Madhya Pradesh High Court
M/S Lion Engineering Consultants Pvt. ... vs The State Of Madhya Pradesh on 3 October, 2024
Author: Vivek Rusia
Bench: Vivek Rusia, Avanindra Kumar Singh
1
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE AVANINDRA KUMAR SINGH
ARBITRATION APPEAL No. 23 of 2020
M/S LION ENGINEERING CONSULTANTS PVT. LTD.
Versus
THE STATE OF MADHYA PRADESH AND OTHERS
Appearance:
Shri Naman Nagrath, learned Senior Advocate alongwith Shri Jubin Prasad,
Advocate for the appellant.
Shri Anshuman Singh Advocate with Shri Anuj Shrivastava, Advocate for the
respondent No.3.
Heard and reserved on : 11.09.2024
Pronounced on : 03.10.2024
ORDER
Per: Justice Vivek Rusia
This is an appeal under Section 37 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as "Act, 1996") challenging the order dated
20.12.2019 passed by Commercial Court (District Level Bhopal) in MJC
Arbitration No.17/2011, whereby application filed under Section 34 of Act,
1996 by respondents has been allowed and the award dated 10.07.2010 has
been set aside for want of jurisdiction.
The facts of the case in short are as under:
2. Respondent No.2 invited tenders for the execution of the consultancy's
work, evaluation, and quality control/assurance of the construction of its
buildings. The appellant which is a firm engaged in the construction work
known as M/s Lion Engineering Consultants Pvt. Ltd. submitted its bid which
was found to be the lowest. An agreement was entered between the appellant
and the respondents for providing consultancy services valued at Rs.19.67
crores. After the issuance of the work order, the appellant commenced the
work. During the progress of the work, the first stage of the bill as per clause
10 of the agreement was released in favour of the appellant on 27.02.2007
thereafter, the second bill was also paid on 02.06.2007.
3. According to the appellant, the work up to Rs.232.09 was verified by
the District Assistant Engineer and bills were submitted to the Manager Civil
however, some dispute arose between the parties and further bills were
withheld. The appellant was served with the show-cause notice dated
27.08.2007 by the respondent to explain why the contract was not terminated
due to non-performance of the obligation under the contract. The appellant
submitted the objection but the contract was terminated by the respondents.
Thereafter, the appellant approached this Court for the appointment of an
arbitrator by way of an application under Section 11(6) of the Arbitration &
Conciliation Act 1996 which was registered as Arbitration Case No.15 of
2008. Vide order dated 04.09.2008, this Court appointed a sole Arbitrator for
the resolution of the dispute between the parties under the Arbitration &
Conciliation Act 1996.
4. Before the sole arbitrator, the appellant submitted its claim of
Rs.832.56 crores. The respondent submitted a written statement along with
the counterclaim. After recording the findings the learned Arbitrator passed
an award dated 10.07.2010 in favour of the appellant by partly allowing
certain claims submitted before the Arbitrator.
5. Being aggrieved by the award dated 10.07.2010, respondents
approached the District Court Bhopal by way of an application under Section
34 of the Act, 1996 which was registered as MJC Arbitration No.17/2011.
During the pendency of the aforesaid proceeding, the respondent filed an
application seeking amendment in the application under Section 34 of the Act,
1996 raising the ground of lack of jurisdiction of the learned Arbitrator for
entertaining a dispute under the provisions of the Arbitration and Conciliation
Act, 1996. According to the respondents, the appellant was awarded a Works
Contract, therefore, a dispute ought to have been raised before the M.P.
Arbitration Tribunal, Bhopal. The District Court vide order dated 14.02.2014
rejected the application, the respondents approached this Court by way of
Writ Petition No.4559 of 2014, vide order dated 25.11.2014 the writ petition
was allowed meaning thereby the amendment sought by the respondent was
allowed to be incorporated in the application under Section 34 of Act, 1996.
