SC Clarifies Waiver Of Jurisdictional Objections In Arbitration Proceedings

The appeal of arbitration is primarily anchored in its capacity for prompt and self-directed resolution; however, disputes regarding jurisdiction frequently jeopardize this efficiency. Such challenges raise fundamental questions regarding the legitimacy of the arbitral tribunal's authority, invoking considerations such as the lack of a legitimate agreement, the non-arbitrability of the subject matter, or the presence of statutory overrides. In the Indian context, the Arbitration and Conciliation Act, 1996 (A&C Act) navigates these complexities through the principle of competence-competence articulated in Section 16, alongside a constrained framework for judicial review as given in Section 34. The ruling rendered by the Supreme Court in M/s Gayatri Project Limited v. Madhya Pradesh Road Development Corporation Limited¹ illuminates this path, asserting that while jurisdictional claims may arise post-award as legal inquiries, the waiver is significant in the absence of compelling grounds for any delay. Delivered on May 15, 2025, by Justices J.B. Pardiwala and R. Mahadevan, this judgment reconciles previously conflicting legal precedents, emphasising procedural diligence in order to uphold the finality of arbitral decisions. This discourse meticulously examines the dimensions of the case, investigating its reinforcement of party accountability and its broader implications for the arbitration framework in India.

Factual Background

The origins of the dispute are deeply rooted in a 2010 engineering, procurement, and construction (EPC) agreement established between M/s Gayatri Project Limited (Gayatri), acting as the contractor, and the Madhya Pradesh Road Development Corporation Limited (MPRDC), a state-owned institution tasked with leading infrastructure initiatives. The contract, valued at significant monetary sums, mandated Gayatri to execute the development of a crucial segment of highway infrastructure, which included a standard arbitration provision as per the A&C Act that stipulated the formation of a three-member tribunal i.e. each party was to appoint one arbitrator, with the two arbitrators then charged with selecting the presiding arbitrator.

The execution of the project encountered substantial challenges, including site restrictions, alterations to the design, and delays attributed to bureaucratic inefficiencies, which compelled Gayatri to request both contract extensions and compensation that exceeded Rs. 10 crore, citing increased expenses and diminished productivity. In response, MPRDC contested these claims, arguing that there were breaches of contract and asserting the applicability of liquidated damages. The initiation of arbitration occurred in 2016, during which the tribunal convened and meticulously reviewed extensive evidence across multiple hearings. In 2018, the tribunal rendered a decision favouring Gayatri, awarding the principal amounts along with interest, and affirming the legitimacy of the claims put forth.

Unknown to the parties involved during the arbitration proceedings, a statutory framework: the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (MP Act) was applicable. This legislation was enacted with the intent to facilitate the resolution of disputes arising from public works, and Section 19 specifically grants exclusive jurisdiction to the Madhya Pradesh Arbitration Tribunal (MPAT) for claims directed against governmental entities, which could effectively preclude the execution of ad hoc arbitration under the A&C Act. Nevertheless, MPRDC submitted its defense statement without raising a demurrer, engaged in the arbitration process in its entirety, and did not invoke Section 16 to challenge the tribunal's jurisdiction, thereby permitting the arbitration to progress without interruption.

Procedural History

Following the award, MPRDC shifted its focus to the Commercial Court located in Bhopal under Section 34, thereby revealing the jurisdictional deficiency imposed by the MP Act. The court, persuaded by the arguments presented, invalidated the award in 2020, determining that the tribunal acted beyond its legal authority and declaring the proceedings void ab initio. Gayatri's appeal under Section 37 to the Madhya Pradesh High Court met with similar unfavourable results; the Division Bench, in January 2022, upheld the annulment, classifying it as a non-waivable public policy necessity, resistant to the principle of estoppel.

Dissatisfied with the outcome, Gayatri sought relief from the Supreme Court through a civil appeal. The apex court, granting permission for the appeal, framed the inquiry concerning the implications of waiver: Does the failure to raise jurisdictional issues during arbitration extinguish post-award challenges? The oral hearings meticulously examined the intricate relationships among Sections 4 (general waiver), 16 (jurisdictional challenges), and 34 (annulment of awards), in conjunction with the statutory provisions of the MP Act.

