The Hon'ble Apex Court in Serosoft Solutions Pvt. Ltd. v. Dester Capital Advisors Pvt. Ltd1 has upheld the Arbitral Tribunal's autonomy while setting aside a judgment (herein after referred to as 'Impugned Judgment') wherein while exercising its supervisory jurisdiction under Article 227 of the Constitution of India, the High Court had granted the Respondent (Claimant) one more opportunity to cross-examine the Appellant's Witness (Respondent). The Apex Court has further reiterated that the interference of the Courts under the umbrella of Article 226 /227 is permitted only under grave perversity, exceptional rarity and bad faith.
- Background of the Dispute:
The parties to the dispute had entered into a Client Service Agreement for provision of educational software and related services. Disputes arose between the parties and the dispute resolution clause was invoked, leading to the constitution of the Arbitral Tribunal. The arbitral proceedings were initiated after the constitution of the Tribunal, with the parties submitting their statements of claim and defense. Pursuant thereto cross-examinations of the Respondent/Claimant's witnesses were conducted and concluded. However, issues arose during the cross-examination of the Appellant/Respondent's Witnesses. The Respondent/Claimant could not conduct the cross examination in a timely manner, despite being granted multiple opportunities. The parties consequently agreed to extend the Tribunal's mandate by six months. After the cross examination was resumed post order of the Court, the Respondent/Claimant again sought time to cross examine the Appellant/ Respondent's Witness. The Arbitral Tribunal rejected the request, emphasizing the time-bound nature of the proceedings and the Respondent/Claimant's lack of preparedness and further directed that the final arguments be concluded. The Respondent/Claimant challenged the said order of the Arbitral Tribunal by filing a petition under Article 227 of the Constitution seeking direction from the Hon'ble Court to direct the Arbitral Tribunal for providing further opportunity to the Respondent/Claimant to cross-examine Appellant/ Respondent's Witness. The Hon'ble High Court, in view of the exceptional circumstances in its opinion, directed the Arbitral Tribunal to grant further opportunity to the Respondent/ Claimant to cross-examine Appellant/ Respondent's Witness.
The Appellant/ Respondent had impugned the above-mentioned order of the Hon'ble High Court before the Apex Court.
The main issue before the Apex Court was whether the High Court had correctly exercised its supervisory jurisdiction under Article 227 of the Constitution of India in granting the Respondent/ Claimant one more opportunity to cross examine the Appellant/Respondent's Witness despite the Arbitral Tribunal having already rejected this request.
- Analysis and Findings
The Apex Court first discussed Chapter V of the Arbitration and Conciliation Act, 1996 (herein after referred to as the "Act"), while emphasizing that the conduct of arbitral proceedings is first and foremost subject to the equal treatment of parties and how each party should be given equal opportunity to present its entire case. However, while discussing the above, the Apex Court, more importantly pointed out the obligation of the judicial authorities to exercise restraint in interfering with matters governed under Part I of the Act relating to arbitration agreement, composition and jurisdiction of the Arbitral Tribunal, the conduct of proceedings and making, challenge and enforcement of award.
The Apex Court also stated that the High Court has relied on its own judgment to justify its interference and extension of time2 discussing the conditions for exercising the jurisdiction under Article 226/227. Some of these conditions relied upon by the High Court were enunciated in Surender Kumar Singhal v. Arun Kumar3 after considering various decisions of the Supreme Court.4 Some of the following principles that have been settled by the Courts over the period of time were discussed by the High Court in the Impugned Judgment:
- "Interference is permissible only if the order is completely perverse i.e. that the perversity must stare in the face.
- High Courts ought to discourage litigation which necessarily interfere with the arbitral process.
- Excessive judicial interference in the arbitral process is not encouraged.
- It is prudent not to exercise jurisdiction under Articles 226/227.
- The power should be exercised in 'exceptional rarity' or if there is 'bad faith' which is shown.
- Efficiency of the arbitral process ought not to be allowed to diminish and hence interdicting the arbitral process should be completely avoided."
After having discussed the above, the Hon'ble Apex Court was of the opinion that the Arbitral Tribunal had provided sufficient opportunity to the parties to cross-examinethe witnesses. The Hon'ble Apex Court reiterated that the High Court should have restrained itself from interfering with the Arbitral order, there being no perversity or exceptional rarity in the same. The Hon'ble Apex Court highlighted that the High Court only discussed that the cross examination is one of the most valuable and effective means of discovering the truth when the the only question that required consideration was whether there was a denial of opportunity to the Respondent/ Claimant for an effective cross examination of the Appellant's Witness. Accordingly, the Hon'ble Apex Court set aside the judgment of the High Court allowing the appeals and further directed the Arbitral Tribunal to resume the proceedings.
- Conclusion:
Excessive judicial intervention in arbitral proceedings needs to be discouraged, as the same undermines the efficiency and integrity of the arbitration process. By setting aside the High Court's order, the Apex Court has reinforced the importance of judicial restraint, ensuring that arbitral proceedings remain free from unwarranted disruptions and that parties adhere to the established timelines and procedures.
This judgment serves as a reminder that the Courts should exercise caution when considering petitions under Articles 226/227 of the Constitution in the context of arbitration and judicial intervention should only be resorted to in cases where there is clear perversity, bad faith, or exceptional rarity. Arbitral tribunals should be allowed to manage proceedings with minimal interference to ensure the efficiency and integrity of the process. This will further help in strengthening Arbitral Tribunal's autonomy and also streamline the arbitration process, and while maintaining judicial efficiency ensuring that the dispute resolution mechanism remains effective, independent, and free from excessive interference.
Footnotes
1 Serosoft Solutions Pvt. Ltd. v. Dester Capital Advisors Pvt. Ltd (2025) SCC Online SC 22
2 Kelvin Air Conditioning and Ventilation System Pvt. Ltd. v. Triumph Reality Pvt. Ltd., 2024 SCC OnLine Del 7137,
3 Surender Kumar Singhal v. Arun Kumar3 Bhalotia, 2021 SCC OnLine Del 3708
4 Deep Industries Ltd. v. ONGC Ltd., (2020) 15 SCC 706; Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1 SCC (Civ) 374; Punjab State Power Corpn. Ltd. v. EMTA Coal Ltd., (2020) 17 SCC 93 : (2021) 4 SCC (Civ) 341; Virtual Perception OPC (P) Ltd. v. Panasonic India (P) Ltd., 2022 SCC OnLine Del 566 and Ambience Projects & Infrastructure (P) Ltd. v. Neeraj Bindal, 2021 SCC OnLine Del 4023]
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