# M/s Gayatri Project Limited v. Madhya Pradesh Road Development Corporation Limited

- **Citation:** 2025 INSC 698
- **Court:** Supreme Court of India
- **Decided:** 2025-05-15
- **Case number:** Civil Appeal No. 6856 of 2025
- **Bench:** J.B. Pardiwala, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-gayatri-project-limited-v-madhya-pradesh-road-development-corporation-38365
- **Pages:** 59

## Headnote

1.
Whether an arbitral award rendered under the Arbitration
and Conciliation Act, 1996 (hereinafter "Act, 1996"), where
the arbitration proceedings ought to have been governed
by the M.P. Madhyastham Adhikaran Adhiniyam, 1983
(hereinafter "MP Act, 1983"), can be set aside solely on the
ground of lack of jurisdiction, even when no such plea was
raised before the arbitral tribunal in terms of Section 16(2)
of the Act, 1996?
2.
Whether the decision of this Court in M.P. Road Development
Authority & Anr v. L.G. Chaudhary Engineers & Contractors
reported in (2018) 10 SCC 826 can be said to be per incuriam
for not considering the Court's ruling in Lion Engineering?
In other words, is there a conflict between the decisions in
Lion Engineering and L.G. Chaudhary (II), particularly on
when a plea of lack of jurisdiction may be raised under the
Act, 1996?
Headnotes†
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - Arbitral award cannot be set
aside solely on the ground of jurisdiction if no objection was
raised under Section 16(2) of the Arbitration and Conciliation
Act, 1996:
The appellant executed a "works contract" dated 12.12.2005 with
the respondent for "Rehabilitation and Strengthening of KhargoneBarwani Road (SH-26) Project Road No.19" & "Rehabilitation and
Strengthening of Khargone-Bistan Road (SH-31) Project Road
No.20" in the State of Madhya Pradesh - Clause 67.3 of the
* Author
[2025] 5 S.C.R.
2535
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
"General Conditions of Contract" read with Clause 67.4 of the
"Conditions of Particular Application" provided for arbitration as
the means for resolution of disputes between the Parties - The
arbitration agreement mandated that the tribunal shall comprise
of three members, one to be appointed by each party and the
two coarbitrators had to nominate the presiding arbitrator - The
disputes arose between the parties from 06.08.2010 onwards in
relation to the appellant's right to be reimbursed additional cost
incurred by it on account of introduction of subsequent legislation
on increase in entry tax on High-Speed Diesel under Clause 70.8
of the Particular Conditions of Contract - The appellant invoked
arbitration under Clause 67.4 vide its notice dated 06.08.2010 and
the Tribunal stood constituted on 24.09.2010 - The Tribunal passed
a unanimous award dated 08.07.2011 in favour of the appellant
for a sum of Rs.1,03,55,187 (i.e. Rs.1.04 Crore) - As is evident
from Para 1.19 of the Award quoted above, the quantification of
this amount was in-fact recommended by the Engineer and had
been admitted by the respondent - The Tribunal also awarded
future interest at the rate of 10% p.a. from the date of the award
till the date of actual payment as per para 3.1 - As of 17.02.2025,
the amount payable by the respondent to the appellant stands at
Rs.2,44,63,775 - The respondent challenged the award before the
Civil Court under Section 34 of the Arbitration Act vide a petition
filed on 30.09.2011 - The same came to be allowed holding that
the Arbitral Tribunal did not jurisdiction in view of M.P Madhyastham
Adhikaran Adhiniyam, 1983 - The order passed by the Commercial
Court and 19th Additional Sessions Judge, Bhopal (M.P.) came
to be challenged by way of appeal before the High Court under
Section 37 of the Act, 1996 - The appeal came to be dismissed -
Hence, the present Appeal before this Court.
Held: It was noted that the decision in M.P. Road Development
Authority & Anr v. L.G. Chaudhary Engineers & Contractors
(2018) 10 SCC 826 elucidated how the courts are expected to
deal with the various issues that may arise insofar as the pending
proceedings that were inadvertently initiated under the Arbitration
and Conciliation Act, 1996 and any awards already passed
thereunder are concerned - M.P. Road Development Authority v.
L.G. Chaudhary, (2018) 10 SCC 826 was referred to wherein it was
held that an arbitral award cannot be set aside

## Text

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[2025] 5 S.C.R. 2534 : 2025 INSC 698
M/s Gayatri Project Limited
v.
Madhya Pradesh Road Development Corporation Limited
(Civil Appeal No. 6856 of 2025)
15 May 2025
[J.B. Pardiwala* and R. Mahadevan, JJ.]
Issue for Consideration
1.
Whether an arbitral award rendered under the Arbitration
and Conciliation Act, 1996 (hereinafter "Act, 1996"), where
the arbitration proceedings ought to have been governed
by the M.P. Madhyastham Adhikaran Adhiniyam, 1983
(hereinafter "MP Act, 1983"), can be set aside solely on the
ground of lack of jurisdiction, even when no such plea was
raised before the arbitral tribunal in terms of Section 16(2)
of the Act, 1996?
