Knowledge Centre

MCM Worldwide Private Limited v Construction Industry Development Council

I.    Introduction:

1. The Hon’ble Supreme Court of India in MCM Worldwide Private Limited v. Construction Industry Development Council¹MCM Worldwide Private Limited v. Construction Industry Development Council, 2026 SCC OnLine SC 717 addressed a fundamental question arising under the Arbitration and Conciliation Act, 1996 (“the Act”). The issue was whether an order passed by an arbitral tribunal wherein a plea of lack of jurisdiction under Section 16(2) of the Act has been rejected is amenable to challenge under Section 34 of the Act at an interlocutory stage or whether such a challenge can only be raised after the passing of the final award. The Court held that the challenge thereto could only be raised after the passing of the final award.

 II.   Facts & Procedural History:

2. Disputes arose between the parties in relation to two Memoranda of Understanding entered into between the Respondent, Construction Industry Development Council, and Employment Generation and Marketing Mission, Department of Rural Development, Government of Andhra Pradesh, one in the year 2006 and the other in the year 2008, in the context of which the Appellant, MCM Worldwide Private Limited, claimed certain dues against the Respondent.
3. The Appellant MCM Worldwide Private Limited filed a suit for recovery of its alleged dues before the learned District and Session Judge, South-East, Saket Courts, New Delhi. The Respondent filed an application under Section 8 of the Act and sought for reference of the parties to arbitration in terms of the arbitration clause contained in the said MoUs pursuant to which the suit was disposed of. However, upon the Respondent’s failure 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 Act which resulted in the appointment of a sole arbitrator.
4. At the stage of framing of issues, the Respondent filed an application under Order VII Rule 11 of the Civil Procedure Code, 1908 and sought for rejection of the Appellant’s claim petition on the ground that its claims were barred by limitation. The learned Arbitrator dismissed the said application. Pursuant to this, the Respondent filed an application under Section 34 of the Act before the learned District Judge which was rejected on the ground that the order of the Arbitrator was not amenable to challenge under Section 34 of the Act. The Respondent assailed this order before the Delhi High Court which was dismissed. However, the Respondent was granted liberty to file an application before the learned Arbitrator under Section 16 of the Act.
5. Pursuant to such liberty, the Respondent filed an application under Section 16 of the Act before the learned Arbitrator praying for dismissal of the statement of claim on the ground that the Arbitrator lacked jurisdiction to entertain the same as the claims were barred by limitation. The said application was dismissed by the learned Arbitrator. Aggrieved by this decision, the Respondent filed a fresh application under Section 34 of the Act before the learned District Judge. The Respondent placed reliance upon the judgment of this Court in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, (2018) 2 SCC 534 on the strength of which the Appellant conceded the maintainability of the application under Section 34 of the Act. The learned District Judge accordingly proceeded to consider the matter on merits and dismissed the Respondent’s application.
6. The Respondent challenged the said order before a Division Bench of the Delhi High Court by way of an appeal under Section 37 of the Act. The Division Bench proceeded to decide the matter on merits and allowed the appeal without addressing the question of maintainability of either the application under Section 34 or the appeal before it under Section 37 of the Act against an order passed by the learned Arbitrator wherein a plea of lack of jurisdiction under Section 16 of the Act was rejected. It is the said judgment that was called in question before the Supreme Court in the present appeal.

III.  Issues

1. Whether an order passed by an arbitral tribunal wherein a plea of lack of jurisdiction has been rejected under Section 16(2) of the Act is amenable to challenge under Section 34 at an interlocutory stage or whether such challenge can only be raised after the passing of the final award.
2. Whether the judgment of this Court in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, (2018) 2 SCC 534, has any application to orders passed under Section 16 of the Act while rejecting a plea of lack of jurisdiction.

