M/s. MCM Worldwide Private Limited vs M/s. Construction Industry Development Council

2026 INSC 425 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. ............. OF 2026 (@ SLP (C) No. 33075 of 2025)

M/s. MCM Worldwide Private Limited … Appellant

versus

M/s. Construction Industry Development Council … Respondent

JUDGMENT

SANJAY KUMAR, J

1. Leave granted.

2. During the arbitral proceedings between the parties, a fundamental

legal aspect came to be glossed over on a patent misunderstanding of a

decision of this Court. Hence, this order, to clarify the legal position.

3. Arbitration commenced between the parties upon appointment of a

sole Arbitrator by the Delhi High Court in the context of the disputes arising

under their Memorandum of Understanding (MoU) dated 02.03.2006 read

with the Memorandum of Understanding (MoU) dated 05.05.2008 of the

respondent, M/s. Construction Industry Development Council, with

Employment Generation and Marketing Mission, Department of Rural Signature Not Verified Digitally signed by babita pandey Date: 2026.04.28 17:18:20 IST Reason:

Development, Government of Andhra Pradesh.

4. The appellant, M/s. MCM Worldwide Private Limited, had earlier

filed a suit in CS DJ No. 428 of 2018 for recovery of its alleged dues before

the learned District & Session Judge, South-East, Saket Courts, New

Delhi, but the respondent filed an application therein under Section 8 of

the Arbitration and Conciliation Act, 1996 1, to refer the parties to arbitration

in terms of the arbitration clause in the MoU dated 05.05.2008, read with

Clause 4 of the MoU dated 02.03.2006. On 03.08.2019, the suit was

disposed of on this premise. However, as the respondent failed to agree

to the appointment of an arbitrator, the appellant approached the Delhi

High Court by way of a petition under Section 11(6) of the Arbitration Act,

resulting in the appointment of a sole arbitrator by the High Court by order

dated 27.09.2021, which was thereafter confirmed on 11.10.2021.

5. While so, at the stage of framing of issues by the learned Arbitrator,

the respondent filed an application under Order VII, Rule 11 of the Code

of Civil Procedure, 1908, seeking rejection of the appellant’s claim petition

on the ground that its claims were barred by limitation. However, the

learned Arbitrator dismissed the application on merits, by order dated

16.04.2022. Assailing the said order, the respondent filed OMP (Comm.)

No. 24 of 2022, an application under Section 34 of the Arbitration Act,

before the learned District Judge (Comm.), South-East, Saket Courts,

1 For short, ‘the Arbitration Act’

2 New Delhi. The application was rejected by the learned District Judge on

11.11.2022, holding that the said order was not amenable to challenge

under Section 34 of the Arbitration Act. The respondent assailed this order

before the Delhi High Court in FAO (Comm.) No. 50 of 2023. The High

Court dismissed the same on 24.02.2023 but granted liberty to the

respondent to file an application before the learned Arbitrator under

Section 16 of the Arbitration Act.

6. Pursuant to such liberty, the respondent filed an application before

the learned Arbitrator under Section 16 of the Arbitration Act with the

following prayer: -

‘Dismiss the present statement of claim as the same is not maintainable since the Ld. Sole Arbitrator does not possess jurisdiction to entertain the same due to barred by limitation.’

This application was dismissed by the learned Arbitrator on

19.05.2023. Aggrieved thereby, the respondent again filed an application

under Section 34 of the Arbitration Act in OMP (Comm.) No. 64 of 2023

before the learned District Judge (Commercial Court-01), South-East,

Saket Courts, New Delhi. Significantly, the appellant raised the issue of

maintainability of this application under Section 34 of the Arbitration Act

against an order passed under Section 16 thereof. The specific contention

of the appellant was that, in the scheme of the Arbitration Act, an order

rejecting the contention that the arbitrator lacked jurisdiction could only be

assailed after the award was made by the arbitrator, upon conclusion of 3 the arbitral proceedings, and not prior thereto. While so, the respondent

placed reliance on the decision of this Court in Indian Farmers Fertilizer

Cooperative Limited vs. Bhadra Products 2 and the appellant

conceded, on the strength thereof, that the application under Section 34

of the Arbitration Act was maintainable.

7. In the light of the parties being ad idem on the maintainability of the

application, the learned District Judge considered the matter on merits

and dismissed the respondent’s application under Section 34 of the

Arbitration Act, by order dated 26.03.2024. This order was challenged by

the respondent before a Division Bench of the Delhi High Court, by way

of an appeal under Section 37 of the Arbitration Act, in FAO (Comm.) No.

