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Intersection between Arbitral and Writ Jurisdiction

Time and again in India, it has been ruled that invocation of writ jurisdiction against an order of Arbitral Tribunal is not generally permissible. The scheme of Arbitration and Conciliation Act, 1996 (the Act) stems from the principle that there has to be minimal judicial intervention following the lines of UNCITRAL Model Law on Commercial Arbitration, 1985. In the arbitration process, Arbitral Tribunal plays a significant role as it sets the procedure of the proceedings, and passes an award/decree on the subject matter of dispute.

It must be appreciated that the Supreme Court as well as various High Courts have expressed reluctance to interfere in the arbitration proceedings by exercising writ jurisdiction over non-appealable orders of the Arbitral Tribunal.

In one of the recent developments a three-judge Constitutional Bench of Apex Court in Bhaven Construction v. Executive Engineer Sardar Sarovar Narmada Nigam Limited & Anr.,[1] has observed that the High Court's power of interference under Articles 226 and 227 of the Constitution of India, in the context of arbitral proceedings, may be exercised only in "exceptional rarity".

Similarly, the Gujarat High Court in GTPL Hathway Limited v. Strategic Marketing Private Limited,[2] dismissed a writ petition challenging an interim order passed by the arbitrator. It was held, "15. In view of aforesaid settled legal proposition, considering the policy, object and the provisions of the Act,1996, an order passed during arbitration proceedings by the Arbitration Tribunal cannot be challenged under Articles 226 and 227 of the Constitution of India as the Act,1996 is a special act and a self­contained code dealing with arbitration. Therefore, the impugned order of the Arbitration Tribunal deciding the preliminary objection raised by the petitioner cannot be challenged under Article 226 or 227 of the Constitution of India."

One of the most relevant seven-judge Constitutional Bench's judgments laid down the settling principles in S.B.P & Company v. Patel Engineering Limited & Ors.[3], the Apex Court has ruled in golden words that, "45. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach.

Section 37 makes certain orders of the arbitral tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under Section 16 of the Act. The party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under Section 37 of the Act. …It will still be a forum chosen by the parties by agreement.

We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible."

46. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage."

Similar provisions were laid in SAIL v. Indian Council of Arbitration & Ors.[4], wherein it was observed that, "13. Considering the view taken by the Apex Court in SBP & Company (supra) as well as the view taken by this Court in Cadre Estate Pvt. Ltd. (supra). This Court, therefore, must necessarily hold that a writ petition does not lie against a non-appealable order passed by the Arbitrator during the course of arbitral proceedings.

14. In any case, even if it is held that a writ petition against a non-appealable order of the Arbitrator is maintainable, considering the legislative intent, as expressed in Section 5 of the Act, which provides that no judicial authority shall intervene in matters governed by Part-I except to the extent provided in the said Part and acknowledging that interference with the arbitral proceedings, in exercise of writ jurisdiction of the Court, is bound to delay the conclusion of such proceedings, thereby defeating one of the main objectives behind preferring arbitration over litigation, the Court would be well advised in not interfering with such an order in exercise of its writ jurisdiction."

It is imperative to note that despite the dicta laid down by Apex Court, certain judgments have taken a nuanced differentiation of the decision laid down in SBP Co. (supra). For instance, in Raj International v. Tripura Jute Mills[5], it has been observed that:
34. Even if this Court considered the case of Patel Engineering (supra) as relied upon by the learned Counsel of the respondents, then also it can be easily said that their lordship in paragraph 46 held that each and every order made by the Tribunal should not be allowed to challenge under Article 227 or 226 of the Constitution for defeating the purpose of arbitration proceeding meaning thereby that in an extra ordinary situation, the Court can exercise the power under Articles 227 and 226 of the Constitution against the order made by the Arbitral Tribunal or Arbitrator, particularly when there is no provisions either for revision or for any appeal and it would not be proper for a Court to force the party in an arbitral proceeding like the present petitioner to appear before the arbitral tribunal/arbitrator, till the completion of whole proceeding and passing of award though prima facie it appears that the arbitrator did not act in accordance with the mandate of the provisions of the Act and acted as a purported agent of the appointing authority, herein the Commissioner, (I&C), Government of Tripura while respondent is a Government undertaking.