 IV.  Findings and Observations of the Supreme Court:

7. The Supreme Court examined the scheme of Section 16 of the Act. The Court noted that Section 16(5) categorically mandates that once an arbitral tribunal rejects a plea of lack of jurisdiction raised under Section 16(2) or 16(3) of the Act it shall continue with the arbitral proceedings and make a final award and that it is only upon the passing of such final award that the party aggrieved by the rejection of the jurisdictional plea may prefer an application under Section 34 of the Act in terms of Section 16(6).
8. The Court further noted that Section 37 of the Act provides for a direct appeal only in the event the arbitral tribunal accepts the plea of lack of jurisdiction under Section 16(2) or 16(3) and puts an end to the arbitral proceedings and that no such appeal lies against an order wherein such a plea has been rejected. It was accordingly held that the scheme of Sections 16(5) and 16(6) of the Act leaves no room for a challenge to an order rejecting a jurisdictional plea at an interlocutory stage. The Court further held that entertaining such a challenge under Section 34 of the Act would do violate the statutory scheme and render Section 37(2) of the Act superfluous.
9. The Court then examined the judgment in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, (2018) 2 SCC 534, relied upon by the Respondent and on the basis of which the Appellant had conceded maintainability before the courts. The Court clarified that the said decision concerned a situation where the arbitrator had taken up limitation as a preliminary issue and decided it in favour of the Claimant, without such issue being raised under Section 16 of the Act.
10. In that context, the Supreme Court of India had held that a final determination on limitation would qualify as an interim award under Section 2(1)(c) and would therefore be amenable to challenge under Section 34, since the issue would not arise again before the tribunal or be addressed in the final award.
11. The Court further noted that the said judgment expressly distinguished such determinations from orders concerning the arbitral tribunal’s jurisdiction under Section 16 of the Act and clarified that the latter must necessarily follow the statutory scheme prescribed under Sections 16(5) and 16(6) of the Act. Consequently, orders rejecting a plea of lack of jurisdiction under Section 16 fall outside the scope of that judgment and remain governed exclusively by the mechanism prescribed under Sections 16(5) and 16(6) of the Act.
12. The Court held that the Respondent was not entitled to file an application under Section 34 of the Act against the order of the learned Arbitrator wherein its plea of lack of jurisdiction under Section 16(2) was rejected. Consequently, no appeal under Section 37 could lie from a decision rendered on such an application. The Supreme Court of India further observed that the Division Bench of the Delhi High Court erred in deciding the appeal on merits without first addressing the issue of maintainability. The Court also clarified that the Appellant’s concession before the learned District Judge based on a misunderstanding of Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products did not preclude the Court from correcting the legal position as the proceedings were founded on a fundamental error affecting the statutory scheme.
13. Accordingly, the judgment of the Division Bench of the Delhi High Court was set aside, with liberty granted to the Respondent to challenge the arbitral order only after the final award is passed by way of an application under Section 34 of the Act.

V.    Conclusion

14. In summary, this judgment authoritatively clarifies that an order passed by an arbitral tribunal rejecting a plea of lack of jurisdiction under Section 16(2) or (3) of the Act is not amenable to challenge under Section 34 of the Act at an interlocutory stage and that such a challenge can only be raised after the passing of the final award in terms of Section 16(6) of the Act. The Court drew a clear and important distinction between a preliminary determination of limitation which constitutes to an interim award and an order rejecting a jurisdictional plea under Section 16 of the Act, which is exclusively governed by the scheme of Sections 16(5) and 16(6).
15. By reaffirming the statutory scheme and correcting the patent misunderstanding of Indian Farmers Fertilizer Cooperative Limited that had prevailed before the courts, the judgment reinforces the legislative intent of minimal judicial intervention in arbitral proceedings and ensures that jurisdictional challenges do not become a tool for unnecessary delay and disruption of the arbitral process.

This Case Brief is authored by Anu Sura, Associate Partner and Anam Khan, Associate.

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  MCM Worldwide Private Limited v. Construction Industry Development Council, 2026 SCC OnLine SC 717