83 of 2024. Notably, the Division Bench did not choose to consider the

maintainability of either the application filed under Section 34 of the

Arbitration Act or the appeal filed before it under Section 37 thereof, in the

context of an order passed by the learned Arbitrator, rejecting the plea of

lack of jurisdiction under Section 16 of the Arbitration Act. The judgment

dated 08.05.2025 of the Division Bench, allowing the appeal, focused on

the merits, without addressing the essential issue as to whether the case

was proceeding on the right track. The said judgment is called in question

before us in this appeal.

2 (2018) 2 SCC 534

4

8. Having given our earnest consideration to the matter, we are of the

opinion that neither the learned District Judge nor the Division Bench were

correct in entertaining the matters brought before them, i.e., under Section

34 and, thereafter, under Section 37, of the Arbitration Act. In this regard,

we may note that Section 16 of the Arbitration Act is titled ‘Competence of

arbitral tribunal to rule on its jurisdiction’ and Section 16(1) provides that

the arbitral tribunal may rule on its own jurisdiction, including ruling on any

objection with respect to existence or validity of the arbitration agreement.

Section 16(2) states that a plea that the arbitral tribunal does not have

jurisdiction should be raised not later than the submission of the statement

of defence, but a party would not be precluded from raising such a plea

merely because he has appointed or participated in the appointment of

the arbitrator. Section 16(3) states that a plea that the arbitral tribunal is

exceeding the scope of its authority should be raised as soon as the

matter alleged to be beyond the scope of such authority is raised during

the arbitral proceedings. Section 16(4) stipulates that, in either of the

cases referred to in Section 16(2) or (3), the arbitral tribunal may admit a

later plea, if it considers the delay justified. Section 16(5) categorically

mandates that once the arbitral tribunal decides on a plea raised under

Section 16(2) or (3) and where the arbitral tribunal rejects such plea, it

shall continue with the arbitral proceedings and make an arbitral award.

Section 16(6) states that the party aggrieved by such an arbitral award 5 may then make an application for setting it aside in accordance with

Section 34 of the Arbitration Act. It is also relevant to note that Section 37

of the Arbitration Act, titled ‘Appealable orders’, provides for an appeal

being filed only in the event an arbitrator upholds the plea of lack of

jurisdiction under Section 16(2) or (3), i.e., where the arbitrator puts an

end to the arbitration proceedings by accepting the plea that he/she has

no jurisdiction to proceed further.

9. This being the scheme of the Arbitration Act, the crucial question

that arises in the present scenario is whether the respondent was entitled

to file an application under Section 34 of the Arbitration Act against the

learned Arbitrator’s order dated 19.05.2023 under Section 16(2), rejecting

the plea that she lacked jurisdiction to continue with the arbitral

proceedings. Though an issue in that regard was not raised before the

Delhi High Court, the Division Bench ought to have been mindful of the

scheme of the Arbitration Act and should have applied its mind to this

basic and foundational aspect.

10. At this stage, it would be apposite to take note of what this Court

had held in Indian Farmers Fertilizer Cooperative Limited (supra), the

decision cited before the learned District Judge during the hearing of the

application under Section 34 of the Arbitration Act. This decision did not

relate to an order passed under Section 16 of the Arbitration Act. It

recorded that an interesting question arises as to whether an award 6 delivered by an arbitrator, which decides the issue of limitation, can be

said to be an interim award and whether such an interim award can be set

aside under Section 34 of the Arbitration Act. The background of that case

was that, after initiation of arbitral proceedings, the learned Arbitrator

therein deemed it fit to take up the issue of limitation first. Thereupon, the

issue was decided in favour of the claimant, holding that the claims were

not time-barred. This decision came to be challenged by way of an

application under Section 34 of the Arbitration Act, by styling it as a ‘First

Partial Award’. The learned District Judge before whom the application

was filed dismissed it, stating that he lacked jurisdiction as the decision

could not be said to be an interim award for the purposes of Section 34 of

the Arbitration Act. The High Court agreed with this view and the matter

came before this Court.

