2014 (12) TMI 1416 - SC - Indian Laws

Whether a party to an arbitration proceeding may be permitted to raise objections Under Section 34 of the Arbitration and Conciliation Act, 1996, with regard to the jurisdiction of the Arbitral Tribunal after the stage of submission of the written statement? - HELD THAT - All objections to jurisdiction of whatever nature must be taken at the stage of the submission of the statement of defence, and must be dealt with Under Section 16 of the Arbitration Act, 1996. However, if one of the parties seeks to contend that the subject matter of the dispute is such as cannot be dealt with by arbitration, it may be dealt Under Section 34 by the Court. Though, it cannot be said that the upholding of a state law would not be part of the public policy of India, much depends on the context. Where the question arises out of a conflict between an action under a State Law and an action under a Central Law, the term public policy of India must necessarily understood as being referable to the policy of the Union. It is well known, vide Article 1 of the Constitution, the name 'India' is the name of the Union of States and its territories include those of the States. There are no hesitation in coming to the conclusion that the amendment application raised a ground which was contrary to law and ought not to have been allowed by the High Court. Appeal allowed.

Summary

Issues Involved:
1. Whether a party can raise objections under Section 34 of the Arbitration and Conciliation Act, 1996, regarding the jurisdiction of the Arbitral Tribunal after the submission of the written statement.
2. The applicability of the M.P. Madhyastham Adhikaran Adhiniyam, 1983 versus the Arbitration and Conciliation Act, 1996.
3. The interpretation of Section 16(2) of the Arbitration and Conciliation Act, 1996.
4. The scope of objections under Section 34(2)(b) of the Arbitration and Conciliation Act, 1996.
5. Whether the amendment application to introduce new grounds of objection was permissible.

Detailed Analysis:

1. Objections Under Section 34 of the Arbitration and Conciliation Act, 1996:
The primary issue was whether objections regarding the jurisdiction of the Arbitral Tribunal could be raised after the submission of the written statement. The Supreme Court held that Section 16(2) of the Arbitration Act, 1996, explicitly prohibits raising jurisdictional objections after the submission of the statement of defense. The Court emphasized that the provision aims to prevent parties from challenging the jurisdiction belatedly after participating in the arbitration proceedings and receiving an unfavorable award. The Respondent did not raise the jurisdictional objection at any stage before the Tribunal and only raised it two years after filing the petition under Section 34, which the Court found impermissible.

2. Applicability of M.P. Madhyastham Adhikaran Adhiniyam, 1983 vs. Arbitration and Conciliation Act, 1996:
The Respondent contended that the dispute should have been resolved under the M.P. Act of 1983, which has exclusive jurisdiction over works contracts involving government undertakings. The Appellant argued that the arbitration clause in the Concession Agreement and the subsequent consent terms before the Calcutta High Court clearly indicated that disputes would be resolved under the Arbitration Act, 1996. The Supreme Court did not delve into the question of whether the Central Act or the State Act would prevail, as it was unnecessary given the finding that the jurisdictional objection was raised belatedly.

3. Interpretation of Section 16(2) of the Arbitration and Conciliation Act, 1996:
Section 16(2) mandates that any plea regarding the Tribunal's lack of jurisdiction must be raised no later than the submission of the statement of defense. The Court found that the Respondent's failure to raise the jurisdictional objection at the appropriate stage barred it from doing so later. The provision aims to ensure that arbitration proceedings are not delayed by belated jurisdictional challenges.

4. Scope of Objections Under Section 34(2)(b) of the Arbitration and Conciliation Act, 1996:
The Respondent argued that jurisdictional objections could be raised under Section 34(2)(b), which allows setting aside an award if the subject matter is not capable of settlement by arbitration or if the award conflicts with public policy. The Court rejected this argument, clarifying that Section 34(2)(b) addresses situations where the subject matter itself is non-arbitrable, such as criminal or matrimonial disputes, as identified in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited. The Court held that jurisdictional objections must be raised under Section 16, not Section 34.

5. Permissibility of the Amendment Application:
The Respondent sought to amend the original petition under Section 34 to introduce new grounds of objection. The Additional District & Sessions Judge rejected the amendment as unjust and unfair, given the two-year delay. The High Court allowed the amendment without addressing its tenability. The Supreme Court set aside the High Court's decision, holding that the amendment application raised a ground contrary to law and should not have been allowed.

Conclusion:
The Supreme Court concluded that the Respondent's amendment application to introduce jurisdictional objections was impermissible under Section 16(2) of the Arbitration Act, 1996. The Court emphasized the importance of raising jurisdictional objections at the appropriate stage to prevent delays in arbitration proceedings. The judgment of the High Court allowing the amendment was set aside, and no costs were awarded.