HC: Arbitral Tribunal has to decide jurisdictional objections u/s 16 of Arbitration & Conciliation Act at a preliminary stage [Read Order]

The Delhi High Court has ruled that an arbitral tribunal must decide the objections under Section 16 of the Arbitration and Conciliation Act on an early basis, as a preliminary ground. The order was passed by a single- judge Bench of Justice Prathiba M Singh.

Factual Background

In the present case, a writ petition was instituted by the petitioner against an order of the arbitrator refusing to rule on its jurisdiction to entertain any claims.

Case of the Arbitrator

The arbitrator stated that a final decision on the application of the Petitioner under Section 16 could not be taken without any further evidence in the matter, therefore, would be decided at the final stage.

Observations of the Court

The Court also analyzed the scope of its interference under Article 226 of the Constitution. It stated that although a petition stands maintainable under Article 226/227 against an arbitral tribunal, intervention can only be accepted if the order is completely perverse.

The sufficiency of the arbitral process, the Court said, must not be allowed to blur.

“For interference under Article 226/227, there have to be “exceptional circumstances”. Though interference is permissible, unless and until the order is so perverse that it is plenty lacking in inherent jurisdiction, the writ court would not interfere” the Court emphasized.

In view of the arbitrator’s order, the Court held the fact situation did not present an “exceptional rarity” requiring the exercise of jurisdiction.

“Arbitrator was of the opinion that a final decision on the application of the Petitioners under Section 16 cannot be taken, without further evidence in the matter. The property which the petitioners have purchased as per the Arbitrator is clearly subject matter of the arbitral proceedings and thus the Id. Arbitrator after evidence being recorded may be required to modify relief in the same manner. Thus, the tests for interference under Article 226/227 being extremely strict, this Court does not deem it appropriate to interfere under Article 227.”

However, the question with respect to jurisdiction raised by the Petitioners would have to decide on a prior basis, prior to the passing of the final award.

Case Details

Before: Delhi High Court

Case Title: Surendar Kumar v. Arun Kumar

Coram: Hon’ble Justice Prathiba M Singh

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