Justice Bhargav D. Karia, in the case of GTPL Hathway Ltd. v. Strategic Marketing Pvt. Ltd. on 20 April 2020 has passed an order stating that an order passed during the pendency of arbitral proceedings cannot be challenged under Article 226 and/or 227 of the Constitution.
The impugned order dated 14 February 2019 was passed by the Arbitration Tribunal, dismissing the primary objection application filed by the petitioner. A contract was executed on 5th December 2014 between the petitioner and the respondent for establishing a Customer Care Centre and accordingly the petitioner had outsourced customer call services to the respondent. The respondent with two other employees had used a computer manipulation to claim and raise false and inflated invoices based on an exaggerated number of persons employed by the respondent for the petitioner’s service call centre.
After filing a petition under section 11 of the Arbitration and Conciliation Act, 1996, the respondent filed his statement of claim and thereafter the petitioner filed his counterclaim against the same. The petitioner also made an application seeking certain documents from the respondent which is still pending for consideration by the learned arbitrator. The Arbitral Tribunal vide order dated 19 December 2018 directed to take on record the preliminary statement of defence and counterclaim and observed that it would be open for the petitioner to amend the same in accordance with the law.
After hearing the parties, the Arbitral Tribunal vide order dated 14 February 2019, dismissed the preliminary objection application filed by the petitioner. Being aggrieved by the said order rejecting the application filed by the petitioner raising a preliminary objection, the petitioner has preferred the present petition.
Issues before the Court
In the present petition, the primary issue before Justice Bhargav D. Karia was whether an order passed during the pendency of Arbitration proceedings be challenged by certiorari under Articles 226 and 227 of the Constitution.
Petitioner’s Arguments
Relying on the obiter dictum laid down in the cases of
- M/s S.B.P and Co. v. M/s Patel Engineering Ltd. and Anr (2005) 8 SCC 618,
- National Thermal Corporation Limited v. Siemens Atkeingesellschaft (2007) 4 SCC 451,
- Punjab Agro Industries Corpn. Ltd. v. Kewal Singh Dhillon (2008) 10 SCC 128,
- Vidya Drolia v. Durga Trading Company 2019 SCC Online SC 358,
- M/s Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman,
- Duro Felguera SA v. Gangavaram Port Limited (2017) 9 SCC 729,
- State of Rajasthan v. Lord Northbrook 2019 SCC Online SCC 1117,
- Ameet Lalchand Shah and ors. v. Rishabh Enterprises and ors. AIR 2018 SC 3041,
- Radhey Shyam and Anr. v. Shhabi Natha and ors. (2015) 5 SCC 423,
- M/s. Indian Farmers Fertilizers Cooperative Limited v. M/s Bharda Products,
- State of West Bengal v. Sarkar & Sarkar 2018 (12) SCC 736,
the advocate on behalf of petitioner submitted that the order passed by the Arbitral Tribunal can be challenged by a writ petition under Article 226 and 227 of the Constitution of India. The provisions of the Arbitration Act 1996 also provide an alternative mechanism of adjudication of disputes under the Code of Civil Procedure Act, 1908. The Supreme Court as well as other High Courts, including the High Court of Gujarat, have time and again entertained such petitions challenging the order passed by the Arbitration Tribunal.
Arguments of the Respondent
The advocate on behalf of the respondent submitted that in the case of M/s S.B.P and Co. v. M/s Patel Engineering Ltd. and Anr (2005) 8 SCC 618 the constitution bench of the Supreme Court has disproved that stand that any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 and 227 of the Constitution of India and has categorically held that such intervention by the High Court is not permissible.
This was also restricted by Section 5 and 16 of the Act. It was submitted that any remedy available to the petitioner lay in Section 34 of the Act and hence, the petitioner’s challenge to the arbitral award in question could not be moved before the High Court under Article 226 and 22.
In the case of M/s. Deep Industries limited v. Oil and Natural Gas Corporation, the seven-judge bench of the Apex Court has also referred to the object of the Arbitration Act 1996 which is minimizing the judicial intervention and that this object should always be kept at the forefront while deciding a petition under Article 227 of the Constitution against the proceedings that are decided under the 1996 Act. It also held that the policy of the Arbitration Act is speedy disposal and it is a “self-contained” Code that deals with all cases.
Order of the High Court
The court considered the settled legal proposition, considering the policy, objects and the provisions of the Act and held that since the Arbitration Act, 1996 is a special act and a self-contained code dealing with Arbitration, an order passed during the Arbitration proceedings by the Arbitral Tribunal cannot be challenged under Articles 226 and 227 of the Constitution. Hence, the petition was dismissed.
While dismissing the petition, Justice Karia made it clear that it was being done only because the order had been passed during the Arbitration proceedings and not based on the merits of the case. Hence, both the sides were welcome to raise the contentions based on the merits before the appropriate forum in an appropriate proceeding at an appropriate in accordance with the law. All interim reliefs were vacated and the request of the learned advocate of the petitioner to stay the operation, implementation and the execution of the judgement was also rejected.
Mr Sunit Shah and Mr Yatin Soni were the Advocates on behalf of the petitioner.
Mr Shivang J. Shukla was the Advocate on behalf of the respondents.
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