2.
Whether the decision of this Court in M.P. Road Development
Authority & Anr v. L.G. Chaudhary Engineers & Contractors
reported in (2018) 10 SCC 826 can be said to be per incuriam
for not considering the Court's ruling in Lion Engineering?
In other words, is there a conflict between the decisions in
Lion Engineering and L.G. Chaudhary (II), particularly on
when a plea of lack of jurisdiction may be raised under the
Act, 1996?
Headnotes†
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - Arbitral award cannot be set
aside solely on the ground of jurisdiction if no objection was
raised under Section 16(2) of the Arbitration and Conciliation
Act, 1996:
The appellant executed a "works contract" dated 12.12.2005 with
the respondent for "Rehabilitation and Strengthening of KhargoneBarwani Road (SH-26) Project Road No.19" & "Rehabilitation and
Strengthening of Khargone-Bistan Road (SH-31) Project Road
No.20" in the State of Madhya Pradesh - Clause 67.3 of the
* Author
[2025] 5 S.C.R.
2535
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
"General Conditions of Contract" read with Clause 67.4 of the
"Conditions of Particular Application" provided for arbitration as
the means for resolution of disputes between the Parties - The
arbitration agreement mandated that the tribunal shall comprise
of three members, one to be appointed by each party and the
two coarbitrators had to nominate the presiding arbitrator - The
disputes arose between the parties from 06.08.2010 onwards in
relation to the appellant's right to be reimbursed additional cost
incurred by it on account of introduction of subsequent legislation
on increase in entry tax on High-Speed Diesel under Clause 70.8
of the Particular Conditions of Contract - The appellant invoked
arbitration under Clause 67.4 vide its notice dated 06.08.2010 and
the Tribunal stood constituted on 24.09.2010 - The Tribunal passed
a unanimous award dated 08.07.2011 in favour of the appellant
for a sum of Rs.1,03,55,187 (i.e. Rs.1.04 Crore) - As is evident
from Para 1.19 of the Award quoted above, the quantification of
this amount was in-fact recommended by the Engineer and had
been admitted by the respondent - The Tribunal also awarded
future interest at the rate of 10% p.a. from the date of the award
till the date of actual payment as per para 3.1 - As of 17.02.2025,
the amount payable by the respondent to the appellant stands at
Rs.2,44,63,775 - The respondent challenged the award before the
Civil Court under Section 34 of the Arbitration Act vide a petition
filed on 30.09.2011 - The same came to be allowed holding that
the Arbitral Tribunal did not jurisdiction in view of M.P Madhyastham
Adhikaran Adhiniyam, 1983 - The order passed by the Commercial
Court and 19th Additional Sessions Judge, Bhopal (M.P.) came
to be challenged by way of appeal before the High Court under
Section 37 of the Act, 1996 - The appeal came to be dismissed -
Hence, the present Appeal before this Court.
Held: It was noted that the decision in M.P. Road Development
Authority & Anr v. L.G. Chaudhary Engineers & Contractors
(2018) 10 SCC 826 elucidated how the courts are expected to
deal with the various issues that may arise insofar as the pending
proceedings that were inadvertently initiated under the Arbitration
and Conciliation Act, 1996 and any awards already passed
thereunder are concerned - M.P. Road Development Authority v.
L.G. Chaudhary, (2018) 10 SCC 826 was referred to wherein it was
held that an arbitral award cannot be set aside solely on the ground
of jurisdiction if no objection was raised under Section 16(2) of the
2536
[2025] 5 S.C.R.
Supreme Court Reports
Arbitration and Conciliation Act, 1996 - However, other challenges
may be raised under Section 34 of the Act. [Paras 14, 15]
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - Stage at which plea regarding
jurisdictional error has to be raised - Plea of jurisdiction can
be raised under Section 34 of the Act even if no such objection
was raised under Section 16:
Held: In Lion Engineering Consultants v. State of Madhya Pradesh
(2018) 16 SCC 758, it was held that any legal plea arising on
undisputed facts can be raised in the proceedings under Section
34 of the Act, 1996 even if they were never raised under Section
16 - It further held that, such plea being a question of law arising
from admitted facts, can be raised without seeking any amendment
of the pleadings - Accordingly, it held that there is 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. [Para 16]
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - There is no conflict between
Lion Engineering Consultants v. State of Madhya Pradesh
(2018) 16 SCC 758 & M.P. Road Development Authority v.
L.G. Chaudhary (2018) 10 SCC 826 if either omission in
referring to previous decision does not amount to a nonconsideration of the ratio of an earlier decision or where
there is no palpable conflict or contradiction in the ratio of
both decisions:
Held: It was contended that there exists a conflict between the
decisions of this Court in Lion Engineering and L.G. Chaudhary (II),
insofar as the issue of when a plea of lack of jurisdiction on the
basis of applicability of a State law can be raised. It was submitted
that Lion Engineering clearly holds that an objection of lack of
jurisdiction is a legal plea that may be raised for the first time in
the proceedings under Section 34 of the Act, 1996, even if the
same was never raised before the arbitral tribunal, and being
a question of law, Section 16 sub-section (2) of the Act, 1996
would have no application - However, in L.G. Chaudhary (II) it
was held that no plea of lack of jurisdiction can be raised in the
proceedings under Section 34 - This was contended to be per
[2025] 5 S.C.R.
