2023 (10) TMI 1570 - HC - Indian Laws

Challenge to Section 11 arbitration appointment and Section 16 arbitrator jurisdiction - writ relief dismissed; alternative remedy required.

Whether writ jurisdiction under Arts.226/227 lies to challenge an order under Section 11 Arbitration Act: HC reiterates that writ relief is discretionary ... Maintainability of petition - availability of efficacious alternate remedy under the provisions of 34 of the Arbitration Act - jurisdiction of Arbitrator to proceed with the matter in view of the fraud committed by Respondent No.1 and that the Arbitration Proceedings should be terminated u/s 32 (2) (c) of the Arbitration Act - HELD THAT:- The High Court, in the exercise of its writ jurisdiction under Articles 226 and 227 of the Constitution of India, should not interfere in orders passed by Arbitral Tribunals or Courts in Arbitration Proceedings, except in the exceptional circumstances - the present Petition, in so far as it challenges the said Order dated 12th December 2022 passed under Section 11 of the Arbitration Act, is not maintainable. It is also well settled position in law that the remedy by way of a writ is a discretionary remedy, this Court should not exercise that discretion as a remedy is available to the Petitioner to challenge the said Order dated 12th December 2022 by filing an SLP before the Hon’ble Supreme Court. It is the case of the Petitioner that it has subsequently discovered that the Respondents obtained the said Order fraudulently. Even if that case of the Petitioner is true, it is open to the Petitioner to file an SLP challenging the said Order dated 12th December 2022. The Petitioner is not left without a remedy. For this reason, writ jurisdiction under Articles 226 and 227 of the Constitution of India not exercised, in respect of the challenge to the said Order dated 12th December 2022. The present Petition, in so far as it challenges the said Order dated 12th December 2022, passed under Section 11 of the Arbitration Act, is not maintainable. As far as the exception of lack of inherent jurisdiction is concerned, it cannot be said that the Arbitrator did not have jurisdiction to pass the said Order dated 16th September 2023 - As far as the exception of a party acting in bad faith is concerned, the same cannot be decided at this stage in the writ jurisdiction of this Court. Further, whether, Respondent No.1, in invoking Arbitration, has acted in bad faith, is something which cannot be decided by a Writ Court, especially since the same would involve disputed questions of fact. The present case of the Petitioner is not one of those exceptionally rare cases where interference with an order passed under Section 16 of the of the Arbitration Act is justified under Articles 226 and 227 of the Constitution of India - it is not inclined to exercise writ jurisdiction to entertain a challenge to the said Order dated 16th September 2023 passed by the Arbitrator under Section 16 of the Arbitration Act. The present Writ Petition is not maintainable and is therefore dismissed. Issues: (i) Whether a High Court should exercise writ jurisdiction under Articles 226/227 to set aside an appointment order made under Section 11 of the Arbitration and Conciliation Act, 1996; (ii) Whether a High Court should exercise writ jurisdiction under Articles 226/227 to interfere with an arbitrator's order under Section 16 of the Arbitration and Conciliation Act, 1996 rejecting a party's challenge to the tribunal's jurisdiction.Issue (i): Whether the challenge to the Section 11 appointment order is maintainable by way of a writ petition under Articles 226/227.Analysis: The statutory scheme (including Section 11(7)) and precedent limit judicial intervention in Section 11 appointment orders and provide that such orders are to be challenged by special leave petition to the Supreme Court; the writ remedy is discretionary and should not be exercised where an efficacious statutory remedy exists. The principles and authorities require restraint to avoid opening floodgates and to respect the finality and appellate route prescribed by the Arbitration Act.Conclusion: The challenge to the Section 11 appointment order is not maintainable by writ; remedy available by SLP to the Supreme Court.Issue (ii): Whether the High Court should entertain a writ petition challenging the arbitrator's Section 16 order holding that the tribunal has jurisdiction.Analysis: The Arbitration Act contemplates that jurisdictional objections under Section 16 are to be decided by the tribunal first and, if necessary, challenged when the award is set aside under Section 34; interference under Articles 226/227 is permitted only in exceptionally rare circumstances (patent lack of inherent jurisdiction, absence of any remedy, or clear bad faith) or where an order is completely perverse. Participation in arbitration, prior acceptance of the tribunal constitution, the availability of Section 34, and disputed factual questions militate against writ intervention.Conclusion: The challenge to the arbitrator's Section 16 order is not maintainable by writ; no exceptional circumstance, bad faith, or glaring perversity is made out to justify interference.Final Conclusion: The writ petition challenging both the Section 11 appointment order and the Section 16 interlocutory order is not maintainable and is dismissed; the statutory arbitral remedies remain the appropriate forum for adjudication of the disputed issues.Ratio Decidendi: Where the Arbitration Act furnishes specific remedies and procedures for appointment and for adjudication of jurisdictional objections (Sections 11, 16, 34 and 37) and Section 5 limits judicial intervention, a High Court should decline to exercise Articles 226/227 jurisdiction except in truly exceptional cases (patent lack of inherent jurisdiction, absence of any remedy, or clear bad faith) or where an order is palpably perverse, and challenges to such orders should ordinarily be pursued through the statutory routes prescribed by the Act.