Short Summary
The State of Himachal Pradesh and others filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the District Judge's dismissal of their Section 34 objections against an arbitral award in favor of contractor Nitin Sonkhla. The dispute arose from a road construction contract that was rescinded after the contractor failed to complete the work within the stipulated time. The High Court set aside the District Judge's judgment on the ground that the District Judge was not designated as a 'commercial court' under Section 3 of the Commercial Courts Act, 2015 at the time of filing or adjudicating the objections, and therefore lacked jurisdiction to entertain the commercial dispute.
Detailed Summary
The State of Himachal Pradesh and others filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the judgment dated 05.11.2024 passed by the learned District Judge, Mandi in Arb. Case No. 39 of 2023, whereby objections under Section 34 of the Act against the arbitral award dated 13.02.2023 were dismissed. The dispute originated from a road construction contract for 'MT& CD on Gokhara Nichla Lot Khajron Road KM 0/0 to 6/0' under NABARD RIDF-XVI, awarded to respondent-contractor Nitin Sonkhla vide Agreement No. 102 of 2011-12 for Rs.1,63,79,522/- with a stipulated completion period of three years (commencement 22.09.2011 and completion 21.09.2014). The Executive Engineer imposed 10% liquidated damages amounting to Rs.16,37,952/- on 30.05.2014 for non-completion of work and rescinded the contract on 12.05.2015. The contractor sought arbitration, and Sh. Ashok Kumar Chauhan, a retired Engineer-in-Chief, was appointed as Sole Arbitrator. The contractor raised twelve claims including wrongful levy of compensation, loss of profit, less payment for work executed, release of security deposit, site overheads, loss of material, revised rates, non-payment under clause 10-cc, illegal recovery of stone, and pre and post pendente lite interest. The Arbitrator passed an award on 13.02.2023 partly allowing several claims in favor of the contractor. The appellants challenged this award under Section 34 before the District Judge, Mandi, who dismissed the objections on 05.11.2024. The appellants then approached the High Court under Section 37. The core legal issue before the High Court was whether the District Judge had jurisdiction to entertain the Section 34 objections, given that the dispute was a 'commercial dispute' under the Commercial Courts Act, 2015. The court noted that the objections were filed on 12.06.2023 and 06.06.2024 respectively, and at that time, the District Judge was not designated as a 'commercial court' under Section 3 of the Commercial Courts Act, 2015. Commercial courts at the District level were notified only on 13.5.2026 by the Home Department, Government of Himachal Pradesh. The court relied on its earlier coordinate bench decisions in Nitin Sonkhia v. Executive Engineer HPPWD Mandi Division No.II (CARBA No. 07 of 2025, decided on 19.3.2026) and State of Himachal Pradesh v. Dina Nath (CARBA No. 1 of 2026, decided on 9.7.2026), which had held that a District Judge not notified as a commercial court lacks jurisdiction to entertain commercial disputes. Since the institution of objections involving a commercial dispute arising out of tender was defective, the court refrained from going into the merits and demerits of the arguments. The appeal was disposed of with the judgment dated 05.11.2024 being set aside, and the District Judge was directed to return the objections filed by both parties for presentation before the appropriate forum in accordance with law, particularly Section 3 of the Commercial Courts Act. The court further ordered that the period from the date of institution of the appeal till the supply of a certified copy of the order shall be excluded while calculating limitation.
Practitioner Note
This case demonstrates the evidentiary and procedural standards applied in other matters before Himachal Pradesh High Court. Understanding the court's reasoning in State of Himachal Pradesh & Ors vs Nitin Sonkhla is valuable context for structuring arguments or assessing risk in similar proceedings.
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