6. Being aggrieved by the order dated 25.11.2014, the appellant
approached the Apex Court by way of SLP (C) No.8089 of 2015. Initially,
vide order dated 08.05.2015, the stay was granted in the SLP and after notice
to the respondent the aforesaid SLP was disposed of vide order dated
22.03.2018 by observing that it will be open for the respondent to argue that
the act stands excluded by the M.P. Madhyastham Adhikaran Adhiniyam,
1983 (hereinafter referred as "Adhiniyam, 1983") could be raised even
without formal pleading being purely a legal plea meaning thereby it was left
open to the respondent to argue its objection that the Act of 1996 stands
excluded by the Adhiniyam, 1983. In compliance with the order passed by the
Apex Court, the District Judge permitted the respondent to raise such a plea.
The learned Commercial Court by placing reliance on the order dated
24.10.2018 passed in Arbitration Appeal No.10/2013 (M/s JMC Project V/s
M.P. Road Development Corporation) has set aside the award dated
10.07.2010 to be without jurisdiction vide order dated 20.12.2019 hence, this
appeal before this Court.
7. Shri Naman Nagrath, learned senior counsel appearing for the appellant
submits that the respondents did not raise any objection before this High
Court in a proceeding under Section 11(6) of the Arbitration & Conciliation
Act 1996, hence this Court appointed a sole arbitrator for adjudication of the
dispute under the provisions of the Arbitration & Conciliation Act 1996,
which had attained finality as same was not challenged by the respondents. It
is further submitted by the learned senior counsel that when such a plea of
jurisdiction was raised by the respondents in the proceedings under Section 34
of the Arbitration & Conciliation Act 1996 such a plea/ objection was not
liable to be raised by way of amendment which was time-barred, however the
matter travelled upto the Apex Court in the name of Lion Engineering
Consultants Pvt. Ltd. V/s State of Madhya Pradesh, (2018) 16 SCC 758 in
which the Apex Court has dismissed the SLP as rendered infructuous because
the respondent did not press the application for amendment.
8. Shri Nagrath, learned senior counsel further argued that in the matter of
MPRRDA V/s L.G. Choudhary, (2018) 10 SCC 826 in para 17 the Apex
Court has declined to express any opinion on the applicability of the State Act
i.e. Adhiniyam, 1983 where the award has already been made because no
such objection to the jurisdiction of the arbitration was taken at the relevant
stage hence, the award may not be annulled on that ground. It was made clear
that this order will not debar the proceeding under Section 34 of the
Arbitration & Conciliation Act 1996, therefore, in the present case, the
District Judge ought to have entertained the application under Section 34 of
the Arbitration & Conciliation Act 1996 on merit also instead of dismissing as
not maintainable. Shri Nagrath, learned senior counsel further submitted that
the learned Commercial Court has placed reliance on a judgment passed by
the Division Bench of this Court in the case of M/s JMC Projects Ltd. V/s
MPRRDA in Arbitration Appeal No.10/2013, [Civil Appeal No.204/2020]
the aforesaid appeal was challenged before the Apex Court in which the Apex
Court has held that the plea of jurisdiction if not raised as per Section 16(2) of
the Arbitration & Conciliation Act 1996 cannot be subsequently raised by the
parties.
9. Finally, Shri Nagrath, learned senior counsel has also placed reliance
on the latest judgment passed by the Apex Court in the matter of Shweta
Construction V/s Chhattisgarh State Power Generation Company Ltd.,
(2024) 4 SCC 722, in which the Apex Court by placing reliance on a
judgment passed in case of L.G. Choudhary (supra) held that the judgment
passed in the case of Lion Engineering Consultants (supra) is an order and
not a judgment. If at all there were any right of the respondent to have
claimed arbitration under the Adhiniyam, 1983, that right was never exercised
or waived. The respondent cannot be permitted to approbate or reprobate and
that too in an arbitration proceeding and finally relegated the matter to the
Commercial Court to decide the matter under Section 34 of the Arbitration &
Conciliation Act 1996 on merit dehors the issue of jurisdiction and submits
that the impugned order be set aside and the matter be remitted back to the
Commercial Court for deciding the application under Section 34 of the
Arbitration & Conciliation Act 1996 on its merit.
