In a significant ruling by a bench comprising Justice Abhay S. Oka and Justice Augustine George Masih, the Supreme Court of India has restored a civil appeal filed by M/s. Modern Builders, invoking its powers under Article 142 of the Constitution to ensure complete justice. The appeal, previously dismissed by the Madhya Pradesh High Court solely due to the appellant’s alleged failure to invoke the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (the ‘1983 Act’), has been reinstated for fresh consideration.
Background of the Case
The dispute arose from a contract awarded by the State of Madhya Pradesh to M/s. Modern Builders for the construction of a minor bridge. However, the contract was rescinded by the State’s Executive Engineer, National Highway Division, Sagar, Madhya Pradesh, through a letter dated November 9, 2001. The appellant, M/s. Modern Builders, sought arbitration in accordance with Clause 29 of the work order, which incorporated an arbitration clause. After the State rejected the request for arbitration, the appellant approached the Madhya Pradesh Arbitration Tribunal under Section 7 of the 1983 Act.
Legal Issues and Proceedings
The Madhya Pradesh Arbitration Tribunal, by its order dated April 19, 2010, held that since there was an arbitration clause in the contract, the provisions of the Arbitration and Conciliation Act, 1996 (the ‘Arbitration Act’) would apply, rather than the 1983 Act. Following this, the appellant filed a petition under Section 11(6) of the Arbitration Act in the High Court of Madhya Pradesh at Jabalpur, which appointed a retired District Judge as the arbitrator. An award was subsequently made on April 25, 2014, in favor of M/s. Modern Builders.
The State of Madhya Pradesh challenged this award under Section 34 of the Arbitration Act before the District Judge, Jabalpur, who dismissed the petition. The State then filed an appeal under Section 37 of the Arbitration Act in the High Court, which set aside the award solely on the ground that the 1983 Act should have been invoked, relying on the Supreme Court’s decision in Madhya Pradesh Rural Road Development Authority & Anr. v. L. G. Chaudhary Engineers and Contractors [(2018) 10 SCC 826].
Supreme Court’s Observations and Decision
Counsel for the appellant, M/s. Modern Builders, argued that the High Court erred in setting aside the award based on the 1983 Act, as the decision in the Madhya Pradesh Rural Road Development Authority case was rendered almost four years after the arbitrator’s award. Additionally, they highlighted that no objection regarding the jurisdiction of the arbitrator had been raised at the appropriate stage.
Justice Abhay S. Oka, delivering the judgment, observed that the High Court’s decision to annul the award solely on the ground of the non-invocation of the 1983 Act was unjust. The bench noted, “In the facts of the case, it will be unjust to set aside the award only on the ground of the failure of the appellant to take recourse to the 1983 Act. In fact, the appellant had taken recourse to the 1983 Act before seeking the appointment of an Arbitrator.”
The Court further referred to paragraph 17 of the Madhya Pradesh Rural Road Development Authority decision, where it was noted that an award should not be annulled if no objection to the jurisdiction was raised at the relevant stage. The judgment stated, “Even assuming that the observations in paragraph 17… are not applicable, this is a fit case to exercise jurisdiction under Article 142 of the Constitution to ensure that complete justice is done.”
The Supreme Court set aside the impugned judgment of the High Court dated May 12, 2022, and restored the Arbitration Appeal No. 45 of 2019 to its file. The Court directed the High Court of Madhya Pradesh, Principal Seat at Jabalpur, to list the restored appeal on September 30, 2024, and decide it on merits without setting aside the award solely on the ground of the applicability of the 1983 Act.
