M/S Vidyawati Construction Company vs. Union of India

Civil Appeal No.(S). 215 of 2025 Arising out of S.L.P (Civil) No. (S). 6053/2021

In the instant case the Supreme Court reaffirmed that a party cannot challenge the jurisdiction of an Arbitral Tribunal after submitting its Statement of Defence, as per Section 16(2) of the Arbitration & Conciliation Act, 1996. A bench comprising Justices Abhay S. Oka and Ujjal Bhuyan set aside the Allahabad High Court’s ruling, which had upheld the District Judge’s decision to invalidate an arbitral award on jurisdictional grounds.

The dispute arose from a contract for the construction of a building for the General Manager, Railway Electrification Project, Allahabad. The contract required a three-member Arbitral Tribunal. In response to the respondent’s application, the High Court appointed two arbitrators and directed them to nominate an Umpire. When they failed to do so, the High Court appointed Shri P.K. Sharma as the Umpire. However, following his resignation, the High Court appointed a retired Chief Justice as the sole arbitrator to proceed with the arbitration. The Respondent initially accepted this appointment and proceeded with the arbitration, filing a Statement of Defence on 14.02.2004. However, instead of modifying its Defence, the respondent later objected to the Tribunal’s jurisdiction on 24.04.2004, arguing that the appointment of a sole arbitrator was contrary to the arbitration agreement.

The sole arbitrator rejected the jurisdictional objection and issued an award on 21.02.2008. The Respondent challenged the award under Section 34, and the District Judge set it aside, citing an improper composition of the Tribunal. This decision was upheld by the Allahabad High Court, leading to the this appeal in Supreme Court.

The Supreme Court overturned the High Court’s ruling, holding that the Respondent had explicitly accepted the sole arbitrator’s appointment in the proceedings recorded on 05.12.2003. Section 16(2) of the Arbitration Act imposes a clear bar on raising jurisdictional objections after the submission of the Statement of Defence. The respondent failed to challenge the jurisdiction at the appropriate time and instead engaged in arbitration proceedings. Further the District Judge and High Court erred in upholding the Respondent’s objection, as the issue of jurisdiction had already been settled before the Tribunal.

The Supreme Court set aside the judgments of the High Court dated 17.11.2020 and the District Judge dated 09.09.2013, reinstating Arbitration Case No. 25/2008 before the District Judge, Allahabad, with directions to hear and decide the case on merits. However, the issue of the Tribunal’s jurisdiction was deemed conclusively settled, and the Respondent could not raise it again. The judgment reaffirms the principle of procedural discipline in arbitration and emphasizes that parties cannot belatedly challenge an arbitrator’s jurisdiction after actively participating in proceedings.