10. Per contra, Shri Anshuman Singh, learned counsel appearing for the
respondent submits that the issue between the parties here before this Court
has been settled in the case of Lion Engineering (supra) by the Apex Court
where the respondent was permitted to raise the plea of jurisdiction, an
application under Section 34 and in view of the law laid down by the Apex
Court in the case of L.G. Choudhary (supra), the jurisdiction lies with the
State Arbitration Tribunal and not before the Arbitrator. He has placed
reliance on a judgment passed by the Apex Court in the case of Dr
Subrabanyam Swami V/s State of Tamil Nadu, 2014 (5) SCC 75, in which
the Apex Court has held that the decision of the Court on the question of law
which attained finality would operate as res judicata even if the same is
erroneous, therefore, the Lion Engineering (supra) judgment given by Three
Judges Bench will prevail over all the judgments given by the Two Judges
Bench of the High Court, the present matter is a works contract and for which
the M.P. Arbitration Tribunal is having an exclusive jurisdiction to decide the
issue hence, this Appeal be dismissed with a liberty to the appellant to
approach the M.P. Arbitration Tribunal, Bhopal.
We have heard learned counsel for the parties and perused the record.
11. The facts of the case are not in dispute, as initially, the respondents
did not raise any objection about the jurisdiction before the learned
Arbitrator and thereafter the award was passed and the respondents filed
an application under Section Application 34 of the Arbitration &
Conciliation Act 1996 before the District Court. In the said application, a plea
of jurisdiction was sought to be raised by way of the amendment which was
rejected but this Court has allowed the said amendment application in a
petition filed under art. 227 of the Constitution of India. Thereafter, the
appellant approached the Apex Court by way of SLP, although the Apex
Court has held that since the amendment application was not pressed, the
appeal was rendered infructuous but set aside the impugned order and
directed the District Court to take up the matter for consideration of the
objection under Section 34 of the Central Act. It was made open to
respondents to argue that its objection that the Arbitration & Conciliation Act
1996 stand excluded by Adhiniyam, 1983 and could be raised even without
formal pleading. Hence, the respondents were permitted to plea about the
jurisdiction without formal amendment in the application under Section 34.
12. In view of the aforesaid, the learned District Judge (Commercial
Court) has entertained the said objection and upheld in favour of the
respondents, therefore, the lis between the parties have been settled after
disposal of the SLP in the matter of Lion Engineering (supra). Facts remain
that it was argued in Lion Engineering (supra) by the State that the
amendment sought is formal, and the legal plea arising out of the undisputed
fact is not precluded by Section 34, even if such objection is not raised under
Section 16 of the Arbitration & Conciliation Act 1996 and that submission
was accepted by the Apex Court. There is no bar to take the plea of
jurisdiction by way of an objection under Section 34, even if no such
objection was raised under Section 16 of the Arbitration & Conciliation Act
1996 and the issue came to an end between the parties. In the case of L.G.
Choudhary ( supra) decided by a three Judges Bench the Apex Court has held
that in such cases if no objection to the jurisdiction of the arbitration was
taken at the relevant stage, the award may not be annulled only on that
ground.
