Supreme Court on Jurisdiction Of Sole Arbitrator And The Scope Of Re-agitation.

The Supreme Court of India, in Ms. Vidyawati Construction Company and the Union of India, wherein it has held that once the jurisdiction of the sole arbitrator concluded, the same cannot be re-agitated thereafter. Dispute arose out of a contract wherein the Company was to construct a building for a Railway Electrification Project in Allahabad.

Thereafter, the dispute arose about the payments, and it was provided in the contract that disputes shall be referred to an Arbitral Tribunal consisting of three arbitrators. Initially, two arbitrators were appointed with a direction to them that they would select an umpire. However, they did not, and then the Chief Justice appointed Mr. P.K. Sharma as the Umpire. Mr. Sharma resigned and thereafter a retired Chief Justice was appointed as a Sole Arbitrator. It is this shift from a three-member tribunal to a single arbitrator that ignited the sparks of litigation.

The moot question was thus whether the appointment of a sole arbitrator, when the original contract provided for a three-member arbitrator tribunal, was valid. In defending against such an action by the respondent Union of India, the respondent controverted that the appointment of a sole arbitrator was beyond the terms of the contract. The learned District Judge accordingly set aside the award. The High Court confirmed it.

Initial Agreement: The respondent, Union of India, initially agreed to the appointment of the sole arbitrator in a meeting on December 5, 2003, and also agreed that the statements of claim and defense already filed should form the basis of the proceedings.

Submission to Jurisdiction: The court highlighted that the respondent had submitted to the jurisdiction of the sole arbitrator by agreeing to continue the proceedings and file the same statement of defense. They didn't raise any objections at the time, and in fact, sought time to modify their statement of defence.

Delayed Objection: The respondent raised the objection about the composition of the tribunal much later, on April 24, 2004, instead of modifying their statement of defense.

Section 16(2) of the Arbitration Act: The Supreme Court pointed out that under Section 16(2) of the Arbitration and Conciliation Act, objections to an arbitrator's jurisdiction must be raised before or at the time of filing the statement of defense. Since the respondent had already filed their statement of defense (even if it was a copy of what was previously filed), it was too late to challenge the jurisdiction of the sole arbitrator.

Waiver of Objection: The court stated that by agreeing to the sole arbitrator's appointment and participating in the proceedings, the respondent had essentially waived their right to object to the jurisdiction later.

The Apex Court stressed the importance of adhering to the principle that a party cannot submit to the jurisdiction of an arbitrator and then later challenge it. The Court also emphasized that the respondent's conduct showed acceptance of the sole arbitrator.

The court underscored the legal bar in Section 16(2) of the Arbitration Act against raising a jurisdiction challenge after submitting a statement of defense.

The court made it clear that the issue of the sole arbitrator's jurisdiction was concluded and could not be re-agitated by the respondent.

The Supreme Court set aside the judgments of the High Court and District Judge. The case was sent back to the District Judge, Allahabad, to review the other challenges to the award (besides the jurisdiction issue), which were not addressed earlier. The court made it clear that the issue of the sole arbitrator’s jurisdiction was settled and cannot be re-opened. The court also directed that if the District Judge finds the case falls under the purview of the Commercial Court, the case should be transferred there.

Coram: Justice Abhay S. Oka and Justice Ujjal Bhuyan
Between: Ms Vidyawati Construction Company vs Union Of India
Date of Judgment: 07-01-2025