Madhya Pradesh High Court
The State Of Madhya Pradesh vs M/S Smec India Pvt. Ltd. on 8 April, 2026
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IN THE HIGH COURT OF MADHYA
PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE PRADEEP MITTAL
ARBITRATION APPEAL No. 266 of 2023
THE STATE OF MADHYA PRADESH
Versus
M/S SMEC INTERNATIONAL PVT. LTD
Appearance:
Shri Abhijeet Awasthi - Deputy Advocate General for
appellant/State.
Dr. Anuvad Shrivastava - Advocate for respondent.
WITH
ARBITRATION APPEAL No. 265 of 2023
THE STATE OF MADHYA PRADESH
Versus
M/S SMEC INDIA PVT. LTD.
Appearance:
Shri Abhijeet Awasthi - Deputy Advocate General for
appellant/State.
Dr. Anuvad Shrivastava - Advocate for respondent.
ORDER
Heard on : 16.03.2026
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Pronounced on: 08.04.2026
Per: Justice Pradeep Mittal
Issue involved in these two Arbitration Appeals are similar in
nature, thus they are being decided by this Common order.
1. The present appeal has been filed by the appellant Water
Resources Department, Government of Madhya Pradesh
(hereinafter “WRD” or “the appellant”) under Section 37 of the
Arbitration and Conciliation Act, 1996 (hereinafter “the Act of
1996”), challenging the order dated 22.06.2023 passed by the
learned Commercial Judge / 8th District Judge, Bhopal in M.J.C.
(Arbitration Case No. 82/2018), whereby the application filed by
the appellant under Section 34 of the Act of 1996 was dismissed.
2. The brief facts germane to the present appeal are as follows. The
appellant Project Implementation Coordination Unit (PICU), Water
Resources Department, Government of Madhya Pradesh issued a
Request for Proposal (RFP) on 14.12.2005 for consultancy services
for developing Capacity Building for Water User Associations
(WUA) in the basins of Sindh, Ken, Tons, Chambal and Betwa in
Madhya Pradesh. The project was financed by the International
Bank for Reconstruction and Development / World Bank. In
response, the respondent SMEC International Pty. Ltd., an
Australian company with its registered address at 220, Sharp Street
(PO Box 356), Cooma 2630, Australia submitted its technical and
financial proposal. The said proposal was accepted by the appellant
vide letter dated 28.03.2007 and a Lump Sum Contract (Agreement
No. 16/EE/BVPP/SAC/225/06-07) was executed between the
parties. The respondent was directed to commence work vide letter
dated 29.03.2007 and the stipulated period of performance was 36
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months, i.e., till 28.03.2010. The total contract value (inclusive of
tax) was Rs.19,26,83,092/-. The period of the contract was
subsequently extended till 30.06.2010 and further till 30.09.2010.
3. An advance payment of Rs.1,92,58,309/- (representing 10% of
the contracted amount) was made by the appellant to the
respondent against a bank guarantee of equivalent amount. It is the
case of the appellant that the respondent failed to deploy the named
key professionals, failed to submit deliverables of acceptable
quality, and committed persistent breach of contract. The appellant
consequently issued a termination notice dated 27.11.2010 calling
upon the respondent to rectify the shortcomings within 30 days. As
the respondent failed to do so, the contract was closed vide letter
dated 27.12.2010 and the advance payment bank guarantee of
Rs.1,92,58,309/- was encashed.
4. In view of the ensuing dispute, the respondent filed a writ
petition (W.P. No. 7781/2013) for appointment of an arbitrator. By
order dated 06.05.2015, the High Court appointed Justice V.K.
Agarwal (Retd.) as Sole Arbitrator. The learned sole arbitrator
passed the award dated 15.02.2018, allowing the claim of the
respondent and directing the appellant to pay:
(i) Rs.8,17,43,319/- (which includes the bank guarantee
amount of Rs.1,92,58,309/-) along with USD 1,85,578 and
AUD 1,47,007;
(ii) Interest @ 9% p.a. on the bank guarantee amount from
28.12.2010 till payment, and interest @ 9% p.a. on the
remaining amount from 28.02.2011 till payment; and
(iii) Costs of Rs.20,00,000/- (inclusive of stamp duty).
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Subsequently, the respondent filed an application under
Section 33 of the Act of 1996 for correction of the award. The
learned arbitrator, vide corrected/modified award dated 13.03.2018,
modified Clauses 1 and 2 of Para 102 of the original award,
clarifying that the bank guarantee amount was already included in
the principal INR amount and was not separately payable. The
corrected award dated 13.03.2018 is the final award for the
purposes of this proceeding.
5. Before proceeding to the issues, it is necessary to extract the
dispute resolution clause. Clauses 8.2 and 8.3 of the agreement read
as under:
“8.2(i) Any dispute, controversy, or claim arising out of or relating to
this contract, or the breach, termination or invalidity thereof shall be
settled by arbitration in accordance with the following provisions:
8.2(ii) Each dispute submitted by a Party to arbitration shall be heard
by a sole arbitrator or an arbitration panel composed of three
arbitrators…
8.3 Rules of Procedure: Arbitration proceedings shall be conducted in
accordance with procedure of the Arbitration & Conciliation Act 1996
of India unless the Consultant is a foreign national/firm, where
arbitration proceedings shall be conducted in accordance with the
rules of procedure for arbitration of the United Nations Commission on
International Trade Law (UNCITRAL) as in force on the date of this
Contract.”
