# Municipal Corporation of Greater Mumbai v. M/s R.V. Anderson Associates Limited

- **Citation:** 2026 INSC 228
- **Court:** Supreme Court of India
- **Decided:** 2026-03-11
- **Bench:** J.K. Maheshwari, Atul S. Chandurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/municipal-corporation-of-greater-mumbai-v-m-s-r-v-anderson-associates-limited-39181
- **Pages:** 31

## Headnote

Whether the arbitral award deserves to be set aside on the ground
of lack of jurisdiction due to improper constitution of the arbitral
tribunal or patent illegality.
Headnotes†
Arbitration and Conciliation Act, 1996 - ss.16, 34, 37, 4 -
Constitution of Arbitral Tribunal - Interpretation of arbitration
clause - Waiver - The Appellant-MCGM had floated a tender
and invited proposals - The stipulated duration for completion
of the work under the Agreement was 72 months and the
contract was designed to be implemented in stages - The
work under the contract was completed - A dispute arose
in respect of payment of outstanding dues - On 09.08.2005,
the Respondent invoked the arbitration clause as contained
in the Agreement - On 07.07.2009, MCGM filed an application
u/s.16 of the 1996 Act, challenging the appointment of the
Presiding Arbitrator as a 'nullity' and seeking consequential
reliefs - Arbitral Tribunal dismissed the application holding
that the appointment of the Presiding Arbitrator was valid -
On 05.06.2010, the Tribunal passed the final award, directing
MCGM to pay specified amounts - Application seeking setting
aside of the arbitral award u/s.34 of the 1996 Act was filed
before the High Court - The Single Judge of the High Court
dismissed the application - An appeal was preferred u/s.37 of
the 1996 Act - High Court dismissed the appeal and confirmed
the judgment and order of the Single Judge - Correctness:
Held: 1. In the facts of this case, it cannot be said that the Arbitral
Tribunal has been improperly constituted in derogation of the
* Author
526
[2026] 3 S.C.R.
Supreme Court Reports
arbitration agreement, or that the interpretation of the arbitration
clause as made by the Arbitral Tribunal has resulted in any patent
illegality, which would warrant setting aside of the award - As such,
the High Court has rightly decided not to interfere with the arbitral
award u/s.34(2)(a)(v) or s.34(2A) while rejecting the application to
set aside the award. [Para 37]
2. The MCGM raised their objection for the first time, addressing
the letter dated 20.02.2009 to the Presiding Arbitrator, alleging
that his appointment is a 'nullity' since the Co-Arbitrators had not
succeeded in appointing the third arbitrator within 30 days and
therefore had no power to appoint - In the facts of this case,
beyond 30 days from the date of appointment of the second
Arbitrator, i.e. 07.10.2005, the MCGM agreed to attempt mediation /
conciliation by its letter dated 07.01.2006 and then informed the
Co-Arbitrators about there being no mediation / conciliation by its
letter dated 15.12.2006 - MCGM passively sat idle while three
different persons were appointed as the Presiding Arbitrator under
Clause 8.3(b) of the Agreement by the Co-Arbitrators, without any
demur. [Paras 54, 63]
3. In the present case, the MCGM was completely aware about the
non-compliance of a contractual requirement under the arbitration
agreement - It proceeded with the arbitration process without any
demur, agreed to keep the arbitration proceedings in abeyance to
pursue other methods of dispute resolution (mediation / conciliation),
and did not object to such non-compliance on three different
occasions when such alleged non-compliance took place - In
such a case, filing of an application u/s.16 of the 1996 Act cannot
regularize or condone its conduct and such conduct is a relevant
consideration to decipher its understanding of the contractual terms
while deciding the s.16 application on merits by the Tribunal even
in the absence of statutory waiver u/s.4 being attracted - A party
cannot keep a 'jurisdictional ace' up their sleeve and then claim
that filing of the jurisdictional challenge u/s.16 would go back in
time and wipe out the past conduct and acquiescence of the party
which would clearly evince how the contractual terms were viewed
by the parties - If the same is permitted, it will erode the basic
principles of alternative dispute resolution and ethos of arbitration.
[Paras 6

## Text

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[2026] 3 S.C.R. 525 : 2026 INSC 228
Municipal Corporation of Greater Mumbai
v.
M/s R.V. Anderson Associates Limited
(Civil Appeal No(s). 3277-78 of 2026)
11 March 2026
[J.K. Maheshwari* and Atul S. Chandurkar, JJ.]
Issue for Consideration
Whether the arbitral award deserves to be set aside on the ground
of lack of jurisdiction due to improper constitution of the arbitral
tribunal or patent illegality.
