M/S MSP INFRASTRUCTURE LTD.versusM.P. ROAD DEVL. CORP. LTD.

                    [2014] 13 S.C.R. 1331


            M/S MSP INFRASTRUCTURE LTD.                          A
                               v.
               M.P. ROAD DEVL. CORP. LTD.
              (Civil Appeal No. 10778 of 2014)
                                                                  B
                   DECEMBER 05, 2014
       [J. CHELAMESWAR AND S. A. BOBDE, JJ.]
      Arbitration and Conciliation Act, 1996: s. 16 - Whether
a party to an arbitration proceeding may be permitted to raise
objections u/s. 34 with regard to the jurisdiction of the Arbitral C
 Tribunal after the stage of submission of written statement-
Respondent filed a petition uls. 34 for setting aside the
arbitration award -After two years, he filed an application to
amend the original petition uls. 34 raising the question of
jurisdiction of Tribunal - Application dismissed by Session D
Judge but allowed by the High Court- Held: A party is bound,
by virtue of sub-section (2) of s. 16, to raise any objection it
may have to the jurisdiction of the Tribunal before or at the
 time of submission of its statement of defence, and at any
 time thereafter it is expressly prohibited - Amendment E
application raised a ground which was contrary to law and
 ought not to have been allowed by High Court.
     Public policy- Held: Where the question arises out of
a conflict between an action under a State Law and an action F
under a Central Law, the term public policy of India must
necessarily understood as being referable to the policy' of
the Union.
      Allowing the appeal, the Court
      HELD: 1. Section 16 mandates that a plea that the G
Tribunal does not have jurisdiction shall not be raised
later than the submission of the statement of defence.
This provision disables a party from petitioning an
Tribunal to challenge its jurisdiction belatedly, having
                                                         H
                          1331
1332      SUPREME COURT REPORTS               [2014] 13 S.C.R.


 A submitted to the jurisdiction of the Tribunal, filed the
   statement of defence, led evidence, made arguments and
   ultimately challenged the award under Section 34 of the
   Arbitration Act, 1996. This is exactly what has been done
   by the Respondent Corporation. They did not raise the
 B question of jurisdiction at any stage. They did not raise
   it in their statement of defence; they did not raise it at
   any time before the Tribunal; they suffered the award;
   they preferred a petition under Section 34 and after two
   years raised the question of jurisdiction of the Tribunal.
 c The mandate of Section 34 clearly prohibits such a cause.
   A party is bound, by virtue of sub-section (2) of Section
   16, to raise any objection it may have to the jurisdiction
   of the Tribunal before or at the time of submission of its
   statement of defence, and at any time thereafter it is
 D expressly prohibited. Suddenly, it cannot raise the
   question after it has submitted to the jurisdiction of the
   Tribunal and invited an unfavourable award. It would be
   quite undesirable to allow arbitrations to proceed in the
   same manner as civil suits with all the well-known
 E drawbacks of delay and endless objections even after
   the passing of a decree. [Para 14][1338-D-H; 1339-A-D]
         2. There is nothing to warrant the inference that all
   objections to the jurisdiction of the Tribunal cannot be
   raised under Section 16 and that the Tribunal does not
 F have power to rule on its own jurisdiction. Secondly,
   Parliament has employed a different phraseology in
   Clause (b) of Section 34. That phraseology is "the subject
   matter of the dispute is not capable of settlement by
   arbitration." This phrase does not necessarily refer to
 G an objection to 'jurisdiction' as the term is well known.
   In fact, it refers to a situation where the dispute referred
   for arbitration, by reason of its subject matter is not
   capable of settlement by arbitration at all. [Para 16]
   [1340-F-H]
 H
 M/S MSP INFRASTRUCTURE LTD. v. M.P. ROAD DEVL.                1333
                  CORP. LTD.

