High Court Under Article 226/227 Can Examine Validity Of Interlocutory Orders Passed By Arbitrator: Bombay High Court

Brief Facts

The respondent was selected through tender process by the petitioner for constructing building for ladies hostel and extension work of electrical buildings. The work was completed and then disputes were started between the parties on account of payment of the work done.

The respondent invoked arbitral clause of the agreement between the parties. A sole arbitrator was appointed.The petitioner submitted application under Section 16 (2) of the Arbitration and Conciliation Act of 1996 for framing preliminary issue of limitation. It was rejected.

Being aggrieved, Writ Petition No. 7278 of 2023 was filed. It was also rejected and the matter was carried to the Supreme Court. Supreme Court rejected SLP, vide order dated 10.11.2023, granting liberty to raise the plea. Then the arbitrator passed interim orders on various dates which are subjected to challenge in present petition vide prayers clause 37 (b) to (g). Prayer clause (h) pertains to termination of mandate of the arbitral tribunal. Remaining prayers are consequential in nature. The maintainability of the petition needs to be adjudged on the basis of prayers (a) to (h).

It is the contention of the respondent that in view of ratio laid down by Constitutional Bench of the Supreme Court in the matter of M/s. S.B.P and Company Vs. Patel Engineering Ltd. And Another (2005), the High Court can not interfere with the orders passed by the arbitrator during the course of arbitration. The petitioner has to wait till the final award is pronounced. There is alternate and statutory remedy under Section 34 of the Act.

It further contended that the prayer clause 37(h) is in respect of Section 14 of the Act. There are no grounds to invoke Section 14 and the petition is liable to be dismissed because the allegation of the petitioner is outside of the purview of Section 14.

On the other hand, it is the case of the petitioner that the powers of judicial review under Article 226 and 227 of the Constitution of India forms integral part of basic structure of the constitution. It cannot be taken away either by the Act or by the judgment of the Supreme Court, be that of Constitutional Bench.

It was also argued that the petitioner has no alternate efficacious remedy for the injustice and hardship caused due to the interlocutory orders and due to the conduct/ Modus Operandi of arbitrator. The remedy under Section 34 operates in narrow sphere and does not resolve the present grievances.

It is also the case of the petitioner that the arbitrator is biased which can be demonstrated from proceedings of Arbitration Application No. 10 of 2020. There are shocking circumstances to demonstrate malice and bias of the arbitrator which can be looked into by High Court under its supervisory jurisdiction which are even beyond provisions of Section 14 of the Act.

Observations:

The court noted that in M/s. S.B.P and Co.(supra) the Supreme Court has held that “the object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under section 37 of the Act even at an earlier stage.”

It further added that under our Constitutional scheme, the Supreme Court and High Courts are the sole repositories of the powers of judicial review. Such a power being inclusive of power to pronounce upon the validity of statues, action taken and orders passed by individuals and bodies falling within the ambit of expression 'State' in Article 12 of the Constitution has only been entrusted to the Constitutional Courts i.e High Courts and Supreme Court.

The court also observed that in the wake of the test laid down by Supreme Court in Dhanwanti Devi (supra) we are of the considered view that the ratio of L. Chandrakumar (supra) would apply. Its an authority directly on the point which is well addressed, analyzed and answered by reasoned judgment.

“As against this, in M/s. S.B.P (supra) the issue was nature of the function of The Chief Justice or its designate under Section 11 of the Act. Whether the jurisdiction of the High Court under Article 226 or 227 was excluded or not was not the direct question which fell for consideration before the Bench” the court noted.

“It is pertinent to note that the judgment of Supreme Court in L. Chandra kumar (supra) has not been referred in the said matter which is indicative of the fact that the proposition with which we are concerned was not the predominantly the issue before the Supreme Court in the later judgment. Therefore, with all respect we are of the considered view that we are bound by law laid down in L. Chandra kumar (supra). The later judgment of the Supreme Court would be of no avail to respondent to sustain objection” the court noted.

Based on the above, the court observed that our jurisdiction under Article 227 is not excluded from examining the validity of the interlocutory orders for which prayers are made in paragraph 37 (a) to paragraph 37 (g).

“The grievance of the petitioner touches to the Principles of Natural Justice which can not be overlooked just because the arbitration is in process. Whether Section 14 would be attracted or not or whether under the supervisory jurisdiction this Court can grant any relief would be decided on merit. But even for prayer clause 37(h), it would be unjust to shut the doors of the petitioner” it added.

Finally, the court observed that the Preliminary Objections are overruled to the extent of maintainability of writ petition only. The matter needs to be examined on merits.

Case Title: Shri Guru Gobind Singhji Institute of Engineering and Technology Versus M/s. Kay Vee Enterprises (WRIT PETITION NO. 9868 / 2024)

Citation: 2024 LiveLaw (Bom) 635

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