35. In view of the aforesaid observation and discussion, this Court has no hesitation to hold that this is a fit case where the Court should exercise its power under Article 227 of the Constitution and accordingly, the impugned order is set aside and the matter is remitted back to the Arbitrator to decide the plea of jurisdiction raised before him by the petitioner and then proceed with the matter of arbitration in accordance with law."

Another such instance of dismissal of a writ petition is in the judgment delivered by Karnataka High Court in Tejaejavathamma v. M. Nataraj & Ors.[6], wherein the principles of S.B.P (supra) were reiterated.

Similarly in Dowell Leasing & Finance Ltd. v. Radheshyam B. Khandelwal & Ors.[7], it was observed that, "10. It would be clear from a reading of the paragraph as also the directions, the Hon'ble Supreme Court has held that the High Courts ought not to invoke its extra-ordinary jurisdiction under Articles 226 and 227 in respect of orders passed in pending arbitral proceedings. This is more so in respect of proceedings in respect of which a remedy is available under the Act. The judgment has not taken a view that no writ can go to an Arbitral Tribunal or that Arbitral Tribunal is not a person to whom a writ cannot be issued."

The Bombay High Court also in M/s Sanwal Coal Carriers v. Western Coalfields Ltd.[8] also affirmed the dicta laid in Dowell Leasing (supra) judgment.

However, the Supreme Court slightly changed its decisions in the judgments delivered later on. In Deep Industries Ltd. v. ONGC[9], it has been held that, "13. This being the case, there is no doubt whatsoever that if petitions were to be filed Under Articles 226/227 of the Constitution against orders passed in appeals Under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years.

At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante Clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed Under Article 227 against judgments allowing or dismissing first appeals Under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction."

Again in L. Chandra Kumar v. Union of India[10], it has been observed that, "92. It has also been contended before us that even in dealing with cases which are properly before the Tribunals, the manner in which justice is dispensed by them leaves much to be desired. Moreover, the remedy provided in the parent statutes, by way of an appeal by special leave under Article 136 of the Constitution, is too costly and inaccessible for it to be real and effective. Furthermore, the result of providing such a remedy is that the docket of the Supreme Court is crowded with decisions of Tribunals that are challenged on relatively trivial grounds and it is forced to perform the role of a First Appellate Court.

We have already emphasised the necessity for ensuring that the High Courts are able to exercise judicial superintendence over the decisions of Tribunals under Article 227 of the Constitution. In R.K. Jain's case, after taking note of these facts, it was suggested that the possibility of an appeal from the Tribunals on questions of law to a Division Bench of a High Court within whose territorial jurisdiction the Tribunal falls, be pursued.

It appears that no follow-up action has been taken pursuant to the suggestion. Such a measure would have improved matters considerably. Having regard to both the afore-stated contentions, we hold that all decisions of Tribunals, whether created pursuant to Article 323A or Article 323B of the Constitution, will be subject to the High Court's writ jurisdiction under Articles 226/227 of the Constitution, before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls."

A perusal of the above judgments shows that it is a clear and well-settled principle of law pertaining to writ jurisdiction over orders of arbitral tribunals. However, the dispute still continues to come up before the courts for adjudication which takes the time of the Courts which needs to be stopped.

End-Notes:
  1. 2022 (1) SCC 75.
  2. 2020 (4) GLH 1.
  3. 2005 (8) SCC 618.
  4. (2013) SCC OnLine Del 4490.
  5. (2008) SCC OnLine Gau 333.
  6. MANU/KA/2288/2020.
  7. (2007) SCC OnLine Bom 655.
  8. (2010) SCC OnLine Bom 1256.
  9. (2019) SCC OnLine 1602.
  10. (1997) 3 SCC 261.

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