     Boaz Allen and Hamilton Inc. v. SB/ Home Finance          A
     Limited and Ors. (2011) 5 SCC 532: 2011 (7) SCR
     310 - relied on.
       3. All objections to jurisdiction of whatever nature
must be taken at the stage of the submission of the
statement of defence, and must be dealt with under             8
Section 16 of the Arbitration Act, 1996. However, if one
of the parties seeks to contend that the subject matter
of the dispute is such as cannot be dealt with by
arbitration, it may be dealt under Section 34 by the Court.
It was submitted that it is the public policy of India that    C
arbitration should be held under the appropriate law and
that unless the arbitration was held under the State Law
i.e. the M.P. Act that it would be a violation of the public
policy of India. This contention is misconceived·since
the intention of providing that the award should not be        D
in conflict with the public policy of India is referable to
the public policy of India as a whole i.e. the policy of the
Union of India and not merely the policy of an individual
State. Though, it cannot be said that the upholding of a
state law would not be part of the public policy of India,      E
much depends on the context. Where the question arises
out of a conflict between an action under a State Law
and an action under a Central Law, the term public policy
of India must necessarily understood as being referable
to the policy of the Union. It is well known, vide Article 1    F     .,
of the Constitution, the name 'India' is the name of the
Union of States and its territories include those of the
States. Thus, the amendment application raised a
ground which was contrary to law and ought not to have
been allowed by the High Court. [Paras 16 to 18)                G
[1339-G-H]
                CASE LAW REFERENCE
2011 (7) SCR 310           relied on.           Para 16
                                                                H
1334         SUPREME COURT REPORTS                 [2014] 13 S.C.R.


 A         CIVILAPPELLATE JURISDICTION: Civil Appeal No.
       10778of2014.
            From the Judgment and Order dated 18-02-2010 of the
       High Court of Madhya Pradesh, Principal, Principal Seat at
       Jabalpur, M.P. in W.P. No. 14315 of2009.
 B
            Ravindra Shrivastava, Sr. Adv., Kunal Verma, Siddharth
       Shrivastava, Medha Shrivastava, Oshi Jain, Advs. for the
       Appellant.
       Shyam Divan, Sr. Adv., Ashiesh Kumar, Advs. for the
 C Respondent.
            The Judgment of the Court was delivered by
            S.A. BOBDE, J. 1. Leave granted.
          2. The question that has arisen in this appeal is : whether
 D a party to an arbitration proceeding may be permitted to raise
   objections under Section 34 of the Arbitration and Conciliation
   Act, 1996 (for short "the Arbitration Act, 1996"), with regard to
   the jurisdiction of theArbitral Tribunal (for short "the Tribunal")
   after the stage of submission of the written statement.
 E
         3. M/s M.S.P. Infrastructure (Appellant) and the M.P. Road
   Development Corporation (Respondent) entered into a
   contract on 04-04-2002 for the development and upgradation
   of the Raisen-Rahatgarh road (a stretch of about 100 Kms.)
 F in the State of Madhya Pradesh.
         4. Upon a dispute arising between the parties in respect
   of the work carried out by the Appellant, the Respondent
   Corporation terminated the said contract and encashed the
   bank-guarantee. Thereafter, the Appellant filed a Civil-Suit
 G being C.S. No. 63 of 2003 before the Calcutta High Court
   challenging the termination of the Agreement as well as the
   encashment.
         5. The Calcutta High Court disposed of the suit on 22-
   05-2003 by recording "Terms of Settlement" between the
 H parties, whereby it was decreed that the dispute would be
 M/S MSP INFRASTRUCTURE LTD. v. M.P. ROAD DEVL.                  1335
            CORP. LTD. [S.A. BOBDE, J.]

referred to arbitration in terms of the contract dated 04-04-    A
2002 within a period of 30 days, under the provisions of the
Arbitration Act, 1996.
     6. The Tribunal made an award on 27-11-2006. By the
said award, the Tribunal partly allowed the claims of the
Appellant and accordin_gly awarded a sum of approximately        B
Rs. 6. 90 crores as well as the release of Fixed Deposit
Receipts which had been deposited as security with the
Respondent.
      7. Aggrieved by the award dated 27-11-2006, the            c
Respondent filed a petition on 09-01-2007 for setting aside
the award under Section 34 of the Arbitration Act, 1996. The
Respondent assailed the award as being in contravention of
clause (b) of sub-section (2) of Section 34 of the Arbitration
Act, 1996.
                                                                  D
       8. Subsequently, on 28-02-2009 the Respondent moved
an application to amend the original petition under Section 34
to add additional grounds of objection. The Additional District
& Sessions Judge, Bhopal (Madhya Pradesh) vide order
dated 26-08-2009 rejected the said amendment application. E
The learned Additional District & Sessions Judge observed·
that it was absolutely unjust and unfair to file such objections
after two years of the filing of the petition under Section 34 of
theArbitratior:Act, 1996. Aggrieved, the Respondent preferred
a Petition under Article 227 before the High Court of Madhya F
Pradesh at Jabalpur. The Madhya Pradesh High Court without
going into the tenability of the amendment application at the
stage at which it was moved, i.e., beyond the time permitted
by Section 16 of the Arbitration Act, 1996, simply allowed the
amendment by observing that they are not deciding the merits G
of the case and that they were simply considering the
amendment application.
     9. On 18-02-2010, the High Court allowed the
Respondent's petition and set aside the order of the District
Court, thus allowing the amendment application.                  H
1336         SUPREME COURT REPORTS                    [2014] 13 S.C.R.