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M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
incurium and a contradictory view since L.G. Chaudhary (II) did not
refer to Lion Engineering - It was held that merely because L.G.
Chaudhary (II) does not refer to the decision of Lion Engineering,
would not render it per incuriam, if either such omission in referring
to previous decision does not amount to a non-consideration
of the ratio of an earlier decision or where there is no palpable
conflict or contradiction in the ratio of both decisions - If L.G.
Chaudhary (II) was not conscious of the position of law laid in
Lion Engineering, then there was no need for it to clarify that
an award would not be annulled only on the ground of lack of
jurisdiction - As even without the aforesaid clarification, such
awards would not have been susceptible to annulment, if not for
the ratio of Lion Engineering - Thus, it was held that even if L.G.
Chaudhary (II) does not refer to the decision of Lion Engineering,
it cannot be termed to be per incuriam, as the very factum that
the aforesaid observations were made by L.G. Chaudhary (II) in
paras 16, 17 and 19, shows that this Court was well aware of
the decision of Lion Engineering, and accordingly chose to carve
out an exception to the ratio of Lion Engineering keeping in mind
the cleavage of judicial view that was prevailing earlier - Lion
Engineering does not address the question whether an award may
be annulled only on the ground of lack of jurisdiction or not - It
does not disturb the settled position of law as regards the scope
of Section 34 of the Act, 1996 i.e., an award may be set aside
only if such lack of jurisdiction goes to the root of the matter and
results in patent illegality - On the contrary, L.G. Chaudhary (II)
specifically addresses this question in the context of the issue of
applicability of MP Act, 1983 and explicitly states that any award
already passed shall not be annulled only on the ground of lack
of jurisdiction where such plea was not raised at the relevant
stage - Thus, the aforesaid ratio of Lion Engineering by no stretch
can be construed to mean that such a plea of jurisdiction would
automatically result in annulment of an award, de hors the fact
whether such lack of jurisdiction goes to the root of the award
rendered or not - The ratio of L.G. Chaudhary (II) unlike Lion
Engineering does not deal with whether it is permissible for such
plea of jurisdiction to be raised under Section 34 or not, and only
deals with the issue whether an award may be annulled only on the
ground of jurisdiction or not, which was never an issue before Lion
Engineering, hence there is no conflict or contradiction between
the ratios of the aforesaid two decisions. [Para 19]
2538
[2025] 5 S.C.R.
Supreme Court Reports
It was held that L.G. Chaudhary (II) carved out an exception to
the general rule that was laid in Lion Engineering, that although a
plea of lack of jurisdiction being a question of law can be raised
for the first time in the proceedings under Section 34 of the Act,
1996, yet insofar as the MP Act, 1983 is concerned, particularly the
state of flux in which the position of law regarding its applicability
stood, in cases where either the award has already been passed
or where the statement of defence is already been filed, and no
plea of lack of jurisdiction or applicability of the MP Act, 1983,
has been raised before the arbitral tribunal, then such a plea of
jurisdiction will no longer be available, and the award cannot be
annulled solely on such ground. [Para 20]
Sweta Construction v. Chhattisgarh State Power Generation
Company Ltd. (2022) SCC OnLine SC 1447 referred to where
it was held that the law expounded in L.G. Chaudhary (II)
insofar as those awards which have already been passed are
concerned, should be read as one made by this Court under
Article 142 of the Constitution to do substantive justice inter se
the parties, keeping in mind the cleavage of judicial view earlier
and to ensure that the objective of arbitration as an expeditious
and effective alternative dispute resolution mechanism is not
defeated. [Para 23]
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - The question of whether a failure
to raise a plea of jurisdiction at the relevant stage in terms
of Section 16 sub-section (2) of the Act, 1996 would amount
to a 'waiver' or not was never examined or looked into by
Lion Engineering - This question left to the Court exercising
jurisdiction under Section 34:
Held: The observations made by this Court in Lion Engineering
that "We do not see any 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" cannot be singled out and
construed devoid of its context - The aforesaid observations have
to be construed in light of the settled position of law by a catena
of decisions of this Court - The decision of this Court in Pam
Development has held that where a plea of lack of jurisdiction is
not raised before the arbitral tribunal, such a plea cannot be raised
[2025] 5 S.C.R.