Headnotes†
Arbitration and Conciliation Act, 1996 - ss.16, 34, 37, 4 -
Constitution of Arbitral Tribunal - Interpretation of arbitration
clause - Waiver - The Appellant-MCGM had floated a tender
and invited proposals - The stipulated duration for completion
of the work under the Agreement was 72 months and the
contract was designed to be implemented in stages - The
work under the contract was completed - A dispute arose
in respect of payment of outstanding dues - On 09.08.2005,
the Respondent invoked the arbitration clause as contained
in the Agreement - On 07.07.2009, MCGM filed an application
u/s.16 of the 1996 Act, challenging the appointment of the
Presiding Arbitrator as a 'nullity' and seeking consequential
reliefs - Arbitral Tribunal dismissed the application holding
that the appointment of the Presiding Arbitrator was valid -
On 05.06.2010, the Tribunal passed the final award, directing
MCGM to pay specified amounts - Application seeking setting
aside of the arbitral award u/s.34 of the 1996 Act was filed
before the High Court - The Single Judge of the High Court
dismissed the application - An appeal was preferred u/s.37 of
the 1996 Act - High Court dismissed the appeal and confirmed
the judgment and order of the Single Judge - Correctness:
Held: 1. In the facts of this case, it cannot be said that the Arbitral
Tribunal has been improperly constituted in derogation of the
* Author
526
[2026] 3 S.C.R.
Supreme Court Reports
arbitration agreement, or that the interpretation of the arbitration
clause as made by the Arbitral Tribunal has resulted in any patent
illegality, which would warrant setting aside of the award - As such,
the High Court has rightly decided not to interfere with the arbitral
award u/s.34(2)(a)(v) or s.34(2A) while rejecting the application to
set aside the award. [Para 37]
2. The MCGM raised their objection for the first time, addressing
the letter dated 20.02.2009 to the Presiding Arbitrator, alleging
that his appointment is a 'nullity' since the Co-Arbitrators had not
succeeded in appointing the third arbitrator within 30 days and
therefore had no power to appoint - In the facts of this case,
beyond 30 days from the date of appointment of the second
Arbitrator, i.e. 07.10.2005, the MCGM agreed to attempt mediation /
conciliation by its letter dated 07.01.2006 and then informed the
Co-Arbitrators about there being no mediation / conciliation by its
letter dated 15.12.2006 - MCGM passively sat idle while three
different persons were appointed as the Presiding Arbitrator under
Clause 8.3(b) of the Agreement by the Co-Arbitrators, without any
demur. [Paras 54, 63]
3. In the present case, the MCGM was completely aware about the
non-compliance of a contractual requirement under the arbitration
agreement - It proceeded with the arbitration process without any
demur, agreed to keep the arbitration proceedings in abeyance to
pursue other methods of dispute resolution (mediation / conciliation),
and did not object to such non-compliance on three different
occasions when such alleged non-compliance took place - In
such a case, filing of an application u/s.16 of the 1996 Act cannot
regularize or condone its conduct and such conduct is a relevant
consideration to decipher its understanding of the contractual terms
while deciding the s.16 application on merits by the Tribunal even
in the absence of statutory waiver u/s.4 being attracted - A party
cannot keep a 'jurisdictional ace' up their sleeve and then claim
that filing of the jurisdictional challenge u/s.16 would go back in
time and wipe out the past conduct and acquiescence of the party
which would clearly evince how the contractual terms were viewed
by the parties - If the same is permitted, it will erode the basic
principles of alternative dispute resolution and ethos of arbitration.
[Paras 66, 67]
Arbitration and Conciliation Act, 1996 - ss.16, 4 - Conduct,
Acquiescence and waiver - Discussed. [Paras 39-42, 55, 56]
[2026] 3 S.C.R.
527
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
Case Law Cited
Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam
Ltd., 2025 SCC OnLine SC 2578; Narayan Prasad Lohia v.
Nikunj Kumar Lohia [2002] 1 SCR 1136 : (2002) 3 SCC 572 -
relied on.
Consolidated Construction Consortium Limited v. Software
Technology Parks of India, 2025 INSC 574 : [2025] 4 SCR
1846; SEPCO Electric Power Construction Corporation v. GMR
Kamalanga Energy Ltd., 2025 INSC 1171; Quippo Construction
Equipment Ltd. v. Janardan Nirman (P) Ltd. [2020] 6 SCR 272 :
(2020) 18 SCC 277 - referred to.
List of Acts
Arbitration and Conciliation Act, 1996.
List of Keywords
Principle of party autonomy; Co-arbitrators; Jurisdictional ace;
Dispute resolution; forum non conveniens; Section 16 of Arbitration
and Conciliation Act, 1996; Mediation/conciliation; Non-compliance
of the arbitration agreement; Waiver of right; Conduct; Constitution
of Arbitral Tribunal; Arbitral autonomy; Acquiescence; Waiver;
Minimum judicial interference; Appointment of arbitrator.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 3277-3278
of 2026
From the Judgment and Order dated 04.07.2025 of the High Court
of Judicature at Bombay in ARBA (L) No. 4339 of 2024 in IA (L)
No. 7312 of 2024
Appearances for Parties
Advs. for the Appellant(s):
Siddharth Bhatnagar, Sr. Adv., Ms. Ananya Nair, Ms. Nivedita Nair,
Ms. Asha Gopalan Nair.
