Recently, a three-judge Constitutional Bench of the Supreme Court, in Bhaven Construction vs. Executive Engineer Sardar Sarovar Narmada Nigam Limited and Another (Bhaven Construction)1 has observed that the High Courts' power of interference under Articles 226 and 227 of the Constitution of India (Constitution), in the context of arbitral proceedings, may be exercised only in "exceptional rarity". The three-judge bench while clarifying the term "exceptional rarity", has pointed out that such interference would be warranted only in cases wherein a party is left remediless under the Arbitration and Conciliation Act, 1996 (Arbitration Act) or a clear bad faith is shown by one of the parties.
The sole question that was before the hon'ble Supreme Court was that "whether the arbitral process could be interfered with under Article 226/227 of the Constitution of India, and under what circumstances?". While answering the above question, the bench has noted that the Arbitration Act is a Code in itself, and the said phrase is not merely perfunctory but has definite legal consequences. It was noted by the hon'ble court that one such consequence is spelled out under Section 5 of the Arbitration Act, which reads as "notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part". The court observed that the non-obstante clause is provided under Section 5 of the Arbitration Act in order to uphold the intention of the legislature as provided in the Preamble to adopt UNCITRAL Model Law and Rules to reduce the excessive judicial interference which is not contemplated under the Arbitration Act. The main objective of the Arbitration Act is to make 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 the courts in the arbitral process.
Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court should not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 or Section 34 of the Arbitration Act.
It is relevant to note that a seven-judge Constitutional Bench of the Supreme Court of India in its golden words had observed in the matter of S.B.P. and Company vs. Patel Engineering Limited and Others2 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 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 Arbitration Act even at an earlier stage.
The hierarchy of the legal framework, mandates that a legislative enactment cannot curtail a constitutional right. In Nivedita Sharma vs Cellular Operators Association of India3, the Supreme Court while referring to L. Chandra Kumar v. Union of India (1997) 3 SCC 2614, has held that there cannot be any dispute that the power of the High Courts to issue directions, orders or writs including writs in the nature of habeas corpus, certiorari, mandamus, quo warranto and prohibition under Article 226 of the Constitution is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation. However, it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the state and/or its agency/ instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, 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.
Similarly, the Supreme Court in the matter of M/s Deep Industries Limited vs. Oil and Natural Gas Corporation Limited5, interplayed Section 5 of the Arbitration Act and Article 227 of the Constitution and has held that there is no doubt whatsoever that if petitions were to be filed under Articles 226 or 227 of the Constitution against orders passed in appeals under Section 37 of the Arbitration Act, the entire arbitral process would be derailed and would not come to fruition for many years. The court further held that Article 227 of the Constitution is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same. Hence, the court observed that taking into account the statutory policy the interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction.
In this context, the High Court of Gujarat in GTPL Hathways Limited vs. Strategic Marketing Pvt. Limited6, has held that though Articles 226 and 227 are extraordinary powers conferred by the Constitution, the same ought to be exercised with extreme caution when a statute provided an alternative efficacious remedy, especially a statute which sought to limit judicial interference and is intended to be a self-contained code for arbitral proceedings. The High Court held that were it to hold otherwise, the legislative object of the Act would be defeated, as parties would be at liberty to challenge any and every order of the arbitral tribunal in writ proceedings. Doing so would disregard express statutory provisions of the Act that provided an alternate remedy.
CONCLUSION
Hence in Bhaven Construction, the hon'ble Supreme Court has held that therefore, it is prudent for a judge to not to exercise discretion to allow judicial interference beyond the procedure established under the enactment. The Supreme Court has held that 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 high standard set by the Supreme Court is in terms of the legislative intention to make the arbitration fair and efficient. In this context the court noted 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 observed that it is prudent for a judge to not exercise discretion to allow judicial interference beyond the procedure established under the enactment. The court highlighted that the opening phase of Section 34 read as 'Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3) and has emphasized that the use of term 'only' as occurring under the provision served two purposes of (i) making the enactment a complete code; and (ii) laying down the procedure. Thus, keeping in line with the well-established principle of minimum judicial interference, the Supreme Court has highlighted that the parties to an arbitration agreement must only seek adjudication within outlines of the Arbitration Act. The court has clarified that parties are not expected to resort to other statutory assistance unless they are left remediless or there is an element of bad faith involved.
Footnotes
1. Civil Appeal No. 14665 of 2015, decided on 06.01.2021
2. (2009)10SCC293
3. (2011) 14 SCC 337
4. (1997) 3 SCC 261
5. (2019) SCC Online SC 1602
6. Special Civil Application No. 4524 of 2019, decided on 20.04.2020
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