- Rituparna Padhy
I. Introduction
Arbitral tribunals exercise significant power, be it to pass an award/order on the subject-matter of the dispute and other ancillary issues, set its procedure for proceedings, or even determine its competence. However, judicial intervention is still restrictively accommodated within the legislation as a check to the arbitral tribunal’s competence and discretion. The restrictive ambit of judicial intervention is manifest from Section 5 of the Arbitration and Conciliation Act, 1996 (“Act”), whose non-obstante clause clarifies that the only judicial intervention permitted is what is expressly provided in the Act.[1]
While the general boundaries of the court’s writ jurisdiction in arbitration appear to be well-established,[2] the dichotomy between preserving the extraordinary jurisdiction of writ courts and upholding the parties’ contractual obligation to arbitrate persists even today. This year itself has seen two Supreme Court judgments on this issue (to be elaborated in the following sections). The more recent of them reiterated as obiter that if the case is of a public law nature, then writ jurisdiction of courts cannot be fettered by an alternative remedy. The other introduced a distinct ground of ‘exceptional circumstances or bad faith’ which can be invoked by writ courts to exercise their plenary powers. In light of the recent developments that push the boundaries of courts’ extraordinary jurisdiction further ahead, this article attempts to overview the current scope of writ jurisdiction in arbitral proceedings. Part II enumerates certain judicial pronouncements that have set the limits of the courts’ writ jurisdiction in different matters relating to arbitration proceedings, and Part III concludes by examining whether the judicial pronouncements in this regard have remained consistent.
(For better understanding, the author has categorized the different cases based on the matters the courts have adjudicated and not by chronology.)
II. Limitations on Writ Jurisdiction for different matters
While Article 227 has a wider scope than Article 226 and both are distinct from each other, it is interesting to note that many writ petitions to the High Court are often filed under both Articles 226 and 227, presumably because “the distinction between the two jurisdictions stands almost obliterated in practice”.[3] We will also observe that most of the relevant cases revolve around the abovementioned Articles of the Constitution, often reaching the Supreme Court through Special Leave Petitions.
A. Violations of Natural Justice
In the 2005 case of Ashish Gupta v IBP Co. Ltd.,[4] (“Ashish Gupta”), a Section 8 (of the Act) application was filed for the breach of the audi alteram partum principle. While writ jurisdiction for arbitral matters is excluded from application by an alternative remedy, the Delhi High Court clarified that the rule is discretionary and not obligatory.[5] In suitable matters, despite an alternate remedy being available, the High Court may still exercise writ jurisdiction where (including but not limited to these cases)
the writ petition seeks enforcement of any of the fundamental rights;
there is a failure of principles of natural justice, or
the orders or proceedings are wholly without jurisdiction.[6]
In this case, with the application being allowed, the court further emphasised that a writ court can exercise its extraordinary jurisdiction only when “illegality is writ large on the face of the record”.[7] Issuing a prerogative writ “to the exclusion of other available remedies”[8] would generally be permitted only if the actions of the State or its instrumentality violates Article 14 of the Constitution or for other valid and legitimate reasons that make it necessary to exercise such plenary power of the High Court. We thus observe that for judicial intervention through writ jurisdiction, the circumstances should prima facie indicate a sufficiently serious contingency.
B. Scope of Writ Jurisdiction when State or State Instrumentalities are Involved
Be it at the stage of beginning or during the course of arbitral proceedings; courts have been more inclined to exercise their extraordinary writ jurisdiction when the State or a State instrumentality is a party. In the most recent Supreme Court judgment Unitech Ltd. and Ors v Telangana State Industrial Infrastructure Corporation (TSIIC) and Ors,[9] the Court opined as obiter that while an arbitration clause ousts the courts’ writ jurisdiction, the courts may still determine on a case-to-case basis if “recourse to a public law remedy can justifiably be invoked”.[10]
Even though courts generally agree that their writ jurisdiction may be subject to a more efficacious alternative remedy, they are reluctant to uphold the same strictly when the State or State entities are involved. In the case of Union of India v Tantia Construction Pvt. Ltd.,[11] the East Coast Railway [a State instrumentality] had awarded a project to the respondent. Despite the contract containing an arbitration agreement, the respondent filed a writ petition under Article 226 of the Constitution before the High Court. The petitioner appealed against the High Court’s decision to allow the respondent’s writ petition. The Supreme Court, rejecting the appeal, reasoned that “injustice, whenever and wherever it takes place, has to be struck down as an anathema to the rule of law and the provisions of the Constitution”.[12] We thus observe that despite an alternative remedy of arbitration being available, the courts can still exercise their writ jurisdiction if injustice was evident on the record.
