Wednesday, 24 July 2019

Whether any order passed by arbitral tribunal during arbitration can be challenged under Article 226 or 227 of Constitution?

 Having heard learned counsel for the parties
at length, we find that the judgment of the High
Court is liable to be set aside on one ground alone.
The High Court entertained a writ petition under
Article 227 of the Constitution of India against an
order of the learned District Judge, Gautam Budh
Nagar purportedly passed under Section 20 of the
Arbitration and Conciliation Act, 1996(for short,
"the Arbitration Act") read with Section 19 of the
Micro, Small & Medium Enterprises Development Act,
2006 (for short, "the MSME Act"). This application
was made to the District Judge by respondent No. 1-
Jayprakash Associates Ltd. against a partial award
made under Section 16 of the Arbitration Act. Such
an application was not tenable vide Section 16 (6) of
the Arbitration Act. Since such an application was
not tenable, we fail to understand how in a writ

petition filed against an order made by the District
Judge in an untenable application, the High Court
could have set aside the partial award. This is
clearly contrary to law. This court in the case of
SBP & Co. vs. Patel Engineering Ltd. & Anr., reported
in (2005) 8 SCC 618 in Paragraph No. 45 held as
follows.
"45.It is seen that some High Courts
have proceeded on the basis that any
order passed by an arbitral tribunal
during arbitration, would be capable
of being challenged under Article 226
or 227 of the Constitution of India.
We see no warrant for such an
approach. Section 37 makes certain
orders of the arbitral tribunal
appealable. Under Section 34, the
aggrieved party has an avenue for
ventilating his grievances against
the award including any in-between
orders that might have been passed by
the arbitral tribunal acting under
Section 16 of the Act. The party
aggrieved by any order of the
arbitral tribunal, unless has a right
of appeal under Section 37 of the
Act, has to wait until the award is
passed by the Tribunal. This appears
to be the scheme of the Act. The
arbitral tribunal is after all, the
creature of a contract between the
parties, the arbitration agreement,
even though if the occasion arises,
the Chief Justice may constitute it
based on the contract between the
parties. But that would not alter the
status of the arbitral tribunal. It
will still be a forum chosen by the
parties by agreement. We, therefore,
disapprove of the stand adopted by
some of the High Courts that any
order passed by the arbitral tribunal

is capable of being corrected by the
High Court under Article 226 or 227
of the Constitution of India. Such an
intervention by the High Courts is
not permissible."
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 7117-7118 OF 2017

M/S. STERLING INDUSTRIES Vs JAYPRAKASH ASSOCIATES LTD.

Dated:JULY 10,2019.


O R D E R
1. Having heard learned counsel for the parties
at length, we find that the judgment of the High
Court is liable to be set aside on one ground alone.
The High Court entertained a writ petition under
Article 227 of the Constitution of India against an
order of the learned District Judge, Gautam Budh
Nagar purportedly passed under Section 20 of the
Arbitration and Conciliation Act, 1996(for short,
"the Arbitration Act") read with Section 19 of the
Micro, Small & Medium Enterprises Development Act,
2006 (for short, "the MSME Act"). This application
was made to the District Judge by respondent No. 1-
Jayprakash Associates Ltd. against a partial award
made under Section 16 of the Arbitration Act. Such
an application was not tenable vide Section 16 (6) of
the Arbitration Act. Since such an application was
not tenable, we fail to understand how in a writ

petition filed against an order made by the District
Judge in an untenable application, the High Court
could have set aside the partial award. This is
clearly contrary to law. This court in the case of
SBP & Co. vs. Patel Engineering Ltd. & Anr., reported
in (2005) 8 SCC 618 in Paragraph No. 45 held as
follows.
"45.It is seen that some High Courts
have proceeded on the basis that any
order passed by an arbitral tribunal
during arbitration, would be capable
of being challenged under Article 226
or 227 of the Constitution of India.
We see no warrant for such an
approach. Section 37 makes certain
orders of the arbitral tribunal
appealable. Under Section 34, the
aggrieved party has an avenue for
ventilating his grievances against
the award including any in-between
orders that might have been passed by
the arbitral tribunal acting under
Section 16 of the Act. The party
aggrieved by any order of the
arbitral tribunal, unless has a right
of appeal under Section 37 of the
Act, has to wait until the award is
passed by the Tribunal. This appears
to be the scheme of the Act. The
arbitral tribunal is after all, the
creature of a contract between the
parties, the arbitration agreement,
even though if the occasion arises,
the Chief Justice may constitute it
based on the contract between the
parties. But that would not alter the
status of the arbitral tribunal. It
will still be a forum chosen by the
parties by agreement. We, therefore,
disapprove of the stand adopted by
some of the High Courts that any
order passed by the arbitral tribunal

is capable of being corrected by the
High Court under Article 226 or 227
of the Constitution of India. Such an
intervention by the High Courts is
not permissible."
2. In these circumstances, we are of the view
that the judgment of the High Court is liable to be
set aside. Ordered accordingly.
3. Shri S.B. Upadhyay, learned senior counsel
appearing on behalf of respondent No. 1-Jayprakash
Associates Ltd. consents to this order and seeks
liberty to challenge the award as and when it is
finally passed under the MSME Act in accordance with
law. Such liberty is granted. However, there is
some dispute about whether the final award has been
passed. It is not necessary for us to adjudicate on
this aspect.
4. The appeals are disposed of accordingly.
..................J.
[ S.A. BOBDE ]
...................J.
[ R. SUBHASH REDDY ]
....................J.
[ B.R. GAVAI ]
NEW DELHI,
JULY 10,2019.

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