 A           10. Aggrieved by the allowing of the amendment
       application, the Appellant has moved this Court. We must at
       once notice that the main challenge to the order allowing the
       amendment is that it allows the Respondent to raise an
       objection to jurisdiction contrary to Section 16 of the Arbitration
 B     Act, 1996, which provides that an objection to jurisdiction shall
       not be raised later than the submission of the statement of
       defence. The grounds allowed to be raised by the order allowing
       the amendment application are as follows:
                   "I-A That the Indian Council of Arbitration, New
 c           Delhi had no jurisdiction to appoint any Arbitral Tribunal
             of private persons to entertain and decide the dispute
             between the parties as it related to a works contract
             between a contractor and a/Govt. Undertaking.
                   1-B That the dispute being a dispute between a
 D
             contractor and a Govt. Undertaking arising out of a
             works contract of more than Rs. 50, 0001- the Arbitration
             Tribunal Constituted by the State Govt. of M.P had the
             exclusive jurisdiction to decide the said dispute on
             being submitted to it under sub section 1 of, Section 7
 E
             of the M.P Madhyastham Adhikaran Adhiniyam, 1983
             and none else. As such, the impugned award passed
             by the Arbitral Tribunal constituted-by the Indian Council
             of Arbitration, New Delhi having no jurisdiction to
             entertain and/or decide the dispute, the impugned
 F
             award is a total nullity and non-est in the eye of law."
         11. According to the Appellant,. the Tribunal under the
   Arbitration Act, 1996 was fully empowered to enter into and
   decide the dispute submitted to it, since the dispute was
 G referred in pursuance of an arbitration clause contained in the
   Concession Agreement, which reads as follows:
             "39. 1 Any dispute, which is not resolved amicably as
             provided in Clause 39. 1 and 39. 2 shall be finally
             decided by reference to arbitration by a Board of
 H
                                                 •

 M/S MSP INFRASTRUCTURE LTD. v. M.P. ROAD DEVL.                  1337
            CORP. LTD. [S.A. BOBDE, J.]

    . Arbitrators appointed as per the provision of the A
      Arbitration and Conciliation Act, 1996 and any
      subsequent amendment thereto. Such Arbitration shall
      be held in accordance with the Rules of Arbitration of
      the Indian Council of Arbitration and shall be subject to
      the provisions of the Arbitration and Conciliation Act, B
      1996 and as amended from time to time thereafter."
         12. The Appellant further contends that the aforesaid
clause covers any dispute which is not resolved amicably and
is intended to cover the present dispute which arises under
the contract formed and concluded by the agreement which C
contains this very arbitration clause. The Appellant further.
contends that this agreement was entered into by the parties
in the year 2002, being fully aware of the existence of the
Madhya Pradesh MadhyasthamAdhikaran Adhiniyam, 1983
(for short "the M.P. Act of 1983"). Not only this, the parties D
reiterated this agreement before the Calcutta High Court when
they specifically agreed vide Clause 'C' of the consent terms
that if the Appointing Authority fails to appoint and constitute
the Tribunal in terms of the Concession Agreement dated 04-
04-2002 within a period of 30 days, the parties shall be at E
liberty to apply to the Madhya Pradesh High Court for
appointment and constitution of the Tribunal under the
provisions of the Arbitration Act, 1996. Thus, on two occasions,
the parties asserted and consented that the dispute between
them would he resolved by Arbitration under the provisions of F
the Arbitration Act, 1996. Therefore, according to the Appellant,
there is no merit whatsoever in the ground introduced by the
amendment application. Even otherwise, the Appellant
contended that the provisions of the Arbitration Act, 1996, being
a Parliamentary Statute would have precedence over the M.P. G
Act of 1983, which is a State Act on the same subject. Above
all, it was contended that the introduction of the ground that the
Tribunal did not have jurisdiction is grossly belated and
impermissible in view of Section 16(2) of the Arbitration Act,
 1996.                                                             H
                 •

1338 ·     SUPREME COURT REPORTS                   [2014] 13 S.C.R.