2539
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
later in the proceedings under Section 34 - Pam Development
says this, not because such a plea is barred from being raised
only by virtue of Section 16 sub-section (2), but rather says
this, because such a plea is deemed to have been waived on
account of the failure of the party in raising such a plea - Thus,
Pam Development in no manner lays down that a plea of lack
of jurisdiction cannot be raised in the proceedings under Section
34 due to the bar of Section 16 sub-section (2) of the Act, 1996,
and thus to this extent both the decisions of Pam Development
and Lion Engineering are in tune with each other - The variance
between the decisions of Pam Development and Lion Engineering
is only in respect of whether a failure to raise such a plea at the
relevant stage in terms of Section 16 sub-section (2) of the Act,
1996 would amount to a 'waiver' or not, and this issue was never
examined or looked into by Lion Engineering - The observations
that it will be open for the respondents therein to argue that such
an object could be raised even without a formal pleading and that
it will be open for the appellants therein to argue the contrary,
clearly shows that the very issue of whether such a plea can
be allowed to be raised or not i.e., issues such as whether it is
a purely legal plea or whether there was any waiver or not etc.
were never decided by this Court in Lion Engineering and rather
was left to be gone into by the court under Section 34 of the Act,
1996. [Paras 32, 33]
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - Plea of jurisdiction cannot be
raised for the first time in proceedings under Section 34 as
it is deemed to have been waived, unless the party makes
out a strong and good reason for its failure to take such a
plea before the arbitral tribunal as per Gas Authority of India
Ltd. v. Keti Construction (I) Ltd. reported in (2007) 5 SCC 38:
Held: Although a plea of lack of jurisdiction, being a question of
law, can be raised even for the first time in the proceedings under
Section 34 as held in Lion Engineering, yet such a plea ought not
to be allowed to be raised as it is deemed to have been waived
in view of Section 4 of the Act, 1996 as per Pam Development,
unless the party makes out a strong and good reason for its failure
to take such a plea before the arbitral tribunal as per Gas Authority
of India Ltd. v. Keti Construction (I) Ltd. reported in (2007) 5 SCC
2540
[2025] 5 S.C.R.
Supreme Court Reports
38, and as per the dictum of L.G. Chaudhary (II) any failure to raise
the issue of applicability of the MP Act, 1983 before the arbitral
tribunal is not a strong and good reason to permit raising such a
plea in the proceedings under Section 34 of the Act, 1996. [Para 35]
Arbitration and Conciliation Act, 1996 - M.P Madhyastham
Adhikaran Adhiniyam, 1983 - Stage of seeking transfer to MP
Arbitration Tribunal - Explained:
Held: Where the arbitration proceedings are still underway, but
no statement of defence has been filed, there it would be open
for the parties to raise an objection of lack of jurisdiction in view
of the applicability of MP Act, 1983 - The parties will also be
at liberty to approach the High Court by way of a petition under
Article 227 of the Constitution for seeking a transfer of the
arbitration proceedings to the M.P. State Arbitration Tribunal under
the MP Act, 1983 - Where the arbitration proceedings are still
underway, but statement of defence has already been filed i.e.,
the relevant stage for raising an issue of jurisdiction is already
crossed, there it would not be open for the parties to raise an
objection of lack of jurisdiction in view of the applicability of MP
Act, 1983 - Furthermore, in such scenarios since the arbitration
proceedings have already commenced and made substantial
progress, it would not be appropriate to transfer such proceedings
to the M.P. State Arbitration Tribunal under the MP Act, 1983,
and the better course of action would be to let the arbitration
proceedings conclude - As per L.G. Chaudhary (II) where the
arbitration proceedings have concluded and an award has been
passed, and if no objection to the jurisdiction in view of the
applicability of MP Act, 1983 was taken at the relevant stage then
such an award cannot be annulled only on the ground of lack of
jurisdiction - Any award passed by an arbitral tribunal under the
Act, 1996, where otherwise the MP Act, 1983 was applicable,
such an award may be challenged or assailed in terms of Section
34 and thereafter Section 37 of the Act, 1996 and other relevant
provisions thereunder. [Para 38]
Case Law Cited
M.P. Road Development Authority & Anr. v. L.G. Chaudhary
Engineers & Contractors (2018) 10 SCC 826 - relied on.
[2025] 5 S.C.R.
2541
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
Lion Engineering Consultants v. State of Madhya Pradesh [2018] 6
SCR 683 : (2018) 16 SCC 758; Union of India v. Pam Development
(P) Ltd. [2014] 1 SCR 1069 : (2014) 11 SCC 366 - explained.
VA Tech Escher Wyass Flovel Limited v. M.P. State Electricity
Board & Anr. (2011) 13 SCC 261; MP Rural Road Development
Authority & Anr v. L.G. Chaudhary Engineers& Contractors [2012] 2
SCR 162 : (2012) 3 SCC 495; JMC Projects (India) Ltd v. Madhya
Pradesh Road Development Corporation, 2020 SCC OnLine
SC 1452; M.P. v. Anshuman Shukla [2008] 8 SCR 349 : (2008)
7 SCC 487; Ravikant Bansal v. M.P. Rural Road Development
Authority (2012) 3 SCC 513; MSP Infrastructure Ltd. v. M.P. Road
Development Corpn. Ltd. [2014] 13 SCR 1331: (2015) 13 SCC
713; Sweta Construction v. Chhattisgarh State Power Generation
Company Ltd., 2022 SCC OnLine SC 1447; Modern Builders v.
