Court Holds Jurisdictional Objection Waived After Filing Defence; Restores Arbitration for Merits Hearing

A bench of Justice Abhay S. Oka and Justice Ujjal Bhuyan heard Civil Appeal No.215 of 2025 arising out of an SLP challenging the setting aside of an arbitral award and the validity of the appointment of a sole arbitrator under a construction contract executed by the Union of India.

The Court allowed the appeal, set aside the judgments of the District Judge, Allahabad and the High Court which had annulled the award on the ground that the composition of the arbitral tribunal was illegal, and restored Arbitration Case No.25/2008 to the file of the District Judge for a hearing on merits. The Court held that the respondent had submitted to the jurisdiction of the sole arbitrator and, in any event, was barred by Section 16(2) of the Arbitration and Conciliation Act from raising a jurisdictional plea after the submission of its statement of defence. The Court, in its reasoning, observed: “16. Competence of arbitral tribunal to rule on its jurisdiction.—(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.” The Court further recorded that “Thus, it is crystal clear that 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.”

Background The dispute arose from a contract for construction of an office building for the General Manager, Railway Electrification Project, Allahabad. The contract provided for a three-member arbitral tribunal. After initial appointments and a failed umpire nomination, the Chief Justice of the High Court appointed a sole arbitrator (a retired Chief Justice) on 26 September 2003. Proceedings before the sole arbitrator commenced and, at a hearing on 5 December 2003, the record stated: “Learned counsel for both the parties stated that earlier the matter in dispute had been referred for arbitration to two arbitrators. They agree ... that present arbitrator has to act as sole arbitrator. They also agree that respective statements of claim and defense already filed by them before previous arbitrators should form the basis of adjudication in the present proceedings.”

The respondent filed a copy of its earlier statement of defence on 14 February 2004 and was granted time on several occasions to modify that defence. Instead of seeking modification, the respondent on 24 April 2004 filed an application objecting to the tribunal’s jurisdiction and contending that the arbitration clause required three arbitrators. The sole arbitrator rejected the objection by order dated 20 October 2004. The respondent challenged the award under Section 34 of the Arbitration Act before the District Judge who set aside the award solely on the ground of illegal tribunal composition; the High Court affirmed that decision.

Before the Supreme Court, the appellant argued that the respondent had accepted the appointment and filed its statement of defence and, under Section 16(2), could not raise a jurisdictional plea after filing the defence. The Union of India (ASG) countered that the Section 11 order was administrative and that the statement of defence was filed before the earlier three-member tribunal, so the respondent could validly raise jurisdictional objections later.

The Supreme Court found that the 5 December 2003 proceedings recorded the respondent’s acceptance of the sole arbitrator and its agreement to file the same statement of defence before the sole arbitrator. Applying Section 16(2), the Court held that a plea of lack of jurisdiction must be raised no later than the submission of the statement of defence and therefore the respondent could not belatedly object on 24 April 2004. The Court set aside the impugned judgments, restored the Section 34 petition to the District Judge, directed that Arbitration Case No.25/2008 be listed on 7 February 2025 and ordered that the jurisdiction issue shall not be re-agitated by the respondent while keeping all other contentions in the Section 34 petition open. The Court directed priority disposal of the restored petition and permitted transfer to the appropriate Commercial Court if required.

Case Details: Case No.: Civil Appeal No.215 of 2025 (Arising out of SLP (C) No.6053/2021); Citation: 2025 INSC 101 Case Title: M/s Vidyawati Construction Company v. Union of India Appearances: For the Petitioner(s): Senior Counsel for the appellant (name not indicated in judgment) For the Respondent(s): Additional Solicitor General (for Union of India) (name not indicated in judgment)