FACTS:
The appellant filed an application under section 11(6) of the Arbitration and Conciliation Act, 1996 before the Madhya Pradesh High Court alleging that on execution of an agreement a work order was issued to him by the respondent and as the bills submitted by the appellant were not paid, it filed a writ petition and that petition was disposed of with a direction to seek reference to arbitration; as the clause 29 of the General Rules and directions for the Guidance of the contractor provided for settlement of disputes by arbitration therefore the appellant requested the Chief Justice to appoint an independent arbitrator to arbitrate upon the disputes. The designate of the Chief Justice appointed a retired Judge of the High Court as arbitrator.
Before the Arbitrator, the appellant made claims aggregating to Rs.76,64,725 with interest at 18% per annum. The respondents contested the claims contended that the appellant was not entitled to payment of any of the bills. The arbitrator made an award directing the respondents to pay a sum of Rs.76,64,725 to the appellant with interest at 9% per annum from the date of the award till date of payment.
The respondents then filed an application under section 34 of the Act for setting aside the award. In the said proceedings, the respondents made an application raising a preliminary objection that the sole arbitrator had no jurisdiction as the dispute had to be decided by arbitration under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983. The District Judge, Gwalior before whom the said application was filed rejected the said preliminary objection. The review petition filed by the respondents seeking review of order was also dismissed by the learned District Judge, Gwalior.
Meanwhile, the appellant also filed a review application seeking review of the order by which the designate of the Chief Justice allowed the application. The said review petition was dismissed by the High Court. The respondent challenged the arbitral award before the High Court in an arbitration appeal. The High Court allowed the appeal holding that the arbitral award passed by the sole arbitrator was without jurisdiction.
Feeling aggrieved, the appellant has challenged the orders of the Madhya Pradesh High Court.
ISSUE FOR CONSIDERATION:
Whether there was inherent lack of jurisdiction in the Arbitrator, thereby nullifying the award?
HELD:
The apex Court allowed the appeals. The Court observed that as per V.A.Tech Escher Wyass Flovel Ltd. vs. M.P. S.E.Board, the provisions of the Act would apply where there was an Arbitration clause and the provisions of the 1983 Adhiniyam would apply where there was no Arbitration clause. In this case, it said, it is not in dispute that the contract between the parties contained an arbitration clause (clause 29). Further, in SBP & Co. v. Patel Engineering Ltd., it was held that once the Chief Justice or his designate appoints an Arbitrator after satisfying himself that the conditions for exercise of power to appoint an arbitrator are present, the arbitral tribunal could not go behind such decision and rule on its own jurisdiction or on the existence of an arbitration clause. Therefore the contention of the respondents that the arbitrator ought to have considered the objection relating to jurisdiction and held that he did not have jurisdiction, cannot be accepted.
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