Bombay High Court upholds arbitral award, finds challenge to tribunal composition waived and 2015 amendment inapplicable

A Division Bench of Justices Arun R. Pedneker and Vaishali Patil-Jadhav heard an appeal by the State of Maharashtra (Public Works Department) challenging the Commercial Court’s refusal to set aside an arbitral award in favour of a toll-operating contractor. The appeal raised questions on whether the sole arbitrator was validly appointed in breach of a three-member panel clause, whether objections to the tribunal were waived, and whether post-2015 amendments to the Arbitration Act applied.

The Court dismissed the commercial arbitration appeal and upheld the sole arbitrator’s award of Rs. 5.966 million (596.60 lakhs) with interest. The Bench held that the State had participated in arbitration without timely objection and therefore “deemed to have waived” its right to challenge the tribunal’s constitution under Section 4 read with Section 16 of the Arbitration and Conciliation Act. The Court also concluded that provisions and disqualifications introduced by the Arbitration Amendment Act, 2015 (notably Section 12(1)/Schedule V and Section 12(5)/Schedule VII) did not apply because the notice invoking arbitration preceded 23/10/2015. The Court noted that the High Court in the Section 11 proceedings “merely recorded” that the parties had decided to appoint Mr C.D. Fakir and did not itself exercise appointment powers under Section 11(6). The Court, in its reasoning, observed: “Thus, from conjoint reading of Sections 10, 16 and 4, it is evident that an objection to the composition of the arbitral tribunal is a matter which is derogable and must be raised in the manner and within the time prescribed under Section 16(2), failing which the party is precluded from raising such objection at a subsequent stage.” The Bench further relied on precedents including Quippo Construction and BCCI clarifying commencement of arbitral proceedings under Section 21.

Background The dispute arose from a BOT road contract awarded after a 2002 tender to the respondent, Morya Infrastructure Pvt. Ltd., for toll collection and road maintenance in Beed district. The respondent completed work and began toll collection; the State later alleged deterioration and ordered stoppage of tolls in mid-2014 and paid a buy-back price of Rs. 67.79 lakhs. Dissatisfied, the respondent invoked arbitration on 30/06/2014 and later filed a Section 11 petition after an absence of response. The High Court recorded a communication that the Executive Engineer and the parties had jointly appointed Mr C.D. Fakir and disposed the Section 11 petition on 02/03/2015, observing: “In the circumstances, by recording displeasure of this Court, present application is disposed, as the Arbitrator is appointed….”

Arbitral proceedings proceeded; the State filed written statements and a counter-claim and participated in hearings for nearly two years. An objection to the tribunal’s constitution and the arbitrator’s disqualification was raised for the first time in the fifth meeting (22/07/2017). The respondent obtained an award directing payment of Rs. 596.60 lakhs with interest. The State moved under Section 34 to set aside the award; the Commercial Court dismissed that application and the State appealed.

The High Court examined (i) whether the High Court had appointed the arbitrator under Section 11(6), (ii) whether the State had waived objections to the tribunal’s composition, (iii) whether the arbitrator was disqualified under pre- or post-amendment provisions, and (iv) whether the 2015 amendments applied. The Court held that the High Court did not itself appoint the arbitrator but recorded parties’ joint decision; the State’s participation without timely objection triggered deemed waiver under Section 4; and because the notice invoking arbitration predated 23/10/2015, the 2015 Amendment provisions and the associated disqualification schedules did not apply. The appeal was dismissed with costs and pending applications were disposed of. The AGP sought a stay after pronouncement; the Bench refused a stay.

Case No.: Commercial Arbitration Appeal No. 01 of 2023 Case Title: State of Maharashtra, Through Public Works Department, Through its Executive Engineer, Public Division, Beed v. Morya Infrastructure Pvt. Ltd., Beed, Through Its Director, Bhaskar Tukaram Waghmare Appearances: For the Petitioner(s): Mr. M. K. Goyanka and Mr. P. K. Lakhotiya (A.G.P.) For the Respondent(s): Mr. J. N. Singh with Mr. Sunil L. Sange