[Cites 21, Cited by 0]
Madhya Pradesh High Court
Madhya Pradesh Power Transmission ... vs V.K.Udyog Ltd. on 8 April, 2026
Author: Vivek Rusia
Bench: Vivek Rusia
..1..
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE PRADEEP MITTAL
ARBITRATION APPEAL No. 15 of 2024
MADHYA PRADESH POWER TRANSMISSION COMPANY
LIMITED
Versus
V.K. UDYOG
Appearance:
Shri Sheersh Agrawal - Advocate for appellant.
Shri K. T. Thakre - Senior Advocate with Vaishali Dubey -
Advocate for respondent.
WITH
ARBITRATION APPEAL No. 16 of 2024
MADHYA PRADESH POWER TRANSMISSION COMPANY
LIMITED
Versus
V.K.UDYOG LTD.
Appearance:
Shri Sheersh Agrawal - Advocate for appellant.
Shri K. T. Thakre - Senior Advocate with Vaishali Dubey -
Advocate for respondent.
Order
Per: Justice Pradeep Mittal
Heard on 16.03.2026
Signature Not Verified
Signed by: PRAVEEN
Signing time: 08-04-
2026 17:04:16
..2..
Order pronounced on 08.04.2026
The issue involved in these arbitration case are similar in
nature, thus they are being decided by this common order.
The present Commercial Appeal has been filed by the
Appellant, Madhya Pradesh Power Transmission Company Limited
(hereinafter referred to as 'MPPTCL' or 'the Appellant'), under
Section 13 of the Commercial Courts Act, 2015 read with Section
37 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as 'the Act, 1996'), challenging the order dated
03.01.2024 passed by the learned 24th District Judge (Commercial
Court), Jabalpur, whereby the application filed by the Appellant
under Section 34 of the Act, 1996 has been dismissed and the
arbitral award dated 16.11.2018 passed by the learned Sole
Arbitrator, Justice (Retd.) Shri S.C. Pandey has been affirmed.
BRIEF FACTS
2. The Appellant had placed two purchase orders dated
29.09.2007 upon the Respondent for supply of disc insulators (70
KN and 90 KN) under the Asian Development Bank (ADB) funded
M.P. Power Sector Investment Programme. The total contract value
was USD 4,042,992 (approximately Rs.16.20 crores). As per the
tender conditions and ADB guidelines, the Respondent furnished
manufacturer authorisation of a Chinese entity, namely Jiangxi
Gaoqiang Ceramic Insulators Group Co. Ltd., and undertook
complete responsibility for performance of the contract.
3. The delivery schedule required completion of supplies by
28.04.2009. The first lot of insulators was offered for inspection in
..3..
December 2007, and third-party inspection was conducted by
ERDA, Vadodara, in China during 24-26 January 2008, wherein
the samples initially met the required standards. However, upon
receipt at the Appellant's stores at Indore and Jabalpur, large-scale
breakages and defects were noticed. On further inspection, the
insulators were found to be non-homogeneous and improperly
cemented, raising serious safety concerns for extra high voltage
(EHV) transmission lines.
4. Samples sent to ERDA laboratory at Vadodara failed the
prescribed tests. Even upon re-testing before the Respondent's
representatives during 19-22 April 2008, the results remained
unsatisfactory. The Appellant accordingly rejected the entire first
lot vide order dated 28.04.2008, which was accepted by the
Respondent. Thereafter, based on an undertaking dated 30.05.2008
given by the Respondent assuring improved quality, a second lot
was permitted for inspection in China in July 2008. However, it
was subsequently discovered that a substantial portion of the
supplied material had been manufactured prior to the undertaking,
thereby vitiating the quality assurance. Consequently, only
insulators manufactured after 30.05.2008 were accepted; the
balance was rejected. Due to urgent operational requirements, the
Appellant procured the balance quantity through a fresh tender. An
additional expenditure of Rs. 2,06,35,698/- was incurred, partly
recovered through encashment of bank guarantee, leaving a balance
of Rs. 36,46,000/- unpaid by the Respondent.
5. The Respondent, instead of discharging its liability, initiated
arbitration proceedings. The learned Sole Arbitrator, vide award
..4..
dated 16.11.2018, allowed the claims of the Respondent. The
Appellant's application under Section 34 of the Act, 1996 before
the Commercial Court, Jabalpur, came to be dismissed vide the
impugned order dated 03.01.2024. Hence this appeal.