6. The appellant filed an application under Section 34 of the Act of
1996 before the learned Commercial Court, Bhopal. The learned
Commercial Court, by order dated 20.04.2022, dismissed the
application on the grounds that the challenge did not fall within
Section 34(2)(b)(ii) of the Act. The appellant preferred Arbitration
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Appeal No. 46/2022 before this Court (along with connected A.A.
No. 47/2022).
7. A Division Bench of this Court, vide judgment dated 15.09.2022,
set aside the order dated 20.04.2022 and remanded the matter to the
learned Commercial Court for rehearing afresh. The relevant
extract from the remand order reads as below:
“33. In view of foregoing analysis, in our opinion, it will not be proper
to deal with the merits of the case and rival contentions raised before
us.
34. Since in the impugned order, an incorrect finding is given that
application was barred by limitation, it cannot sustain judicial scrutiny.
Similarly, in the impugned order, the learned Court below has not dealt
with the rival contentions of the parties by assigning minimum
justifiable reasons… For these cumulative reasons, we deem it proper to
set aside the order dated 20.04.2022 and remit the matter back before
the learned Commercial Court to rehear the parties and decide the
matter afresh in accordance with law. It is made clear that this Court
has not expressed any opinion on the merits of the case.
35-36. …stand of learned counsel for the respondent is that this matter
is arising out of an International Commercial Arbitration, whereas,
learned counsel for the State has taken a diametrically opposite stand.
Shri Seth, Deputy Advocate General submits that since award is a
domestic award, it cannot be said to be arising out of an International
Commercial Arbitration. Suffice it to say that Court below has not
given any finding on this aspect. Thus, this question will also remain
open to be raised by the parties and decided by the Court below in
accordance with law…”
8. After remand, the learned Commercial Court vide the impugned
order dated 22.06.2023 once again dismissed the application under
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Section 34. On the question of limitation, the learned Commercial
Court held as under:
“Looking at the present case in light of the aforementioned provision, it
is clear that the award was passed by the learned Arbitrator on
15.02.2018. If the applicant’s contentions are accepted as they are, then
according to him, he became aware of the said award on 13.03.2018. It
does not appear that any application was filed by the applicant or non-
applicant before the learned Arbitrator under Section 33 of the Central
Act. Therefore… the challenged award could have been contested
within 03 months from 15.02.2018 in the first instance, or secondly…
from 13.03.2018 within a period of 03 months. After the expiry of the
03-month period, this could be extended by an additional period of 30
days with the permission of the Court. However, no application
showing sufficient cause in this regard has been presented by the
applicant before the Court. The period for challenging the award
expired on 12.06.2018. But the applicant filed the application
challenging the award on 06.08.2018, which is a delay of
approximately one and a half months. The application is not within the
time limit prescribed under the provisions mentioned in the Act.”
On the question of International Commercial Arbitration, the
learned Commercial Court noted the respondent’s objection but did
not decide the issue independently on merits, noting only that the
appellant had not filed the relevant documents to substantiate the
ground.
9. Learned counsel for the appellant submits that the impugned
order dated 22.06.2023 is contrary to law and facts on record. It is
submitted that the arbitral award dated 15.02.2018 (as corrected on
13.03.2018) is ex facie illegal and the Court below committed error
in dismissing the Section 34 application. Learned counsel has
raised the following grounds:
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(i) The present arbitration constitutes an International
Commercial Arbitration within the meaning of Section
2(1)(f) of the Act of 1996, inasmuch as the respondent-
claimant is a body corporate incorporated in Australia
consequently, challenge under Section 34 (Part I) is
maintainable only to the extent permissible under Section 5
read with the scheme of Part II, and the appropriate forum
and legal framework ought to have been applied accordingly.
(ii) The application under Section 34 was within limitation.
The Section 33 application was filed by the respondent-
claimant (not the appellant), and the corrected/modified
award dated 13.03.2018 was received by the appellant
thereafter. The limitation period under Section 34(3)
therefore commenced from the date of receipt of the
corrected award i.e. 13.03.2018, and the application filed on
06.08.2018 is within the prescribed period of three months
plus thirty days.
(iii) The arbitral award is vitiated by patent illegality
inasmuch as the arbitrator failed to appreciate that the
respondent had failed to perform approximately 40% of
contractual obligations, failed to deploy key professionals,
and failed to submit deliverables of acceptable quality, the
termination and encashment of bank guarantee were
therefore justified.
(iv) The contract in question is a “works contract” within the
meaning of the M.P. Madhyastham Adhikaran Adhiniyam,
1983, and therefore the Arbitral Tribunal lacked jurisdiction.
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10. Learned counsel for the respondent submits that: (i) the Section
33 application was filed by the respondent-claimant, not the
appellant, and hence the limitation period commenced from the
date the appellant received the original award dated 15.02.2018; the
Section 34 application filed on 06.08.2018 is thus barred by
limitation, (ii) the present arbitration is an International
Commercial Arbitration within the meaning of Section 2(1)(f) of
the Act, governed by Part II thereof, and the challenge under
Section 34 (Part I) is therefore not maintainable at all (iii) the
award is a well-reasoned document passed after thorough
consideration of evidence and does not suffer from any patent
illegality.
ISSUES FOR CONSIDERATION
Having heard the learned counsel for the parties and perused the
record including the arbitral award, the following issues arise for
consideration:
Issue No. I: Whether the present arbitration is an “International
Commercial Arbitration” within the meaning of Section 2(1)(f) of
the Act of 1996, and if so, whether the application under Section 34
(Part I) is maintainable ?