 A        13. It is clear from the circumstances, that in the event it
   is found that the newly added ground could not have been
   raised at this stage, i.e. the stage at which it was allowed to
   be raised, it is not necessary to go into the wider question as
   to which Act will prevail, the Central Act or the State Act. Thus,
 B the only question that falls for consideration at this stage is
   whether, having regard to Section 16 of the Arbitration Act,
   1996, the Respondent was entitled to introduce the ground
   that the Arbitration Tribunal constituted under the M.P. Act of
   1983 would take precedence over the Tribunal constituted
 c under the Arbitration Act, 1996, that too by way of an
   amendment to the petition under Section 34.
           14. Section 16(2) of the Arbitration Act, 1996 reads as
     follows:
           "Section 16(2) A plea that the arbitral tribunal does not
 D
           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."
 E
          On a plain reading, this provision mandates that a plea
   that the Tribunal does not have jurisdiction shall not be raised
   later than the submission of the statement of defence. There
   is no doubt about eitherthe meaning of the words used in the
 F Section nor the intention. Simply put, there is a prohibition on
   the party from raising a plea that the Tribunal does not have
   jurisdiction after the party has submitted its statement of
   defence. The intention is very clear. So is the mischief that it
   seeks to prevent. This provision disables a party from
 G petitioning an Tribunal to challenge its jurisdiction belatedly,
    having submitted to the jurisdiction of the Tribunal, filed the
   statement of defence, led evidence, made arguments and
    ultimately challenged the award under Section 34 of the
   Arbitration Act, 1996. This is exactly what has been done by
 H the Respondent Corporation. They did not raise the question
 M/S MSP INFRASTRUCTURE LTD. v. M.P. ROAD DEVL.                       1339
            CORP. LTD. [S.A. BOBDE, J.]

of jurisdiction at any stage. They did not raise it in their A
statement of defence; they did not raise it at any time before
the Tribunal; they suffered the award; they preferred a petition
under Section 34 and after two years raised the question of
jurisdiction of the Tribunal. In our view, the mandate of Section
34 clearly prohibits such a cause. A party is bound, by virtue B
of sub-section (2) of Section 16, to raise any objection it may
have to the jurisdiction of the Tribunal before or at the time of
submission of its statement of defence, and at any time
thereafter it is expressly prohibited. Suddenly, it cannot raise
the question after it has submitted to the jurisdiction of the c
Tribunal and invited an unfavourable award. It would be quite
 undesirable to allow arbitrations to proceed in the same
 manner as civil suits with all the well-known drawbacks of delay
 and endless objections even after the passing of a decree.
       15. Shri Divan, the learned senior counsel for the              D
Respondent vehemently submitted that a party is entitled under
the law to raise an objection at any stage as to the absence of
jurisdiction of the Court which decided the matter, since the
order of such a Court is a nullity. It is not necessary to refer to
the long line of cases in this regard since, that is the law. But,     E
it must be remembered that this position of law has been well
settled in relation to civil disputes in Courts and not in relation
to arbitrations under the Arbitration Act, 1996. Parliament has
the undoubted power to enact a special rule of law to deal with
arbitrations and in fact, has done so. Parliament, in its wisdom,      F
must be deemed to have had knowledge of the entire existing
 law on the subject and if it chose to enact a provision contrary
to the general law on the subject, its wisdom cannot be doubted.
 In the circumstances, we reject the submission on behalf of
the Respondent.                                                        G
     16. It was next contended on behalf of the Respondent
by Shri Divan, that Section 16 undoubtedly empowers the
Tribunal to rule on its own jurisdiction and any objections to it
must be raised not later than the submission of the statement
                                                                       H
1340        SUPREME COURT REPORTS                     [2014] 13 S.C.R.


 A of defence. However, according to the learned senior counsel,
   objections to the jurisdiction of a Tribunal may be of several
   kinds as is well-known, and Section 16 does not cover them
   all. It was further contended that where the objection was of
   such a nature that it would go to the competence of the Arbitral
 B Tribunal to deal with the subject matter of arbitration itself ''..--:d
   the consequence would be the nullity of the award, such
   objection may be raised even at the hearing of the petition
   under Section 34 of the Act. In support, the learned senior
   counsel relied on clause (b) of sub-section (2) of Section 34
 c which reads as follows:-
              "34(2) An arbitral award may be set aside by the Court
              only if-
           (a) .......... .
 D         (b) the Court finds that-
              (i)     the subject-matter of the dispute is not capable
                      of settlement by arbitration under the law for
                      the time being in force, ,or
 E             (ii)   the arbitral award is in conflict with the public
                      policy of India.
           It is not possible to accept this s.ubmission. In the first
   place, there is nothing to warrant the inference that all objections
   to the jurisdiction of the Tribunal cannot be raised under
 F Section 16 and that the Tribunal does not have power to rule
   on its own jurisdiction. Secondly, Parliament has employed a
   different phraseology in Clause (b) of Section 34. That
   phraseology is "the subject matter of the dispute is not capable
   of settlement by arbitration." This phrase does not necessarily
 G refer to an objection to 'jurisdiction' as the term is well known.
   In fact, it refers to a situation where the dispute referred for
   arbitration, by reason of its subject matter is not capable of
   settlement by arbitration at all. Examples of such cases have

