Plea of lack of jurisdiction of Arbitral Tribunal can be raised under Section 34 of the Arbitration and Conciliation Act for the first time even if not raised earlier under Section 16 in the statement of defence.

In a recent judgment, the Apex Court ruled that an objection as to jurisdiction of the arbitral tribunal can be raised in a petition under Section 34 for the first time even if omitted to be raised in the statement of defense during the arbitration proceedings.

The said ruling was delivered by the Supreme Court in the judgment of M/s Lion Engineering Consultants Vs.  State Of M.P., Civil Appeal Nos. 8984-8985 of 2017, decided on 22.03.2018.

Challenge:

The dispute in the present case emanates from an execution of a works contract which was referred to the Arbitrator by the High Court wherein the Arbitrator made his Award in favour of the Appellant. The said award was challenged under Section 34 of the Arbitration and Conciliation Act, 1996. The respondent sought to amend its objections after three years which was rejected by the trial Court. On a petition under Article 227 of the Constitution of India, the High Court has allowed the said amendment.

The counsel for the Appellant submitted that the objection having not been raised under Section 16(2) of the Act before the Arbitrator, could not be raised under Section 34 of the Act. In support of this submission he placed reliance on MSP Infrastructure Ltd. vs. Madhya Pradesh Road Development Corporation Ltd. reported in (2015) 13 SCC 713.

On the other hand, the counsel for the Respondent  submitted that the amendment sought is formal and only a legal plea arising on undisputed facts which is not precluded by Section 34(2)(b) of the Act. Even if an objection to jurisdiction is not raised under Section 16 of the Act, the same can be raised under Section 34 of the Act.

Held:

In para 16 of the judgment of MSP Infrastructure a 2 judge bench of the Supreme Court had held that any 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. In the present case, a 3-judge of the Supreme court held the observations in paragraphs 16 and 17 in MSP Infrastructure (supra) to be incorrect law and thus overruled the same. The Apex Court held that there was no bar to plea of jurisdiction being raised by way of an objection under Section 34 of the Act even if no such objection was raised under Section 16.