Issue No. II: Whether the application filed under Section 34 of
the Act of 1996 was barred by limitation under Section 34(3) of the
Act ?
Issue No. III: Whether the arbitral tribunal lacked jurisdiction in
view of the applicability of the M.P. Madhyastham Adhikaran
Adhiniyam, 1983 ?
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ISSUE NO. I – INTERNATIONAL COMMERCIAL
ARBITRATION AND MAINTAINABILITY OF SECTION 34
APPLICATION
11. The definition of “international commercial arbitration” is
contained in Section 2(1)(f) of the Act of 1996, which reads as
under:
“2(1)(f) ‘international commercial arbitration’ means an arbitration
relating to disputes arising out of legal relationships, whether
contractual or not, considered as commercial under the law in force in
India and where at least one of the parties is —
(i) an individual who is a national of, or habitually resident in, any
country other than India; or
(ii) a body corporate which is incorporated in any country other than
India; or
(iii) a company or an association or a body of individuals whose
central management and control is exercised in a country other than
India; or
(iv) the Government of a foreign country.”
12. In the present case, it is undisputed that the respondent-claimant
before the arbitrator is SMEC International Pty. Ltd., which is an
Australian company incorporated under the laws of Australia, with
its registered/principal address at 220, Sharp Street (PO Box 356),
Cooma – 2630, Australia. The respondent is thus a “body corporate
which is incorporated in any country other than India” within the
meaning of Section 2(1)(f)(ii) of the Act of 1996. The dispute
arises from a commercial consultancy contract. Accordingly, the
present arbitration is squarely an “International Commercial
Arbitration” within the meaning of Section 2(1)(f).
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13. Respondent company has been authorised to Mr. Gaurav
Kumar Srivastava as a country head of SMEC(India) Pvt Ltd by
power executing of attorney to represent SMEC International Pty.
Ltd. before the Central /State/ Local Government Authorities of
India and the Royal Government’ of Bhutan, for any purpose
connected with or relating to business activities of the Company. it
is clear from the agreement that the respondent company was
registered in Australia and its office in Australia. petitioner argued
that the respondent company having its local office at Gurgaon
therefore the agreement does not fall under the definition of
international commercial arbitration. Respondent company issued a
power of attorney to conducted the work at India and power
attorney holder opened his office at Gurgaon it does not mean the
respondent company registered at India hence the one parry of the
contract is foreign nation and contract govern by foreign law
therefore contract covered under the definition of 2a of the
arbitration conciliation act 1996 and commercial court Bhopal
failed to considered that aspects of the contract therefore we hold
that the contract is a international contract arbitration and its
govern by the foreign law as per the contract.
14. The Dispute Resolution Clause (Clause 8.3) of the contract
itself recognizes this character by providing that “unless the
Consultant is a foreign national/firm, where arbitration proceedings
shall be conducted in accordance with the rules of procedure for
arbitration of the United Nations Commission on International
Trade Law (UNCITRAL).” Since the respondent is admittedly a
foreign firm, the contract itself contemplated UNCITRAL rules,
confirming the international character of the arbitration. Despite
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this clear position, the arbitration was conducted under Part I of the
Act by a domestic arbitrator appointed by this Court a circumstance
that directly goes to the root of jurisdiction and maintainability.
15. The Apex Court authoritatively dealt with the interplay between
Part I and Part II of the Act in the context of international
commercial arbitrations seated in India in
In Bharat Aluminium Co. v. Kaiser Aluminium Technical Services
Inc., (2012) 9 SCC 552 (BALCO), a Constitution Bench of the
Hon’ble Supreme Court held at paragraph 75:
“75. We are of the considered opinion that the Parliament, while
enacting the 1996 Act, intended to provide a different and distinct
regime for international commercial arbitrations held in India. Part I is
applicable to domestic arbitrations as well as international commercial
arbitrations held in India. In contrast, Part II applies only to the
enforcement of foreign awards.”
Further, in GE Power Conversion India Pvt. Ltd. v. PASL Wind
Solutions Pvt. Ltd., (2021) 7 SCC 1, the Hon’ble Supreme Court
held at paragraph 60 that Part I of the Act, including Section 34, is
applicable to international commercial arbitrations seated in India:
“Part I of the 1996 Act applies to international commercial
arbitrations held in India. Therefore, an application under
Section 34 can be made to set aside an award made in an
international commercial arbitration held in India.”
16. In TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt.
Ltd., (2008) 14 SCC 271, the Hon’ble Supreme Court held that:
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Section 2(1)(f) of the Act, the term ‘International
Commercial Arbitration’ has been defined. For an arbitration
to be an international commercial arbitration, the
requirement of the definition is that at least one of the parties
must be a person of the kind specified in sub-clauses (i) to
(iv) of Section 2(1)(f).”
17. Thus, the present arbitration with the seat in India and one
party being a foreign body corporate is an International
Commercial Arbitration to which Part I of the Act applies, and
the challenge under Section 34 is therefore maintainable before
the courts in India. However, the legal significance of the
international character of arbitration cannot be overlooked, the
ground of “patent illegality” contained in Section 34(2A) is
available only in domestic arbitrations and does not apply to
international commercial arbitrations. As held by the Hon’ble
Supreme Court in Ssangyong Engineering & Construction Co.
