Party Cannot Keep ‘Jurisdictional Ace’ Up Its Sleeve To Challenge Arbitral Tribunal Later: Supreme Court Dismisses MCGM Appeal
Court noted that parties cannot remain silent during crucial stages of the arbitration and raise the objection only later in the proceedings
Supreme Court
The Supreme Court has dismissed an appeal filed by the Municipal Corporation of Greater Mumbai challenging an arbitral award in favour of M/s R.V. Anderson Associates Ltd., holding that a party cannot participate in arbitration proceedings and later raise a belated jurisdictional objection regarding the constitution of the arbitral tribunal.
The Division Bench noted that MCGM had remained silent during crucial stages of the arbitration and raised the objection only later in the proceedings. Therefore, it remarked that a party cannot keep a “jurisdictional ace” up its sleeve and later attempt to invalidate the proceedings after having acquiesced in the process.
The Bench upheld the decision of the Bombay High Court which had refused to interfere with the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 and the Court had also dismissed MCGM’s appeal under Section 37 of the Act.
Justice J.K. Maheshwari and Justice Atul S. Chandurkar observed, “…The MCGM seems to have conveniently turned a blind eye to the communication which was marked to it and then at the stage prior to filing of the statement of defence, for the first time, raised this issue which relates to alleged non-compliance of terms of the agreement in respect of appointment of arbitrators. In such a fact situation, no party can be permitted to take the dispute resolution process, the nominee arbitrators or the opposite party for a ride. A party cannot keep a ‘jurisdictional ace’ up their sleeve and then claim that filing of the jurisdictional challenge under Section 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”.
“…subsequent conduct of the parties serves as a powerful practical tool to understand their contractual intent. Reliance on a party’s original understanding of obligations under a contract as well as their actions prevents a party from later on adopting a legalistic interpretation which supports their case in stark contradiction of how they actually operated on the ground. In the present case, even though the MCGM argues with vehemence that the Co-Arbitrators had no power to appoint the third arbitrator, the admitted case is that neither party triggered the contingency by approaching the ICSID. Additionally, the MCGM was put to notice by the Co-Arbitrators and the Respondent about the appointment of the third arbitrator, not only once, but on three different occasions. In response to communication where the Respondent has requested the Co-Arbitrators to appoint the third arbitrator, the MCGM has not taken a view that the Secretary General, ICSID is the only authority who could appoint the third arbitrator”, the Bench had also noted.
Asha Gopalan Nair, AOR appeared for the appellant and Riddhi Sancheti, AOR appeared for the respondent.
In the matter, a consultancy agreement dated 18-09-1995 between MCGM and the Canadian engineering firm R.V. Anderson Associates Ltd. was signed for providing consultancy services to upgrade sewerage operations and maintenance in Mumbai under a World Bank-funded project. After completion of the project in 2001, disputes arose regarding payment of outstanding dues, eventually leading the respondent firm to invoke arbitration in 2005.
Thereafter, during the arbitration process, the presiding arbitrator initially appointed resigned after an objection regarding nationality requirements under the agreement. Subsequently, further steps were taken by the co-arbitrators to continue the proceedings. However, MCGM later challenged the arbitral award by arguing that the tribunal had been improperly constituted and therefore lacked jurisdiction.
The Court emphasised that allowing such conduct would undermine the principles and efficiency of arbitration as a dispute resolution mechanism. It noted that the arbitral tribunal’s view was a plausible one and that no grounds existed under Section 34 of the 1996 Act to set aside the award.
Accordingly, the Court dismissed the appeals and upheld the arbitral award, observing that no interference was warranted and also clarified that there would be no order as to costs.
Cause Title: Municipal Corporation Of Greater Mumbai v. M/S R.V. Anderson Associates Limited [Neutral Citation: 2026 INSC 228]
Appearances:
Appellant: Asha Gopalan Nair, AOR.
Respondent: Riddhi Sancheti, AOR, Mukul Kulhari, Tanjul Sharma, Advocates.