CASE: Bhaven Construction vs. Executive Engineer Sardar Sarovar Narmada Nigam Ltd.
CITATION: [CIVIL APPEAL NO. 14665 OF 2015]
CORAM: Justice N.V. Ramana, Justice Surya Kant and Justice Hrishikesh Roy
The Supreme Court set aside the judgement of the Gujarat High Court where it had allowed a writ petition challenging the jurisdiction of a sole arbitrator. The court observed in the case that the power of the High Court under Article 226 and 227 of the Constitution of India in relation to interference with arbitration proceedings has to be applied in exceptionally rare cases. This rarity maybe when one party does not have any remedy or it is clear that there was bad faith on the part of the other party.
The issue in the petition was whether under Article 226 and 227 the arbitral process can be interfered and if so then under what circumstances.
The bench stated that the Arbitration Act is a code having a non-obstante clause in Section-5, which has been provided to further the intention of the legislature in adopting the UNCITRAL model law and rules, to reduce the excess of judicial interference in arbitration proceedings.
The Court said that the Arbitration Act’s framework clearly shows that the intention is to address most of the issues within the Act itself without any extra-statutory mechanism for resolution. Parties who enter into arbitration have to fulfill the ingredients of Section 7 of the Act. If a party fails to put up the matter for arbitration or appoint the arbitrator according to the procedure that was agreed upon by them, then a party can take the route of Section 8 or 11 of the Act and approach the court for assistance.
In this case, the court observed that the order given by the arbitrator under Section 16(2) of the Arbitration Act was challenged under Article 226 and 227 through a petition. The court observed the intention behind using the term “only” in Section 34 of the Act. The term is used to signify that the Act is a complete enactment and that it lays down the procedure.
The court also referred to other judgements and further observed that it is prudent that a judge does not allow the judicial interference to be beyond what is laid down in the Act.
The court observed that in the present case there was no bad faith or any exceptional circumstance.
The court stated that the ambit of Article 227 is very wide but the High Court at this stage should not have brought its inherent power in use. The court also took note of the pending challenge to the final award of the arbitrator under Section 34 of the Act by Respondent No.1. This final order was passed subsequent to the impugned order.
The court set aside the High Court judgement and stated that as per the Act jurisdictional questions have to be first looked into by the tribunal before they can be brought to the court under Section 34. Therefore, Respondent No.1 was not remediless and had a chance given by the statute to appeal.
The court observed that the High Court erred in using its power under Article 226 and 227 and set aside the High Court order.