Ltd. v. National Highways Authority of India (NHAI), (2019) 15
SCC 131-
” It will be noticed that Section 34(2A) applies only to a
domestic award not involving an international commercial
arbitration… The ground of “patent illegality” added by
Section 34(2A) is, therefore, not available for international
commercial arbitrations…
. …In the case of international commercial arbitrations held
in India, a challenge can be made only on the grounds
contained in Sections 34(2)(a) and 34(2)(b), and Section
34(2A) would not apply.”
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18. The learned Commercial Court, after being directed by this
Court vide remand order dated 15.09.2022 to specifically
adjudicate the question of ICA status, failed to return any
substantive finding on merits. The Court below merely observed
that the appellant had not filed the relevant documents to
substantiate the ground an observation that is incorrect on the face
of the record, inasmuch as the incorporation of the respondent as an
Australian company is an undisputed fact and the contract itself
discloses the respondent’s Australian address and registration.
19. In view of the above, this Court holds that the present
arbitration is an International Commercial Arbitration within the
meaning of Section 2(1)(f)(ii) of the Act of 1996. The application
under Section 34 of the Act is maintainable. However, the ground
of “patent illegality” under Section 34(2A) is not available to the
appellant. The challenge can succeed only if the award falls within
the grounds enumerated in Section 34(2)(a) or Section 34(2)(b) of
the Act. Issue No. I is answered accordingly.
ISSUE NO. II — LIMITATION UNDER SECTION 34(3)
20. The statutory provision governing the period for challenging an
arbitral award is Section 34(3) of the Act of 1996, which reads as
under:
“Section 34(3). An application for setting aside may not be made after
three months have elapsed from the date on which the party making
that application had received the arbitral award or, if a request had been
made under Section 33, from the date on which that request had been
disposed of by the arbitral tribunal:
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of three months it may entertain the application within a further period
of thirty days, but not thereafter.”
21. The learned Commercial Court, in its impugned order, held that
the period of limitation must be computed from 15.02.2018 (date of
the original award) because the Section 33 application was filed by
the respondent (claimant) and not by the appellant. The Court
below held that the challenge period expired on 12.06.2018 (three
months from 15.02.2018 + 30 days condonable delay), and since
the application was filed on 06.08.2018, it was barred by limitation.
This finding is legally erroneous for the reasons that follow.
22. A plain reading of Section 34(3) shows that where “a request
had been made under Section 33,” the limitation period runs from
“the date on which that request had been disposed of by the arbitral
tribunal.” The section does not state that the request must have been
made by the party filing the Section 34 application. The language
of the provision is unambiguous, it uses the passive phrase “if a
request had been made,” without any qualification as to which party
made it. The object of the provision is evidently to ensure that the
party challenging the award has access to the final, corrected
version of the award before the limitation period commences.
23. In the present case, it is an admitted position that the respondent
filed an application under Section 33 of the Act, and the arbitrator
passed a corrected/modified award on 13.03.2018. The original
award of 15.02.2018 was thereby modified in material respects
specifically, Clauses 1 and 2 of Para 102 were amended to clarify
the inclusion of the bank guarantee amount. A party challenging an
award must be entitled to challenge the final, operative version of
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the award. Since the corrected award was passed on 13.03.2018,
and the Section 34 application was filed on 06.08.2018, the
application is within the maximum period of three months plus
thirty days (13.03.2018 + 3 months = 13.06.2018 + 30 days =
13.07.2018). At the very best, even if the condonable period of 30
days is required, the delay is minimal and ought to have been
condoned.
24. The Hon’ble Supreme Court in State of Himachal Pradesh v.
Himachal Techno Engineers, (2010) 12 SCC 210, has held that the
period under Section 34(3) commences from the receipt of the
award by the party, and that a corrected award under Section 33
sets a fresh period of limitation running from the date of correction.
This position has also been affirmed in Union of India v. Tecco
Trichy Engineers & Contractors, (2005) 4 SCC 239, wherein the
Court held at paragraph 8:
“8. The period of limitation of three months provided under sub-section
(3) of Section 34 commences from the date of receipt of the arbitral
award. Such receipt has to be of a signed copy of the award, delivered
to the party. If a request has been made under Section 33, the period of
three months would commence from the date on which the request
made under Section 33 has been disposed of by the arbitral tribunal.”
25. The reasoning of the learned Commercial Court that the Section
33 request was made by the respondent and hence cannot extend
the limitation for the appellant is contrary to the plain text of
Section 34(3) and the above authorities. The corrected award is the
final and operative award, and it is that award which the appellant
has sought to challenge. The limitation period therefore runs from
13.03.2018. The application filed on 06.08.2018 is, at most, beyond
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three months by approximately 26 days, which falls within the
condonable period of 30 days. In any event, the appellant being a
government department, adequate cause exists for the short delay.
26. During the course of hearing, learned senior counsel for the
respondent did not dispute that on the question of limitation, the
Court below already gave its finding on 03.07.2019 held that
application is within limitation and dismissed the application of
respondent filed under section 34(3) of the Arbitration Act. We find
substance in the argument of learned counsel for the appellant that
the final order of Court below on the question of limitation runs
contrary to its previous order. After having dismissed the
application under Section 34(3) of Arbitration Act filed by the
respondent, it was no more open to the Court below to take a
different view. Thus, the finding of Court below to the extent of
limitation is certainly perverse and cannot sustain judicial scrutiny.
Since in the impugned order an incorrect finding is given that
application was barred by limitation, therefore we hold the
application was within time. The application is held to be within
limitation. Issue No. II is decided accordingly.