State of Madhya Pradesh & Anr. (2024) 10 SCC 637; Gas Authority
of India Ltd. v. Keti Construction (I) Ltd. [2007] 6 SCR 439 : (2007)
5 SCC 38; AC Chokshi Share Broker (P) Ltd. v. Jatin Pratap Desai
[2025] 2 SCR 1545 : 2025 SCC OnLine SC 281 - referred to.
Viva Highways Ltd & Ors v. M.P. Road Development Corporation
Limited, AIR 2017 MP 103 - referred to.
List of Acts
M.P. Madhyastham Adhikaran Adhiniyam, 1983; Arbitration and
Conciliation Act, 1996; Constitution of India.
List of Keywords
Arbitration; Waiver; Plea of jurisdiction; Arbitral award; Tribunal;
Section 34.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6856 of 2025
From the Judgment and Order dated 07.01.2022 of the High Court
of Madhya Pradesh Principal Seat at Jabalpur in AA No.79 of 2021
Appearances for Parties
Advs. for the Appellant:
Kaushik Laik, Ashay Kaushik, Shashank Tiwari.
Advs. for the Respondent:
Saurabh Mishra, Sr. Adv., Harmeet Singh Ruprah, Kanishk Sharma,
Paras Bajpai.
2542
[2025] 5 S.C.R.
Supreme Court Reports
Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
For the convenience of the exposition, this judgment is divided in
the following parts: -
INDEX*
A. FACTUAL MATRIX ................................................................
3
B. ISSUES FOR DETERMINATION ...........................................
16
C. ANALYSIS ..............................................................................
16
i.
Can an Award passed under the Act, 1996 be annulled
on the ground of lack of jurisdiction where no plea of
applicability of MP Act, 1993 was raised before the
Arbitral Tribunal? ............................................................
34
a.
Is there a conflict between the decisions of L.G.
Chaudhary (II) and Lion Engineering?......................
37
b.
Whether a plea of lack of jurisdiction may be raised
for the first time under Section 34 of the Act, 1996
if no such objection was taken before the arbitral
tribunal? ....................................................................
51
D. CONCLUSION ...........................................................................
58
1.
Leave Granted.
2.
This appeal arises from the judgment and order passed by the
High Court of Madhya Pradesh, Principal Seat at Jabalpur dated
07.01.2022 in Arbitration Appeal No. 79 of 2021 by which the appeal
filed by the appellant herein under Section 37 of the Arbitration
and Conciliation Act, 1996 (for short, the "Act, 1996") came to be
dismissed thereby affirming the order dated 20.12.2019 passed by
the Commercial Court and 19th Additional Sessions Judge, Bhopal
(M.P.) allowing application filed by the respondent herein under
Section 34 of the Act, 1996.
* Ed. Note: Pagination as per the original Judgment.
[2025] 5 S.C.R.
2543
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
3.
It appears that the respondent herein suffered an award dated
08.07.2011 passed by the Arbitral Tribunal (for short, the "Tribunal").
The said award was challenged by the respondent Corporation under
Section 34 of the Act, 1996. The appeal filed by the Corporation
under Section 34 of the Act, 1996 came to be allowed on the ground
that the Tribunal had no jurisdiction to pass the award in view of the
provisions of the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (for
short, the "MP Act, 1983"). The order passed by the Commercial
Court and 19th Additional Sessions Judge, Bhopal (M.P.) came to be
challenged by way of appeal before the High Court under Section 37
of the Act, 1996. The appeal came to be dismissed.
A.
FACTUAL MATRIX
4.
The facts giving rise to this appeal may be summarised as under:-
(i)
The appellant executed a "works contract" dated 12.12.2005
with the respondent for "Rehabilitation and Strengthening of
Khargone - Barwani Road (SH-26) Project Road No. 19" &
"Rehabilitation and Strengthening of Khargone - Bistan Road
(SH-31) Project Road No. 20" in the State of Madhya Pradesh.
Clause 67.3 of the "General Conditions of Contract" read with
Clause 67.4 of the "Conditions of Particular Application" provided
for arbitration as the means for resolution of disputes between
the Parties.
(ii)
The arbitration agreement mandated that the tribunal shall
comprise of three members, one to be appointed by each
party and the two co-arbitrators had to nominate the presiding
arbitrator.
(iii) Clause 67.4 of the Conditions of Particular Application - Part-II
reads thus: -
"Sub-Clause 67.4 : Arbitration
Any dispute in respect of which:
a)
the decision, if any, of the Board has not become
final and binding pursuant to Sub-Clause 67.2,
and
b)
amicable settlement has not been reached:
2544
[2025] 5 S.C.R.
