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Case Analysis State of Maharashtra vs Morya Infrastructure Pvt Ltd 2026 BHC-AUG 7325-DB

Synopsis

This judgment, delivered by a Division Bench of the Bombay High Court (Aurangabad Bench), dismisses a Commercial Arbitration Appeal filed by the State of Maharashtra challenging an arbitral award and the subsequent dismissal of its Section 34 petition by the Commercial Court. The core dispute arose from a BOT road project where the State terminated toll collection and paid a "buyback price." The contractor, dissatisfied with the amount, invoked arbitration. A sole arbitrator, Mr. C. D. Fakir, was appointed with the State's apparent consent before the High Court in a Section 11 proceeding. The State later objected to the arbitrator's appointment and the composition of the tribunal, arguing it should have been a three-member panel and that the arbitrator was disqualified. The High Court rejected these challenges, holding that the State had waived its right to object by participating in the proceedings without raising timely objections under Section 16 of the Arbitration Act. Crucially, the court also held that the 2015 Amendment to the Arbitration Act, which introduced stricter disclosure and disqualification norms, did not apply to these proceedings as they had commenced before the amendment came into force.

1. Heading for the Judgment

In the High Court of Judicature at Bombay, Bench at Aurangabad

Commercial Arbitration Appeal No. 01 of 2023

With Civil Application No. 9207 of 2023 & 12453 of 2023

State of Maharashtra ....appellant

Versus

Morya Infrastructure Pvt. Ltd. ....respondent

Coram: Arun R. Pedneker and Vaishali Patil-jadhav, JJ.

Date of Decision: 16th FEBRUARY, 2026

2. Legal Framework

This judgment operates within the following legal framework:

The Arbitration and Conciliation Act, 1996 (the Act):
Section 11(6): Empowers the High Court or Supreme Court to appoint an arbitrator when a party fails to act as per the agreed procedure. The court examined whether the arbitrator was appointed by the High Court under this provision or by party consent.
Section 4 (Waiver): A party who knows of a non-compliance with a non-mandatory provision of the Act or the arbitration agreement and yet proceeds with the arbitration without stating its objection without undue delay is deemed to have waived its right to object.
Section 10: Deals with the number of arbitrators, stating that parties are free to determine the number, which shall not be an even number.
Section 12: Pertains to the grounds for challenge to the appointment of an arbitrator. The 2015 Amendment introduced Schedules V and VII, with Section 12(5) creating a de jure ineligibility for persons falling under Schedule VII.
Section 16: Embodies the principle of competence-competence, allowing the arbitral tribunal to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or the proper constitution of the tribunal. Sub-section (2) mandates that a plea as to the lack of jurisdiction or improper constitution must be raised not later than the submission of the statement of defence.
Section 21: Defines the commencement of arbitral proceedings as the date on which a request for that dispute to be referred to arbitration is received by the respondent.
The Arbitration and Conciliation (Amendment) Act, 2015:
Section 26 (of the Amendment Act): The critical provision governing the applicability of the amended provisions. It states that the amendments shall not apply to arbitral proceedings commenced before the commencement of the Amendment Act (23.10.2015) unless the parties otherwise agree. The court relied heavily on this to hold that the new disqualification norms did not apply.
The Commercial Courts Act, 2015:
Section 13: Provides for appeals from decrees of Commercial Courts. The appeal was filed under this section read with Section 37 of the Arbitration Act.

Related Precedents Cited and Relied Upon:

Quippo Construction Equipment Limited v. Janardan Nirman Private Limited, (2020) 18 SCC 277: (Supreme Court) - Held that Sections 10 and 16 must be read conjointly. An objection to the composition of the arbitral tribunal must be raised under Section 16, and failure to do so results in waiver under Section 4.
Konkan Railway Corporation Ltd. v. Rani Construction (P) Ltd., (2002) 2 SCC 388: (Supreme Court) - Affirmed the principle that the arbitral tribunal is competent to rule on its own jurisdiction.
Narayan Prasad Lohia v. Nikunj Kumar Lohia, (2002) 3 SCC 572: (Supreme Court) - Supported the principle of waiver regarding objections to tribunal composition.
M.K. Shah Engineers & Contractors v. State of M.P., (1999) 2 SCC 594: (Supreme Court) - Held that a party cannot take advantage of its own wrong or internal procedural lapses to defeat the claim of the contractor or invalidate arbitration.
Bhadra International (India) Pvt. Ltd. v. State of U.P. & Ors., 2024 SCC OnLine 1190: (Supreme Court) - Clarified the applicability of the 2015 Amendment, holding that arbitral proceedings commence on the date of receipt of the notice invoking arbitration under Section 21.
Board of Control for Cricket in India v. Kochi Cricket Pvt. Ltd. and Ors., (2018) 6 SCC 287: (Supreme Court) - Provided an authoritative interpretation of Section 26 of the Amendment Act, distinguishing between arbitral proceedings (governed by the old law) and court proceedings in relation thereto (governed by the new law).

