Arbitration | Article 227 Can't Be Ordinarily Invoked To Challenge Rejection Of S.16 Application By Arbitral Tribunal : Supreme Court

The Supreme Court on Tuesday (July 14) held that it is impermissible for the High Court to ordinarily interfere with, while exercising its supervisory jurisdiction, the decision of an Arbitral Tribunal rejecting the application under Section 16 of the Arbitration and Conciliation Act, challenging the jurisdiction of the tribunal.“…we hold that the High Court was not justified in entertaining the challenge under Article 227 of the Constitution and staying the arbitral proceedings. The remedy against the rejection of a Section 16 of the Act application strictly lies under Section 34 of the Act after the pronouncement of the final award. Hence, we deem it appropriate to set aside both the impugned orders of the High Court and dismiss the revision petition before the High Court.”, observed a bench of Justice KV Viswanathan and Justice Vijay Bishnoi, while setting aside the order of the Gauhati High Court, which had entertained a revision petition challenging an Arbitral Tribunal's rejection of a Section 16 application filed by non-signatory parties.The dispute stems from a partnership firm constituted in 1948 by the Bezboruah family. A partnership deed executed on November 16, 1976, contained an arbitration clause.After the plea seeking reference to an arbitration was rejected by the trial court and High Court, the Supreme Court, with the consent of parties, appointed a Sole Arbitrator to adjudicate the disputes. Respondent Nos. 1 to 3, though parties to the proceedings, did not contest the reference.Following the reference, the Arbitral Tribunal framed issues. Respondent Nos. 1 to 3 filed applications seeking deletion of their names, contending that being non-signatories, they were not bound by the arbitration agreement. The Tribunal rejected the applications on August 4, 2025.Aggrieved, Respondent Nos. 1 to 3 filed a revision petition under Article 227 before the Gauhati High Court. The High Court stayed the Tribunal's notices on September 2, 2025, and on January 28, 2026, held the revision petition maintainable.Aggrieved the appellant moved to the Supreme Court.Setting aside the impugned order, the judgment authored by Justice Bishnoi observed that the Act is a "self-contained code" and Section 5 restricts judicial intervention except where expressly contemplated under the Act. Section 16 empowers the Arbitral Tribunal to rule on its own jurisdiction under the doctrine of kompetenz-kompetenz.The Court noted that the High Court committed an egregious error in entertaining the revision petition under Article 227, as the interference under Article 227 is permissible only in cases of "patent lack of inherent jurisdiction."“In cases involving the joinder of non-signatory parties, the referral court is only required to prima facie rule on the existence of the arbitration agreement, leaving the intricate determination of whether the non-signatory is indeed bound by the agreement to the Arbitral Tribunal. This interpretation gives true effect to the doctrine of kompetenz-kompetenz enshrined under Section 16 of the Act, which empowers the Arbitral Tribunal to rule on its own jurisdiction. Therefore, the Arbitral Tribunal possessed the absolute competence to decide the question as to whether Respondent Nos. 1 to 3 were veritable parties to the arbitration agreement, notwithstanding their non-signatory status and hence 28 the order of the Tribunal in the present case ought not have been challenged by filing an Article 227 Petition before the High Court.”, the Court observed.High Court's Must Record Prima Facie Finding Regarding Patent lack of inherent jurisdiction “…this is a settled position of law that the High Court must exercise extreme circumspection while invoking its supervisory jurisdiction under Article 227 of the Constitution of India in matters challenging an Arbitral Tribunal's rejection of an application under Section 16 of the Act. In the absence of such a manifest jurisdictional defect, judicial interference at the interlocutory stage would be unwarranted and contrary to the legislative policy of minimal court intervention in arbitral proceedings. Orders passed by the Tribunal on an application under Section 16 of the Act are ordinarily amenable to challenge only under Section 34 of the Act upon the conclusion of the arbitral proceedings and the passing of the final award. It is always safe for the High Courts that, before entertaining revision petitions under Article 227 of the Constitution of India against the Orders passed by the Arbitral Tribunal, while exercising powers under Section 16 of the Act, it should record a prima facie finding regarding the patent lack of inherent jurisdiction and that too after providing an opportunity of hearing to the rival party/parties.”, the Court observed.In view of the aforesaid, the appeal was allowed.HeadnoteArbitration and Conciliation Act, 1996 - Section 16, Section 5, and Section 34 — Constitution of India — Article 227 — Maintainability of Revision Petition...

Arbitration | Article 227 Can't Be Ordinarily Invoked To Challenge Rejection Of S.16 Application By Arbitral Tribunal : Supreme Court

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Arbitration | Article 227 Can't Be Ordinarily Invoked To Challenge Rejection Of S.16 Application By Arbitral Tribunal : Supreme Court

Yash Mittal

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