SUBMISSIONS OF LEARNED COUNSEL
6. Learned counsel for the Appellant submits that the contract
in question constitutes a 'works contract' as defined under the M.P.
Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter 'the
Adhiniyam, 1983'), as amended, and therefore all disputes arising
thereunder could only be adjudicated by the Madhyastham Tribunal
constituted under the said Adhiniyam. Reliance is placed on the
Full Bench judgment of this Court in Viva Highways Ltd. v. M.P.
Road Development Corporation Ltd., and the judgment of the
Hon'ble Supreme Court in Lion Engineering Consultants v. State
of Madhya Pradesh, to urge that the issue of jurisdiction can be
raised even at the stage of Section 34/37 proceedings and is not
amenable to waiver.
7. It is further contended that by the amendment of 24.04.1990,
the definition of 'works contract' was expanded to include
agreements for supply of goods or material connected with
execution of works relating to powerhouses, transformers and allied
infrastructure. The present contract, being for procurement of disc
insulators specifically for use in 400 KV, 220 KV and 132 KV
EHV transmission systems under an ADB-funded project, is
intrinsically linked to the execution of power transmission
infrastructure works, thereby squarely falling within the definition.
..5..
8. Learned counsel for the Respondent submits that the contract
was purely a supply contract for disc insulators, with no obligation
upon the Respondent to execute any works. The scope of the
contract, as reflected in Clause 4, was limited to supply, testing,
delivery and related local handling and transportation. The contract
cannot be characterised as a 'works contract' under the Adhiniyam,
1983.
9. Having heard learned counsel for both sides and having
perused the record, this Court frames the following principal point
for determination:
Whether the contract between the parties constitutes a
'works contract' within the meaning of the M.P. Madhyastham
Adhikaran Adhiniyam, 1983, so as to oust the jurisdiction of the
Arbitral Tribunal constituted under the Arbitration and
Conciliation Act, 1996, and to vest exclusive jurisdiction in the
Madhyastham Tribunal?
10. The M.P. Madhyastham Adhikaran Adhiniyam, 1983 was
enacted to provide a specialised forum for resolution of disputes
arising from 'works contracts' between State Government/Public
Sector Undertakings and contractors, with the objective of ensuring
expeditious and expert adjudication. The Madhyastham Tribunal
created thereunder has exclusive jurisdiction over all such disputes,
and recourse to any other forum including arbitration under the Act,
1996 is barred.
11. The original definition of 'works contract' under Section
2(1)(i) of the Adhiniyam, 1983 covered agreements for execution
..6..
of works relating to construction, repair or maintenance of
buildings, dams, canals, roads, powerhouses, transformers and
allied works. By the amendment dated 24.04.1990, the definition
was significantly expanded in two material respects: first, it
expressly included 'powerhouse' and 'transformer' in the category
of enumerated works; and second, it extended the definition to
cover 'an agreement for supply of goods or material and all other
matters relating to the execution of any of the said works.' A
further notification dated 04.11.1996 included agreements for
execution of works relating to construction, repair or maintenance
of 'electric lines' within the scope of specified works.
12. The cumulative effect of these expansions is that any
agreement for supply of goods or material which is integrally
connected to, or directly relates to, the execution of works
enumerated in Section 2(1)(i) including powerhouses, transformers
and electric lines is brought within the definition of 'works
contract' under the Adhiniyam, 1983.
13. Clause 4 of the agreement dated 29.09.2007, which defines
the scope of contract, provides for supply, testing and delivery of
disc insulators specifically 4,51,200 Nos. of 70 KN and 2,22,600
Nos. of 90 KN EMS ball and socket type Porcelain Disc Insulators
to project sites/area stores, along with local handling, transportation
and transit insurance. The insulators were procured exclusively and
specifically for installation in 400 KV, 220 KV and 132 KV EHV
transmission lines being constructed by the Appellant under an
ADB-funded infrastructure programme.
..7..
14. This Court is of the considered view that the phrase 'relating
to the execution of any of the said works in the expanded definition
does not require that the supplier itself must execute the
infrastructure works. The test is one of nexus and purpose whether
the agreement for supply of goods is meaningfully connected to the
execution of specified works. The disc insulators in question are
not general-purpose commercial goods; they are specialised
components procured exclusively for installation in EHV
transmission lines, which constitute 'electric lines' as covered by
the 1996 notification and infrastructure linked to powerhouses and
transformers as specified in the 1990 amendment. The connection
between the supply and the execution of transmission works is not
incidental but direct and integral.
