Arbitration cannot be objected in the middle, says SC

A bench of Justice Chelameswar and S.A. Bobde of the Apex Court in M/s MSP Infrastructure Ltd v. M P Road Development Corporation Ltd. stated that a party to the arbitration proceedings cannot be objected regarding jurisdiction of the tribunal midway. Issue arose in this appeal was whether a party to an arbitration proceeding may be permitted to raise objections under Section 34 of the Arbitration and Conciliation Act, 1996 with regard to the jurisdiction of the Arbitral Tribunal after the stage of submission of the written statement.

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 referred in pursuance of an arbitration clause contained in the Concession Agreement entered between the Parties to this appeal. Appellant further argued 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 contains this very arbitration clause.

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 of defence. However, objections to the jurisdiction of a Tribunal may be of several kinds as is well-known, and Section 16 does not cover them all. Where the objection was of such a nature that it would go to the competence of the Arbitral Tribunal to deal with the subject matter of arbitration itself and 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.

However, Court observed that, 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 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 an objection to ‘jurisdiction’ as the term is well known.

Court even considered its earlier decision in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Ors (([2011] 5 SCC 532)), that, “Even if there is an arbitration agreement between the parties, and even if the dispute is covered by the arbitration agreement, the court where the civil suit is pending, will refuse an application u/s.8, to refer the parties to arbitration, if the subject matter of the suit is capable of adjudication only by a public forum or the relief claimed can only be granted by a special court or Tribunal”.