ISSUE NO. III – JURISDICTION UNDER M.P.
MADHYASTHAM ADHIKARAN ADHINIYAM, 1983
27. Appellants take an additional objection that private arbitration
could not be appoint according to M.P. Act, 1983 and disputed only
be resolve by the M.P. Madhyastham Tribunal. Respondent object
on the grounds of that the rule of waiver applied, under section 4 of
the act once waive the objection regarding the jurisdiciion, it
cannot be raised after passing the award. These issues are no
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longer res integra. In Gayatri Project Ltd. v. M.P. Road
Development Corpn. Ltd., (2025) 10 SCC 750, the Hon’ble Apex
Court observed that it would be open for the parties to raise an
objection regarding lack of jurisdiction, in view of the applicability
of the M.P. Act, 1983, at the stage of Sections 34 and 37 of the
Arbitration and Conciliation Act, 1996. However, such objections
cannot be the sole ground for setting aside the award. In other
words, if there are independent valid grounds for setting aside the
award, this objection may be considered along with them. In such a
situation, the dispute may then be referred to the M.P.
Madhyastham Tribunal for adjudication in accordance with the
M.P. Act, 1983. It is evident from the record that the high court
appoint an arbitrator with the consent of the both party and both
party allowed to passed an award by arbitrator, but this case is
entirely deferent front the Gaitri case because in present case the
contract is a internation contract therefore Indian law like M.P.
Madhyastham Act, 1983 and arbitration conciliation act 1996 does
not apply as per agreement of contract. Therefor the award passed
by arbitration patently illegal.
28. It is not disputed that the contract in question is a “works
contract” within the meaning of the Adhiniyam, 1983. The
appellant has raised the ground that the Arbitral Tribunal lacked
jurisdiction in view of the applicability of the M.P. Madhyastham
Adhikaran Adhiniyam, 1983 (hereinafter “the Adhiniyam, 1983”).
It is submitted that the contract in question is a “works contract”
within the meaning of the Adhiniyam, 1983, and hence the
Madhyastham Tribunal had exclusive jurisdiction.
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29. These issues are no longer res integra. In Gayatri Project Ltd. v.
M.P. Road Development Corpn. Ltd., (2025) 10 SCC 750, the
Hon’ble Apex Court has comprehensively laid down the framework
governing the interplay between arbitration under the Act of 1996
and the jurisdiction of the M.P. Madhyastham Tribunal. The
relevant observations of the Apex Court, at paragraphs 66.1 to 66.6,
read as under:
“66.1. Where arbitration proceedings are ongoing and no statement of
defence has been filed, it is open to the parties to raise an objection
regarding lack of jurisdiction due to the applicability of the M.P. Act,
1983. The parties may also approach the High Court under Article 227
of the Constitution for transfer of the proceedings to the M.P. State
Arbitration Tribunal.
66.2. Where arbitration proceedings are ongoing but the statement of
defence has already been filed (i.e., the stage for raising jurisdictional
objections has passed), such objection shall not be entertained. Since
proceedings have substantially progressed, transfer to the M.P. State
Arbitration Tribunal would not be appropriate, and the arbitration
should be allowed to conclude.
66.3. As held in M.P. Rural Road Development Authority v. L.G.
Chaudhary Engineers & Contractors, (2018) 10 SCC 826, where
arbitration proceedings have concluded and an award has been passed,
and no jurisdictional objection was raised at the appropriate stage, the
award cannot be set aside solely on the ground of lack of jurisdiction.
66.4. Any award passed by an Arbitral Tribunal under the 1996 Act, in
cases where the M.P. Act, 1983 was otherwise applicable, may be
challenged under Section 34 and thereafter Section 37 of the 1996 Act,
along with other relevant provisions.
66.5. Such an award must, however, be executed in accordance with
the provisions of the M.P. Act, 1983.
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66.6. Where an objection regarding applicability of the M.P. Act, 1983
was raised in the written statement or statement of defence, but no steps
were taken to challenge jurisdiction under Section 16 of the 1996 Act,
or such challenge was rejected under the legal position prevailing prior
to the decision in L.G. Chaudhary (2), then, in light of Modern Builders
v. State of M.P., (2024) 10 SCC 637, the award shall not be set aside
solely on the ground of lack of jurisdiction.”
30. Applying the principles laid down in Gayatri Project Ltd. to the
present case, the arbitration proceedings have been concluded, and
the award has been passed. The jurisdictional objection regarding
the Adhiniyam, 1983 was raised if at all neither at the stage of
filing a statement of defence, nor by way of a petition under
Section 16 of the Act of 1996 before the arbitrator, nor under
Article 227 of the Constitution during the currency of the
proceedings. It has been raised for the first time at the post-award
stage under Section 34. In terms of paragraph 66.3 of Gayatri
Project Ltd., the award cannot be set aside solely on the ground of
lack of jurisdiction. Moreover, this is an International Commercial
Arbitration, which raises a serious question as to whether the
Adhiniyam, 1983 a state legislation could operate to oust the
jurisdiction of an arbitral tribunal constituted under an agreement
that itself contemplated UNCITRAL rules for a foreign consultant.
31. Furthermore, in terms of paragraph 66.4 of Gayatri Project
Ltd., the jurisdiction to challenge the award lies under Section 34
and Section 37 of the Act of 1996. Since we have found on Issue
No. III that no valid ground under Section 34(2) has been made out
for setting aside the award, the Adhiniyam objection cannot
independently sustain the challenge. As clarified in paragraph 66.6,
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the award cannot be set aside solely on the ground of lack of
jurisdiction. Issue No. IV is answered accordingly.