15. This interpretation finds support in the scheme and purpose
of the Adhiniyam, 1983. The legislature's intent in expanding the
definition in 1990 was evidently to bring within the specialised
forum disputes relating not merely to execution contractors but also
to suppliers whose contracts are the very substratum of
infrastructure projects. A supply contract for goods procured solely
for a specific enumerated work, pursuant to a project document,
forms the material substratum of that work and cannot be
disaggregated from it simply because the physical act of installation
is to be performed by the purchaser or another contractor.
16. This Court also notes the Full Bench judgment of this Court
in Viva Highways Ltd. v. M.P. Road Development Corporation
Ltd. and the judgment of the Hon'ble Supreme Court in Lion
Engineering Consultants v. State of Madhya Pradesh [(2018) 16
..8..
SCC 758], which affirm that the question of jurisdiction of the
Madhyastham Tribunal is not merely a procedural objection but a
substantive, non-waivable limitation on the competence of any
other adjudicatory forum. The objection that the subject matter falls
within the exclusive jurisdiction of the Madhyastham Tribunal may
be raised at any stage, including at the stage of proceedings under
Section 34/37 of the Act, 1996, and is not susceptible to waiver by
conduct or participation.
17. These issues are no longer res integra. In Gayatri Project Ltd. v.
M.P. Road Development Corpn. Ltd., (2025) 10 SCC 750, the
Hon'ble Apex Court clarified that it would be open for the parties
to raise an objection regarding lack of jurisdiction, in view of the
applicability of the M.P. Act, 1983, at the stage of Sections 34 and
37 of the Arbitration and Conciliation Act, 1996. However, the
consequence of such objection would depend on the following
circumstances:
66.1. Where arbitration proceedings are ongoing and no statement
of defence has been filed, it is open to the parties to raise an
objection regarding lack of jurisdiction due to the applicability of
the M.P. Act, 1983. The parties may also approach the High Court
under Article 227 of the Constitution for transfer of the proceedings
to the M.P. State Arbitration Tribunal.
66.2. Where arbitration proceedings are ongoing but the statement
of defence has already been filed (i.e., the stage for raising
jurisdictional objections has passed), such objections shall not be
entertained. Since proceedings have substantially progressed,
..9..
transfer to the M.P. State Arbitration Tribunal would not be
appropriate, and arbitration should be allowed to conclude.
66.3. As held in M.P. Rural Road Development Authority v. L.G.
Chaudhary Engineers & Contractors, (2018) 10 SCC 826, where
arbitration proceedings have concluded and an award has been
passed, and no jurisdictional objection was raised at the appropriate
stage, the award cannot be set aside solely on the ground of lack of
jurisdiction.
66.4. Any award passed by an Arbitral Tribunal under the 1996
Act, in cases where the M.P. Act, 1983 was otherwise applicable,
may be challenged under Section 34 and thereafter Section 37 of
the 1996 Act, along with other relevant provisions.
66.5. Such an award must, however, be executed in accordance
with the provisions of the M.P. Act, 1983.
66.6. Where an objection regarding applicability of the M.P. Act,
1983 was raised in the written statement or statement of defence,
but no steps were taken to challenge jurisdiction under Section 16
of the 1996 Act, or such challenge was rejected under the legal
position prevailing prior to the decision in L.G. Chaudhary (2),
then, in light of Modern Builders v. State of M.P., (2024) 10 SCC
637, the award shall not be set aside solely on the ground of lack of
jurisdiction.
18. From the principles laid down in Gayatri Project Ltd., it is
evident that an objection regarding jurisdiction under the M.P. Act,
1983 can be raised at the stage of Section 34 of the Arbitration and
..10..
Conciliation Act, 1996 after the award is passed. However, such
objection cannot be the sole ground for setting aside the award.
19. In other words, if there are independent valid grounds for
setting aside the award, this objection may be considered along
with them. In such a situation, the dispute may then be referred to
the M.P. Madhyastham Tribunal for adjudication in accordance
with the M.P. Act, 1983.
20. Accordingly, this Court holds that the present contract being an
agreement for supply of disc insulators specifically for use in EHV
transmission lines under an ADB-funded power sector investment
programme constitutes a 'works contract' within the meaning of
Section 2(1)(i) of the M.P. Madhyastham Adhikaran Adhiniyam,
1983, as amended. However, in view of the law laid down by the
Hon'ble Supreme Court in Gayatri Project Ltd. v. M.P. Road
Development Corpn. Ltd., (2025) 10 SCC 750, since the Appellant
did not raise any objection to the jurisdiction of the Arbitral
Tribunal at the relevant stage either in its statement of defence or
by way of an application under Section 16 of the Act, 1996 the
arbitral award cannot be set aside solely on the ground of lack of
jurisdiction. The award is, however, found to suffer from patent
illegality and is liable to be set aside on that ground.
