2024 (9) TMI 105 - SC - Indian Laws

Applicaility of arbitration clause in the contract - After the contract granted to the appellant was rescinded, the appellant invoked Section 7 of the 1983 Act by approaching the Arbitration Tribunal - HELD THAT - The order of the Arbitration Tribunal, holding that the Arbitration Act will apply, led the appellant to file a petition under Section 11(6) of the Arbitration Act, which was not objected to on the grounds of the applicability of the 1983 Act. The objection of the State government was confined to the merits of the claim. The award is only in the sum of Rs. 6,52,235/- with interest. The award was made on 25th April 2014. Therefore, in the facts of the case, it will be unjust to set aside the award only on the ground of the failure of the appellant to take recourse to the 1983 Act. In fact, the appellant had taken recourse to the 1983 Act before seeking the appointment of an Arbitrator. In this case, as can be seen from the impugned judgment, the award has been set aside only on the ground that the appellant ought to have invoked the provisions of the 1983 Act. Even assuming that the observations in paragraph 17 of the decision in the case of MADHYA PRADESH RURAL ROAD DEVELOPMENT AUTHORITY ANR. VERSUS M/S. L.G. CHAUDHARY ENGINEERS AND CONTRACTORS 2018 (3) TMI 2044 - SUPREME COURT , are not applicable, this is a fit case to exercise jurisdiction under Article 142 of the Constitution of India to ensure that complete justice is done. Therefore, by setting aside the impugned judgment, the appeal under Section 37 of the Arbitration Act will have to be restored with a request to the High Court to decide the same on merits. The impugned judgment and the order passed in the Arbitration Appeal are set aside - Appeal allowed.

Summary

Issues:
1. Applicability of the 1983 Act vs. the Arbitration Act in a contract dispute.
2. Challenge to the arbitral award under Section 34 of the Arbitration Act.
3. Jurisdictional objection raised at different stages of the arbitration process.

Analysis:

Issue 1: Applicability of the 1983 Act vs. the Arbitration Act
The case involved a contract dispute where the appellant, a contractor, had a contract rescinded by the State of Madhya Pradesh. The arbitration clause in the contract raised a question of whether the 1983 Act or the Arbitration Act applied. The Arbitration Tribunal initially held that the Arbitration Act applied due to the arbitration clause. However, the respondents challenged the arbitral award citing the Madhya Pradesh Rural Road Development Authority case, which held that the 1983 Act applied even with an arbitration clause. The Supreme Court noted that the appellant had initially invoked the 1983 Act before seeking arbitration under the Arbitration Act. The Court held that setting aside the award solely based on the failure to invoke the 1983 Act would be unjust, especially since the objection was not raised at crucial stages of the process.

Issue 2: Challenge to the arbitral award under Section 34 of the Arbitration Act
The respondents challenged the arbitral award under Section 34 of the Arbitration Act, which was dismissed by the District Judge. The High Court set aside the award solely based on the applicability of the 1983 Act as per the Madhya Pradesh Rural Road Development Authority case. The Supreme Court, however, found that the objection regarding the jurisdiction of the arbitration was not raised at appropriate stages and that setting aside the award on this ground alone would be unjust.

Issue 3: Jurisdictional objection raised at different stages of the arbitration process
The appellant had invoked Section 7 of the 1983 Act initially, and later filed a petition under Section 11(6) of the Arbitration Act for the appointment of an Arbitrator. The respondents' objection was on the merits of the claim, and the jurisdiction issue was not raised at crucial stages. The Court emphasized that the objection based on the applicability of the 1983 Act was raised late in the process, and the award should not be set aside solely on this ground. The Court restored the appeal under Section 37 of the Arbitration Act to be decided on merits by the High Court, emphasizing the need for complete justice.

In conclusion, the Supreme Court allowed the appeal, set aside the impugned judgments, and restored the appeal to the High Court for a decision on merits, ensuring that the award should not be set aside based solely on the applicability of the 1983 Act. The Court also directed the appellant to deposit the awarded amount with the High Court pending the appeal's disposal.