2022 (8) TMI 1605 - HC - Indian Laws

Amenability of interlocutory arbitral orders to writ petitions clarified; writ relief limited to exceptional bad faith or no statutory remedy, petition dismissed

Interlocutory orders of arbitral tribunals are ordinarily not amenable to writ relief under constitutional supervisory jurisdiction; the discretionary ... Maintainability of petition under Article 227 of the Constitution of India - Rejection of petitioner’s request for dismissal of the counter-claim of Respondent 1 - HELD THAT:- The issue of amenability, to writ proceedings under Articles 226 and 227 of the Constitution of India, of interlocutory orders passed by arbitral tribunals, once again arose for consideration before a Bench of three Hon’ble Judges of the Supreme Court in Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd. [2021 (1) TMI 177 - SUPREME COURT] As in the present case, the challenge before the High Court, in Bhaven Construction was to an order passed by the learned arbitrator under Section 16 of the 1996 Act. Sardar Sarovar Narmada Nigam Ltd (SSNNL) preferred an application before the learned arbitrator, in that case, under Section 16 of the 1996 Act, questioning the jurisdiction of the learned arbitrator to arbitrate on the dispute. Whether the order passed by the learned arbitrator, in that case, under Section 16(2) of the 1996 Act, could be challenged under Articles 226 and 227 of the Constitution of India? - HELD THAT:- Bhaven Construction [2021 (1) TMI 177 - SUPREME COURT] augments and reasserts the principle enunciated in SBP Bhaven Construction, too, in clear and unmistakable terms, holds that, even while no statutory provision could be permitted to derogate from the constitutional power of High Courts, vested in them by Article 227 of the Constitution of India, nonetheless, the power vested in them by the said provision is discretionary in nature and “needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear “bad faith” shown by one of the parties.” Thus, save and except for cases where there are allegations of bad faith, interlocutory arbitral orders against which the party would have no other remedy, alone would form subject matter of challenge under Articles 226 and 227 of the Constitution of India. The impugned order dated 3rd June 2022 passed by the learned arbitrator in the present case cannot, in any manner, of speaking, be said to be such as could not be challenged, inter alia, under S.34(1) of the 1996 Act, with the challenge, if any, to the final award which may come to be passed in the arbitral proceedings. The order is, clearly, not one of the categories of the orders which are susceptible to challenge under Section 37(2) of the 1996 Act. This Court is bound by the law enunciated in SBP and Bhaven Construction Following the said decisions and reserving the right of the petitioner to raise all grievances, raised in this petition, at the appropriate stage, this petition is dismissed as not maintainable. Issues: Whether a High Court may entertain and decide a writ petition under Article 227 (and Article 226) challenging an interlocutory order passed by an arbitral tribunal (order dated 3 June 2022) or whether such interlocutory orders are to be challenged only under the statutory remedies provided in the Arbitration and Conciliation Act, 1996 (notably Sections 16, 34 and 37), except in rare and exceptional cases.Analysis: The statutory framework of the Arbitration and Conciliation Act, 1996 confines challenges to arbitral determinations to the remedies it prescribes. Section 16 embodies the competence-competence principle allowing the tribunal to rule on its jurisdiction. Section 34 provides the exclusive route for setting aside an arbitral award, and Section 37 identifies the limited category of interlocutory orders which are appealable. Section 5 underscores limited judicial intervention in matters arising under Part I of the Act. The Supreme Court decisions in SBP & Co. v. Patel Engineering Ltd. and Bhaven Construction v. Executive Engineer reaffirm that High Courts must exercise their constitutional writ jurisdiction under Articles 226 and 227 with extreme circumspection so as not to frustrate the arbitration process; writ relief against interlocutory arbitral orders is available only in rare and exceptional circumstances (for example, where a party is left remediless or where bad faith is shown). Where an aggrieved party has the statutory avenue of challenge (including by raising grievances in a Section 34 challenge to the final award or by appeal where Section 37 applies), the writ remedy should ordinarily be declined to protect the integrity and finality of arbitration and to respect the limited appellate scheme in the Act.Conclusion: The writ petition challenging the interlocutory arbitral order is not maintainable and is dismissed; interlocutory arbitral orders are ordinarily to be challenged by the remedies under the Arbitration and Conciliation Act, 1996, and writ jurisdiction under Articles 226/227 is permissible only in rare and exceptional cases, which are not shown here.