21. The learned Arbitrator, while deciding Claim No. 2, framed
the question whether the Respondent took delivery of 90 KN
insulators as per the terms of the Revised Delivery Schedule
mentioned in the letter dated 20.04.2009, and, if not, whether the
Claimant was entitled to claim damages from the Respondent for
breach of contract.
..11..
21. The delivery of 1,57,680 Nos. of 90 KN insulators was a
subsequent development. The question before the learned
Arbitrator was that whether the amendment to the original
agreement was a valid agreement under the provisions of the
Contract Act. Section 62 of the Contract Act permits the parties to
(i) substitute a new contract for the original, (ii) rescind it, or (iii)
alter it, and if that be so, then the original contract need not be
performed. The amendment sought to alter the contract in respect
of the balance quantity of insulators, amounting to 2,22,600 minus
11,520 = 2,11,080 Nos. of 90 KN, which were to be supplied
through Indian manufacturers, the freight charges were to be borne
by the Claimant, price variation was not made available, and the
standard of goods to be supplied was changed to IS-731.
22. The learned Arbitrator found that the Respondent was not
entitled to reject the goods supplied by the Claimant through the
Chinese manufacturer amounting to 45,000 Nos., and that no
additional goods were supplied. The Arbitrator held that both
parties were under a misapprehension regarding the fact that the
goods had been rightly rejected. The Arbitrator further observed
that, in the case of 90 KN insulators, after acceptance of 11,520
insulators there was no occasion to amend the contract requiring
supply of 90 KN insulators through Indian manufacturers, and that
such an amendment was independent and could not be mixed up
with the supply of 70 KN insulators. The learned Arbitrator was of
the view that the amendment in the contract for 90 KN insulators
was obtained by economic coercion and undue influence, contrary
to the provisions of the Contract Act and also contrary to the
guidelines of the Asian Development Bank. The Arbitrator held
..12..
that this was an error on the part of both parties in substituting a
new amended contract without any substantial reason, except the
dominant desire of the Respondent to alter the contract by the
exercise of its economic power. These errors were held to be
essential to the entering into of the amended contract, rendering it a
void agreement within the meaning of Section 20 of the Contract
Act.
23. The learned Arbitrator further held that the Respondent had
committed a breach of the original contract by rejecting the goods
and could not be permitted to take advantage of its own wrong to
require the Claimant to enter into an altered contract to supply
goods through Indian manufacturers. In the opinion of the
Arbitrator, a substantial part of the insulators supplied by the
Claimant were rejected by the Respondent on invalid grounds, and
the Respondent had prevented the Claimant from fulfilling further
supply. The original contract was accordingly held to have been
aborted and to have ceased to subsist. Since both parties had sought
to amend the contract on the assumption that it subsisted, whereas
it did not, there was no question of altering a contract that had
already come to an end, and the purported amendment under
Section 62 of the Contract Act was therefore a nullity.
24. On Claim No. 2, the Claimant had asserted entitlement to
reimbursement of Rs. 3,27,566.65 paid by it towards extension of
Bank Guarantee and Letter of Credit in respect of 1,57,680 Nos. of
90 KN insulators to be supplied by Indian Potteries Ltd. and Allied
Ceramics Pvt. Ltd., contending that the Respondent had delayed
taking delivery, thereby compelling the Claimant to extend the
..13..
Bank Guarantee and Letter of Credit. The Respondent denied that
the Claimant had paid any such amount and contended that, in any
event, the Claimant was responsible for extension of the Bank
Guarantee until expiry of the warranty period. The learned
Arbitrator, upon examination of the evidence of Shri Manoj
Agrawal (Paragraphs 27 to 30) and the documentary exhibits C-18
and C-19, recorded that demand drafts of Rs. 19,995/- (towards
Letter of Credit extension) and two demand drafts of Rs.
1,53,748.35 and Rs. 1,53,823.30 (towards Bank Guarantee
extension) had been paid by the Claimant. The testimony remained
unchallenged in material particulars, as the Respondent's witness
Shri M.K. Mittal admitted payment of the said amounts while
asserting only that the Claimant had paid a differential amount. The
learned Arbitrator accordingly awarded the total claim of Rs.
3,27,566.65 under this head.