Similarly, in Ram Barai Singh & Co. v State of Bihar and Ors,[13] it is noteworthy to take into account the significance of raising timely objections to a writ petition’s maintainability as well. The petitioner had challenged the order of the Patna High Court (Division Bench), which had allowed the respondents’ Letters Patent Appeal by setting aside the Single Judge’s order for the writ petition on the sole ground that an arbitration agreement existed between the parties but was not availed by the appellant. The appellant argued that the contract no longer existed since the work was completed long back. Moreover, the respondents had not raised the point of arbitration clause before the Single Judge.
The Supreme Court accepted the appellant’s argument, observing that even though the availability of an alternative remedy is a permissible ground to exclude writ jurisdiction, an arbitration clause cannot ipso facto oust the courts’ writ jurisdiction. Moreover, since the respondents had not objected to the writ petition’s maintainability before the Single Judge, a judgment on merits cannot be set aside merely because arbitration could have been resorted to. The writ court may exercise its discretionary power for either accepting its jurisdiction or relegating to availing alternate remedy.
To note:
In most of the abovementioned cases, ABL International Ltd. and Anr v Export Credit Guarantee Corporation of India Ltd and Ors (“ABL”) has been relied upon by the Courts.[14]Courts have often relied on this case to uphold the exercise of their writ jurisdiction if public law is involved, even if an arbitral agreement exists. However, even though the Supreme Court had opined in the ABL case that a petition can be filed under Article 226 of the Constitution if a State “acts in an arbitrary manner even in a matter of contract”,[15] there was no arbitration clause in the contract in question. In fact, the Supreme Court further held that
“[I]f the parties to a dispute had agreed to settle their dispute by arbitration and if there is an agreement in that regard, the courts will not permit recourse to any other remedy without invoking the remedy by way of arbitration unless of course both the parties to the dispute agree on another mode of dispute resolution.”[16]
Therefore, the relevance of the ABL case in the current discourse may be limited to writ jurisdiction over contractual matters only when a State or State instrumentality is involved. Reliance on it would be misplaced when an arbitration agreement is involved.
C. Jurisdiction of Arbitral tribunals
One of the major Supreme Court cases dealing with applications under Section 16 of the Act is Deep Industries v Oil and Natural Gas Corporation (“Deep Industries”).[17] The High Court was found to have contradicted the arbitrator’s order dismissing the Section 16 application (which the Supreme Court deemed sufficient grounds to set aside the High Court judgment) and exceeded its writ jurisdiction by going into the merits of the dispute.[18]
While declaring that the High Court through its jurisdiction under Article 227 of the Constitution can correct only jurisdictional errors, the Supreme Court also held that since the Act does not provide any option for appealing against an Order emanating from a Section 16 application, parties can only await the passing of the final award before appealing under Section 34 of the Act.[19] However, in September 2020, the Supreme Court in Punjab State Power Corporation v EMTA Coal Ltd.[20](“PSPC”) opined that if a Section 16 application is dismissed by the arbitrator, then a writ court can exercise its extraordinary jurisdiction only when the order so passed is “so perverse”[21] on the face of the record that “the only possible conclusion is that there is a patent lack in inherent jurisdiction”.[22]
It remains unclear whether such an exception can be carved for writ jurisdiction when an alternate efficacious remedy exists under Section 34 of the Act, especially when the legislative provision provides no such allowance.[23] While the Ashish Gupta pronouncement may lend credence to the PSPC ratio, it is notable that the former was in the context of a Section 8 application, where the competent court expressly has its authority recognised, and the latter concerns a Section 16 application which gives authority exclusively to the arbitral tribunal to first determine the application.
