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M/s. Bharat Udyog Ltd. (formerly M/s. Jai Hind Contractors Pvt. Ltd.) v. Ambernath Municipal Council through Commissioner

Special Leave Petition (Civil) · 2026 INSC 288Decided 24 Mar 2026
SLP(C) No.-001127-001127 - 2017
Justice Pamidighantam Sri Narasimha · Justice Alok Aradhe

Background

In 1994, the Ambernath Municipal Council awarded an octroi-collection tender to the petitioner for Rs. 6,75,00,000/-. When the petitioner sought a reduction in the fixed reserve price, its representation was rejected, and after withdrawing a writ petition on this issue, it approached the State Government to appoint an arbitrator under the Maharashtra Municipal Councils Act. An arbitrator ruled in the petitioner's favour, and while the Civil Court made the award a rule of court, the Bombay High Court set aside both the award and the Civil Court's judgment, holding there was no valid arbitration agreement between the parties.

Decision Breakdown

The Supreme Court agreed with the High Court that there was neither a genuine arbitration agreement nor informed consent by the Municipal Council to resolve the dispute through arbitration: the government's statutory power to appoint an arbitrator under the 1965 Act could not be equated with a contractual arbitration clause under Section 4 of the Arbitration Act, 1940. The Court held the requirement of mutual consent (consensus ad idem) for a valid arbitration agreement was absent, rendering the arbitrator's proceedings a nullity (coram non judice) and the resulting award non-est. It further held that the Municipal Council's initial participation in arbitration did not estop it from later challenging jurisdiction, since it had done so throughout before the Civil Court and High Court. Finding no error in the High Court's judgment, the Supreme Court dismissed the special leave petition, with parties bearing their own costs.

Lesson Learnt

A statutory power to appoint an arbitrator does not by itself create a valid arbitration agreement: genuine mutual consent between the parties is essential, and its absence renders arbitral proceedings and any resulting award void, regardless of a party's participation in those proceedings.

Official source (sci.gov.in)View Judgment (PDF)

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