Supreme Court Reports
(i)
In the case of dispute arising between
the Employer and a domestic Contractor
or between the Employer and a foreign
Contractor who opts for the application
of the Indian Arbitration and Conciliation
Act, 1996 related to any matter arising
out of or connected with this Contract,
such dispute shall be referred to the
award of two Arbitrators (one each to be
appointed by each party) and an Umpire
to be appointed by the Arbitrators, or if
there is no agreement, to be appointed
by the Arbitration Committee of the Indian
Council of Arbitration. The Indian Arbitration
and Conciliation Act, 1996, the rules there
under and any statutory modification or
re-enactment thereof, shall apply to these
arbitration proceedings; or (2) in the case
of dispute arising between the Employer
and a foreign Contractor, by application of
the UNCITRAL Arbitration Rules related
to any matter arising out of or connected
with this Contract, such dispute shaft be
referred to the award of two Arbitrators
(one each to be appointed by each party)
and an Umpire to be appointed by the
Arbitrators, or if there is no agreement, to
be appointed by the International Centre
for Alternative Dispute Resolution (ICADR).
The UNCITRAL Arbitration Rules shall
apply to the arbitration proceedings.
(ii)
Neither party shall be limited in the
proceedings before such arbitrators to the
evidence or arguments already put before
the Engineer, for the purpose of obtaining
his said decision. No such decision shall
disqualify the Engineer from being called
as a witness and giving evidence before
the arbitrators or any matter whatsoever
relevant to the dispute.
[2025] 5 S.C.R.
2545
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
(iii) The reference to arbitration may proceed
notwithstanding that the Works shall not
then be or be alleged to be complete,
provided always that the obligations of the
Employer, the Engineer and the Contractor
shall not be altered by the reason of the
arbitration being conducted during the
progress of the Works. Neither party
shall be entitled to suspend the Works,
and payment to the Contractor shall be
continued to be made as provided by the
Contract.
(iv) If one of the parties fail to appoint its
arbitrators in pursuance of sub para
(i) and (ii) above, within 60 days after
receipt of the notice of the appointment
of its arbitrators by the other party, then
the Secretary General of the Permanent
Court of Arbitration, the Hague, in the
case of foreign contractors opting for the
application of the UNCITRAL Arbitration
Rules, or the Ministry of Road Transport and
Highways in the case of Indian contractors,
and the foreign contractors who opt for
the application of Indian Arbitration and
Conciliation Act 1996, as the case may
be, shall appoint the arbitrator. A certified
copy of the Secretary General's order or
Ministry of Road Transport and Highways
order, as the case may be, making such
an appointment shall be furnished to both
the parties.
(v)
Arbitration proceedings shall be held at
Bhopal, India, and the language of the
arbitration proceedings and that of all
documents and communications between
the parties shall be English.
(vi) The decision of the majority of arbitrators
shall be final and binding upon both
2546
[2025] 5 S.C.R.
Supreme Court Reports
parties. The expenses of the arbitrators
as determined by the arbitrators shall
be shared equally by the Employer and
the Contractor, However, the expenses
incurred by each party in connection
with the preparation, presentation, etc.,
of its case prior to, during and after the
arbitration proceeding shall be borne by
each party itself.
(vii) All arbitration awards shall be in writing
and shall state the reasons for the award."
(iv) This Court vide its judgment dated 14.01.2010 in the matter of
VA Tech Escher Wyass Flovel Limited v. M.P. State Electricity
Board & Anr. reported in (2011) 13 SCC 261, held that the
State Act would apply only to such works contracts which did
not have an arbitration clause.
(v)
In VA Tech (supra), this Court held as under: -
"1. Heard the learned counsel for the parties. This
appeal has been filed against the impugned judgment
of the High Court of Madhya Pradesh dated 5-32003. It appears that the appellant was awarded
a work contract by the respondents. There was
some dispute between the parties and there is an
arbitration clause in the agreement. The appellant
filed an application under Section 9 of the Arbitration
and Conciliation Act, 1996 (for short "the 1996 Act")
which was rejected by the learned Additional District
Judge and that order has been upheld by the High
Court. Hence, this appeal.
2. Section 7(1) of the Madhya Pradesh Madhyastham
Adhikaran Adhiniyam, 1983 (for short "the 1983 Act")
provides as follows:
"7. Reference to Tribunal.-(1) Either party
to a works contract shall irrespective of
the fact whether the agreement contains
an arbitration clause or not, refer in writing
the dispute to the Tribunal."
[2025] 5 S.C.R.
2547
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
3. Subsequently, Parliament enacted the 1996 Act.
The 1996 Act only applies where there is an arbitration
clause but it does not apply where there is none. The
1996 Act covers all kinds of disputes including the
dispute relating to work contracts. In our opinion, the
1983 Act and the 1996 Act can be harmonised by
holding that the 1983 Act only applies where there is
no arbitration clause but it stands impliedly repealed
by the 1996 Act where there is an arbitration clause.
We hold accordingly. Hence, the impugned judgment
cannot be sustained and we hold that the application
under Section 9 of the 1996 Act was maintainable.
4. The appeal is allowed accordingly. No costs."
(vi) The disputes arose between the parties from 06.08.2010
onwards in relation to the appellant's right to be reimbursed
additional cost incurred by it on account of introduction of
subsequent legislation on increase in entry tax on High-Speed
Diesel under Clause 70.8 of the Particular Conditions of Contract.
(vii) The appellant invoked arbitration under Clause 67.4 vide its
notice dated 06.08.2010 and the Tribunal stood constituted on
24.09.2010.
