Case Name: M/S. MCM WORLDWIDE PRIVATE LIMITED VERSUS M/S. CONSTRUCTION INDUSTRY DEVELOPMENT COUNCIL
Petition No: CIVIL APPEAL ARISING OUT OF SLP (C) NO. 33075 OF 2025
Neutral Citation: 2026 INSC 425
Date of Judgement: 21 April 2026.
Coram: Honourable Mr Justice Sanjay Kumar & The Honourable Mr Justice VINOD CHANDRAN
INTRODUCTION.
The bench has addressed and clarified the fundamental misunderstanding regarding the maintainability of challenges to an arbitrator’s decision on jurisdiction. The judgement clarified the interplay between Section 16 (Competence of arbitral tribunal to rule on its jurisdiction) and Section 34 (Application for setting aside an arbitral award) of the Arbitration & Conciliation Act (Arbitration Act).
FACTS
During the arbitral proceedings, the respondent filed an application for rejecting the claim of the appellant under the Code of Civil Procedure, seeking a dismissal because the appellant’s claim petition was barred on the grounds of limitation and was dismissed by the arbitrator on the merits on 16 April 2022. The respondent filed an application under Section 34 of the Arbitration and Conciliation Act before the learned District Judge, South East Saket Courts, New Delhi. The petition was rejected by the District judge, holding that the petition is not amenable to challenge under Section 34.
The respondent appealed this order before the High Court of Delhi, and the court dismissed the application on the same grounds but granted liberty to the respondent to file an application before the learned arbitrator under Section 16. The application given to the arbitrator was also dismissed by the learned arbitrator. The respondent again challenged this rejection under Section 34, both parties mistakenly agreeing based on a misunderstanding of the Supreme Court’s ruling in Indian Farmers Fertilizer Cooperative Limited vs Bhadra Products that a Section 34 application was maintainable. The learned District judge dismissed the Section 34 application on its merits, but on appeal, a Division Bench of the Delhi High Court allowed the appeal under Section 37 without addressing the foundational issue of maintainability. This led to the present appeal before the Supreme Court.
ISSUES
- Whether an order passed by an arbitral tribunal under Section 16, rejecting a plea of lack of jurisdiction, is amenable to challenge under Section 34 as an “interim award” and a decision on limitation rendered as a preliminary issue under Section 16 constitutes an interim award or a procedural order?
- Whether the High Court was correct in entertaining an appeal under Section 37 against a Section 34 decision that itself was not legally maintainable?
ARGUMENTS OF THE PARTIES
The Respondent (CIDC) submitted that the arbitrator’s decision on limitation was a final determination on a specific issue between the parties and, as such, should be regarded as an interim award under Section 2(1)(c) and the award to be set aside under Section 34. They made extensive use of the precedent in Indian Farmers Fertiliser Cooperative Limited v Bhadra Products.
The Appellant (MCM) initially argued that, according to the scheme of the Act, a rejection of a jurisdictional plea could be challenged only after the final award. They later mistakenly accepted the maintainability of the Section 34 application in the lower court, after being persuaded by the respondent’s interpretation of case law.
JUDICIAL REASONING
The Court held that an order passed by an arbitral tribunal under Section 16 that rejects a plea of lack of jurisdiction is not amenable to challenge under Section 34 as an “interim award” because the statutory scheme of the A&C Act specifically mandates a different procedure for such rejections, meaning there is no option for setting aside the plea of jurisdiction during the proceedings of the arbitration. The Court also objected to the appeal, stating that allowing an independent challenge at this stage would not only lead to “piecemeal challenges” but also cause unnecessary delay and expenses. The Court specifically held that a decision of the arbitrator on limitation, taken up as a preliminary issue, would amount to an interim award which would be amenable to challenge under Section 34 of the Arbitration Act.
The Supreme Court clarified that Sections 16(5) and 16(6) are clear. The Court observed that the statute is categorical when a jurisdictional plea is rejected. The Court held that the provisions of Section 16(5) categorically mandate that once the arbitral tribunal decides on a plea raised under Section 16(2) or (3) and once the arbitral tribunal takes a decision rejecting the plea, it shall continue with the arbitral proceedings and make an arbitral award. The plea of jurisdiction can only be challenged after the rendering of the final award.
The Court also opined that the respondent was not entitled to file an application under Section 34 of the Arbitration Act against the order passed by the learned arbitrator rejecting its plea of lack of jurisdiction on the ground of limitation. As the said application was not even maintainable, the question of an appeal under Section 37 of the Arbitration Act being entertained against the decision passed thereon did not arise. The Court pointed out that Section 37(2)(a) only allows an appeal when the tribunal accepts a plea of lack of jurisdiction, not when it rejects it.
CONCLUSION
The Supreme Court noted that the rejection of a plea under section 16(2) is not an interim award and cannot be challenged in a judicial review under section 34. The Court quashed the order of the Division Bench of the Delhi High Court. It held that the respondent could challenge the validity of the jurisdictional order after the final award was passed if the situation so warranted. The appeal was allowed, and each party was ordered to pay his own costs.