Advs. for the Respondent(s):
Shyam Divan, Sr. Adv., Ms. Riddhi Sancheti, Ms. Tanjul Sharma,
Mukul Kulhari, Raghav Bhatia.
528
[2026] 3 S.C.R.
Supreme Court Reports
Judgment / Order of the Supreme Court
Judgment
J.K. Maheshwari, J.
1.
Leave granted.
2.
The instant appeal(s) are directed against the judgment dated
04.07.2025 of the High Court of Bombay (hereinafter referred to as
"High Court") in Arbitration Appeal (L) No. 4339 of 2024 with Interim
Application (L) No. 7312 of 2024.
3.
By the impugned judgement, the High Court dismissed the appeal of
the Appellant - Municipal Corporation of Greater Mumbai (hereinafter
referred to as "MCGM") under Section 37 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "1996 Act") and
confirmed the judgment and order dated 19th and 20th of October,
2022 of the learned Single Judge in Arbitration Petition No. 84 of
2012 dismissing the application filed under Section 34 of the 1996
Act by MCGM for setting aside the award dated 05.06.2010 of a
three-member Arbitral Tribunal.
4.
The challenge made in the proceedings of Section 34 was threefold -
improper constitution of the tribunal, limitation and interest. However,
before us, the Appellant has confined their arguments only to the
question of lack of jurisdiction due to improper constitution of the
tribunal. As such, our examination of the facts of the case is confined
to the question of validity of constitution of the tribunal.
FACTS
5.
The facts shorn of unnecessary details are that the MCGM had
floated a tender and invited proposals for 'Consultancy Services to
Upgrade Sewerage Operations & Maintenance Services'. The scope
of work of the contract was for providing consultancy in upgrading
the sewage and sewerage handling facilities, operations and routine
maintenance protocols. This was a World Bank funded project and
the Respondent turned out to be the successful bidder in association
with PHE Consultants, Mumbai. Pursuant thereto, an agreement
dated 18.09.1995 (hereinafter referred to as the "Agreement") was
entered into between the MCGM and M/s R.V. Anderson Associates
Ltd., which is an engineering firm based out of Canada.
[2026] 3 S.C.R.
529
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
6.
The stipulated duration for completion of the work under the
Agreement was 72 months and the contract was designed to be
implemented in stages. The work under the contract was completed
on 20.06.2001 and a final report was submitted by the Respondent
to the MCGM. At that stage, a dispute arose in respect of payment
of outstanding dues. A meeting was held on 24.10.2002 where the
Respondent's claims were discussed and rejected by MCGM except
to make partial payments on 17.02.2004.
7.
When things stood as thus, on 09.08.2005, the Respondent
invoked the arbitration clause as contained in the Agreement.
Vide communication dated 09.08.2005, received by the MCGM
on 14.09.2005, the Respondent invoked the arbitration clause,
particularly clause 8.3(b) of the Agreement and appointed Hon'ble
Mr. Justice S.M. Jhunjhunwala (Retd.) as their nominee arbitrator.
On 07.10.2005, the MCGM appointed Mr. Sharad Upasani, former
IAS officer as their nominee arbitrator.
8.
On 04.11.2005, a meeting was held between the Appellant and the
Respondent, where the parties discussed about exploring a possibility
of conciliation or mediation. In reference to the said meeting, another
letter dated 08.11.2005 was sent by the Respondent to MCGM,
seeking to explore non-binding conciliation or mediation and in the
meanwhile, on confirmation by the MCGM, the arbitration proceedings
be put in abeyance. The said letter dated 08.11.2005 was also marked
to Justice Jhunjhunwala (Retd.) and Mr. Upasani. The MCGM, by
writing letter dated 07.01.2006 acknowledged the intention of the
Respondent to keep arbitration proceedings in abeyance and to
start conciliation proceedings.
9.
After a while, the Respondent wrote letters dated 12.02.2006 and
27.02.2006 to the MCGM, requesting to participate in the conciliation.
It appears from the record that steps were not taken by the parties to
explore the possibility of settlement and nothing was materialized. On
15.12.2006, MCGM addressed a letter to Mr. Upasani, informing him
that there was no conciliation pursuant to the letter dated 08.11.2005
and that Respondent was delaying the appointment of arbitrators.
10. On 08.01.2007, the Respondent wrote a letter to the MCGM stating
that since MCGM no longer seems to be inclined to explore mediation
and conciliation, the arbitration proceedings may continue and the
two arbitrators may proceed to appoint the third arbitrator in terms
of the contract.
530
[2026] 3 S.C.R.
Supreme Court Reports
11. The two nominee arbitrators jointly appointed Justice D.R. Dhanuka
(Retd.) as the Presiding Arbitrator by their letter dated 30.04.2007.
The Presiding Arbitrator issued the notice for preliminary meeting
vide communication dated 09.05.2007.
