Arbitration | Writ Jurisdiction Can't Be Invoked To Challenge Arbitrator's Decision Under Section 16 : Supreme Court

The Supreme Court has held that while exercising its Writ Jurisdiction, it is impermissible for the High Courts to interfere with the arbitral tribunal's order passed under Section 16 of the Arbitration & Conciliation Act, 1996. “It was not open for the learned Single Judge in exercise of writ jurisdiction to enter into the merits of the dispute while adjudicating the challenge to an order passed under Section 16 of the A and C Act.”, observed a bench of Justice J.K. Maheshwari and Justice Atul S. Chandurkar, while refusing to interfere with the Orissa High Court's Division Bench judgment, which had set aside the Single Judge decision to interfere with the arbitral tribunal's decision under Section 16 of the Act, while exercising the Writ Jurisdiction. The case arose from an agreement for sale of iron ore executed on February 12, 2004 between M/s Tarini Prasad Mohanty (mine owner) and M/s Sunflag Iron and Steel Company Limited (SISCO). When disputes arose, the matter was referred to a Sole Arbitrator. During the arbitration proceedings, the mine owner filed an application under Section 16 of the A&C Act on February 5, 2024, contending that the agreement and supplementary agreements were insufficiently stamped. According to the mine owner, the contract was in the nature of 'conveyance' requiring stamping under Article 23 of Schedule I to the Indian Stamp Act, 1899, and not under Article 5(c) as claimed by SISCO. The Arbitrator rejected the objection on May 30, 2024, holding that the agreement was "an agreement to sell" and not "conveyance," and that it had been properly stamped. Ultimately, the arbitrator decided to continue the arbitration. Aggrieved by which, the mine owner filed a Writ petition before the High Court, where the Single Judge interfered with the Arbitrator's decision, prompting the Respondent to file intra-court appeal before the Division Bench. The Division Bench set aside the Single Judge decision, holding that it is impermissible to interfere with the arbitrator's decision under Section 16, in exercise of a Writ Jurisdiction, rather a proper mechanism would have been to file an application under Section 34 of the Act seeking a setting aside of an award. Aggrieved by the Division bench decision, the mine owner appealed to the Supreme Court.Affirming the Division Bench decision, the judgment authored by Justice Chandurkar found that the Single Judge erred in interfering with the Arbitral Tribunal's decision under Section 16, as the Arbitrator is duly empowered to decide on the issue of a stamping of a document, as per the seven-judge bench of In Re: Interplay. “The learned Single Judge erred in interfering with the order passed by the learned Arbitrator under Section 16 of the A and C Act. It was not a case of complete lack of inherent jurisdiction on the part of the learned Arbitrator so as to enable writ jurisdiction being invoked. The Constitution Bench in Re: Interplay (supra) having held that the issue as to stamping of a document was one that fell within the ambit of the Arbitral Tribunal, the decision taken by the learned Arbitrator under Section 16 of the A and C Act was thus within its jurisdiction. Merely by stating that the circumstances were 'exceptional', writ jurisdiction could not have been exercised.” the court observed. The Court agreed with the Division Bench ruling, stating that “assuming that the order passed by the learned Arbitrator under Section 16 of the A and C Act was erroneous in law, the same could have been challenged under Section 34 of the A and C Act at the conclusion of the proceedings as provided under Section 16(6).” “We, therefore, find that the learned Single Judge was not justified in going into the merits of dispute between the parties as regards the nature of the agreements while exercising writ jurisdiction. An exercise requiring interpretation of the various agreements ought not to have been undertaken in exercise of extraordinary jurisdiction,”, the Court held. The appeal was dismissed.HeadnoteArbitration and Conciliation Act, 1996; Section 16, 34, 37 – Constitution of India, Articles 226/227 – Challenge to order passed by Arbitral Tribunal under Section 16 – Maintainability of Writ Petition – Held, the scheme of the Act envisages minimal judicial interference in arbitral proceedings – Except in cases where the order is so perverse that a patent lack of inherent jurisdiction stares one in the face, the High Court should not entertain a challenge to a Section 16 order under Article 226/227 – The party must wait for the passing of the final award and avail the remedy under Section 34.Arbitration and Conciliation Act, 1996; Section 16 – Indian Stamp Act, 1899 – Objection regarding stamping of agreement – Whether such objection can be entertained by Writ Court at a pre-arbitral stage – Held, non stamping or inadequate stamping is a curable defect and does not render an agreement void – Any objection in relation to the stamping of the...

Arbitration | Writ Jurisdiction Can't Be Invoked To Challenge Arbitrator's Decision Under Section 16 : Supreme Court

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Arbitration | Writ Jurisdiction Can't Be Invoked To Challenge Arbitrator's Decision Under Section 16 : Supreme Court

Yash Mittal

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