13. The Lion Engineering ( supra ) says that the objection in the case where
the award has been passed without raising any objection and it was further
made clear in para 20 that this order will not debar proceedings under Section
34 of the Arbitration and Conciliation Act, 1996. This Lion Engineering came
up for consideration recently in the matter of Shweta Construction (supra), in
which the Apex Court has held that the issue of jurisdiction can be raised in
objection under Section 34 in the law laid down in the case of M.P. Rural
Road Development Authority Vs. L.G. Chaudhary Engineers and
Contractors. The Lion Engineering has also been taken into consideration,
para 15, 16 and 17 are reproduced below;-
'15. However, as pointed out by learned counsel for the respondent,
there appears to be some lack of clarity on the issue raised in the
present petition on account of the same three Judge Bench having
opined in another order passed in Lion Engineering
Consultants v. State of Madhya Pradesh3 on 22.03.2018 i.e., about
three weeks after that. The issue however, raised was whether there
was any bar to the plea of jurisdiction being raised by way of an
objection under Section 34 of the 1996 Act even if no objection was
raised under Section 16 of that Act. It was opined that public policy
of India refers to the law enforced in India i.e., both Central law as
well as the State law. The respondent State was given liberty to argue
before the trial Court its objections that 1996 Act stood excluded by
the State Adhiniyam even without formal pleadings being a pure
legal plea. This was in the context of an amendment sought being
beyond limitation. In that context there is an observation in one
sentence, "we do not see any bar to plea of jurisdiction being raised
by way of an objection under Section 34 of the Act even if no
objection was raised under Section 16 of that Act."
16. If we appreciate the aforesaid observation and that too emerging
from identical Bench in the two matters, we would have to construe
as what is meant by this sentence extracted aforesaid. We take note
of the fact that this is an order and not a judgment. The controversy
before the court was something different as noticed by us aforesaid.
In that context, this sentence has been inserted, but that does not take
away the law laid down in the substantive judgment dealing with the
issue at hand in respect of awards already made where petitions
were pending before the competent Court under Section 34 of the
said Act. This Court in the context of the 1996 Act and the
Adhiniyam, keeping in mind the cleavage of judicial view earlier and
expounding on the law in that judgment has in succinct terms set out
that the objections under Section 34 of the said Act, where no such
plea of jurisdiction was raised in proceedings before the Arbitrator,
should not be dealt with "alone" on the plea of jurisdiction i.e., it
should be considered on merits. One can say that possibly this part of
the order can also be read as one made under Article 142 of the
Constitution of India to do substantive justice inter se the parties,
more so, when arbitration as an alternative dispute resolution
mechanism presupposes an expeditious disposal of commercial
disputes and that objective would stand nullified if a contrary view
was taken.
17. We are also of the view that in particular facts of the present
case, the position is even more gross because when the appellant
claimed arbitration, the respondent accepted invocation of
arbitration, suggested a panel of Arbitrators, the appellant chose one
of the Arbitrators out of the two suggested and the Arbitrator was so
appointed as the sole Arbitrator. Thus, the arbitration proceedings
commenced in pursuance to the acts of the respondent and it cannot
be permitted to get away to say that the whole process was gone
through because of some misconception or inappropriate legal
advice. Arbitration by consent is always possible. The mode and
manner of conduct of arbitration is possible and how those
arbitration proceedings would be governed is also a matter of
consent. If at all there were any rights of the respondent to have
claimed arbitration under the Adhiniyam, that right was never
exercised or waived. The respondent cannot be permitted to
approbate and reprobate and that too in arbitration proceedings and
that too in dispute or resolution through the method of arbitration
defeating the very purpose of an alternative dispute resolution to
arbitration as an expeditious remedy.''
14. Finally the Apex Court remitted back the matter to the Commercial
Court for deciding the application under Section 34 also, therefore, in view of
the above, the impugned order is set aside. In Loin Engineering, (supra) the
apex court has not directed the District court to decide the application filed in
Section 34 of the Arbitration and Conciliation Act, 1996 only on the issue of
maintainability as a preliminary issue without touching the merit of the case.
Hence the application filed u/s 34 of the Arbitration & Conciliation Act 1996,
has wrongly been rejected only on the ground of the jurisdiction, without
touching the merit of the case. The MJC 17/2011 is restored and the learned
Commercial Court is directed to decide the application under Section 34 on
merit as well as issue on jurisdiction.
(VIVEK RUSIA) (AVANINDRA KUMAR SINGH)
JUDGE JUDGE
Praveen
