Challenge to the Jurisdiction of an Arbitral Tribunal
Author: Tannavi Sharma
Designation: Final Year Law Student (University of Delhi)
Email ID: Tannavi.firstname.lastname@example.org
The article deals with the judgement delivered by the Hon’ble Supreme Court in connection with the right of parties to raise a challenge to the jurisdiction of arbitrator/ Arbitral Tribunal. The author has critically examined the judgment in light of the provisions of the Arbitration and Conciliation Act, 1996 and the earlier judgments on the same aspect.
Arbitration, being one of the modes of alternate dispute redressal, has vastly developed since its commencement. The arbitration proceedings are governed by the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”). The statement of objects of the Act clearly states out that one of the objects of bringing the Act was to minimise the supervisory role of courts in the arbitral process. To fulfil this object, the Arbitral tribunal has been given the power to rule on its jurisdiction under Section 16 of the Act. In furtherance to this, Section 16(2) clearly provides that a challenge to the jurisdiction of the Arbitral Tribunal shall be raised before the Arbitral Tribunal only.
In the year 2018, the Supreme Court passed a landmark judgment in the case M/s Lion Engineering Consultants v. State of Madhya Pradesh (AIR 2018 SC 1895) wherein it was held that the jurisdiction of the Arbitrator can be challenged under Section 34 of the Act at any stage of the case, even though the same was not challenged before the Arbitral Tribunal in the first place. The judgment directly affects the scope of interference of courts in the arbitral process. The dispute in the aforementioned case arose out of a works contract which was referred to a sole arbitrator. The Learned Arbitrator had given the award in favour of the appellant and the same was challenged by the respondent under Section 34 of the Act. The respondent sought the permission to amend its objections, by taking a further objection to the jurisdiction of the Sole Arbitrator. The plea was rejected by the district court, however the same was allowed by the High Court under Article 227 of the Constitution. Consequently, the decision of the High Court was challenged by the appellant in the present case. The Hon’ble Supreme Court dismissed the appeal holding that a challenge to the jurisdiction of an arbitrator, being a pure legal question, can be raised at any stage of the case, even though the same was not raised under Section 16(2) of the Act.
In this case, the Hon’ble Court overruled its own judgement delivered in the case of MSP Infrastructure Ltd. v. Madhya Pradesh Road Development Corporation Ltd. (2015) 13 SCC 713 wherein it was held that all objections of jurisdictions must be raised at the submission of the statement of defence and must be dealt with under Section 16 of the Act.
While the Supreme Court recognised the legal angle to the plea in Lion Engineering case, there are certain aspects which the Court failed to notice. Firstly, the Hon’ble Court did not take into consideration the language of the Act. Section 16(2) clearly states that “a plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence”. The word used in the section is “shall” and not “may”. It casts an obligation on the parties that the objection must be raised at the time of submission of the statement of defence and not later than that. Hence, the intention of the legislature that the jurisdiction must be challenged before the Arbitral tribunal first was clear and there was no reason for the Court to deviate from the same. Secondly, the judgment runs contrary to the basic objects of the Act which are to deliver expeditious justice with the least intervention of the courts. The grounds on which the Arbitral award can be challenged are limited and are listed under Section 34 of the Act. The reason for the same is to restrict the challenge to the arbitral award on any frivolous grounds. This judgment would entitle the parties to challenge each and every award under Section 34 by taking the plea of jurisdiction. By allowing the parties to raise objections to the jurisdiction for the first time at the later stages of the case would only lead to lengthening the entire proceedings, making them more time consuming and thus, defeating the basic objects of the Act.Thirdly, under Section 16, the Arbitral Tribunal has been vested with the power to determine its own jurisdiction. Section 16(1) states that “The arbitral tribunal may rule on its own jurisdiction”. Conferring such a power clearly shows the intention of the legislature that any objection to the jurisdiction must be made before the arbitral tribunal in the first place. It is the arbitral tribunal which has been vested with the power to deal with all the objections raised in respect to its jurisdiction. The parties should not be permitted to sleep over their rights given expressly in the Act and then come to the courts seeking remedy.
In the view of author, the judgment delivered by the Honl’ble Supreme Court needs to be reviewed as it runs contrary to the basic objects of introducing arbitration as an alternate mode of dispute settlement.