3. Basic Relevant Facts of the Case

The Contract: The respondent (contractor) was awarded a BOT project for road development. An agreement was executed with a concession period of 13 years and 6 months for toll collection.
Dispute and Termination: The State alleged the contractor failed to maintain the road, leading to complaints. Toll collection was stopped in July 2014. The State paid the contractor a "buyback price" of Rs. 67.79 lakhs as a settlement on 27.06.2014.
Invocation of Arbitration: The contractor, dissatisfied with the buyback price, issued a notice invoking arbitration on 30.06.2014, as per the dispute resolution clause in the agreement.
Section 11 Application: As the State did not respond, the contractor filed an application under Section 11(6) before the High Court for appointment of an arbitrator.
The "Consent" and Appointment: During the hearing of the Section 11 application, the Government Pleader produced a communication from the Executive Engineer stating that a joint decision had been taken to appoint Mr. C. D. Fakir, a retired Chief Engineer, as the sole arbitrator. Based on this, the High Court disposed of the application on 02.03.2015, recording the appointment. The court clarified that it had not itself appointed the arbitrator under Section 11(6), but merely noted the parties' consent.
Arbitral Proceedings: The arbitrator entered upon reference. The State participated actively for over two years: it filed a written statement, raised a counter-claim, and attended multiple hearings. It raised no objection to the arbitrator's appointment or the tribunal's constitution until the 5th meeting on 22.07.2017.
Arbitral Award (10.12.2017): The arbitrator passed an award in favor of the contractor for Rs. 596.60 lakhs with interest.
Challenge Under Section 34: The State challenged the award before the Commercial Court, which dismissed its petition.
Present Appeal: The State then filed the present appeal under Section 37 of the Act.

4. Issues in the Judgment

The court framed and addressed the following primary issues:

Nature of Appointment: Whether the sole arbitrator, Mr. C. D. Fakir, was appointed by the High Court under Section 11(6) of the Act, or by the joint consent of the parties.
Validity of Tribunal Composition (Waiver): Whether the appointment of a sole arbitrator was in violation of Clause 3.4.17 of the contract (which provided for a panel of three arbitrators), and whether the State had waived its right to object to this composition by participating in the proceedings without raising a timely objection under Section 16(2).
Applicability of 2015 Amendment (Disqualification): Whether the provisions of the 2015 Amendment Act, particularly Section 12(5) read with the Seventh Schedule (de jure ineligibility), applied to the arbitral proceedings, given that the arbitration was invoked in 2014, before the amendment came into force.

5. Ratio Decidendi (The Reasoning of the Court)

The court's reasoning was systematic and addressed each issue in detail.

Issue 1: Appointment was by Consent, Not by the Court.
The court analyzed the High Court's order dated 02.03.2015 and the communication from the Executive Engineer. It concluded that the High Court did not exercise its power under Section 11(6) to appoint the arbitrator. It merely recorded that the State had communicated its joint consent to appoint Mr. Fakir. The appointment was therefore by party agreement.
Issue 2: State Waived its Right to Object (Sections 16 & 4).
Contractual Deviation: The court acknowledged that Clause 3.4.17(iii) contemplated a panel of three arbitrators, making the appointment of a sole arbitrator a deviation from the agreed procedure.
Timely Objection Required: Relying on Quippo Construction and Section 16(2), the court held that any objection to the constitution of the arbitral tribunal must be raised not later than the submission of the statement of defence.
Facts Show Waiver: The State participated in the proceedings for over two years, filing its written statement and counter-claim, before raising any objection in July 2017. This amounted to a clear waiver of its right to object under Section 4 of the Act. The court also noted that the State, through its own officers (Executive Engineer), had created the ambiguity about consent. Applying the principle from M.K. Shah Engineers, the court held that the State cannot take advantage of its own internal lapses to defeat the contractor's claim.
Issue 3: 2015 Amendment is Not Applicable to These Proceedings.
This was the most significant legal finding. The court applied Section 26 of the Amendment Act and the Supreme Court's interpretation in BCCI v. Kochi Cricket.
Commencement Date: Under Section 21 of the Act, arbitral proceedings commence on the date the notice invoking arbitration is received by the respondent. The contractor's notice was issued and received in March 2014, well before the 2015 Amendment came into force on 23.10.2015.
No Agreement to Apply New Law: There was no evidence that the parties had agreed to apply the amended provisions.
Consequence: Since the proceedings commenced before the amendment, the stricter disclosure and disqualification norms introduced in 2015 (including Section 12(5) and the Fifth and Seventh Schedules) did not apply. Therefore, the State's arguments about the arbitrator's alleged disqualification were irrelevant.

