Authority: High Court at Calcutta, Commercial Division (Justice Gaurang Kanth)

Order Date: 07 October 2026

Case Overview

  • The petitioner, Damodar Valley Corporation (DVC), filed a petition under Section 34 of the Arbitration & Conciliation Act, 1996 challenging the arbitral award dated 16 May 2026, which had rejected DVC’s objection to the jurisdiction of the arbitral tribunal.
  • Background: In 2015 DVC invited tenders for the rehabilitation of Maithon Dam (DRIP, Package‑I). H.R. Builders (a sole proprietorship of Mr. Hans Raj Dhankar) was awarded the contract valued at Rs 25,06,62,070, with a Letter of Acceptance dated 27 May 2016 and a Contract Agreement No. MDD/DRIP/(01)(2016‑17) dated 01 Aug 2016 (signed 12 Aug 2016) containing an arbitration clause (Clause 25.3 of General Conditions and Clause 4 of Special Conditions).
  • Due to Covid‑19, the parties treated 22 Mar 2020‑03 May 2020 as force majeure. DVC directed work to be withheld from 30 Jun 2020 because World Bank funding stopped, and later issued remobilisation letters on 21 Oct 2020 and 24 Dec 2020. H.R. Builders declined remobilisation on 29 Dec 2020; DVC issued a Termination Notice on 28 Jun 2021 (No. MDD/DRIP/276) and a formal Termination Letter on 13 Jul 2021 (No. MDD/DRIP/291).
  • H.R. Builders filed a writ petition (C) No. 2929 of 2021 in the Jharkhand High Court on 05 Aug 2021, later amended to include challenges to the termination letter and bank‑guarantee extensions.
  • Arbitration was invoked by H.R. Builders on 21 Mar 2022 under Clause 25.3; the arbitral tribunal (three arbitrators, presiding arbitrator Sh. Krishna Kant) was constituted on 26 Sep 2022.
  • On 21 Nov 2022, a Business Transfer Agreement (BTA) was executed whereby H.R. Builders (Seller) transferred its business as a going concern to HRD Builders Pvt. Ltd. (Purchaser) for consideration of Rs 10 crores via allotment of equity shares.
  • Despite the arbitration being invoked before the BTA, the Statement of Claim was filed on 15/16 Dec 2022 by HRD Builders Pvt. Ltd., claiming Rs 24,94,52,706 under twelve heads, relying on the BTA to establish its status as assignee/"Representative‑in‑interest".
  • DVC filed its Statement of Defence and Counter‑Claim on 20 May 2023, denying all averments, followed by affidavits, rejoinders and replies.
  • The Jharkhand High Court disposed of the writ petition on 06 Apr 2023, returning bank guarantees and stating that "no dispute exists between the parties", without reserving any right to further remedies.
  • Evidence: Claimant’s witness CW‑1 (Mr. Rakesh Kumar Kataria, Authorised Representative) filed an affidavit on 10 Nov 2023; DVC’s witnesses RW‑1 (Mr. Taskheer Zaman), RW‑2 (Mr. Sanjeev Kumar) and RW‑3 (Mr. Abhishek Shukla) were examined. Cross‑examination of CW‑1 (30 Jan 2024‑29 Feb 2024) elicited admissions that the Letter of Acceptance was issued to H.R. Builders, that Clause 5 of Schedule B of the BTA vested litigation rights exclusively in the Seller, and that the Jharkhand High Court order pertained only to H.R. Builders and DVC.
  • After the death of the presiding arbitrator, the tribunal was reconstituted with Justice Aloke Chakrabarti (Retd.) as the new Presiding Arbitrator, joined by Mr. M.C.T. Pareva and Mr. Rakesh Munjal as co‑arbitrators.
  • DVC filed an application on 12 Sep 2025 under Section 23/19 (with Order VIII Rule 1A, Order XII Rule 6 and CPC Section 151) challenging the maintainability of the arbitration, arguing: (a) the Claimant was not a signatory to the 2016 contract; (b) Clause 7.1 of the General Conditions prohibited assignment without DVC’s consent; (c) the BTA was a private arrangement that could not bind DVC; (d) Clause 5 of Schedule B of the BTA required the Seller alone to prosecute the litigation; (e) the arbitration was invoked before the BTA, so the right remained with the original claimant; (f) the Jharkhand High Court order constituted constructive res‑judicata.
  • HRD Builders replied on 21 Oct 2025, asserting it was the lawful successor‑in‑interest, that arbitration rights are assignable, that DVC had waived objections by participating in the proceedings, that an arbitration agreement could be inferred under Section 7(4)(c), and that the Jharkhand High Court order was limited in scope.
  • The tribunal heard arguments, and on 16 May 2026 issued a split award. The majority (Justice Aloke Chakrabarti and Mr. M.C.T. Pareva) held the Claimant, as assignee, was entitled to continue arbitration; Clause 7.1 barred only sub‑contracting, not slump‑sale assignment; the BTA did not strip the Claimant of rights; DVC’s belated objection did not disentitle the Claimant. The minority (Mr. Rakesh Munjal) dissented, finding no valid assignment, that Clause 5 of the BTA gave exclusive litigation rights to the Seller, that DVC’s participation did not amount to waiver, and that the Jharkhand High Court order operated as constructive res‑judicata, thus dismissing the claim and terminating the arbitration.
  • Aggrieved, DVC filed a petition under Section 34(2) and 34(2A) seeking the award set aside as contrary to law.
  • The Calcutta High Court first considered the preliminary objection on maintainability of the petition. Respondent counsel argued that an order rejecting a jurisdictional plea under Section 16(5) cannot be challenged under Section 34 until the final award, citing Section 16 scheme and Supreme Court decisions in MCM Worldwide (2026 INSC 425) and Indian Farmers Fertilizer (2018 2 SCC 534).
  • Petitioner counsel counter‑argued that the award was an “interim award” under Section 2(1)(c) because it finally determined the Claimant’s locus, relying on Zillion Infraprojects (2026) and Palmview Investments (2023), and that the procedural label (Section 23) should not dictate the nature of the order.
  • The Court examined the jurisprudence, distinguishing pure jurisdictional rulings (MCM Worldwide, Deep Industries, Uttarakhand Purva Sainik) from interim awards that finally dispose of substantive rights (Zillion Infraprojects, Palmview). It concluded that the majority award merely rejected a jurisdictional objection and did not extinguish any claim or decide any substantive issue.
  • Accordingly, the Court held the petition premature, dismissed it, and directed DVC to await the final arbitral award before invoking Section 34.

Final Outcome

  • The petition under Section 34 filed by Damodar Valley Corporation is dismissed as premature; DVC must wait for the final arbitral award to challenge the majority award.

Topics: Arbitration, Jurisdiction, Section 34 Petition