commencement of these Court proceedings that is
referred to in the second part of Section 26, as the words “in
relation to the arbitral proceedings” in the second part are not
controlled by the application of Section 21 of the 1996 Act.”
39. Section 26, therefore, bifurcates proceedings, as has
been stated above, with a great degree of clarity, into two sets
of proceedings – arbitral proceedings themselves, and Court
proceedings in relation thereto. The reason why the first part of
Section 26 is couched in negative form is only to state that the
Amendment Act will apply even to arbitral proceedings
commenced before the amendment if parties otherwise agree.
If the first part of Section 26 were couched in positive language
(like the second part), it would have been necessary to add a
proviso stating that the Amendment Act would apply even to
arbitral proceedings commenced before the amendment if the
parties agree. In either case, the intention of the legislature
remains the same, the negative form conveying exactly what
could have been stated positively, with the necessary proviso.
Obviously, “arbitral proceedings” having been subsumed in the
first part cannot re-appear in the second part, and the
expression “in relation to arbitral proceedings” would,
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therefore, apply only to Court proceedings which relate to the
arbitral proceedings. The scheme of Section 26 is thus clear:
that the Amendment Act is prospective in nature, and will
apply to those arbitral proceedings that are commenced, as
understood by Section 21 of the principal Act, on or after the
Amendment Act, and to Court proceedings which have
commenced on or after the Amendment Act came into force.”
56. The Supreme Court in BCCI (Supra) clarified that the first part of
Section 26 makes it explicit that the Amendment Act, 2015 is prospective
in nature and would not apply to arbitral proceedings which commenced
prior to 23/10/2015, unless the parties otherwise agree. The
commencement of proceedings must be understood in the manner
contemplated under Section 21 of the principal Act. Section 21 of the
Arbitration Act provides :
“Unless otherwise agreed by the parties, the arbitral
proceedings in respect of a particular dispute commence on
the date on which a request for that dispute to be referred to
arbitration is received by the respondent.”
57. Thus, the determining factor for applicability of the Amendment Act,
2015 is the date on which the notice invoking arbitration was received by
the respondent. In the present case, it is found that the first notice
invoking arbitration was issued in March 2014 and was received by the
respondent. Thus the notice of arbitration was prior to the commencement
of the Amendment Act, 2015. The respondent thereafter approached the
High Court under Section 11(6) and the High Court disposed of the
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application by an order on 02/03/2015. Thus commencement of arbitral
proceedings, in terms of Section 21, had already taken place upon receipt
of the notice invoking arbitration, much prior to the commencement of the
Amendment Act in 2015.
58. Since the arbitral proceedings in the present case commenced prior
to 23/10/2015, and there is no material to show that the parties agreed to
the applicability of the amended provisions, the Arbitration and Conciliation
(Amendment) Act, 2015 would not apply to the present proceedings.
Consequently, Section 12(1), and the Fifth Schedule of the Act and Section
12 (5) and the Seventh Schedule of the Act , which were introduced by the
2015 Amendment, are not applicable to the present arbitration
proceedings. Thus the disqualification of Sole Arbitrator as provided in the
above provisions [i.e. Schedule V read with Section 12 (1) and Schedule VII
read with Section 12 (5)] cannot be invoked qua the present proceedings.
59. In view of he above discussion, no case is made out to set aside the
arbitral award. The Commercial Arbitration Appeal is thus dismissed with
costs. Pending civil applications stand disposed of.
( VAISHALI PATIL-JADHAV, J. ) ( ARUN R. PEDNEKER, J. )
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AFTER PRONOUNCEENT OF JUDGMENT :
60. The learned A.G.P., after pronouncement of the Judgment, seeks stay
of the Judgment passed today. The Arbitral Award is against the Appellant,
and the application under Section 34 of the Arbitration and Conciliation Act,
1996 has been dismissed by this order. We have also dismissed the
Commercial Appeal under Section 13 of the Commercial Courts Act read
with Section 37 of the Arbitration and Conciliation Act, 1996.
61. Considering the same, no case is made out to stay the Judgment
passed today.
( VAISHALI PATIL-JADHAV, J. ) ( ARUN R. PEDNEKER, J. )
vj gawade/-.
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