Writ Jurisdiction Cannot Be Invoked To Challenge Appointment Of Arbitrator: Kerala High Court

The Kerala High Court recently held that writ jurisdiction cannot be invoked to challenge the appointment of an arbitrator since such grievances could be redressed as per the provisions of the Arbitration and Conciliation Act, 1996.

Ruling that there should not be any judicial interference in the course of the arbitral proceedings for redressal of such grievances, Justice P.B. Suresh Kumar observed:

"It is evident from the provisions contained in Section 13 that the scheme of the Act is that the grievances of the parties concerning the appointment of the arbitrator shall be addressed in terms of the provisions of the Act itself and that there shall not be any judicial interference in the course of the arbitral proceedings. That being the scheme of the Act, according to me, if the courts interfere in the arbitral process beyond the ambit of the Act, the efficiency of the arbitral proceedings would be impaired and the object of the Act would be defeated."

The third respondent had availed a loan from the second respondent to purchase a vehicle. The petitioner was one of the guarantors to this loan.

The parties entered into an agreement providing that all disputes, differences and/or claims arising out  the said agreement, whether during its subsistence or thereafter shall be settled by arbitration in accordance with the Arbitration and Conciliation Act.

When the third respondent defaulted in repaying the loan, the second respondent invoked the arbitration clause. Consequently, the first respondent herein was nominated as the arbitrator to adjudicate their claim.

The petitioner moved the High Court through Advocate Bindu Sreekumar seeking a declaration that the appointment of the first respondent as the arbitrator to adjudicate the claim against the petitioner is void ab initio and to stay the arbitral proceedings.

It was argued that the clause in the agreement conferring authority on the second respondent to nominate the sole arbitrator to adjudicate the claim against the petitioner was invalid. 

The Court noted that the petitioner's argument was valid in the light of the Arbitration and Conciliation (Amendment) Act, 2015 and various decisions of the Apex Court explaining the scope of the said amendments.

However, the pertinent question that arose for consideration before the Court was whether the petitioner is justified in approaching the Court seeking a declaration to that effect invoking its jurisdiction under Article 226 of the Constitution.

The Judge observed that arbitration was an arrangement for taking and abiding by the judgment of selected persons in some disputed matters, instead of carrying the dispute to established courts of justice and is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation.

"The object of the Act is to make appropriate provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration and to minimize the supervisory role of courts in the arbitral process so as to promote the concept of arbitration as an effective dispute resolution mechanism."

The Court also recalled that Section 5 of the Act which begins with a non obstante clause provides that in matters governed by Part I of the Act, there shall not be any judicial interference except where so provided in the said Part. 

"Of course, a legislative enactment cannot curtail a constitutional right including the one provided for under Article 226 of the Constitution, but it is now trite that the said power can be invoked only in exceptional circumstances where a party to a dispute is left remediless under the statute or a clear bad faith is shown by one of the parties."

Therefore, the next question the Court had to answer was whether the petitioner had made out any exceptional circumstances or bad faith on the part of the second respondent for invoking the remedy under Article 226.

The Single Judge noted that Sections 13(4) and 34 of the Act provided for a very effective alternative remedy for a party to an arbitral proceedings challenging the arbitrator. 

Recording so, it was held that judicial interference was not warranted in arbitral proceedings challenging the appointment of the arbitrator. Finding no merit in the petition, the Court dismissed the plea. 

Case Title: Subramaniyan N.N. v. Anwar C.K. & Ors.

Citation: 2022 LiveLaw (Ker) 17

Click Here To Read/Download The Order