(viii) The Tribunal passed a unanimous award dated 08.07.2011
in favour of the appellant for a sum of Rs. 1,03,55,187 (i.e.
Rs. 1.04 Crore). The relevant paras 1.19 and 3.1 respectively
of the Arbitral Award are as follows: -
"1.19 The valuation of the claim as assessed by the
Engineer in its letter dt 18.03.2009 (CD - 01 pages
20 & 21) and recommended for reimbursement is
Rs 1,03,55,187.00. This amount is agreed to by both
the parties as the valuation of the claim.
3.1 The Claimant has referred two claims for
arbitration before this AT. After careful examination
and consideration of the written/ oral submissions
and evidence presented by both the parties to the
extent relevant, AT awards amounts against each
claim as under:
2548
[2025] 5 S.C.R.
Supreme Court Reports
Amount Claimed
Amount Awarded
Claim No. 1
Rs. 1,03,55,187.00
Rs. 1,03,55,187.00
Claim No. 2
Amount not specified Rs. Nil
................................. ...............................
Total Amount
Rs. 1,03,55,187.00
plus Interest.
Rs. 1,03,55,187.00
(ix) As is evident from Para 1.19 of the Award quoted above, the
quantification of this amount was in-fact recommended by the
Engineer and had been admitted by the respondent. The Tribunal
also awarded future interest at the rate of 10% p.a. from the
date of the award till the date of actual payment as per para
3.1. As of 17.02.2025, the amount payable by the respondent
to the appellant stands at Rs. 2,44,63,775.
(x)
The respondent challenged the award before the Civil Court
under Section 34 of the Arbitration Act vide a petition filed on
30.09.2011. However, the respondent in its petition admittedly
did not challenge the jurisdiction of the Tribunal. The respondent
has admitted this fact in Para 5 of its counter affidavit filed
before this Court. The respondent's grounds for challenge
were essentially on matters of appreciation of evidence by the
Tribunal which grounds were, in any case, untenable given the
limited scope of Section 34 of the Arbitration Act.
(xi) A two Judge Bench of this Court delivered a judgment in the
matter titled MP Rural Road Development Authority & Anr v.
L.G. Chaudhary Engineers & Contractors, reported in (2012)
3 SCC 495, wherein it held VA Tech (supra) to be per incuriam.
The relevant para 42 reads as under: -
"42. Therefore, the appeal is allowed and the judgment
of the High Court which is based on the reasoning of
Va Tech [Va Tech Escher Wyass Flovel Ltd. v. M.P.
SEB, Misc. Appeal No. 380 of 2003, order dated
5-3-2003 (MP)] is set aside. This Court holds that the
decision in Va Tech [(2011) 13 SCC 261] has been
rendered per incuriam. In that view of the matter the
arbitration proceeding may proceed under the M.P.
Act of 1983 and not under the AC Act, 1996."
[2025] 5 S.C.R.
2549
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
(xii) The Division Bench, however, differed on the point of applicability
of the State Act to such works contracts which had been
terminated, and this difference of opinion caused this matter
to be referred to a larger bench in the follow terms: -
"Order
60. In view of some divergence of views expressed in
the two judgments delivered today by us, the matter
may be placed before the Hon'ble the Chief Justice
of India for constituting a larger Bench to resolve
the divergence."
(xiii) The appellant filed its reply dated 16.03.2012 before the Civil
Court wherein each of the grounds raised by the respondent
in its Section 34 petition were duly responded to.
(xiv) Relying on the judgment of this Court in L.G. Chaudhary (I)
(supra), the respondent moved an application dated 26.06.2012
before the Civil Court seeking to introduce the ground of lack
of jurisdiction in its Section 34 petition.
(xv) A Full-Bench of the High Court delivered a judgment dated
05.05.2017 in the matter of Viva Highways Ltd & Ors v.
M.P. Road Development Corporation Limited, reported in
AIR 2017 MP 103, which, in-effect, reiterated the ratio of L.G.
Chaudhary (I) (supra) insofar as this Court had held that the
State Act would apply to all work contracts in the State of
Madhya Pradesh notwithstanding the existing of an arbitration
agreement therein.
(xvi) Relying on the Full Bench decision of the High Court, referred to
above, the respondent moved yet one another application dated
15.01.2018 before the Civil Court wherein it again sought to
introduce additional grounds to its Section 34 petition contending
lack of jurisdiction of the Tribunal.
(xvii) A three-Judge Bench of this Court delivered a judgment on
22.03.2018, in the matter of Lion Engineering Consultants v.
State of Madhya Pradesh reported in (2018) 16 SCC 758,
taking the view that objections regarding lack of jurisdiction of
an arbitral tribunal, being a question of law, can be raised in
Section 34 proceedings even if no such objections had been
2550
[2025] 5 S.C.R.
Supreme Court Reports
raised during the arbitral proceedings. Para 4 thereof is to the
following effect: -
"4. We find merit in the contentions raised on behalf
of the State. We proceed on the footing that the
amendment being beyond limitation is not to be
allowed as the amendment is not pressed. We do
not see any 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."