32. Effect of International Commercial Arbitration is whether the
award is Nulty due to appointment of the arbitrator by High Court
in ICA. That objection neither raised by the petitioner nor the
respondent during the arbitration proceeding nor the appeal under
34/37 of the Act.
33. As per the agreement clause 8.2 Disputes shall be settled by
arbitration in accordance with the provisions given as under: –
8.2. Disputes shall be settled by arbitration in accordance with the following
provisions:
(i) Any dispute controversy, or claim arising out of or relating to the
contract or the breach termination or invalidity thereof shall be settled by
arbitration in accordance with following provisions;
8.2 (ii) Each dispute submitted by a Party to arbitration shall be heard by-a
sole arbitrator or an arbitration panel composed of three arbitrators, in
accordance with the following provisions:
(a) Where the Parties agree that the dispute concerns a technical matter,
they may agree to appoint a sole arbitrator or, failing agreement on the
identity of such sole arbitrator within thirty (30) days after receipt by the
other Party of the proposal of a name for such an appointment by the Party
who initiated the proceedings, either Party may apply to the President,
Institution of Engineers India, New Delhi, for a list of not fewer than five
nominees and, on receipt of such list, the Parties shall alternate strike names
there from, and the last remaining nominee on the list shall be the sole
arbitrator for the matter in dispute. If the last remaining nominee has not
been determined in this manner within sixty (60) days of the date of the list,
the President, Institution of Engineers India, New Delhi, shall appoint,Signature Not Verified
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upon the request of either Party and from such list or otherwise, a sole
arbitrator for the matter in dispute.
(b). Where the Parties do not agree that the dispute concerns a technical
matter, the Client and the Consultants shall each appoint one arbitrator, and
these two arbitrators shall jointly appoint a third arbitrator, who shall chair
the arbitration panel. If the arbitrators named by the Parties do not succeed
in appointing a third arbitrator within thirty (30) days after the latter of the
two arbitrators named by the Parties has been appointed, the third arbitrator
shall, at the request of either Party, be appointed by Secretary, the Indian
Council of Arbitration, New Delhi.
(c) If, in a dispute subject to Clause. 7.2 (ii) (b), one Party fails to appoint its
arbitrator within thirty (30) days after the other Party has appointed its
arbitrator, the Party which has named an arbitrator may apply to the
Secretary, Indian Council of Arbitration, New Delhi, to appoint a sole
arbitrator for the matter in dispute, and the’ arbitrator appointed pursuant to
such application shall be the sole arbitrator for that dispute.
8.3. Rules of Procedure Arbitration proceedings shall be conducted in
accordance with procedure of the Arbitration & Conciliation Act 1996, of
India unless the Consultant is a foreign national/firm, where arbitration
proceedings shall be conducted in accordance with the rules of procedure
for arbitration of the United Nations Commission on International Trade
Law (UNCITRAL) asin force on the date of this Contract.
8.4 Substitute Arbitrators, If for any reason an arbitrator is unable to
perform his function, a substitute shall be appointed in the same manner as
the original arbitrator.
8.5. Qualifications of Arbitrators the sole arbitrator or the third arbitrator
appointed pursuant to paragraphs (a) through (c) of Clause 7.2.(ii) hereof
shall be an internationally recognized legal or technical expert with
extensive experience in relation to the matter in dispute.
8.6 Miscellaneous
In any arbitration proceeding hereunder:
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(i) Proceedings shall, unless otherwise: agreed by, the Parties, be held in
Bhopal. (ii) the English language shall be the official language for all
purposes’ and.'(iii) the decision of the sole arbitrator or of a majority of the
arbitrators (or of the third arbitrator if there is no such majority) shall be
final and binding and shall be enforceable in any court of competent
jurisdiction, and the Parties hereby waive any objections to or claims of
immunity in respect of such enforcement.
34. We considered the rule from the agreement which provided
that Arbitration proceedings shall be conducted in accordance with
procedure of the Arbitration & Conciliation Act 1996, of India
unless the Consultant is a foreign national/firm, where arbitration
proceedings shall be conducted in accordance with the rules of
procedure for arbitration of the United Nations Commission on
International Trade Law (UNCITRAL) as in force on the date of
this Contract. Substitute Arbitrators, if for any reason an arbitrator
is unable to perform his function, a substitute shall be appointed in
the same manner as the original arbitrator.
35. We also considered the Qualifications of Arbitrators from the
agreement which provided that the Qualifications of Arbitrators the
sole arbitrator or the third arbitrator appointed pursuant to
paragraphs (a) through (c) of Clause 8.2.2 here of shall be an
internationally recognized legal or technical expert with extensive
experience in relation to the matter in dispute.
36. We further considered the Miscellaneous provision from the
agreement which provided that in any arbitration proceeding
hereunder:
(i) Proceedings shall, unless otherwise: agreed by, the Parties, be
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language for all purposes’ and.'(iii) the decision of the sole
arbitrator or of a majority of the arbitrators (or of the third
arbitrator if there is no such majority) shall be final and binding and
shall be enforceable in any court of competent jurisdiction, and the
Parties hereby waive any objections to or claims of immunity in
respect of such enforcement.