D. Applications regarding Section 11
In the landmark judgment of SBP & Co. v Patel Engineering,[24] (“SBP”), an order by the Chief Justice refusing to appoint an arbitrator was challenged before the High Court under Article 226 of the Constitution. The Supreme Court emphasised that except for a right to appeal under Section 37 of the Act,[25] interference of the writ courts regarding the orders passed by the arbitral tribunal during the arbitration proceedings is impermissible.[26]
Essentially, the Supreme Court in the SBP case opined that should an order regarding a Section 11 application be passed by the Chief Justice of India or the designated Supreme Court judge; there can be no appeal against such an order.[27] Meanwhile, an order by the Chief Justice of the High Court or the designated High Court judge can be only appealed against through Article 136 of the Constitution and not Articles 226 or 227 of the Constitution.[28]
Interestingly, in 2008, the court in Punjab Agro Industries Corp. v Kewal Singh Dhillon[29]ruled that an order by the Civil Judge can be challenged under Article 227 of the Constitution. The Supreme Court distinguished this case from the SBP pronouncement on the ground that the relevant ratio of SBP was applicable only for orders made by the Chief Justice of a High Court or the designated judge of that High Court and did not apply to a “subordinate court functioning as Designate of the Chief Justice”.[30] The court’s decision here was also influenced by the fact that no provision for appeal existed against an order under Section 11(4) of the Act.[31]
E. Orders for Interim Measures/Orders during the pendency of arbitral proceedings
The general stance of courts in matters which involve an appeal against the interim measure(s) or order(s) amidst ongoing arbitration proceedings is that interlocutory orders of an arbitrator/arbitral tribunal can be challenged only after the final award is passed and the aggrieved party invokes Section 34 of the Act. In 2020, the Karnataka High Court adjudicated the case of Tejavathamma v M. Nataraj and Ors, where an interlocutory order of the arbitral tribunal (rejecting the petitioner’s plea to impound certain agreements) was challenged under Article 227 of the Indian Constitution.[32] Here, the petitioner heavily relied on Section 17(1)(ii)(c) of the Act, which allows an interim measure to be granted/refused for “the detention, preservation or inspection of any property or thing which is the subject- matter of the dispute in arbitration, or as to which any question may arise therein”.[33] However, the court clarified that the abovementioned provision does not pertain to “questioning the admissibility of the documents”,[34] as was the case here. Unless an order of the arbitrator(s) is challenged under Section 37, no challenge could lie before the extraordinary writ jurisdiction of the High Court against an interlocutory order in the course of arbitral proceedings. At best, the court further observed, the aggrieved party may reserve its rights to challenge such an interlocutory order if and when it suffers an adverse award.[35]
Thus, pertinently it can be seen that there is a reiteration of the judicial view that unless a challenge can be successfully invoked under Section 37 of the Act, no orders of the arbitral tribunal during the course of arbitral proceedings can be challenged under Articles 226 and 227 of the Constitution. The suggestion of the court for the aggrieved party to reserve its rights to a challenge appears to be a sound option that may offer some solace to the aggrieved party. Notably, the Karnataka HC is this case did not refer to the Deep Industries case, even though the latter judgment was pronounced nearly seven months before the former and is a considerably relevant Supreme Court case.
