Appellate Review: A new trend in Arbitration Cases?

The Author, Manik Ahluwalia is practising advocate currently working as a Senior Associate with P&A Law Offices

The Supreme Court in its recent judgment of Patel Engineering Ltd. v. North Eastern Electric Power Corporation Limited^[1] (“judgment”) pronounced on May 22, 2020 enunciated a very crucial position of law pertaining to “patently illegality” in a domestic arbitration award. It held that patently illegality shall be a ground for setting aside a domestic Arbitral Award based upon the newly inserted sub-section (2A)^[2] in Section 34 of the Arbitration and Conciliation Act, 1996 (“act”). 

The law as laid down by the Hon’ble Supreme Court shall have some consequence to the ambition of India in becoming an Arbitration Hub. However, the present article is not concerned with the substantive law laid by the  Supreme Court but rather the procedure adopted therein while considering the entire case, which makes for a very interesting read.

The method and procedure adopted by the Supreme Court while considering the Special Leave Petition is in divergence from the standard practice of the Court and established principles of law.

The facts of the case were that a Sole Arbitrator had passed three declaratory awards in favour of Patel Engineering Limited (“PEL”) and against North Eastern Electric Power Corporation Limited (“NEEPCL”). NEEPCL filed three applications under Section 34 of the act challenging the award before the concerned Court in Shillong. The Shillong Court rejected the Section 34 applications filed by NEEPCL and upheld all the three awards. NEEPCL filed appeals under Section 37 of the act against the said rejection orders before the High Court of Meghalaya. The High Court allowed the appeals filed by NEEPCL and set aside the awards vide its common judgments dated 26.02.2019 (“main order”).

PEL being aggrieved by the order of the High Court filed Special Leave Petitions bearing no. 13629-13631 of 2019 before the Supreme Court. The Supreme Court refused to interfere with the main order and dismissed the said Special Leave Petitions vide order dated 19.07.2019. Subsequent to this dismissal, PEL filed review petitions before the High Court contending that the main order suffers from errors apparent on the face. PEL raised various grounds including non-consideration of Arbitration and Conciliation (Amendment) Act, 2015. The review was also dismissed by the High Court vide its order dated 10.10.2019 for the reasons that no ground for review had been made out and that there was delay in filing the application for review (“review order”). Against the review order, PEL moved to the Supreme Court wherein the judgment was passed.

What is noteworthy here is that the Special Leave Petitions were filed only against the review order without impugning the main order. The Supreme Court not only considered the Special Leave Petitions but also passed a judgment clarifying an important aspect of law concerning the Arbitrations in the Country.

The judgment duly records the submissions made by the Petitioner i.e. PEL and it seems that the Petitioner was aware of the procedural diversion made by it while filing the Special Leave Petitions. The Petitioner however took recourse of Article 136 of the Constitution to contend that the Supreme Court has residuary power which are exercisable outside the purview of the ordinary laws in cases where the needs of justice demand interference by the Supreme Court.

The Petitioner relied on what appears to be the obiter dicta of the judgment of Bussa Overseas and Properties Private Limited and Another v. Union of India and Another^[3](“Bussa”) to contend that though the provisions of Code of Civil Procedure, 1908 (“CPC”) bar an appeal against the order of the Court rejecting the review, it is not to be understood that that the same has curtailed the plenary jurisdiction of the Supreme Court under Article 136 of the Constitution.

The Respondent i.e. NEEPCL was not only aware of the omission made by PEL but raised the same as preliminary objection before the Supreme Court questioning the maintainability of the Special Leave Petitions. Interestingly, NEEPCL too was relying also on Bussa. However, the thrust of reliance was ratio of Bussa and not the obiter.

The Supreme Court in the judgment discusses and quotes Bussa at length. It takes note of the fact that the law as laid down in Bussa is a consistent view taken by the Supreme Court and further records that in the absence of the main order, the Supreme Court is obliged not to entertain a Special Leave Petition challenging only the order passed in review. The relevant para of the judgment is being reproduced herein for ready reference:

“10. After considering the Constitution Bench decision in Durga Shankar Mehta and number of other judgments, in Bussa Overseas, the Court held that consistency is the cornerstone of the administration of justice and courts have evolved and formulated a principle that if the basic judgment is not assailed and the challenge is only to the order passed in review, the Supreme Court is obliged not to entertain such special leave petitions.”

The Supreme Court notes that the requirement of not to entertainment a Special Leave Petition assailing only the review order is not discretionary but obligatory, thus leaving no room for any sort of diversion/divulgence from the settled position.

The Supreme Court despite making this observation and the obligatory requirement/settled position of the law however, continued to entertain the Special Leave Petitions of PEL. It is noteworthy that no observation or reasons were given as to why the divergence from the accepted/settled consistency was allowed. The para 12 of the judgments make a reference to the said issue however concludes the same by saying that it is not necessary to go into the question of maintainability of Special Leave Petitions. It also records that no liberty was taken by PEL for filing review when the earlier Special Leave Petitions were dismissed. However, the Supreme Court refused any further inclination on dealing with the issue. The said para 12 is being reproduced herein for ready reference:

“12. In our considered view, it is not necessary to go into the question of maintainability of these SLPs preferred against the order rejecting the review, after the challenge to the main judgment had been rejected in the earlier SLPs. As noted earlier, in this case, the judgment of the High Court under Section 37 of the Act was challenged before the Supreme Court and the SLPs were dismissed by the Supreme Court after hearing the Senior Counsel for the parties vide order dated 19.07.2019. Be it noted when the earlier SLPs were dismissed, no liberty was taken to file the review before the High Court. Be that as it may, we are not inclined to go into this aspect any further.”

The Supreme Court on earlier occasions also, even prior to Bussa, in its judgment of Municipal Corporation of Delhi vs Yashwant Singh Negi ^[4](“Yashwant Singh Negi”) had settled the same issue. In this judgment, the Supreme Court had refused to entertain a Special Leave Petition filed by the Municipal Corporation of Delhi as the main order had not been challenged by the Petitioner.  More recently, a division bench of Justice S.K. Kaul and Justice Indira Banerjee  relying on Yashwant Singh Negi had infact refused to entertain a Special Leave Petition^[5] vide its order dated 26.04.2019, as not maintainable on account of non-impugning of the main order.

It is pertinent to take note that the judgment of PEL has been authored by a Full Bench whereas Bussa and Yashwant Singh Negi were passed by Division Bench. A full bench thus is well empowered to over-rule any division bench judgment. However, the lack of closure on the issue by the full bench leaves a lot to be interpreted.

The Supreme Court despite entertaining the Special Leave Petitions ultimately dismissed the same however, (as stated above) the same was on merits. The Supreme Court it seems was of the view that the Special Leave Petition, though a lost cause on merits, has passed the procedural threshold as mandated under law. Although, had the Special Leave Petition been allowed the reaction from the legal fraternity would have been intriguing. The Supreme Court would have initiated or atleast given inception to the idea of a new form of jurisdiction i.e. Appellate Review.

The question whether appellate review is a possible circumstance has been left unanswered by the judgment however, since Bussa and Yashwant Singh Negi have not been overruled, they continue to be good law. But as the saying goes, law is a growing phenomenon and the first seed towards the new trend seems to have been sowed. Whether the seed grows further or dies or is taken out as weed is something only future can tell.

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