37. After considered the above provision we are the opinion that
each party was agreed that the place of the arbitration will be
Bhopal and qualification of the arbitrator must be as Clause 8.2.2
that he shall be an internationally recognized legal or technical
expert with extensive experience in relation to the matter in dispute.
And Arbitration proceedings shall be conducted in accordance with
procedure of the Arbitration & Conciliation Act 1996, of India
unless the Consultant is a foreign national/firm, where arbitration
proceedings shall be conducted in accordance with the rules of
procedure for arbitration of the United Nations Commission on
International Trade Law (UNCITRAL) as in force on the date of
this Contract. Substitute Arbitrators, it is clear from the agreement
that the respondent company is registered in Australia and its office
at Australia. Respondent argued that the respondent company
having its office also at Gurgaon therefore the agreement does not
fall under the definition of international contract. Respondent
company issued a power of attorney to conducted the work at India
and power attorney holder opened his office at Gurgaon it does not
mean the respondent company registered at India hence the one
party of the contract is foreign nation and contract govern by
foreign law therefore contract covered under the definition of 2a of
the Arbitration Conciliation Act 1996 and Commercial Court
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Bhopal failed to considered that aspects of the contract therefore
we hold that the contract is a international contract arbitration and
its govern by the foreign law as per the contract.
38. As per the condition of the agreement of contract, arbitrator
shall be appointed by the President, Institution of Engineers India,
New Delhi upon the request of either Party and from such list or
otherwise, a sole arbitrator for the matter in dispute. In present case
the sole arbitrator was appointed by the High court with the consent
of both parties. But arbitrator does not possess the requisite
qualification and knowledge of foreign law, which is applicable to
the dispute, therefore the consent does not validate the appointment
of arbitrator in the contravention of the provision of contract. It is
clarified by the Apex court in internation contract the jurisdiction
of Indian courts is excluded. 2025 Supreme (SC) 1960 Balaji
Steel Trade V/S Fludor Benin S.A. & Ors. The court reasoned
that since the arbitration clause in the BSA clearly designated
Benin as the seat, and governed by Benin law, the jurisdiction
of Indian courts is excluded. Furthermore, established legal
principles mandate that unless clearly demonstrated,
subsequent contracts do not override original agreements
unless intended to novate.
39. The Supreme Court on dismissed a plea seeking the
appointment of an arbitrator in an international commercial
arbitration, holding that once the principal contract is governed by
foreign law and provides for a foreign-seated arbitration, Indian
courts lose jurisdiction, irrespective of the Indian nationality of any
party. “Indian Courts have no jurisdiction to appoint an arbitrator
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for a foreign-seated arbitration, irrespective of the nationality or
domicile of the parties
40. 2025 LiveLaw(Del) 102 Hala Kamel Zabal Versus Arya
Trading Ltd. and Others Delhi High court opined that the
Validity of the appointment of Arbitrator in International
Commercial Arbitration by the High Court was not per se
illegal as it conformed to the arbitration agreement, despite the
argument for Supreme Court appointment. In above cited case
the condition was that in the event a dispute cannot be resolved
through conciliation pursuant to Article 27.1 here of within (15)
days of such extended period as parties may agree, a party may
refer the dispute or difference to binding arbitration as hereunder
provided in accordance with the Arbitration and Conciliation Act,
1996. The arbitration shall be held in New Delhi. A sole Arbitrator
shall be appointed by the Chief Justice of the Delhi High Court
upon a reference made to him as per the provision of the
Arbitration and Conciliation Act, 1996. The applicable law shall be
Indian Law.
41. 2025 Live Law (Mad) 479 Madras High court opined that
appointment of arbitrator by a High Court in case of an
international commercial arbitration renders the award a nullity.
Sections 4 and 11(6), Arbitration and Conciliation Act (“ACA”) are
non-derogable and it is only the Apex Court which can appoint an
arbitrator in an international commercial arbitration. We are the
opinion without the condition of that appointment by the High
Court is against the public policy therefore we agreed the finding of
the Madras High Court.
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42. Vide order dated 17.07.2013 High Court at Calcutta has
appointed sole arbitrator shri S.C Pandey by AP no 719/13, 720/13.
no party has opposed the appointment order of arbitrator given by
High Court at Calcutta. The conjoint reading of Section 11(6) and
Section 11(12)(a), ACA makes it abundantly clear that the power to
appoint an arbitrator in an ICA lies exclusively with the Supreme
Court. The High Court has no jurisdiction to appoint an arbitrator
in an international commercial arbitration, and such power is in the
exclusive domain of the Supreme Court. The aforesaid provisions
are non-derogable and any order passed by the High Court
appointing an arbitrator in ICA suffers from complete lack of
jurisdiction and is a nullity in law. As to the contention that
jurisdictional objection cannot be raised for the first time at the
stage of Section 34. The plea of lack of inherent jurisdiction is open
for examination even at the stage of Section 34 petition even when
the same has not been raised before the arbitrator under Section 16.
Parties by consenting to the appointment of the arbitrator could not
cure what was on the face of it a clear case of inherent lack of
jurisdiction. Analysing the provisions of ACA, we are the view,
while ACA grants parties the freedom to design their own
procedure for arbitration, this cannot extend to tinkering with the
statutory power of the Court under Section 11(6), ACA which is
non-derogable. Therefore consequence of such an appointment
would be that tribunal shall be a coram-non-judice, the entire
arbitral proceedings including all hearings and the Award shall be a
nullity in law.
