Research › Browse › Judgment

Supreme Court of India · body

2025 DIGILAW 1157 (SC)

Sew Infrastructure Ltd. v. Government of Chhattisgarh

2025-05-07

JOYMALYA BAGCHI, PAMIDIGHANTAM SRI NARASIMHA

body2025
ORDER : 1. Leave granted. 2. This appeal is against the judgment and order passed by the High Court of Chhattisgarh at Bilaspur in Writ Petition Civil No. 1142/2019 dated 05-08-2024. 3. The appellant before us, a corporate entity, entered into an agreement with the State of Chhattisgarh on 20.12.2007 for construction of concrete dam(s) and allied work. As disputes arose during the course of execution of the contract, in view of the arbitration clause in the agreement, the appellant sought adjudication and determination of the disputes through arbitration under the Arbitration and Conciliation Act, 1996[Hereinafter referred to as the 'Act'.]. 4. Sole arbitrator came to be appointed on 05.11.2015. The arbitral proceedings culminated in the passing of the award on 30.03.2017. It is not in dispute that before the Arbitral Tribunal the respondent-State had not taken any objection about the applicability of the Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983, (hereinafter referred to as the 'State Act'). 5. However, when the State challenged the award on jurisdictional ground under Section 34 of the Act, that the State Act alone applies, the Commercial Court by its order dated 05.12.2018 accepted the submissions and set aside the award. For this purpose, the Commercial Court relied on the decision in Lion Engineering Consultants v. State of Madhya Pradesh and Ors, (2018) 16 SCC 758 that a ground of jurisdiction can be raised at any stage. 6. Questioning the correctness of the decision of the Commercial Court, the appellant filed a writ petition under Article 226, which came to be dismissed by the High Court by the order impugned before us on the ground of alternative remedy under Section 37 of the Act. 7. In the order impugned, the High Court held as under: "16. In the case at hand, the Commercial Court while exercising the Jurisdiction under Section 34 of the Act of 1996 has allowed the application under Section 34 of the Act of 1996 for the reasons assigned therein. The Court in an appeal under Section 37 of the Act of 1996 can very well confirm the award of arbitration, set aside the order passed under Section 34 or reject the application under, Section 34 or appeal under Section 37. 17. The Court in an appeal under Section 37 of the Act of 1996 can very well confirm the award of arbitration, set aside the order passed under Section 34 or reject the application under, Section 34 or appeal under Section 37. 17. In the case at hand, as per case of petitioner, the Sole Arbitrator passed an award in its form and it is the respondent who approached the Commercial Court by filing proceeding under Section 34 of the Act of 1996 and therefore, the grounds on which this petition is filed can very well be considered by the Court in an appeal under Section 37 of the Act of 1996. 18. For the foregoing discussion, in the facts of the case and decisions of Hon'ble Supreme Court in case of Whirlpool Corporation (supra), Nivedita Sharma (supra), Harbanslal Sinha (supra) and Commercial Steel Limited (supra), in the opinion of this Court, writ petition is not maintainable as the petitioner is having efficacious alternate remedy of appeal under Section 37 of the Act of 1996. 19. Accordingly, writ petition is liable to be and is hereby dismissed, reserving liberty with the petitioner to avail the remedy available, in accordance with law." 8. Mr. Harsh Parashar, learned advocate appearing for the appellant submitted that the respondent-State has never objected to the jurisdiction of the arbitrator in view of the State Act. On the other hand, Mr. Karan Khetnai has submitted that the jurisdictional question can be taken up at any stage. 9. We have been encountering cases where the States such as Madhya Pradesh and Chhattisgarh, governed by special State legislations for resolution of disputes through arbitration are taking contradictory and inconsistent stands. It is under these circumstances that this Court passed orders in M.P. Rural Road Development Authority v. L.G. Chaudhary Engineers & Contractors, (2018) 10 SCC 826 JMC Projects (India) Ltd. vs. Madhya Pradesh Road Development Corporation, (2024) 4 SCC 729 and Sweta Construction vs. Chhattisgarh State Power Generation Company Ltd., (2024) 4 SCC 722 It is unfortunate that the State of Madhya Pradesh and Chhattisgarh have contributed to unnecessary litigation. Issues relating to jurisdiction must be taken at the earliest and this has two important values to sub-serve. To start with, there must be clarity and certainty about the existence or non-existence of a statutory remedy for resolution of disputes. Issues relating to jurisdiction must be taken at the earliest and this has two important values to sub-serve. To start with, there must be clarity and certainty about the existence or non-existence of a statutory remedy for resolution of disputes. Secondly, jurisdictional issues, if not taken at the earliest lead to prolonged and unnecessary litigation, having a direct bearing on time and expense. The State Governments must take immediate action and issue necessary instructions about the invocation of the State Acts at the earliest, whenever the State or the contractor seeks arbitration under contracts with the State or their instrumentalities. 10. Returning to the facts of the present case, we have a precedent to follow. In similar circumstances, in L.G. Chaudhary (supra) this Court adopted the following mode. "17. We do not express any opinion on the applicability of the State Act where award has already been made. In such cases if no objection to the jurisdiction of the arbitration was taken at relevant stage, the award may not be annulled only on that ground. 18. The appeals are, accordingly, disposed of. CA No. 2616 arising out of SLP (C) No. 35641 of 2011 19. Leave granted. In view of the order [Set out in paras 15 to 18, above.] passed in CA No. 2751 of 2018 arising out of SLP (C) No. 16615 of 2012, no objection having been raised by the respondents in terms of Section 16(2) of the Arbitration and Conciliation Act, 1996 at appropriate stage within the time stipulated, the award could not have been annulled. 20. Accordingly, this appeal is allowed, the impugned judgment [Sarvesh Rai v. M.P. Rural Road Development Authority, Misc. Appeal No. 2673 of 2006, order dated 17-8-2011 (MP)] is set aside and the award is restored. It is, however, made clear that this order will not debar proceedings under Section 34 of the Arbitration and Conciliation Act, 1996." 11. A similar approach was adopted by this Court again in JMC Projects (India) Ltd. vs. Madhya Pradesh Road Development Corporation and also in Sweta Construction v. Chhattisgarh State Power Generation Company Ltd. 12. The present appeal arises out of an order of the High Court dismissing the writ petition under Article 226 of the Constitution and directing the appellant to avail the alternative remedy of filing an appeal under Section 37 of the Act. The present appeal arises out of an order of the High Court dismissing the writ petition under Article 226 of the Constitution and directing the appellant to avail the alternative remedy of filing an appeal under Section 37 of the Act. It is important to note that the decision of the Commercial Court under Section 34 dated 05.12.2018 is only on jurisdictional question and there was no occasion for the Commercial Court to decide the case on merits. Following the approach adopted by this Court in the above referred precedents, it will be appropriate to restore Section 34 petition and enable the parties to contest or defend the award on merits. This approach would enable the State to have the opportunity to contest the award on merits, which it never had and will also enable the appellant to defend the award on its own merits. 13. In conclusion, while we uphold the decision of the High Court that the appellant must exercise the alternative remedy under the Arbitration and Conciliation Act, in exercise of our jurisdiction under Article 142, we set aside the judgment and order passed by the Commercial Court dated 05.12.2018 and restore Section 34 petition in M.J.C. No 16-17 to its original number and direct the Commercial Court to hear both the parties on merits and decide the case as expeditiously as possible. 14. With the above observations, the Civil Appeal stands disposed of.