Constitution of India: Art. 227 – Exercise of jurisdiction by the High Court u/Art. 227 – In matters decided under the Arbitration and Conciliation Act, 1996 – On facts, termination of contract by respondent due to supply of second hand product by the appellant – Commencement of arbitration proceedings – Meanwhile, respondent blacklisted appellant for a period of two years – Appellant filed application u/s. 17 before the arbitrator against the ban – Appellant also filed application u/s. 16 which was dismissed – Thereafter, disposal of s. 17 application by the arbitrator with the condition that the two year ban will only operate if appellant ultimately loses the final arbitration proceedings – Said order upheld in appeal – First appeal filed u/s. 37 dismissed by the civil court – Application u/Art. 227 filed before the High Court by the respondent – High Court allowed the petition – On appeal, held: Art. 227 is a constitutional provision which remains untouched by the non-obstante clause of s. 5 of the Act – Though petitions can be filed u/Art.227 against judgments allowing or dismissing first appeals u/s. 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 so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction – High Court inverted this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in s.16 application – Entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction u/Art. 227, where only jurisdictional errors can be corrected – Arbitral tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order – More so, merely because, the first appeal was disposed of by a court subordinate to the High Court, an Art. 227 petition ought not to have been entertained – Arbitration and Conciliation Act, 1996 – ss. 5, 37, Arbitration and Conciliation Act, 1996: Policy and object of – Held: Policy of the Act is speedy disposal of arbitration cases – Object of the Act is that of minimizing judicial intervention which should always be kept in the forefront when Art. 227 petition is being disposed of against proceedings decided under the Act. Allowing the appeal, the Court
HELD: 1.1 The Arbitration Act is a special act and a self contained code dealing with arbitration. The policy of the Act is speedy disposal of arbitration cases. The object of the Act being that of minimizing judicial intervention. This object should always be kept in the forefront when a 227 petition is being disposed of against proceedings that are decided under the Act. [Para 14, 17] [1008-H; 1010-F]
SBP & Co. v. Patel Engineering Ltd. & Another
(2005) 8 SCC 618 : [2005] 4 Suppl. SCR 688 –
followed.
Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333 : [2011] 11 SCR 1 – referred to.
1.2 Section 29A of the Arbitration and Conciliation Act, 1996 which was inserted by the Amendment Act, 2016 a time limit was made within which arbitral awards must be made, namely, 12 months from the date the arbitral tribunal enters upon the reference. Even so far as Section 34 applications are concerned, Section 34(6) added by the same amendment states that these applications are to be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub–section (5) is served upon the other parties. Given the said statutory provision and given the fact that the 1996 Act repealed three previous enactments in order that there be speedy disposal of all matters covered by it, it is clear that the statutory policy of the Act is that not only are time limits set down for disposal of the arbitral proceedings themselves but time limits have also been set down for Section 34 references to be decided. [Para 10, 11] [1004-D-F]
Union of India v. M/s Varindera Const. Ltd. (2020) 2 SCC 111 – referred to.
1.3 Most significant of all is the non–obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for an attempt, and interdicts a second appeal being filed. [Para 12] [1004-H; 1005-A]
1.4 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, it cannot be forgotten 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 so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction. [Para 13] [1005-B-D] Nivedita Sharma v. Cellular Operators Association of India and Others (2011) 14 SCC 337 – referred to.
1.5 On 09.05.2018, a Section 16 application had been dismissed by the Arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34. What the High Court has done in the instant case is to invert this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in the Section 16 application, and then decided that the two year ban was no part of the notice for arbitration issued on 02.11.2017, a finding which is directly contrary to the finding of the Arbitrator dismissing the Section 16 application. For this reason alone, the judgment under appeal needs to be set aside. Even otherwise, the judgment under appeal goes into the merits of the case and states that the action of putting the Contractor and his Directors “on holiday” is not a consequence of the termination of the agreement. This is wholly incorrect as it is only because of the termination that the show cause notice dated 18.10.2017 proposing to impose a two year ban was sent. Even otherwise, entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. Therefore to state that the ban order was passed under a General Contract Manual and not Clause 18 of the Agreement, besides being incorrect, would also be incorrect for the reason that the General Contract Manual does not mean that such order was issued as an administrative order invoking the executive power, but was only as an order which emanated from the contract itself. Further to state that “serious disputes” as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral Tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order. Even if it be accepted that the principle laid down by Section 41(e) of the Specific Relief Act was infracted, in that damages could have been granted, as a result of which an injunction ought not to have been issued, is a mere error of law and not an error of jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgment cannot be sustained and is set aside. [Para 16] [1009-F-H; 1010-A-E]
1.6 It becomes clear that had the High Court itself disposed of the first appeal in the instant case, no Article 227 petition could possibly lie – all that could perhaps have been done was to file an LPA before a Division Bench of the same High Court. Merely because, on the facts of this case, the first appeal was disposed of by a court subordinate to the High Court, an Article 227 petition ought not to have been entertained. [Para 17] [1011-C-D]
1.7 The legislative policy qua the general revisional jurisdiction that is contained by the amendments made to Section
115 C.P.C. should also be kept in mind when High Courts dispose of petitions filed under article 227. The legislative policy is that no revision lies if an alternative remedy of appeal is available. Further, even when a revision does lie, it lies only against a final disposal of the entire matter and not against interlocutory orders. The arbitration proceedings may be disposed of as expeditiously as possible, in accordance with the mandate contained in the Act. [Para 18, 19] [1011-E-F; 1012-G]
SBP & Co. v. Patel Engineering Ltd. & Another (2005)
8 SCC 618 : [2005] 4 Suppl. SCR 688 –
distinguished.
Punjab Agro Industries Corporation Limited v. Kewal Singh Dhillon (2008) 10 SCC 128 : [2008] 12 SCR
569 ; Tek Singh v. Shashi Verma and Another 2019 SCC OnLine SC 168 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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