 H
    M/S MSP INFRASTRUCTURE LTD. v. M.P. ROAD DEVL.                  1341
               CORP. LTD. [S.A. BOBDE, J.]

been referred to by the Supreme Court in the case of Booz A
Allen and Hamilton Inc. Vs. SB/ Home Finance Limited
and Ors. 1 This Court observed as follows:-
        "36: The well-recognised examples of non-arbitrable
        disputes are: (i) disputes relating to rights and liabilities
        which give rise to or arise out of criminal offences; (ii) B
        matrimonial disputes relating to divorce, judicial
        separation, restitution of conjugal rights, child custody;
        (iii) guardianship matters; (iv) insolvency and winding-
        up matters; (v) testamentary matters (grants of probate,
        letters of administration and succession certificate); and C
        (vi) eviction or tenancy matters governed by special
        statutes where the tenant enjoys statutory protection
        against eviction and only the specified courts are
        conferred jurisdiction to grant eviction or decide the
        disputes."                                                    D
      The scheme of the Act is thus clear. All objections to
jurisdiction of whatever nature must be taken at the stage of
the submission of the statement of defence, and must be dealt
with under Section 16 of the Arbitration Act, 1996. However, if      E
one of the parties seeks to contend that the subject matter of
the dispute is such as cannot be dealt with by arbitration, it
may be dealt under Section 34 by the Court.
       17. It was also contended by Shri Divan, that the newly
added ground thatthe Tribunal under the Arbitration Act, 1996        F
had no jurisdiction to decide the dispute in question because
the jurisdiction lay with the Tribunal under the M.P.Act of 1983,
was a question which can be agitated under sub-clause (ii) of
clause (b) of sub-section (2) of Section 34 of the Arbitration
Act, 1996. This provision enables the court to set-aside an          G
award which is in conflict with the public policy of India.
Therefore, it is contended that the amendment had been rightly
allowed and it cannot be said that what was raised was only a
question which pertained to jurisdiction and ought to have been
1
    (2011) 5 sec 532                                                 H
1342          SUPREME COURT REPORTS                   [2014] 13 S.C.R.


 A raised exclusively under Section 16 of the Arbitration Act, 1996,
   . but in fact was a question which could also have been raised
     under Section 34 before the Court, as has been done by the
     Respondent. This submission must be rejected. The contention
     that an award is in conflict with the public policy of India cannot
 8 be equated with the contention that Tribunal under the C:..:ntral
     Act does not have jurisdiction and the Tribunal under the State
     Act, has jurisdiction to decide upon the dispute. Furthermore,
     it was stated that this contention might have been raised under
     the head that the Arbitral Award is in conflict with the public
 c policy of India. In other words, it was submitted that it is the
     public policy of India that arbitrations should be held under the
     appropriate law. It was contended that unless the arbitration
     was held under the State Law i.e. the M.P. Act that it would be
     a violation of the public policy of India. This contention is
 o misconceived since the intention of providing that the award
     should not be in conflict with the public policy of India is referable
     to the public policy of India as a whole i.e. the policy of the
     Union of India and not merely the policy of an individual state.
     Though, it cannot be said that the upholding of a state law would
 E not be part of the public policy of India, much depends on the
     context. Where the question arises out of a conflict between
     an action under a State Law and an action under a Central
     Law, the term public policy of India must necessarily understood
     as being referable to the policy of the Union. It is well known,
 F vide Article 1 of the Constitution, the name 'India' is the name
     of the Union of States and its territories include those of the
     States.
         18. We have thus no hesitation in coming to the conclusion
   that the amendment application raised a ground which was
 G contrary to law and ought not to have been allowed by the High
   Court. We accordingly set aside the judgment and order of
   the High Court. There shall be no order as to costs.

       Devika Gujral                                        Appeal allowed.