The Indian Constitution bestows upon the High Courts “extraordinary writ jurisdiction”. While Article 226 empowers Courts to protect and enforce fundamental as well legal rights, Article 227 confers on them the power of superintendence over all courts and tribunals within their jurisdiction.
However, with the promulgation of special legislations, which are generally self-contained codes on specific subject matters, the scope of issuance of writs over those subject-matters has reduced drastically and is being constantly curtailed by the Constitutional Courts; and arbitral proceedings are no exception. Over the years, a catena of judicial pronouncements has well-established the principle of minimum judicial interference in arbitration proceedings. The same is in line with the object and purpose of the Arbitration and Conciliation Act, 1996 (the “Act”).
Though there have been instances of High Courts exercising writ jurisdiction over arbitral proceedings, the issue of maintainability/ non-maintainability of writ petitions against proceedings under the Act is no longer res integra.[1] To harmonise the provisions of the Act and the writ jurisdiction of High Courts, judicial pronouncements have interpreted the constitutional scheme vis-à-vis Articles 226 & 227 to be such that this power is to be exercised rarely, in exceptional circumstances, to ensure that the arbitral stream continues to flow unsullied and undisturbed by any eddies that may impede its path.[2]
A recent decision of the High Court of Delhi follows the trend and reiterates the settled position of law.
Brief Overview of the Delhi High Court Case
In a recent case before the Delhi High Court in State Trading Corporation of India Ltd. v. Micro and Small Enterprises Facilitation Council,[3] a letters patent appeal was filed, challenging the order of a Single Judge whereby he declined to exercise writ jurisdiction against an arbitral award. It was held that when a dispute resolution mechanism is provided under the Act, the Court in exercise of jurisdiction under Articles 226/ 227 of the Constitution of India should not entertain the petitions only because of condition of pre-deposit.[4]
It was the case of the Appellant that the award in question was non-est in law and deserved to be set aside on ground of lack of inherent jurisdiction. The Appellant contended that since at the time of execution of the contract and/ or at the time of concluding of supplies thereunder i.e., in 1991, Respondent No. 2 was not registered under the MSMED Act, since the act itself was enacted in 2006, its provisions are not applicable to the transactions/ contracts entered into before its enactment, including the provision regarding referral to arbitration. It was contended that while the Appellant had availed remedy under Section 34 of the Act, it was not pursuing the same. This was on the ground that it was not an efficacious remedy as it entailed a pre deposit of 75% of the awarded amount as per Section 19 of the MSMED Act.
The High Court referred to various decisions of the Supreme Court. While dismissing the appeal, it observed that the issue of non-maintainability of the petitions under Article 226/ 227 of the Constitution with respect to proceedings arising out of Act was no longer res integra. Further, in a similar matter, the Supreme Court had observed that entertaining petitions under Article 226/ 227 of Constitution, to obviate compliance with the requirement of pre-deposit under Section 19, would defeat the object and purpose of the special enactment, which was legislated upon by Parliament.[5] With respect to the issue of inherent lack of jurisdiction, the Court observed that the Supreme Court[6] has categorically held that it can be decided by the Arbitral Tribunal appointed under the MSMED Act, which is competent to rule on its own jurisdiction. The sequitur is that the decision of the Arbitral Tribunal on the issue of jurisdiction would be amenable to challenge under Section 34 of the Act.
Finally, the Court observed that the Appellant had already taken recourse to the proceedings under Section 34 of the Act and had raised objection to the lack of jurisdiction of the Arbitrator in the said petition. The contention of the Appellant that the obligation to comply with the condition of pre-deposit under Section 19 of the MSMED Act was onerous, without any merit and consequently, dismissed.
Tracing Judicial History
In SBP & Co. v. Patel Engg. Ltd.[7] (“SBP & Co.”), a seven-judge bench of the Supreme Court expressed dissent over judicial interference with arbitral process and condemned the practice of High Courts allowing writ petitions, challenging the orders of the arbitral tribunals. The Apex Court held that the aggrieved party must approach courts under Section 34 or 37 of the Act, as applicable, to challenge the final or interim orders. The Court observed that the object of minimising judicial intervention, while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court can be approached under Article 227 or under Article 226 of the Constitution against every order of the Arbitral Tribunal.
The rationale was that the aggrieved party had recourse to Section 34 to agitate grievances against not only the award, but also any in-between orders rendered prior to the final award. The Court further held that once arbitration commences, parties have to wait until the award is pronounced, unless right to appeal accrues under Section 37 of the Act.
Patent Lack of Jurisdiction Test
Crystallising the principle laid down in SBP & Co., the Supreme Court in Deep Industries Limited v. ONGC[8]observed that while Article 226/227, being Constitutional provisions, remain untouched by the non-obstante clause envisaged under Section 5 of the Act, the High Courts must be extremely circumspect in interfering with the orders passed by an arbitral tribunal and any such interference must be restricted to orders that are patently lacking in inherent jurisdiction.