11. In this factual milieu, this Court opined that, in the event a decision

is made by an arbitrator determining one issue between the parties, it

would have to be treated as an interim award as such issue stood finally

determined between them and could not be re-adjudicated before the

arbitrator again. Reference was made to case law in support of the

proposition that an interim award or partial award would be a final award

on matters covered therein, made at an intermediate stage of the arbitral

proceedings. This Court opined that, as it was clear that the arbitrator had

disposed of one matter between the parties, i.e., the issue of limitation 7 finally, that decision would be an interim award within the meaning of

Section 2(1)(c) of the Arbitration Act and would be subsumed within the

expression ‘Arbitral Award’ and could, therefore, be challenged under

Section 34 thereof. Significantly, this Court observed as follows:

‘30. In our view, therefore, it is clear that the award dated 23-7-2015 is an interim award, which being an arbitral award, can be challenged separately and independently under Section 34 of the Act. We are of the view that such an award, which does not relate to the Arbitral Tribunal’s own jurisdiction under Section 16, does not have to follow the drill of Sections 16(5) and (6) of the Act. Having said this, we are of the view that Parliament may consider amending Section 34 of the Act so as to consolidate all interim awards together with the final arbitral award, so that one challenge under Section 34 can be made after delivery of the final arbitral award. Piecemeal challenges like piecemeal awards lead to unnecessary delay and additional expense.’

12. [

We may note that this 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. This is logical as that issue,

once it stands decided, would no longer figure for consideration before

the arbitrator and would, therefore, not be dealt with again in the final

award that would be passed by the arbitrator. Unless such decision is

treated as an interim award, there would be no scope for the party

aggrieved thereby to challenge the correctness thereof.

13. However, if an arbitrator deals with the very same issue of

limitation on an application filed under Section 16 of the Arbitration Act, 8 on the ground that the arbitrator lacks jurisdiction on that count, it would

be traceable to Section 16(2) of the Arbitration Act and if the arbitrator

rejects that plea, Sections 16(5) and Section 16(6) would apply. In that

situation, there is no option for the party aggrieved by the decision of

the arbitrator upon the application filed under Section 16 except to wait

till the conclusion of the arbitral proceedings and then raise that issue

by way of an application under Section 34 against the final award.

14. Though the final award, even in this situation, would not focus

upon the issue of limitation as it already stood decided by the rejection

of the application filed under Section 16(2) of the Arbitration Act, the

scheme of Section 16 and, more particularly, Sections 16(5) and 16(6),

would keep the issue alive and enable the party aggrieved to challenge

the validity of the rejection order under Section 16 at the final stage,

even after the passing of the final award.

15. However, the scheme of Sections 16(5) and 16(6) would not

apply if the arbitrator deals with limitation as a preliminary issue and

makes a decision thereon in favour of the claimant. That is the reason

why this Court observed that, in such a situation, the drill of Sections

16(5) and 16(6) would not have to be followed. This Court went on to

observe that even such interim awards should be made amenable to

challenge under Section 34 of the Arbitration Act after the passing of

the final award, instead of going in for ‘piecemeal’ challenges. 9

16. The exclusion of an order passed by an arbitrator under Section

16(2), rejecting the plea of lack of jurisdiction is, therefore, manifest

from the aforestated observations of this Court, but this decision has

now been misunderstood to imply that, even the rejection of a plea

under Section 16(2) of the Arbitration Act must be treated as an interim

award and the same can be subjected to challenge under Section 34

of the Arbitration Act. This understanding on the part of the learned

District Judge, which seems to have found favour with the Division

Bench of the Delhi High Court, is erroneous and unsustainable.

Accepting such a construction would do violence to the very scheme

of the Arbitration Act and render Section 37(2) thereof superfluous, as

it is only an order accepting the plea of lack of jurisdiction under

Section 16(2) or (3) that is amenable to appeal directly, without going

through the process under Section 34 thereof. This crucial aspect of

the matter was entirely lost sight of.

17. On the above analysis, the respondent was not entitled to file an

application under Section 34 of the Arbitration Act against the order

dated 19.05.2023 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 Delhi High Court erred in overlooking this 10 crucial aspect and in deciding the appeal on merits. The judgment

dated 08.05.2025 passed by the Division Bench of the Delhi High Court

in FAO (Comm.) No. 83 of 2024 is, accordingly, set aside. It would be

open to the respondent to test the validity of the order dated

19.05.2023 passed by the learned Arbitrator only after passing of the

final award and if the situation so warrants, by way of an application

under Section 34 of the Arbitration Act.

The appeal is allowed in the aforestated terms.

Parties shall bear their own costs.

……………………...J

[SANJAY KUMAR]

.……………………...J [K. VINOD CHANDRAN] New Delhi;

April 21, 2026.

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