Mutual consent is essential for arbitration; without a valid arbitral agreement, the award is without jurisdiction and unenforceable.

An arbitration agreement under the Arbitration Act, 1940 requires a written, mutual consent to submit disputes to arbitration; a contractual clause dealing only with consequences of reference, or a dispute-resolution hierarchy through public , does not by itself create such an agreement. Where the State Government appoints an arbitrator without contractual authority and without concurrence of the other party, the reference is invalid and the arbitrator has no jurisdiction. An award made without a valid arbitral reference is a nullity, and participation by a party does not cure the jurisdictional defect. Objections raised within limitation preserve the challenge to the award and any decree founded on it.

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Issues: (i) Whether there was a valid arbitration agreement between the parties; (ii) whether the appointment of the arbitrator by the State Government was legal and valid under the contractual terms; (iii) whether the award and the decree drawn in terms of it could be sustained.

Issue (i): Whether there was a valid arbitration agreement between the parties.

Analysis: An arbitration agreement under the Arbitration Act, 1940 requires a written agreement showing mutual consent to submit present or future disputes to arbitration. Clause 20 only dealt with the consequence of a matter being referred to arbitration and did not itself create an agreement to arbitrate. Clause 22 provided a dispute-resolution hierarchy through the Collector, Divisional Commissioner, and Government, but it did not amount to an arbitration clause. The essential requirement of ad idem and mutuality was absent.

Conclusion: No valid arbitration agreement existed between the parties.

Issue (ii): Whether the appointment of the arbitrator by the State Government was legal and valid under the contractual terms.

Analysis: The appointment was made solely at the instance of the contractor, without concurrence of the Municipal Council and without any contractual provision authorising the State Government to foist arbitration on the parties. Section 143-A(3) of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965 did not confer such power. In the absence of an arbitration agreement, the arbitrator lacked jurisdiction to enter upon the reference.

Conclusion: The appointment of the arbitrator was not legal or valid.

Issue (iii): Whether the award and the decree drawn in terms of it could be sustained.

Analysis: Objections to the award and to the existence of the arbitration agreement were raised within limitation. A jurisdictional defect cannot be cured by participation or waiver, and an award made without jurisdiction is a nullity. The contractor, having accepted the tender conditions and bid with knowledge of the reserve price, was also not entitled to challenge the concluded tender terms after obtaining the contract.

Conclusion: The award and the decree based on it could not be sustained.

Final Conclusion: The appeal succeeded, the impugned judgment and decree were set aside, and the challenge to the award failed for want of a valid arbitral reference.

Ratio Decidendi: Mutual consent is indispensable to an arbitration agreement, and where arbitration is initiated without such agreement and without contractual authority, the resulting award is without jurisdiction and unenforceable notwithstanding participation by the opposing party.

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