In a significant ruling, a Supreme Court Bench comprising Justice Abhay S. Oka and Justice Ujjal Bhuyan reaffirmed the principle that jurisdictional objections in arbitration proceedings must be raised before the submission of a statement of defence. The judgment came in the case of M/s Vidyawati Construction Company v. Union of India [Civil Appeal No. 215 of 2025], a dispute involving a government contract and the validity of an arbitral tribunal’s composition.
Case Background
The dispute originated from a construction contract awarded by the Union of India to Vidyawati Construction Company for the Railway Electrification Project in Allahabad. Following disagreements over payments, the matter was referred to arbitration under the terms of the contract, which specified a tribunal of three arbitrators.
Initially, two arbitrators were appointed by the Chief Justice of the High Court, with a direction for them to nominate an umpire. However, due to procedural delays and the resignation of the umpire, the Chief Justice, on September 26, 2003, appointed a retired Chief Justice of a High Court as the sole arbitrator.
Both parties participated in the proceedings, and the Union of India submitted its statement of defence. However, it later objected to the jurisdiction of the sole arbitrator, arguing that the arbitral tribunal was improperly constituted under the terms of the arbitration clause. The sole arbitrator rejected the objection and issued an award in favor of Vidyawati Construction Company.
The Union of India challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, before the District Judge, Allahabad. The District Judge set aside the award, holding that the sole arbitrator’s appointment violated the arbitration agreement. This decision was upheld by the High Court, prompting the contractor to appeal to the Supreme Court.
Important Legal Issues
1. Timing of Jurisdictional Objections
The primary legal issue was whether the Union of India could raise an objection to the jurisdiction of the arbitral tribunal after submitting its statement of defence.
2. Effect of Agreement During Proceedings
Another key question was whether the Union of India’s explicit agreement during proceedings to continue with the sole arbitrator precluded it from later challenging jurisdiction.
Key Observations of the Court
The Supreme Court focused on Section 16(2) of the Arbitration and Conciliation Act, 1996, which states:
A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence…
Justice Oka, delivering the judgment, noted:
“The respondent agreed in so many words that the Arbitrator appointed under the order dated 26th September 2003 was to act as the sole Arbitrator.”
The Court highlighted that the Union of India had unequivocally agreed to proceed with the sole arbitrator during a meeting on December 5, 2003, where both parties’ counsel recorded their acceptance of the tribunal’s composition. The judgment stated:
“After submitting to the jurisdiction of the sole Arbitrator, the respondent could not have belatedly objected to the jurisdiction.”
The Court also noted the Union of India’s conduct, which involved submitting its statement of defence and participating in proceedings before raising objections. Justice Oka observed:
“The conduct of the respondent and the statutory bar under Section 16(2) make it clear that the jurisdictional objection was impermissible.”
Decision of the Court
The Supreme Court set aside the judgments of the District Judge and the High Court, holding that the Union of India’s jurisdictional objection was invalid. The Court directed the revival of the Section 34 petition filed by the Union of India for reconsideration of other issues, except jurisdiction.
The Bench underscored the need for expeditious disposal, instructing the District Judge, Allahabad, to prioritize the matter and transfer it to a Commercial Court if required. The Court also clarified that the issue of jurisdiction had been conclusively decided and could not be reopened.
Case Details
– Case Title: M/s Vidyawati Construction Company v. Union of India
– Case Number: Civil Appeal No. 215 of 2025
– Bench: Justice Abhay S. Oka and Justice Ujjal Bhuyan
– Appellant Counsel: Senior Advocate for Vidyawati Construction Company
– Respondent Counsel: Additional Solicitor General for Union of India
