The single Bench of Justice Bivas Pattanayak of the Calcutta High Court in the case of M.D. Creations & Others Vs Ashok Kumar Gupta held that application under Article 227 of the Constitution of India can be invoked on the ground of patent lack in inherent jurisdiction or exceptional circumstances or ‘bad faith’ of the opposite party.
Brief Facts:
The Petitioners were granted access by the opposing party-claimant to the premises for the purpose of conducting their ready-made clothing business pursuant to a leave and license agreement that was lastly renewed on 27.06.2019.
Thereafter, the arbitration clause was invoked, the opposite party filed an application under Section 11 of the Arbitration and conciliation act 1996 (hereinafter referred to as the “Act”), and the sole arbitrator was appointed. During the proceedings before the arbitrator, the application under Section 16 of the act was filed by the Petitioner challenging the jurisdiction of the arbitrator. However, the application was dismissed. Due to this Petitioner filed the present revisional application.
Contentions of the Petitioner:
It was contended that in accordance with Section 37 of the Act, if the Arbitrator accepts a party's plea, there is a right of appeal; however, if the arbitrator rejects the plea made by the party, there is no right of appeal under the Act at all.
Because the arbitrator rejected the petitioners' plea regarding their application under Section 16 of the Act, the Petitioners were left with no choice but to submit a revisional application in accordance with Article 227 of the Indian Constitution.
It was further argued that the legislature used the word ‘accept’ in Section 37 not ‘entertain’ as in Section 9(3) of the Act. Also, the power conferred by Article 227 of the Constitution of India is not limited to administrative supervision alone; it also includes the right to judicial review when inferior courts or tribunals act illegally, exceed their authority, refuse to exercise their jurisdiction, or commit manifest injustice.
Contentions of the Opposite Party:
It was contended that the application which was under challenge was the subject matter of challenge under Section 34 of the act.
It was further contended that the petitioners' application under Article 227 of the Indian Constitution is not maintainable because they have a remedy available to them under the Act itself to challenge the arbitrator's decision. In such a case, the court may order the party to exhaust all alternative remedies first before pursuing a constitutional remedy.
Observations of the Court:
The issue to be adjudicated by the Court was whether an order of arbitrator dismissing an application under Section 16 of the Arbitration and Conciliation Act, 1996 raising objection as to its jurisdiction be challenged by way of revision under Article 227 of the Constitution of India or under what circumstances
The Court observed that the arbitral tribunal has the power to determine whether it has jurisdiction to decide the dispute under Section 16 of the Arbitration and Conciliation Act, 1996, in accordance with the kompetenz doctrine.
The arbitral tribunal may also address any challenges to the existence or legality of the arbitration agreement. The clause further stipulates that a defence for challenging the arbitral tribunal's jurisdiction must be brought before it. Before submitting the statement of defence, this objection should be made. Additionally, a party is not prevented from making such an objection simply because he took part in the appointment of the arbitrator. Additionally, it stipulates that if an issue is brought up during the arbitration proceedings that is alleged to be outside the arbitral tribunal's purview of authority, an objection that the arbitral tribunal is doing so must be submitted immediately.
It was observed that When the aggrieved party's claim challenging the arbitrator's jurisdictional competency is rejected, he must wait until the final award has been rendered before submitting an application to set aside the arbitral ruling under Section 34 of the Act. There isn't a distinct challenge that may be made that exclusively addresses the competency of the arbitral tribunal. Therefore, the aggrieved party cannot be said to be without recourse in the event that the application under Section 16 (2) of the Act is denied because the Arbitration Act allows for a procedure of challenge under Section 34 of the Act.
It was noted that the petition under Article 227 of the Constitution of India can be filed challenging the order of the learned tribunal for dismissing the application under Section 16 of the Act only on the ground that there is a patent lack in inherent jurisdiction. however, in the present case, the jurisdiction was challenging on the ground that the agreement containing arbitration clause was unstamped. There is nothing on record which shows that there was patent inherent lack of jurisdiction.
Based on these considerations, the High Court was of the view that the application under Article 227 of the Constitution of India is not maintainable.
The decision of the Court:
With the above direction, the Calcutta High Court dismissed the present revisional application.
Case title: M.D. Creations & Others Vs Ashok Kumar Gupta
Coram: Hon’ble Mr. Justice Bivas Pattanayak
Citation: C.O. 2545 of 2022
Advocates for the Petitioner: Advs. Mr. Rahul Karmakar, Mr. S. K. Podder, Advocate, Mr. Sounak Mukherjee,
Advocates for the opposite party: Advs. Mr. Farhan Gaffar, Ms. Sagufta Saba Yasmin, Mr. Pathik Bandhu Banerjee
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