The Supreme Court, after analyzing Section 16(2) of the Arbitration Act, which mandates that jurisdictional objections must be raised no later than the submission of the statement of defence, ruled in favor of the appellant. The Court set aside the orders of the District and High Courts and upheld the arbitral award passed by the sole arbitrator as valid and legitimate. The Court held that the respondent, having failed to raise jurisdictional objections within the stipulated time, could not challenge the tribunal's authority thereafter.

New Delhi (ABC Live): The Supreme Court of India, in the case titled M/S Vidyawati Construction Company versus Union of India, affirmed the principle that the jurisdiction of the arbitral tribunal cannot be challenged after the submission of the statement of defence.

Case Facts: The respondent awarded a contract to the appellant for constructing a building for the office of the General Manager, Railway Electrification Project, Allahabad. Disputes arose regarding the payment under the contract, which contained a clause for the appointment of an Arbitral Tribunal consisting of three arbitrators. Initially, the respondent applied to the Chief Justice of the High Court, who appointed two arbitrators with instructions to appoint an umpire. As the arbitrators failed to nominate the umpire, the respondent filed another application, resulting in the appointment of Shri P.K. Sharma as the umpire.

Subsequently, Shri P.K. Sharma resigned, leading the appellant to request a modification of the earlier order to appoint a presiding arbitrator unaffiliated with any government department. On 26th September 2003, the Chief Justice appointed a retired Chief Justice of the High Court as the sole arbitrator.

The arbitration proceedings commenced before the sole arbitrator. After filing the statement of defence, the respondent challenged the sole arbitrator's jurisdiction, arguing that the contract stipulated the appointment of three arbitrators. The sole arbitrator rejected the objection, and an award was issued on 21st February 2008. The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") before the District Judge, Allahabad. The District Judge set aside the award, citing the illegality of the tribunal's composition. The appellant's appeal under Section 37 of the Arbitration Act was dismissed by the High Court, affirming the District Judge's decision.

Appellant's Arguments: The appellant's senior counsel contended that, on 5th December 2003, the respondent had agreed to the appointment of the sole arbitrator. The statement of defence was filed on 14th February 2004, and the respondent was granted time to apply for modifications. However, instead of seeking modifications, the respondent challenged the tribunal's composition on 24th April 2004. The appellant argued that under Section 16(2) of the Arbitration Act, the respondent could not challenge jurisdiction after submitting the statement of defence. Thus, the appellant claimed that the courts erred in setting aside the award.

Respondent's Arguments: The learned Additional Solicitor General (ASG) argued that, at the time of the sole arbitrator's appointment on 26th September 2003, an order under Section 11 was considered an administrative order. The statement of defence was initially filed before the tribunal comprising three arbitrators, and the respondent could not have incorporated an objection to the jurisdiction in that submission. The respondent asserted that raising an objection under Section 16 on 24th April 2004 was valid and appropriate.

Supreme Court Judgment: The Supreme Court, after analyzing Section 16(2) of the Arbitration Act, which mandates that jurisdictional objections must be raised no later than the submission of the statement of defence, ruled in favor of the appellant. The Court set aside the orders of the District and High Courts and upheld the arbitral award passed by the sole arbitrator as valid and legitimate. The Court held that the respondent, having failed to raise jurisdictional objections within the stipulated time, could not challenge the tribunal's authority thereafter.

Case Law Reference: The Supreme Court relied on the precedent set in Ferro Alloys Corporation Ltd. vs. Rajasthan State Electricity Board, (1993) 3 SCC 333, where it was held that objections to jurisdiction must be raised at the earliest opportunity and cannot be entertained at a later stage in the proceedings.