Legal Issues and Arguments

At the core of the matter reside two interrelated inquiries: (i) Is it permissible for a jurisdictional objection to be raised under Section 34, despite the procedural provisions outlined in Section 16? (ii) If so, does the failure to assert such an objection previously instigate a waiver, precluding relief absent exceptional circumstances? MPRDC advocated for the precedent established in Lion Engineering Consultants Pvt. Ltd. v. State of M.P.², wherein a Constitution Bench upheld that such assertions constitute purely legal questions, subject to de novo scrutiny under Section 34(2)(b)(ii) unencumbered by any silence at the arbitral stage. They contended that the MP Act encapsulated the sovereign intent, thereby rendering disputes related to public works non-arbitrable externally; their participation was framed as pragmatic rather than indicative of a consensual waiver. In alignment with public interest considerations, they argued for judicial intervention to avert financial depletion.

In contrast, Gayatri referenced Union of India v. Pamp Developments Pvt.Ltd.³, emphasizing the waiver of uninvoked rights as stipulated in Section 4 and the estoppel imposed by Section 16(2) following the submission of a defense: "A party who participates without objection forfeits the plea." They asserted that the MP Act was directed at execution rather than adjudication; thus, ad hoc arbitration remained unimpeded. They maintained that a delayed assertion contravened the principle of competence-competence, engendering the potential for abuse and undermining the efficiency in accordance with UNCITRAL standards.

Supreme Court's Analysis and Decision

The Bench, navigating through established precedents, affirmed Gayatri's award, reversing the decision of the High Court. Grounded in the minimalist principles of the A&C Act, it elucidated: Jurisdictional challenges are classified as "law" under Section 34, as per Lion Engineering, yet are subject to waiver as per Pamp Developments unless a "strong and good reason" is provided to justify any delay, referencing Gas Authority of India Ltd. v. Keti Construction (India) Ltd⁴. and L.G. Chaudhary (II) v. Union of India (2024)."Although a plea of lack of jurisdiction... may be raised for the first time under Section 34... such a plea should not be permitted... unless the party establishes a strong and good reason," the Court noted, regarding MPRDC's oversight - despite the notorious nature of the MP Act as inadequate; strategic silence or unintentional negligence did not suffice. The relevance of the MP Act, while significant for execution, did not invalidate awards issued under the Arbitration and Conciliation Act if they were not timely contested.

To crystallize, the judgment propounds a six-pronged framework:

This matrix, fidelity to UNCITRAL Model Law, curtails ambush tactics, ensuring "awards... may not be annulled 'only' on that ground."

Implications and Critical Reflections

Gayatri recalibrates the procedural mechanisms of arbitration, instituting early jurisdictional checkpoints to prevent post-facto disruptions. For governmental entities such as MPRDC, it issues a cautionary note against opportunistically exploiting statutory protections, which aligns with the narrowed public policy perspective articulated in Associate Builders v. DDA⁵. Quantitatively, this recalibration may reduce the 40% of Section 34 petitions entangled in jurisdictional complexities (according to 2024 ICC India statistics), thereby expediting India's aspirations to become a prominent arbitration hub.

From a critical standpoint, the "strong reason" criteria including elements such as fraud or novel factual circumstances holds the potential for enhanced clarity, yet it simultaneously poses a risk of arbitrary judicial discretion, which could lead to interpretative conflicts. Does this criteria impose an undue burden on parties with limited resources?The Court refrains from providing a definitive answer: The consensual foundation of arbitration necessitates due diligence; "failure to raise the issue... is not a strong... reason. "Internationally, this perspective finds resonance in Singapore's PT First Media TBK v. Astro Nusantara International BV (2013), which enforces the concept of waiver in cases of participatory laches.

For legal practitioners, this directive serves as a preventative measure: conduct an audit of clauses prior to defense submissions, and invoke Section 16 without delay. Institutionally, this enhancement reinforces the amendments to the A&C Act of 2015 and 2019, promoting predictability in the context of a burgeoning disputes pipeline estimated at Rs. 5 lakh crore.

Footnotes

1 (2025 INSC 698)

2 (2018) 16 SCC 758

3 (2023) 1 SCC 176

4 (2016) 13 SCC 445

5 (2015) 3 SCC 49

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