In the case of Deep Industries, the Appellant had, in its notice of arbitration, challenged the termination of the contract and its blacklisting. Under a Section 17 application, the arbitrator stayed (with qualification) the Respondent’s order that blacklisted the Appellant for two years. However, the Respondent filed a Section 16 application, arguing that the issue of blacklisting is outside the arbitrator’s jurisdiction, which was rejected by the arbitrator. After the first appeal [under Section 37(2)(b) of the Act] was rejected by the Ahmedabad City Civil Court against this Section 16 application, a special civil application was filed under Article 227 challenging the dismissal of the first appeal. Notably, Section 37(3) of the Act expressly provides that “No second appeal shall lie from an order passed in appeal under this section”.[36]
The Supreme Court took into consideration two main provisions of the Act – Section 5 and Section 37. The Court observed that only “one bite at the cherry”[37] is permitted, and a second appeal being filed is interdicted. It finally held that even though the High Court can exercise its writ jurisdiction without being curtailed by the non-obstante clause of Section 5 of the Act, the High Court should be “extremely circumspect in interfering with the same…so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction”.[38] Moreover, the High Court cannot entertain a writ petition under Article 227 merely because the first appeal was dismissed by a subordinate court.[39]
This year, the Gujarat High Court in GTPL Hathway v Strategic Marketing Pvt. Ltd.[40]reiterated that an order passed by the arbitrator during the pendency of arbitration proceedings cannot be challenged under Articles 226 and 227. In this case, during the proceedings, the arbitral tribunal held that the disputes were arbitrable despite the criminal allegations of fraud and cheating as raised by the petitioner. The High Court, while dismissing the petition filed, reiterated two points: firstly, that Section 5 of the Act itself provided for limited judicial intervention by courts except what is expressly permissible, and secondly, that the petitioner still had an alternate efficacious remedy under Section 34 of the Act.[41] On these grounds, the court dismissed the petition.
F. Bad Faith and Exceptional Circumstances
In January 2021, the Supreme Court adjudicated the case of Bhavan Construction v Executive Engineer, Sardar Sarovar Narmada Nigam Ltd. and Anr.[42] wherein Respondent no. 2 was the sole arbitrator, and the appellant and respondent no. 1 had entered into a public works contract, which included an arbitration agreement. The sole arbitrator had rejected a Section 16 application filed by respondent No. 1, which had challenged the arbitrator’s jurisdiction. While the Gujarat High Court rejected respondent no. 1’s writ petition under Article 227 of the Constitution against the arbitrator’s order, its Letters Patent Appeal was allowed. Parallel to the appellant’s appeal to the Supreme Court, respondent no. 1 had challenged the final award under Section 34 of the Act.
The Supreme Court reiterated that “when statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation”.[43] Taking into account that the appellant had acted without mala fides, the Court pointed out that respondent no. 1 had to have shown exceptional circumstances or ‘bad faith’ on part of the appellant to successfully invoke remedies under Article 227 of the Constitution.[44] On this ground, coupled with the pending Section 34 challenge, the Supreme Court allowed the appeal and set aside the High Court’s order under the Letters Patent Appeal.
We observe that proof of exceptional circumstances or bad faith was introduced as a ground to invoke writ jurisdiction where an arbitration agreement existed. This appears to be in addition to the three grounds permitted by the court in Ashish Gupta. While bad-faith may still be accommodated within the principles of natural justice, the ground of ‘exceptional circumstances’ widens the scope of potentially exercising writ jurisdiction, even if it may be on a case-by-case basis. Even though the grounds listed by the court in Ashish Gupta were enumerated as an inclusive list, care must be taken that courts continue to respect the Legislature’s objective of minimum judicial intervention in arbitration.
III. Concluding Remarks
Even from this limited number of cases, it can be seen that while judicial intervention under writ jurisdiction is acknowledged to be used sparingly, the qualifying criteria for its application, though generally inclusive, continues to fluctuate from case to case. Since writ courts often enumerate grounds for invoking their jurisdiction in an inclusive list, this has allowed them to introduce new grounds. However, the purpose of the Act to minimize judicial intervention should remain at the forefront when determining the ‘extraordinary’ writ jurisdiction of courts. It is, however, encouraging to note that even though ambiguous grounds like “valid and legitimate reasons” (in Ashish Gupta) and “exceptional circumstances” (in Bhaven Construction) widen the scope of judicial intervention in arbitration, they remain a high threshold and need to be applied with the context in mind. Given the sheer variety of matters wherein writ jurisdiction of courts has been invoked in, it may soon become imperative for them to clarify whether their determination is restricted to the facts of that case or can be adopted for multiple circumstances.