25. On Claim No. 3 concerning invocation of the Performance
Bank Guarantee, the learned Arbitrator held that the Respondent
was not justified in rejecting the entire lot of 45,000 Nos. of 90 KN
insulators supplied from China, and that no insulators of 90 KN
were rejected in the second lot. The Bank Guarantee dated
12.10.2007 for Rs. 67,95,388/- had been furnished as security
deposit for faithful performance of the contract dated 29.09.2007
for supply of 90 KN disc insulators. Since the Respondent had
infringed the contract by illegally rejecting 45,000 Nos. of 90 KN
insulators and a further 14,848 Nos. of 70 KN insulators (totaling
1,04,848 Nos.), the Respondent could not claim any amount under
the Bank Guarantee. The learned Arbitrator held that the contract
for supply of 2,84,650-disc insulators had been rendered void, the
..14..
Respondent could not recover any money for non-compliance of a
void contract, and the invocation of the Bank Guarantee by
telegram and letter dated 30.05.2011 was illegal. Accordingly, the
Arbitrator directed the Respondent to reimburse the amount of Rs.
6,79,51,388/- to the Claimant. The question of interest was left to
be decided separately.
26. The learned Commercial Court, while examining the
application under Section 34 of the Act, 1996, referred to several
judgments of the Supreme Court regarding the scope of
interference under that provision and observed that an award is
deemed to be against public policy only when it is based on fraud
or corruption. On the basis of that discussion, the learned court held
that the award did not conflict with public policy under the
Arbitration and Conciliation Act, 1996, had been passed after
consideration of all aspects of the dispute in accordance with the
general terms and conditions of the agreement and on the basis of
the documents submitted by both parties, and that no illegality or
patent illegality was apparent. The application was accordingly
dismissed.
27. It is evident from the perusal of the impugned order that
there is no finding or discussion in respect of the specific objections
raised by the Appellant, nor any examination of the arbitrator's
findings with reference to whether those findings were contrary to
public policy or disclosed patent illegality. The Respondent
company had clearly failed to supply material as per the
specifications and conditions of the contract, and those specific
objections required to be considered by the learned Commercial
..15..
Court in order to determine whether the award was against public
policy, or contrary to the Contract Act or the Sale of Goods Act.
The failure to do so renders the impugned order unsustainable.
28. To appreciate the award is legal or patently illegal, it is
preferable to consider the provision of 20, 62, 63,73,74 of the
contract act, which is as under-
"20. Agreement void where both parties are under mistake as to
matter of fact. --Where both the parties to an agreement are
under a mistake as to a matter of fact essential to the agreement,
the agreement is void.
62. Effect of novation, rescission, and alteration of contract. --If
the parties to a contract agree to substitute a new contract for it,
or to rescind or alter it, the original contract, need not be
performed.
63. Promisee may dispense with or remit performance of
promisee. --Every promisee may dispense with or remit, wholly
or in part, the performance of the promisee made to him, or may
extend the time for such performance ,or may accept instead of it
any satisfaction which he thinks fit.
73. Compensation for loss or damage caused by breach of
contract.--When a contract has been broken, the party who
suffers by such breach is entitled to receive, from the party who
has broken the contract, compensation for any loss or damage
caused to him thereby, which naturally arose in the usual course
of things from such breach, or which the parties knew, when they
made the contract, to be likely to result from the breach of it.
..16..
Such compensation is not to be given for any remote and indirect
loss or damage sustained by reason of the breach.
74. Compensation for breach of contract where penalty stipulated
for.--
1.[When a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, or if the
contract contains any other stipulation by way of penalty, the
party complaining of the breach is entitled, whether or not actual
damage or loss is proved to have been caused thereby, to receive
from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the case
may be, the penalty stipulated for.
Explanation. --A stipulation for increased interest from the date
of default may be a stipulation by way of penalty.]
Exception.--When any person enters into any bail-bond,
recognizance or other instrument of the same nature, or, under
the provisions of any law, or under the orders of the [Central
Government] or of any [State Government], gives any bond for
the performance of any public duty or act in which the public are
interested, he shall be liable, upon breach of the condition of any
such instrument, to pay the whole sum mentioned therein.
Explanation. --A person who enters into a contract with
Government does not necessarily thereby undertake any public
duty, or promise to do an act in which the public are interested."
..17..
29. The learned Tribunal has opined that both parties were
under a misconception of facts and acted under a mistake;
therefore, the contract is void under Section 20 of the Contract Act.