12. At this stage, Respondent by their letter dated 28.05.2007, objected
to the appointment of Justice Dhanuka (Retd.) in reference to Clause
8.6 of the Agreement, inter alia stating that the presiding arbitrator
must not be of Indian or Canadian nationality. As such, Justice
Dhanuka (Retd.) tendered his resignation as the Presiding Arbitrator
on 28.06.2007.
13. The two Co-Arbitrators, prior to appointing another presiding arbitrator,
then addressed a letter dated 17.09.2007 to both the Respondent
and the MCGM, seeking information as to whether the parties are
"still interested in the conduct of the pending arbitral proceedings".
The Respondent replied on 29.09.2007 conveying their intention
to continue with the arbitration proceedings and requested both
Co-Arbitrators to proceed with the appointment of the Presiding
Arbitrator. However, the MCGM did not reply in response to the said
letter. Thereafter, the Co-Arbitrators appointed Mr. John Savage
as the Presiding Arbitrator on 24.04.2008, who also tendered his
resignation on 11.08.2008.
14. On 21.10.2008, the Co-Arbitrators wrote to Mr. Anwarul Haque of
Singapore for appointment as the Presiding Arbitrator, who conveyed
his acceptance on 29.10.2008. Finally, on 12.11.2008, the learned
Co-Arbitrators informed the parties that Mr. Anwarul Haque had
been appointed as the Presiding Arbitrator and that a preliminary
meeting was scheduled on 08.12.2008, which was first rescheduled
to 09.12.2008 and again rescheduled to 09.01.2009.
15. The preliminary meeting of the Arbitral Tribunal was conducted on
09.01.2009 which was duly attended by both the parties as evinced
from the Minutes of the Preliminary Meeting of the Arbitral Tribunal.
After the said meeting, MCGM, addressing a letter on 20.02.2009 to
the Presiding Arbitrator, alleged that the appointment of the Presiding
Arbitrator was contrary to the terms of the Agreement, hence a 'nullity'.
It was said that the learned Co-Arbitrators could not have made the
appointment of the Presiding Arbitrator beyond 30 days from the
date of nomination of the second arbitrator. It was stated that the
[2026] 3 S.C.R.
531
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
Presiding Arbitrator, therefore, has 'no right' to be an Arbitrator and
requested that the Presiding Arbitrator ought to withdraw himself
from being an Arbitrator in the matter.
16. A written objection to the letter dated 20.02.2009 was addressed
by Respondent through its letter dated 09.03.2009. Thereafter, the
Respondent submitted its statement of claim before the Arbitral
Tribunal on 20.03.2009. It was at this stage, the MCGM filed an
application under Section 16 of the 1996 Act, challenging the
appointment of the Presiding Arbitrator as a 'nullity' and seeking
consequential reliefs.
17. The learned Arbitral Tribunal, by its order dated 17.07.2009,
(hereinafter referred to as "Section 16 order") dismissed the
application by a detailed order, holding that the appointment of the
Presiding Arbitrator was valid.
18. On 05.06.2010, the Tribunal passed the final award, directing MCGM
to pay specified amounts in United States Dollars (hereinafter referred
to as "USD") and in Indian Rupees (hereinafter referred to as "INR").
The Tribunal, under the final award, directed the payment as follows:
I.
USD 2,078,349.25 and INR 14,76,736 along with interest
amount on USD 1,089,926.88 and INR 1,51,596 at the rate of
14% per annum calculated from 16th June, 2004 till payment
or realization, whichever is earlier.
II.
USD 55,217 and INR 15,57,500 along with USD 42,815 and
INR 4,07,500 quantified as the cost of arbitration.
19. A corrigendum to the final award was passed on 29.06.2010,
making some corrections to the amount payable by the MCGM to
the Arbitrators. After the payments were made, the award was finally
issued and released to the MCGM on 10.08.2011.
20. The application seeking setting aside of the arbitral award under
Section 34 of the 1996 Act was filed before the High Court on
04.11.2011. The learned Single Judge of the High Court pronounced
its judgement dismissing the said application on 19th and 20th of
October, 2022. An appeal was preferred under Section 37 of the
1996 Act before the Division Bench of the High Court which has been
dismissed vide the Impugned Order. Upon filing the present appeals
by the Appellant, notice was issued vide order dated 29.08.2025 and
the operation of the impugned order was stayed.
532
[2026] 3 S.C.R.
Supreme Court Reports
FINDINGS OF THE TRIBUNAL AND HIGH COURT
21. The main thrust of the jurisdictional challenge as raised by the
Appellant is that the Presiding Arbitrator had been appointed after the
expiration of 30 days from 07.10.2005, i.e., the day when the MCGM
had appointed its nominee arbitrator. It has been contended by the
Appellant throughout that as per Clause 8.3(b) of the Agreement, once
period of 30 days had expired, the Arbitral Tribunal was rendered
coram non judice and the Co-Arbitrators had no power to appoint
the Presiding Arbitrator, who could have only been appointed by
the Secretary General of the International Centre for Settlement of
Investment Disputes, Washington D.C. (hereinafter referred to as
"ICSID").
