Arbitration | Party's Active Participation And Acquiescence In Proceedings Bars Belated Jurisdictional Challenge After Adverse Award: Supreme Court
Kiran Raj
The Supreme Court of India Division Bench of Justice J.K. Maheshwari and Justice Atul S. Chandurkar dismissed a challenge to an arbitral award, holding that a party which participates in arbitration proceedings without raising a jurisdictional objection at the appropriate stage cannot subsequently invoke a technical plea against the tribunal's constitution after an adverse award is passed. The Court observed that a party cannot retain a jurisdictional challenge as a tactical reserve, as doing so would erode the foundational principles of arbitration and alternative dispute resolution.
The dispute arose from a contract executed between the Municipal Corporation of Greater Mumbai (MCGM) and M/s R.V. Anderson Associates Ltd., a Canadian engineering firm, for consultancy services aimed at upgrading sewerage operations and maintenance systems under a World Bank funded project. The agreement dated 18.09.1995 provided that the project would be implemented in stages over a period of 72 months. The respondent completed the work on 20.06.2001 and submitted the final report. A dispute later arose regarding payment of outstanding dues. In a meeting held on 24.10.2002, MCGM rejected the respondent’s claims except for partial payments which were made on 17.02.2004.
The respondent invoked the arbitration clause on 09.08.2005 and appointed Justice S.M. Jhunjhunwala (Retd.) as its nominee arbitrator. On 07.10.2005, MCGM appointed Mr. Sharad Upasani as its nominee arbitrator. Discussions between the parties regarding conciliation resulted in the arbitration proceedings being kept in abeyance for some time. Subsequently, the two arbitrators appointed Justice D.R. Dhanuka (Retd.) as the Presiding Arbitrator. Following objections regarding nationality requirements under the agreement, he resigned. Later appointments included Mr. John Savage and subsequently Mr. Anwarul Haque as Presiding Arbitrator.
After participating in preliminary proceedings, MCGM objected to the constitution of the tribunal and contended that the appointment of the Presiding Arbitrator beyond 30 days from the appointment of the second arbitrator violated Clause 8.3(b) of the agreement. The Arbitral Tribunal rejected this objection under Section 16 of the Arbitration and Conciliation Act, 1996 and proceeded with the arbitration. The tribunal eventually passed an award directing MCGM to pay specified amounts along with interest and arbitration costs. The challenge to the award under Section 34 was dismissed by the High Court, and the appeal under Section 37 was also rejected, leading to the present appeal before the Supreme Court.
The Court observed that Clause 8.3(b) of the Agreement was enabling in nature and did not strip the Co-Arbitrators of their power to appoint the Presiding Arbitrator upon expiry of the thirty-day period. It stated that "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."
On the interpretation of the word "shall" in Clause 8.3(b), the Court recorded that "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 commercial absurdity."
On the scope of judicial interference under Section 34 of the 1996 Act, the Court stated that "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."
On the relevance of a party's prior conduct in jurisdictional challenges, the Court observed that "the conduct of the party right from the stage of invocation of arbitration becomes a relevant consideration. While examining the alleged departure from the contractual scheme, acquiescence by the party in its conduct, its actions pursuant to the contractual terms and how it has understood and acted as per the terms of the contract, are all crucial aid in comprehending the contractual scheme."
The Court further recorded that "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 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."
Referring to its earlier decision in Hindustan Construction Co. Ltd. v. Bihar Rajya Pul Nirman Nigam Ltd., the Court quoted that "a party who has actively participated or consented to continuation of the proceedings cannot later challenge the same process merely because the result is adverse."
The Court concluded by observing that "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."
The Court directed: “As such, we do not find any merit in these appeals, they are accordingly dismissed. In the facts, there shall be no order as to cost. All pending applications shall be treated as disposed of.”
Advocates Representing the Parties
For the Petitioners: Siddharth Bhatnagar, Senior Advocate
For the Respondents: Shyam Divan, Senior Advocate
Case Title: Municipal Corporation of Greater Mumbai v. M/s R.V. Anderson Associates Limited
Neutral Citation: 2026 INSC 228
Case Number: Civil Appeal Nos. of 2026 (Arising out of SLP (C) Nos. 23846–47 of 2025)
Bench: Justice J.K. Maheshwari, Justice Atul S. Chandurkar