It further held that, after novation of the contract, the respondent is
not liable to fulfil the obligations of the contract, and the bank
guarantee cannot be extended to a new contract.
30. However, the above finding cannot be sustained in fact or in
law. The new contract was executed after termination of the
original contract due to non-performance of its conditions and the
supply of substandard articles. Once the contract is terminated, the
defaulting party is liable to pay a penalty under Section 74 of the
Contract Act.
31. It is evident from the record that the respondent failed to
comply with the contract by not supplying standard articles as
required. After termination of the contract, the appellant entered a
new contract and had to incur additional expenses to procure the
articles, thereby suffering losses due to the non-performance of the
original contract.
32. To compensate for these losses, under Sections 73 and 74 of
the Contract Act, the appellant is entitled to invoke and confiscate
the bank guarantee. It is pertinent to observe that the relevant
provisions of the Contract Act were ignored and wrongly applied
by the Tribunal; therefore, the award is patently illegal.
33. In the present case at hand, we take note of the following
circumstances emerging from the facts on record: It is an admitted
fact that at the time of constitution of the Arbitral Tribunal, the
..18..
respondent never objected to the invocation of arbitration under the
1996 Act and both the parties proceeded to nominate their
respective co-arbitrators. On the date of invocation of the 1996 Act,
and commencement of arbitration proceedings, as well as of the
date when the arbitration proceeding concluded and the award in
question passed, the respondent herein never raised any objection
to the Arbitral Tribunal's lack of jurisdiction during the arbitration
proceedings either in its statement of defence or by way of an
application under Section 16 of the 1996 Act. Even when the award
was challenged by the respondents, the initial petition filed by them
under Section 34 of the 1996 Act also did not contain any objection
as regards the lack of jurisdiction of the Arbitral Tribunal. The
ground of lack of jurisdiction was introduced by the respondents
herein only after the decision of L.G. Chaudhary (2) [M.P. Rural
Road Development Authority v. L.G. Chaudhary Engineers &
Contractors, (2018) 10 SCC 826 : (2019) 1 SCC (Civ) 97] by way
of an application for amending the grounds of its petition under
Section 34 of the 1996 Act i.e. after the award had been passed.
34. The present case is squarely covered by the decision of the
Hon'ble Supreme Court in Gayatri Project Ltd. v. M.P. Road
Development Corpn. Ltd., (2025) 10 SCC 750, more particularly
paras 64 to 66 thereunder, and as such once the award had been
passed and no objection as to the jurisdiction of the Arbitral
Tribunal had been taken at the relevant stage, the award cannot be
annulled only on the ground of lack of jurisdiction. However, the
award is found to be patently illegal inasmuch as the learned
Arbitrator has not considered the objections regarding Sections
20, 73,74 and 62 of the Contract Act, and has misapplied
..19..
Section 62 of the Contract Act to a bilateral contractual
amendment validly entered into between the parties; therefore,
this Court has no option but to set aside the award on the
ground of patent illegality.
35. In view of the foregoing, the present Commercial Arbitration
Appeal is allowed. The impugned order dated 03.01.2024 passed
by the learned 24th District Judge (Commercial Court), Jabalpur, is
hereby set aside. The arbitral award dated 16.11.2018 passed by
Justice (Retd.) Shri S.C. Pandey, Sole Arbitrator, is also set aside.
36. The award is set aside on the ground of patent illegality,
inasmuch as the learned Arbitrator has: (i) failed to consider
the Appellant's objections founded on Sections 20, 73 and 74 of
the Contract Act; (ii) misapplied Section 62 of the Contract Act
by treating a bilateral contractual amendment, validly entered
into between the parties, as a nullity; and (iii) rendered a
finding on rejection of goods that is contrary to the
documentary record and the terms of the contract. Each of
these infirmities independently constitutes patent illegality
within the meaning of Section 34(2A) of the Act, 1996,
warranting interference.
37. The parties are at liberty to have their disputes adjudicated
by the Madhyastham Tribunal constituted under the M.P.
Madhyastham Adhikaran Adhiniyam, 1983, as per law. Any
amount deposited or paid pursuant to the award or any order of this
Court shall be dealt with in accordance with the directions of the
said Tribunal.
..20..
38. Any interim order or stay, if in operation, shall stand vacated
forthwith. There shall be no order as to costs.
39. Both the Arbitration Appeals are disposed of with the
aforesaid.
Let photocopy of this order be placed in connected case.
(VIVEK RUSIA) (PRADEEP MITTAL)
JUDGE JUDGE
praveen