Tribunal's findings
22. The learned Arbitral Tribunal, while dismissing the challenge laid
out to its jurisdiction in the application filed under Section 16 of
the 1996 Act, found that the provision to approach the Secretary
General of the ICSID for appointment of the Presiding Arbitrator was
merely an enabling provision, which did not denude the power of
the Co-Arbitrators to appoint the Presiding Arbitrator. It was found
that in this case, admittedly, neither party has made a reference to
the Secretary General of ICSID and as such, the power of the CoArbitrators to appoint the Presiding Arbitrator cannot be said to be
ousted. The Tribunal observed that since arbitral proceedings were
kept in abeyance on the request of the parties, hence, no fault can be
found with the decision of the Co-Arbitrators to appoint the Presiding
Arbitrator. It was held that the conduct of MCGM in participating in
the arbitral process amounts to waiver under Section 4 of the 1996
Act and the decision to challenge the appointment of the Presiding
Arbitrator was barred by limitation.
Findings of the High Court in the Section 34 order
23. Learned Single Judge dismissed the application vide order dated
19th and 20th October, 2022. On the question of jurisdiction, it was
found that the interpretation of Clause 8.3(b) made by the Tribunal
is not just a possible or plausible or reasonable view, but rather it is
the only reasonable view, therefore, interference by 'setting aside'
the award under Section 34 is not warranted. The Court observed
[2026] 3 S.C.R.
533
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
that in case the clause is interpreted in a manner that once the 30day period had expired, the Co-Arbitrators had no power to appoint
the Presiding Arbitrator and had to wait indefinitely for the parties to
approach the ICSID, it will lead to absurdity and incongruity since
there was no time limit for the parties to approach the ICSID. In
such a situation, the Arbitrators could not be said to be completely
powerless after their appointment.
Findings of the High Court in the Section 37 order
24. The High Court, while dismissing the appeal under Section 37 of the
1996 Act vide the Impugned Order has approved the interpretation of
Clause 8.3(b) as made by the learned Single Judge and the Arbitral
Tribunal. The Court observed that while exercising appellate power
under Section 37, the Court cannot sit in appeal over interpretation of
the contractual clauses by the Arbitrator merely because a different
interpretation of the said clause is possible. Since the appointment
of the arbitrator is in line with the provisions of Clause 8.3(b) of the
Agreement, no interference is warranted.
ARGUMENTS ADVANCED
25. Learned Senior Counsel Mr. Siddharth Bhatnagar for the MCGM,
argued with vehemence that the arbitral award deserves to be set
aside due to improper constitution of the tribunal and the award
lacks jurisdiction. It has been submitted that the Arbitral Tribunal,
learned Single Judge and the Division Bench of the High Court have
interpreted and substituted the contractual scheme as agreed by the
parties, which militates against the principle of party autonomy. It has
been urged that Clause 8.3(b) of the Agreement permits a period
of 30 days from the date of appointment of the latter Arbitrator for
the arbitrators to jointly appoint the Presiding Arbitrator, after which
the Tribunal is rendered coram non judice and loses its power to
appoint the Presiding Arbitrator. In such a case, he submits, the
only way the Presiding Arbitrator could have been appointed, would
have been by the parties approaching the Secretary General of the
ICSID since use of the word 'shall' in Clause 8.3(b) of the Agreement
makes this the only possible interpretation of the contractual terms.
As such, entire arbitral process becomes 'non-est' in law due to a
foundational jurisdictional defect which is incurable.
534
[2026] 3 S.C.R.
Supreme Court Reports
26. The above said arguments have been met with equal vehemence
by the learned Senior Counsel Mr. Shyam Divan appearing for the
Respondent. He submitted that the Tribunal has passed a detailed
award after interpreting the clauses of the Agreement and the
question of jurisdiction has been aptly dealt with by the learned
Arbitral Tribunal. He further contended that once the award has
been passed by the Arbitral Tribunal, the scope of interference at
the stage of a challenge under Section 34 of the 1996 Act is limited.
Such scope of interference is even more limited in an appeal under
Section 37 of the 1996 Act and more so in a special leave petition
arising out of the said appeal. It is urged that once the learned Arbitral
Tribunal has reached a conclusion with respect to interpretation of
the contract, there is no scope for re-interpretation and the Courts
must not sit in appeal in these proceedings merely because a
different view may be possible. He has urged assiduously that Clause
8.3(b) is an enabling clause and not a restricting clause, it merely
provides an additional avenue for the parties to seek appointment
of the Presiding Arbitrator before the Secretary General of ICSID in
case there is an impasse and the Co-Arbitrators fail to appoint the
Presiding Arbitrator within the prescribed time period of 30 days.
It is argued that neither party took recourse before the ICSID as
specified under this clause and as such, MCGM has waived its
right to challenge the appointment of arbitrator after having actively
participated in the arbitration. It is therefore, submitted that the
jurisdictional challenge is an afterthought, after the arbitral process
was well underway and is hit by waiver.