This was further fortified in Punjab State Power Corporation Ltd v. EMTA Coal Ltd.,[9] wherein the Supreme Court added that to warrant interference on ground of patent lack of inherent jurisdiction, the perversity of the order must stare one in the face.
Exceptional Rarity Test
The Apex Court shed further light on this aspect in Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd.[10]While setting aside the decision of the Gujarat High Court, allowing the writ petition against an arbitral award, the Supreme Court held that the use of the term ‘only’ as occurring under Section 34 serves two purposes – of making the Act a complete code and of laying down the procedure for challenge. While acknowledging that the hierarchy in our legal framework mandates that a legislative enactment cannot curtail a Constitutional right, the Court observed that it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.
The Court, therefore, held that it is prudent for a judge to not exercise discretion (in allowing writ petitions) in allowing judicial interference beyond the procedure established under the Act. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute, or a clear ‘bad faith’ is shown by one of the parties. The Court further opined that this high standard set by the Court is in terms of the legislative intention to make the arbitration fair and efficient.
Jurisdiction under Article 226 cannot always be ousted
However, in Unitech Limited & Ors. v. Telangana State Industrial Infrastructure Corporation[11], the Supreme Court upheld the decision of the Telangana High Court in allowing the writ petition despite the existence of an arbitration clause. The Court, while enunciating on the scope of exercise of jurisdiction under Article 226, held that extraordinary jurisdiction cannot be ousted only on the ground that the dispute arises out of a contractual arrangement. The Court was cautious to observe that it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked and held that a State and its instrumentalities are not exempt from its duty to act fairly, merely because in their business dealings they have entered the realm of contract.
Similarly, in Uttar Pradesh Power Transmission Corp. Ltd. v. CG Power and Industrial Solutions Ltd.[12],the Supreme Court reaffirmed that the existence of an arbitration clause does not debar the Court from exercising its writ jurisdiction in an appropriate case and the availability of alternate remedy does not prohibit a High Court from entertaining a writ petition.
The Court observed that it is well settled that availability of an alternative remedy does not prohibit the High Courts from entertaining a writ petition in an appropriate case. The High Courts may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (i) where the writ petition seeks enforcement of a fundamental right, (ii) where there is failure of principles of natural justice, (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an act is under challenge.
The Court, however, observed that given that the writ jurisdiction under Article 226 is discretionary, the High Courts should try and refrain from entertaining a writ petition, which involves adjudication of disputed questions of fact, which may require analysis of evidence of witnesses.
Conclusion
It is trite law that the High Courts exercise extraordinary jurisdiction under Article 226/227 of the Constitution and the same cannot be ousted.[13] However, the Courts have been cautious in exercising the same, in order to reconcile it with self-containing special legislations, including the Act. The Supreme Court as well as various High Courts have consistently held that the exercise of the extraordinary writ jurisdiction should be limited only to extraordinary circumstances; where no other alternative effective and efficacious remedy is available to the aggrieved party to assail grievances. The same only bolsters the principle of minimal judicial intervention in arbitral proceedings, a principle that has been held to be sanctimonious by the Indian Courts.
For further information, please contact:
Vikash Kumar Jha, Partner, Cyril Amarchand Mangaldas
vikashkumar.jha@cyrilshroff.com
[1] State Trading Corporation of India Ltd. v. Micro and Small Enterprises Facilitation Council, Delhi & Anr., LPA 91/ 2024, Delhi High Court.
[2] Easy Trip Planners Ltd v. One97 Communications Ltd., 2022 SCC OnLine Del 2186.
[3] Supra.
[4] State Trading Corporation of India Ltd. v. Micro and Small Enterprises Facilitation Council, Delhi & Anr., W.P. (C) 4227/2023, Delhi High Court.
[5] M/s India Glycols limited and Anr. v. Micro and Small Enterprises Facilitation Council, Medchal – Malkajgiri and Ors., Civil Appeal No. 7491/2023.
[6] Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods (P) Ltd., (2023) 6 SCC 401.
[7] SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618.
[8] Deep Industries Limited vs ONGC, (2020) 15 SCC 706.
[9] Punjab State Power Corporation Ltd v. EMTA Coal Ltd., 2020 SCC Online SC 1165.
[10] Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75.
[11] Unitech Limited & Ors. v. Telangana State Industrial Infrastructure Corporation, 2021 SCC Online SC99.
[12] Uttar Pradesh Power Transmission Corp. Ltd. v. CG Power and Industrial Solutions Ltd., 2021 SCC Online SC 383.
[13] L. Chandra Kumar v. Union of India and Others, 1997(3) SCC 261.