43. Issue regarding the validity of an arbitral award rendered in
an international commercial arbitration (ICA) where the
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appointment of the arbitrator(s) was done by the High Court. The
appointment of an arbitrator by the High Court, instead of the
Supreme Court, as stipulated under Section 11(6) of the Arbitration
and Conciliation Act, 1996 (“the Act”), rendered the resultant
arbitral award invalid.
44. The petitioners contended that the arbitral award was vitiated
by the invalid appointment of the arbitrator. As per the appellant,
the appointment of an arbitrator in an ICA should be made by the
Supreme Court under Section 11(6) of the Act. Since the High
Court appointed the arbitrator, the entire arbitral process stood
vitiated from its inception. The petitioners relied on the principle
that an order passed without jurisdiction is a nullity, as laid down
in Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam Ltd. (2019)
17 SCC 82. They argued that jurisdictional defects cannot be cured
by consent or by participation in the proceedings.
45. The respondents argued that the arbitrator’s jurisdiction
should have been raised at the earliest stage, as required under
Section 16 of the Act. Since the petitioners participated in the
arbitration without objecting, they had waived their right to
challenge the appointment. The respondents pointed out that under
Section 34(2)(a)(v), an arbitral award can only be set aside if the
composition of the tribunal was not in accordance with the parties’
agreement. Respondent heavily reliance the principles laid down in
Gayatri Project Ltd. to the present case, we are the considered
opinion that principle could not applicable to international
commercial arbitration where lack of jurisdiction constitute a
tribunal.
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46. The respondents contended that the petitioners had failed to
show how the arbitrator’s appointment had prejudiced them. They
(the appellant) had participated in the arbitration, filed
counterclaims, and only raised objections after the award was
passed. The appointment of the arbitrator by the High Court was
inconsistent with the requirement under Section 11(6) of the Act,
which mandates that arbitrators in ICA should be appointed by the
Supreme Court. However, the procedural irregularity did not
automatically invalidate the arbitral award. That objections to the
composition of an arbitral tribunal must be raised before the
tribunal under Section 16 of the Act. Since the petitioners did not
object at the appropriate stage, they were deemed to have waived
their right to challenge the arbitrator’s appointment. Narayan
Prasad Lohia v. Nikunj Kumar Lohia [(2002) 3 SCC 572], where
the Supreme Court held that procedural defects in an arbitrator’s
appointment do not necessarily invalidate an award, especially if
the party fails to object at the proper stage.
47. The respondent argued that the Section 4 of the Act states
that a party who knowingly participates in arbitration without
raising objections in time is deemed to have waived its right to
object later. The petitioners actively participated in the arbitration,
filed counterclaims, and only raised objections post-award, making
their challenge legally untenable. While procedural irregularities
existed, they did not constitute a violation of India’s fundamental
legal framework. The appointment of the arbitrator, though
procedurally flawed, did not vitiate the award. The doctrine
of kompetenz-kompetenz, which allows an arbitral tribunal to rule
on its own jurisdiction. Parties to arbitration agreements must be
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vigilant and assert their rights promptly to avoid losing them due to
procedural default.
48. In case Hindustan Zinc Ltd. v. Ajmer Vidyut Vitran Nigam
Ltd., (2019) 17 SCC 82 it was held that it is settled law that if
there is an inherent lack of jurisdiction, the plea can be taken up at
any stage and in collateral proceedings. Followed the judgement
Kiran Singh v. Chaman Paswan [Kiran Singh v. Chaman Paswan,
(1955) 1 SCR 117
“6. … It is a fundamental principle well-established that a decree passed by a
court without jurisdiction is a nullity, and that its invalidity could be set up
whenever and wherever it is sought to be enforced or relied upon, even at the
stage of execution and even in collateral proceedings. A defect of jurisdiction,
whether it is pecuniary or territorial, or whether it is in respect of the subject-
matter of the action, strikes at the very authority of the Court to pass any
decree, and such a defect cannot be cured even by consent of parties. If the
question now under consideration fell to be determined only on the application
of general principles governing the matter, there can be no doubt that the
District Court of Monghyr was coram non judice, and that its judgment and
decree would be nullities.”
49. We are the opinion that the appointment of arbitrator in
international commercial arbitration by the High court is not a
procedural flawed but it is a lack of jurisdiction. Narayan Prasad
Lohia v. Nikunj Kumar Lohia (2002) 3 SCC 572 is not applicable
to present case because that case was not related to the international
commercial arbitration. We have fully agreed of the judgement of
madras high court and disbarment of Delhi high court. Arbitrator
appointed in international commercial arbitration by High Court
with the consent of the party is not a procedural flawed, it is a lack
of jurisdiction which is not confirmed by the consent of the parties.
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50. In view of the above discussions, the only possible
conclusion is that the order of High Court passed by order dated
06.05.2015 in writ petition (W.P. No. 7781/2013) for appointment
of an arbitrator, in constituting the Arbitral Tribunal suffers from
an inherent lack of jurisdiction. Resultantly, the impugned award
dated 15.02.2018 passed by such a Tribunal shall be a coram-non-
judice and a nullity in law. Appeal is allowed by setting aside the
award dated 15.02.2018 along with the order dated 22.06.2023
passed by the learned Commercial Judge / 8th District Judge,
Bhopal in M.J.C. (Arbitration Case No. 82/2018).
51. With the above, both the Arbitration Appeals disposed of.
(VIVEK RUSIA) (PRADEEP MITTAL)
JUDGE JUDGE
praveen
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