Arbitral award will not be set aside solely for jurisdictional plea not taken before tribunal, Supreme Court clarifies

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by M/s Gayatri Project Ltd. challenging a Madhya Pradesh High Court order that set aside an arbitral award on the ground that the arbitral tribunal lacked jurisdiction under the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (MP Act, 1983). The core question was whether an award rendered under the Arbitration and Conciliation Act, 1996 (Act, 1996) could be annulled solely on jurisdictional grounds when no such objection had been taken before the arbitral tribunal.

The Court allowed the appeal, set aside the High Court judgment, and restored the Section 34 proceedings to the Commercial Court, Bhopal for determination of the remaining challenges to the award. The Court clarified the interplay between this Court’s precedents — notably Lion Engineering, L.G. Chaudhary (I & II), Pam Development and subsequent decisions — and held that although a jurisdictional plea, being a question of law, could be raised for the first time in Section 34 proceedings, such a plea was subject to waiver principles and the requirements of showing good reasons for failure to raise it earlier. The Court emphasised the limited exception carved out in L.G. Chaudhary (II) that awards already passed would not be annulled “only” on the ground of jurisdiction where the plea was not taken at the relevant stage. The Court, in its reasoning, observed: “What emerges from the foregoing is that although Lion Engineering (supra) affirms that a plea of lack of jurisdiction, being a question of law, may be raised for the first time under Section 34 of the Act, 1996, yet such a plea is nevertheless subject to the waiver as held in Pam Development (supra). Furthermore, as per Gas Authority of India (supra), such a plea may only be entertained if the party demonstrates a strong and sufficient reason for not raising it before the arbitral tribunal. However, L.G. Chaudhary (II) (supra) makes it clear that a failure to raise the issue of applicability of the MP Act, 1983 at the appropriate stage cannot be regarded as a sufficient reason, and therefore the plea cannot be permitted at the stage of Section 34 proceedings.” The Court also noted the settled proposition that “in such cases, if no objection to the jurisdiction was taken at relevant stage, the award may not be annulled only on that ground.”

Background The appellant executed a works contract dated 12.12.2005 with the respondent for road rehabilitation in Madhya Pradesh. The contract contained an arbitration clause providing for a three-member tribunal and application of the Arbitration and Conciliation Act, 1996. Disputes arose in 2010 over reimbursement claims; the appellant invoked arbitration by notice dated 06.08.2010, the tribunal was constituted on 24.09.2010, and it passed a unanimous award on 08.07.2011 in favour of the appellant for Rs. 1,03,55,187 plus interest. The respondent challenged the award under Section 34 on 30.09.2011 but initially did not contest the tribunal’s jurisdiction or the applicability of the MP Act, 1983. After a sequence of conflicting precedents (VA Tech; State v. Anshuman Shukla; Ravikant Bansal; the split Bench in L.G. Chaudhary (I); and later the three-judge rulings in Lion Engineering and L.G. Chaudhary (II)), the respondent sought to amend its Section 34 petition to add a jurisdictional ground following L.G. Chaudhary (II). The trial court allowed the Section 34 petition on jurisdictional grounds; the High Court affirmed. Before this Court, the appellant submitted that the respondent had never raised jurisdiction before the tribunal or in its original Section 34 petition and that established law precluded annulling an award solely on that basis once the relevant stage had passed. The Supreme Court found that the facts fell squarely within L.G. Chaudhary (II)’s exception, observed that the respondent had proceeded with arbitration without timely objection, and held that the High Court erred in annulling the award solely on jurisdictional grounds. The Court set aside the High Court order, restored the Section 34 proceedings before the trial court for adjudication on merits of other grounds, disposed of pending applications and directed circulation of the judgment to all High Courts.

Case Details: Case No.: Civil Appeal No. 6856 of 2025 (2025 INSC 698) Case Title: M/S GAYATRI PROJECT LIMITED v. MADHYA PRADESH ROAD DEVELOPMENT CORPORATION LIMITED Appearances: For the Petitioner(s): [Counsel not specified in the reported judgment] For the Respondent(s): [Counsel not specified in the reported judgment]