(xviii) A three-Judge Bench of this Court passed its judgment in M.P.
Road Development Authority & Anr v. L.G. Chaudhary
Engineers & Contractors reported in (2018) 10 SCC 826,
effectively stating that the State Act would prevail over the
Arbitration Act in light of Section 2(4) of the Arbitration Act.
The relevant para 14 is quoted below: -
"14. In view of the above, we are of the view that the
State law will prevail in terms of Section 2(4) of the
Central Act. The reference under the State law was
valid and could be decided in accordance with the
State. Accordingly, we set aside the impugned order
[Gammon India Ltd. v. State of M.P., WP No. 8375
of 2010, order dated 29-11-2010 (MP)] and restore
the proceedings before the Tribunal. The appeal is,
accordingly, allowed in above terms."
(xix) In para 17 of the aforesaid judgment, however, this Court
categorically excluded such cases where awards had already
been made. It was held that "in such cases, if no objection to
the jurisdiction was taken at relevant stage, the award may
not be annulled on that ground". It is necessary to quote para
17 as under: -
"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."
(xx)
In the present case, the respondent had admittedly not raised
the issue of jurisdiction either before the Tribunal nor in its
[2025] 5 S.C.R.
2551
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
initial petition filed under Section 34. Clearly, therefore, the
instant case fell within the ambit of Para 17 of LG ChoudharyII referred to above.
(xxi) The Civil Court passed its judgment dated 20.12.2019 allowing
the respondent's Section 34 petition on the ground that the
Tribunal lacked jurisdiction to adjudicate the disputes. The Court
observed, albeit erroneously, that para 17 of L.G. Chaudhary
(II) (supra) did not save the instant case, inasmuch as the
issue of jurisdiction could have been raised in the Section
34 proceeding even though no such objection had been ever
raised during the arbitral proceedings. The paras 12 and 13
respectively read as follows: -
"12. The relevant part of the Hon'ble Supreme Court's
precedent- "M.P. Rural Road Road Development
Authority & Ors. Vs. M/s L.G. Chaudhary Engineering
and Construction Civil Appeal No. 974/12 dated 1303-2018" is as follows:
"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 that ground."
13. It is also observable that as far as the question
of non-objection of the Applicants on the point
of jurisdiction of the arbitrator is concerned, the
provisions under Section 34 (2) (B) confers special
jurisdiction to the Courts, where it does not need
to rely on the objections or non-objections of either
party. Under Section 34 (2) (B) (i) if the Court is
aware that the subject matter of the dispute is not
arbitrable under the said act, then such an arbitral
award can be set aside by the Court. Apart from this,
it is also observable that Clause 28 of the Contract
also regards such provisions as void, which confers
jurisdiction to Courts not having jurisdiction. It has
been clarified by the Hon'ble Supreme Court in M/s
L.G. Choudhary with regards to the above precedent
2552
[2025] 5 S.C.R.
Supreme Court Reports
that wherever award has been passed, even in those
cases, the above objection can be raised at the time
of application under Section 34 of the Central Act.
It is for this reason the argument made by the Non-
Applicant in this context is not just."
(xxii) This Court in JMC Projects (India) Ltd v. Madhya Pradesh
Road Development Corporation reported in (2020) SCC
OnLine SC 1452 took note of the exception carved out in
L.G. Chaudhary (II) (supra). In a case based on similar facts,
this Court held that the award should not be set aside on
the ground of jurisdiction alone. The order dated 10.01.2020
passed by this Court is as follows: -
"Leave granted.
Mr. K. V. Vishwanathan, learned senior counsel
appearing for the appellant, has shown us our order
dated 08.03.2018 in Madhya Pradesh Rural Road
Development Authority & Anr. v. M/s. L. G. Chaudhary
Engineers and Contractors (Civil Appeal No. 974 of
2012) (being the lead case) and has pointed out
paragraph Nos. 22 to 27 thereof which are quoted
hereinbelow:
"C.A. No. 2751 of 2018 @ SLP (C)No.
11615/2012, C.A. No. 2753 of 2018 @ SLP
(C)No. 11617/2012, C.A. No. 2754 of 2018
@ SLP (C)No. 11618/2012, C.A. No. 2755
of 2018 @ SLP (C)No. 11619/2012, C.A.
Nos. 2756-2757 of 2018 @ SLP (C)Nos.
11633-11634/2012, C.A. Nos. 2758-2759
of 2018 @ SLP (C)Nos. 11631-11632/2012
& C.A. Nos. 2760-2761 of 2018 @ SLP
(C)No. 11628- 11629/2012:
22. 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.
[2025] 5 S.C.R.
2553
M/s Gayatri Project Limited v.
Madhya Pradesh Road Development Corporation Limited
23. The appeals are, accordingly, disposed
of.
C.A. No. 2616@ SLP (C)No. 35641/2011:
24. Leave granted.
25. In view of order passed in C.A. No.
2751 of 2018 @ SLP (C)No. 16615/2012,
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.
26. Accordingly, this appeal is allowed, the
impugned judgment is set aside and the
award is restored.
27.