It is widely accepted that the Act is self-contained and exhaustive, thereby indicating that only those acts are permissible which are expressly mentioned in the Act. Despite courts agreeing that the availability of arbitration ousts the writ courts’ extraordinary jurisdiction, we continue to witness judicial views that assert that an arbitration agreement cannot ipso factor fetter their jurisdiction. We have even noted instances where even when the relevant provisions of the Act provide no scope for judicial intervention (such as Sections 16(6) and 11(4) of the Act), petitions under Articles 226 and 227 of the Constitution have been allowed.
In sum, these are a few conclusions that can be consistently inferred from the overall landscape of such judicial opinions:
1. While a writ court's jurisdiction cannot be curtailed by any legislative authority, extreme caution is needed when applying the same. It is imperative to take into account all the material facts of the case, the intention of parties and the provisions of the Act in question.
2. Orders patently lacking in inherent jurisdiction are permitted to be challenged under Articles 226 and 227.
3. Orders passed during the course of arbitral proceedings (especially interlocutory orders) can be challenged before the writ courts if and only if Section 37 of the Act can be invoked – the only other option is to wait until the final award is passed and then challenge it under Section 34 of the Act.
It is imperative to remain conscious of the overall objective of the Act to minimise judicial intervention, including the exercise of plenary powers by writ courts, and prevent inordinate delays in passing awards. Another useful criterion for the maintainability of such writ petitions may be to observe whether the alternative remedy under Sections 34 and/or 37 are efficacious enough and if any significant contingencies are apparent. In any case, it is evident that the facts of the case will have a considerable impact on the outcome of the question of maintainability of writ petitions when an arbitration agreement is concluded by the parties.
[1] §5, Arbitration and Conciliation Act, 1996. [2] Arts. 226-7, Constitution of India, 1950. [3] Raj International v Tripura Jute Mills Ltd., CRP No. 91 of 2007. [4] AIR 2006 Delhi 57. [5] Id. ¶7. [6] Id. [7] Id. ¶11. [8] Id. ¶28. [9] CA No. 317 of 2021. [10] Id. ¶33. [11] SLP(C) No. 18914 of 2010. [12] Id. ¶27. [13] CA No. 11465 of 2014. [14] CA No. 5409 of 1998 [hereinafter ABL]. [15] Id. ¶10. [16] Id. ¶14. [17] CA No. 9106 of 2019 [hereinafter Deep Industries]. [18] Id. ¶16. [19] §34, Arbitration and Conciliation Act, 1996. [20] SLP (C) No. 8482/2020. [21] Id. ¶3. [22] Id. ¶4. [23] §16, Arbitration and Conciliation Act, 1996. [24] CA No. 4168 of 2003 [hereinafter SBP]. [25] §37, Arbitration and Conciliation Act, 1996. [26] SBP, supra note 24 ¶¶ 44, 46(vi). [27] Id. ¶46(viii). [28] Id. ¶46(vii). [29] CA No. 5226 of 2008. [30] Id. ¶8. [31] §11(4), Arbitration and Conciliation Act, 1996. [32] WP No. 2121/2020 [hereinafter Tejavathamma]. [33] §17(1)(ii)(c), Arbitration and Conciliation Act, 1996. [34] Tejavathamma, supra note 21 ¶18. [35] Id. ¶19. [36] §37(3), Arbitration and Conciliation Act, 1996. [37] Deep Industries, supra note 17 ¶12. [38] Id. ¶13. [39] Id. ¶17. [40] SCA No. 4524 of 2019. [41] Id. ¶19. [42] CA No. 14665 of 2015. [43] Id. ¶17. [44] Id. ¶¶19, 21.