Arbitral Award Quashed – Non-existing Arbitration Agreement

The respondent was given the contract for toll collection for three years and the jurisdiction of the civil court was provided.

Simultaneously, an agreement was executed among petitioner, respondent and the SBI that the SBI would have a right to step into the shoes of the contractor if toll collection agreement were to be terminated with a default of the contractor. The said Replacement Agreement had arbitration clause.

When the respondent invoked the arbitration and proposed names of Arbitrators.   The petitioner rejected the names and proposed other three names. 

On 18.4.2018, the Award was passed and also the reasons for rejecting the application of section 16 of the petitioner.

Arbitrator. In the absence of a positive repudiation of the arbitration clause in the Replacement Agreement being invoked by Jai Laxmi, MSRDC has not only participated in the constitution of the Arbitral Tribunal but also expressed its consent by proposing names. Moreover, MSRDC filed a counter claim and is therefore deemed to have submitted to the jurisdiction of the Learned Arbitral Tribunal and cannot now be heard to deny the existence of the arbitration agreement.

I have already explained why MSRDC’s participation in constitution of the Learned Arbitral Tribunal and the filing of a counterclaim are no bar to filing its objection on jurisdiction and continuing with it. On this count too, the Learned Arbitral Tribunal has fallen into error and has not appreciated the scope and import of Section 16 of the Act.

Therefore, the main test of Section 7(1) has not been met by the arbitration clause in the Replacement Agreement when applied to disputes raised entirely under the Toll Collection Agreement. On the disputes under the Toll Collection Agreement, the parties have agreed that Jai Laxmi would have resort to the Principal Civil Court at Mumbai.

Judgment dated 16.4.2026 of the High Court of Bombay in Commercial Arbitration Petition NO.899 of 2018 of Maharashtra State Road Development Corporation Ltd   Vs   Jai Laxmi Constructions Engineers and Contractors.