Objection Against Arbitral Tribunal's Jurisdiction Has To Be Raised Not Later Than Submission Of Statement Of Defence: Himachal Pradesh HC

The Himachal Pradesh ruled that in terms of Sub-Section (2) of Section 16 Arbitration and Conciliation Act, the plea that the Arbitral Tribunal does not have jurisdiction, has to be raised not later than the submission of statement of defence.

The Court was considering an arbitration appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against the Arbitral Award passed by the Arbitrator.

A single-bench of Justice Jyotsna Rewal Dua observed, "The question of learned Arbitrator having no jurisdiction to determine the claim under Clause 10(CC) of the contract cannot be permitted to be raised. Section 16 of the Act deals with the competence of the Arbitral Tribunal to rule on its jurisdiction. In terms of Sub-Section (2) of Section 16, the plea that the Arbitral Tribunal does not have jurisdiction, has to be raised not later than the submission of statement of defence."

The appellants were represented by Deputy Advocate General Sikander Bhushan while the respondents were represented by Senior Advocate J.S. Bhogal, Advocate Srishti Verma and Advocate Srishti Verma.

Learned Deputy Advocate General representing the appellant inter-alia raised the point that the Arbitrator had no jurisdiction to determine respondent’s claim under Clause 10(CC) of the contract with respect to price escalation and the claim could not have been arbitrated. He contended that the Arbitrator had illegally assumed the jurisdiction to determine a non arbitral claim.

On the other hand, Senior Counsel appearing for the respondent submitted that the question of jurisdiction of Arbitrator to determine the claim under Section 10(CC) of the contract was never raised by the appellants before the learned Arbitrator. Hence, he contended that in view of Section 16 read with Section 4 of the Act, the appellants are now debarred in law from raising the issue of jurisdiction.

The Court accepted the Senior Counsel for the respondent's submission and referred to Supreme Court's dictum in MSP Infrastructure Limited Versus Madhya Pradesh Road  Development Corporation Limited in which it was held that a party is bound by virtue of Section 16(2) to raise any objection it may have to the jurisdiction of the Tribunal before or at the time of submission of its statement of defence, and at any time thereafter it is expressly prohibited. The party cannot raise the question after it has submitted to the jurisdiction of the Tribunal and invited an unfavourable award. It would be quite undesirable to allow arbitrations to proceed in the same manner as civil suits with all the wellknown drawbacks of delay and endless objections even after the passing of a decree.

The Court also cited Quippo Construction Equipment Limited Versus Janardan Nirman Private Limited wherein the Supreme Court while considering the facts of that case where the respondent therein did not raise any submission that the Arbitrator did not have jurisdiction or that he was exceeding the scope of his authority, the respondent was deemed to have waived all such objections. It was further held that the respondent was precluded from raising any such objection pertaining to jurisdiction/venue of arbitration etc. 

It further mentioned Supreme Court's ruling in Sweta Construction Versus Chhattisgarh State Power Generation Company Limited considered Lion Engg. Consultants v. State of M.P. and M.P. Rural Road Development Authority v. L.G. Chaudhary Engineers & Contractors vis-a-vis raising objections under Section 16 of the Act and held that a party cannot be permitted to approbate and reprobate, that too in arbitration proceedings defeating the very purpose of an alternative dispute resolution through arbitration as an expeditious remedy.

"The second objection taken by the appellants that the Arbitrator had no jurisdiction to determine respondent’s claim under Clause 10(CC) of the contract is also misplaced as admittedly no such objection was taken by the appellants at the time of submission of their defence before the learned Arbitrator. In light of Section 16(2) of the Act, such objection cannot be permitted to be raised by the appellants after suffering the award," the court observed.

The appeal was accordingly dismissed as non-meritorious.

Cause Title: State of H.P. and another vs M/s Gurcharan Industries (2024:HHC:10684)

Appearances:

Appellant-  Deputy Advocate General Sikander Bhushan

Respondent-  Senior Advocate J.S. Bhogal, Advocate Srishti Verma and Advocate Srishti Verma

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