ANALYSIS OF SUBMISSIONS
27. Having heard learned counsel for the parties at length and on perusal
of the facts and material placed on record, the short question which
falls for our consideration is whether the arbitral award deserves to
be set aside on the ground of lack of jurisdiction due to improper
constitution of the arbitral tribunal or patent illegality?
Interpretation of Clause 8.3(b) of the Agreement
28. The instant jurisdictional challenge hinges on Clause 8.3(b) of the
Agreement and its interpretation by the learned Arbitral Tribunal.
Clause 8 of the Agreement is of utmost relevance in this case, and
is therefore reproduced as thus:
[2026] 3 S.C.R.
535
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
"8. SETTLEMENT OF DISPUTES
8.1 Amicable Settlement
The Parties shall use their best efforts to settle amicably all
disputes arising out of or in connection with this contract
or the interpretation thereof.
8.2 Right to Arbitration
Any dispute between the Parties as to matters arising
pursuant to this Contract which cannot be settled amicably
within thirty (30) days after receipt by one Party of the
other Party's request for such amicable settlement may
be submitted by either Party to arbitration in accordance
with the provisions of Clauses 8.3 through 8.7 hereinafter.
8.3 Selection of Arbitrators
Each dispute submitted by a Party to arbitration shall be
heard by a sole arbitrator or an arbitration panel composed
of three arbitrators, in accordance with the following
provisions:
(a) Where the Parties agree that the dispute to appoint a
sole arbitrator or, failing agreement on the identity of such
sole arbitrator within thirty (30) days after receipt by the
other Party of the proposal of a name for such appointment
by the Party who initiated the proceedings, either Party
may apply to the Federation Internationale des IngenieursConseil (FIDIC) of Lausanne, Switzerland for a list of not
fewer than five nominees and on receipt of such list, the
Parties shall alternately strike names therefrom, and the last
remaining nominee on the list shall be the sole arbitrator
for the matter in dispute. If the last remaining nominee
has not been determined in this manner within sixty (60)
days of the date of the list. FIDIC shall appoint upon the
request of either Party and from such list or otherwise, a
sole arbitrator for the matter in dispute.
(b) Where the Parties do not agree that the dispute
concerns a technical matter, the Client and Consultants
shall each appoint one arbitrator, and these two arbitrators
536
[2026] 3 S.C.R.
Supreme Court Reports
shall jointly appoint a third arbitrator, who shall chair the
arbitration panel. If the arbitrators named by the Parties
do not succeed in appointing a third arbitrator within thirty
(30) days after the latter of the two arbitrators named by
the Parties has been appointed, the third arbitrator shall, at
the request of either Party, be appointed by the Secretary
General of the International Centre for Settlement of
Investment Disputes, Washington D.C.
(c) If, in a dispute subject to Clause 8.3(b), one Party fails
to appoint its arbitrator within thirty (30) days after the other
Party has appointed its arbitrator, the Party which has
named an arbitrator may apply to the Secretary General
of the International Centre for Settlement of Investment
Disputes, Washington D.C. to appoint a sole arbitrator
for the matter in dispute, and the arbitrator appointed
pursuant to such application shall be the sole arbitrator
for that dispute.
8.4 Rules of Procedure
Except as stated herein, arbitration proceedings shall
be conducted in accordance with the rules of procedure
for arbitration of the United Nations Commission of
International Trade Law (UNCITRAL) as in force on the
date of this Contract.
8.5 Substitute Arbitrators
If for any reason an arbitrator is unable to perform his
function, a substitute shall be appointed in the same
manner as the original arbitrator.
8.6 Nationality and Qualifications of Arbitrations
The sole arbitrator or the third arbitrator appointed pursuant
to paragraphs (a) through (c) of Clause 8.3 hereof shall be
an internationally recognized legal or technical expert with
experience in relation to the matter in dispute and shall
not be a national of the Consultants' home country or of
the Government. For the purpose of this clause, "home
country" means any of:
(a) the country of incorporation of the Consultants or
[2026] 3 S.C.R.
537
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
(b) the country in which the Consultants' (or any of their
Members') principal place of business is located; or
(c) the country of nationality of a majority of the Consultants'
(or of any Members') shareholders; or
(d) the country of nationality of the Subconsultant
concerned, where the dispute involves a subcontract.
8.7 Miscellaneous
In any arbitration proceeding hereunder:
(a) proceedings shall, unless otherwise agreed by the
Parties, be held in Bombay;
(b) the English language shall be the official language for
all purposes; and
(c) the decision of the sole arbitrator or of a majority of
the arbitrators (or of the third arbitrator if there is no such
majority) shall be final and binding and shall be enforceable
in any court of competent jurisdiction, and the Parties
hereby waive any objection to or claims of immunity in
respect of such enforcement."
29. On a plain reading, Clause 8.3(b) provides that the parties shall each
appoint one arbitrator and if the two arbitrators do not succeed in
appointing the third arbitrator who shall preside the arbitration panel,
within 30 days, then, on the request of either party, the ICSID shall
appoint the third arbitrator. Such is the requirement in respect of
appointment of the three arbitrators who shall constitute the Arbitral
Tribunal.