6. New Legal Framework Established

This judgment does not establish a new legal principle. Its primary value lies in its role as a clear and comprehensive application of several well-settled principles under the Arbitration Act, particularly in the context of the 2015 Amendment's applicability. Its key contributions are:

Clarifying the Interplay of Sections 16 and 4: It powerfully reinforces that objections to the composition of the arbitral tribunal are not absolute. They must be raised at the first available opportunity, as mandated by Section 16(2). Failure to do so, coupled with active participation, triggers a deemed waiver under Section 4, precluding the party from later challenging the award on that ground.
Applying Section 26 of the Amendment Act: The judgment provides a practical illustration of how Section 26 operates. It confirms that the trigger for the applicability of the 2015 amendments is the date of commencement of arbitral proceedings under Section 21 (receipt of notice), not the date of the arbitrator's appointment or the date of the award. This protects the validity of proceedings initiated under the old regime.
State Cannot Benefit from Internal Confusion: Following M.K. Shah Engineers, the judgment reinforces that the State, as a contracting party, cannot use its own internal administrative failures or ambiguous communications to later disown commitments made by its authorized representatives before the court. The contractor is entitled to rely on the representations made by the State's counsel.

7. Examination and Analysis by the Court

The court's analysis was thorough, chronological, and legally grounded.

Factual Timeline Analysis: The court meticulously traced the sequence of events from the 2014 notice to the 2017 objection, establishing the crucial fact that the State participated without demur for over two years.
Statutory Interpretation (Section 26): The court engaged in a detailed analysis of Section 26 of the Amendment Act, quoting the Supreme Court's interpretation in BCCI v. Kochi Cricket to distinguish between "arbitral proceedings" and "court proceedings in relation thereto." This was key to holding that the arbitration itself was governed by the pre-amendment Act.
Application of Waiver Principles: The court correctly applied the principles from Quippo Construction and Section 4, finding that the State's conduct met the criteria for waiver. The objection was raised far too late.
Rejection of "Internal Lapse" Argument: The court rejected the State's argument that the consent was given by the wrong officer (Executive Engineer instead of the Secretary). It held that this was an internal matter for the State, and the contractor could not be penalized for it. The State was bound by the actions of its representative before the High Court.
Conclusive Finding on Amendment Applicability: By establishing that the proceedings commenced in 2014, the court rendered the entire disqualification argument moot, as the legal framework relied upon by the State was not in force.

8. Critical Analysis and Final Outcome

Critical Analysis:

This judgment is a textbook example of an appellate court upholding the finality of an arbitral award by correctly applying the principles of waiver and the prospective application of statutory amendments.

Strengths: The judgment's primary strength is its doctrinal clarity and rigorous application of precedent. The analysis of Section 26 of the Amendment Act is particularly strong, correctly applying the Supreme Court's interpretation to protect proceedings initiated under the old law. The finding of waiver is factually unassailable given the State's prolonged participation without objection. The court also rightly refused to let the State benefit from its own internal administrative confusion, upholding the principle of good faith.
Correctness: The decision is legally sound. The State's argument that the arbitrator was disqualified under the 2015 Amendment was fundamentally flawed because that law did not apply. Its argument on tribunal composition was defeated by its own conduct (waiver). The court correctly dismissed the appeal.
Potential Impact: This judgment serves as a strong reminder to all parties, especially government entities, that they cannot participate in arbitration proceedings for years and then raise preliminary objections at a late stage to avoid an unfavorable award. It also provides clear guidance on the crucial date for determining the applicability of the 2015 Amendment: the date of commencement of arbitral proceedings under Section 21, not the date of the award or the Section 34 challenge.

Final Outcome:

The Commercial Arbitration Appeal was dismissed with costs. The court upheld the arbitral award and the Commercial Court's order. All pending civil applications were disposed of. The court also rejected the State's oral request for a stay of the judgment.