30. On an objective perusal of the arbitration clause, it appears to be
enabling in nature. It does not provide that in case the two arbitrators
do not succeed in appointing the third arbitrator within the period so
prescribed, the two arbitrators will lose their power of appointment
of the third arbitrator. Rather, the power of appointment of the third
arbitrator acts in an independent sphere when juxtaposed with the
second part of the clause which is enabling in nature, permitting
the parties to approach the ICSID after 30 days, in case the two
arbitrators appointed by the parties reach an impasse and do not
succeed in making such appointment.
538
[2026] 3 S.C.R.
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31. The consequence of non-appointment of the Presiding Arbitrator
within the prescribed period has not been specified in the Agreement.
In fact, the clause merely grants liberty to the parties to seek the
appointment of the Presiding Arbitrator, after a period of 30 days,
before the ICSID. The intent of the parties while drafting the arbitration
clause could not have been to withdraw the power to appoint the
Presiding Arbitrator from the Co-Arbitrators appointed by the parties
upon expiry of 30 days from the date of appointment of the second
arbitrator, otherwise, it would have certainly found mention in the
Agreement. The intent of the clause appears to be that in case both
Arbitrators cause a delay in appointment of the third arbitrator, the
parties retain the authority to remedy the delay and after 30 days of
such non-appointment, they have liberty to apply before the ICSID to
address the delay and upon making such a request, the ICSID shall
appoint the third Arbitrator. Hence, in absence of such a stipulation
in the said clause and looking to the intent of the language used, the
Court while exercising its jurisdiction in proceedings arising out of
Section 34 of the 1996 Act, cannot read something into the contract
which it does not explicitly provide.
32. The manner in which a contract is understood and acted upon by the
parties is the best aid to interpreting the contract and understanding
the intent of the parties while drafting the contract. The Arbitral Tribunal
has interpreted the arbitration clause in a manner which is certainly
plausible, holding that it is enabling in nature, on the contingency
that an application is made by either party before the ICSID. We
are in complete agreement with the said view, however, addressing
the contentions made before us, it is seen that the initial part of
Clause 8.3(b), "Where the Parties do not agree that the dispute
concerns a technical matter, the Client and Consultants shall each
appoint one arbitrator, and these two arbitrators shall jointly appoint
a third arbitrator, who shall chair the arbitration panel." lays down the
composition of the arbitral tribunal and their method of appointment,
it vests the power of appointment of the third arbitrator with the CoArbitrators appointed by the parties. The subsequent part of Clause
8.3(b) reads "If the arbitrators named by the Parties do not succeed
in appointing a third arbitrator within thirty (30) days after the latter
of the two arbitrators named by the Parties has been appointed, the
third arbitrator shall, at the request of either Party, be appointed by
the Secretary General of the International Centre for Settlement of
[2026] 3 S.C.R.
539
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
Investment Disputes, Washington D.C.". This deals with a contingency
which breaks into three critical components, firstly, the contingency is
triggered upon the expiration of the thirty-day period from the date of
appointment of the second arbitrator without the appointment of the
third arbitrator; secondly, the condition precedent is that a request
must be made by either party, meaning thereby that the Secretary
General of ICSID does not have the power to act sua sponte (on
its own accord); and thirdly, by using the word 'shall', the mandate
is that once such a request is made by either party, the Secretary
General of ICSID is required to make such appointment.
33. The parties have, in their commercial wisdom, drafted a 'fail-safe'
into the arbitration clause to deal with a contingency where the CoArbitrators fail to appoint the third arbitrator, so as not to leave the
dispute resolution process in the balance. They have retained with
themselves the power to approach the ICSID and make a request
for appointment of the third arbitrator in case of such a contingency.
At the very first instance, when the Co-Arbitrators did not succeed in
appointing the third arbitrator within thirty days of the appointment of
Mr. Upasani, neither party exercised the option to approach the ICSID.
If the parties had exercised such an option upon the contingency
being triggered, certainly an argument could have been made that
despite a request being made before the ICSID, the Co-Arbitrators
have proceeded to appoint the third arbitrator and therefore the arbitral
tribunal is improperly constituted. In the present case, however, the
parties have not exercised the option to approach the ICSID and
non-exercise of the contingency cannot make the initial part of the
arbitration clause otiose. It certainly cannot be said that after the
period of thirty days, the power of the Co-Arbitrators to appoint the
third arbitrator was completely extinguished.
34. Much emphasis has been placed by the learned Senior Counsel
Mr. Bhatnagar on the use of the word 'shall' in Clause 8.3(b) to
argue that once the 30-day period from the date of appointment of
the second arbitrator elapses, the only way to appoint the Presiding
Arbitrator is through the Secretary General of ICSID. We are unable
to agree with this submission since the word 'shall' has been used
to enable the parties and the ICSID to proceed in the matter, upon
a request being made by either party, upon the non-appointment of
third, i.e. Presiding arbitrator, otherwise it will lead to procedural and
540
[2026] 3 S.C.R.
Supreme Court Reports
commercial absurdity. By using 'shall' in the clause, the responsibility
has been cast on the Secretary General of the ICSID to appoint the
third Arbitrator only upon a request made by either of the parties. It
provides a mandate that the President of the ICSID shall mandatorily
appoint the third arbitrator and this mandate is based on the condition
precedent, i.e., a request being made by either of the parties. It is
nobody's case that a request has been made by either party before
the ICSID after 30 days and prior to appointment of the Presiding
Arbitrator by the Co-Arbitrators. The enabling clause is permissive
and only attracts when the condition precedent of making a request
before the ICSID is satisfied. The parties have, in their wisdom and
in a specific circumstance, retained the power and liberty, to make
a request before the ICSID, which shall appoint the third arbitrator.
The clause cannot, therefore, be read to be restrictive in nature as
contended by the Appellant, however, this Court is inclined to reject
this argument in line of the decision of the Arbitral Tribunal.
35. Another important factor is that once the arbitrators were appointed
by the respective parties, which initiated the arbitration by sending
a notice, it cannot be said that the arbitrators have to indefinitely
wait for the parties to apply before the ICSID in order to appoint the
Presiding Arbitrator and for the arbitration to proceed. If such an
interpretation is made, it will lead to commercial irrationality, since
until the parties approach the ICSID, the two arbitrators would be
left in a state of limbo. This could not have been the intent of the
parties within the framework of party autonomy and from the conduct
of the parties, which will be discussed in the subsequent part of
this judgement, the parties never interpreted the contract in such a
manner. In view of the aforesaid discussion, it cannot be said that
the parties would want their contract to become unworkable and
for the dispute resolution clause to work in such a manner that the
arbitrators appointed by the parties after invocation of arbitration
would wait indefinitely for either of the parties to approach the ICSID
seeking appointment of the third arbitrator.
36. Of course, while saying so we are cognizant of the sacrosanct principle
of party autonomy and the fact that Courts cannot substitute the
commercial wisdom of parties as is borne out from the plain meaning
of the words used in the contract. However, Clause 8.3(b) has been
rightly interpreted by the learned Arbitral Tribunal in the Section 16
order and the matter has been dealt with in the right perspective
[2026] 3 S.C.R.
541
Municipal Corporation of Greater Mumbai v.
M/s R.V. Anderson Associates Limited
by the learned Single Judge in Section 34 and the learned Division
Bench in the Section 37 appeal. The law in respect of the scope of
interference permissible in proceedings arising out of a challenge to
the arbitral award under Section 34 of the 1996 Act, is well settled.
Generally, the scope of interference is quite narrow. The arbitrator is
the master of evidence and so also of interpretation of the terms of
contract. If the arbitrator has reached at a certain view with respect to
interpretation which is plausible, interference is not warranted merely
because some other view may also be possible. This is a settled
principle of law which has been recently reiterated in the decisions
of this Court in Consolidated Construction Consortium Limited v.
Software Technology Parks of India1 and SEPCO Electric Power
Construction Corporation v. GMR Kamalanga Energy Ltd.2 The
role of the Court, in the proceedings arising out of Section 34 of the
1996 Act, is clearly demarcated. The approach of the Court must be
to respect arbitral autonomy and ensure minimum judicial interference.
37. As rightly observed by the learned Arbitral Tribunal in the Section 16
order as well as the High Court, this is not a case where the Arbitral
Tribunal has been composed completely outside the scope of the
agreement and a procedure alien to the agreement has been adopted
to appoint the arbitrators. The difference in interpretation is merely
as to whether the third arbitrator could only have been appointed by
the Secretary General of ICSID or by the two arbitrators nominated
by the parties. In any case, in the facts of this case, it cannot be
said that the Arbitral Tribunal has been improperly constituted in
derogation of the arbitration agreement, or that the interpretation of
the arbitration clause as made by the Arbitral Tribunal has resulted
in any patent illegality, which would warrant setting aside of the
award. As such, the High Court has rightly decided not to interfere
with the arbitral award under Section 34(2)(a)(v) or Section 34(2A)
while rejecting the application to set aside the award.
Conduct, Acquiescence and Waiver
38. Even though we have found that the Arbitral Tribunal has reached
the right conclusion with respect to interpretation of the arbitration
1
2025 INSC 574.
2
2025 INSC 1171.
542
[2026] 3 S.C.R.
Supreme Court Reports
clause as contained in the Agreement and that the appointment
of the third arbitrator is in line with the arbitration clause, there is
yet another aspect of the instant matter which we must address,
since it forms a part of the reasoning of the Section 16 order. Even
assuming that there is non-compliance of the arbitration agreement
in appointing the third arbitrator, whether the MCGM has waived its
right to object to the same due to its conduct?
39. Section 16 of the 1996 Act permits the arbitral tribunal to rule on
its own jurisdiction. It is relevant and is therefore quoted as under:
"16.