In a significant ruling on the scope of judicial intervention in arbitration, the Gujarat High Court examined the delicate boundary between arbitral discretion and court oversight. The core issue before the Court was whether a High Court could intervene under Articles 226 and 227 of the Constitution to challenge an arbitral tribunal’s rejection of an amendment application to the Statement of Defense, particularly when new documents came to light after the proceedings had commenced. Read on to explore how the Court clarified the limits of judicial scrutiny and reinforced procedural autonomy in arbitration.
Brief Facts:
The case arose from obligations on the claimant to install and commission a 250 MW power plant by an agreed date, later extended. Under a related Implementation and Support Agreement, the claimant was also required to lay 33 KV power cables connecting the plant to an internal pooling station to be set up by the respondent. The respondent contended that until the commissioning and cabling were completed, the pooling station was secondary and no loss occurred.
The claimant initiated arbitral proceedings alleging breach of contract by the respondent and claimed damages of approximately Rs. 150 crores, asserting that the plant was operational by the extended date but could not sell power due to the respondent’s failure in evacuation infrastructure. The respondent, however, submitted official communications from the Chief Electrical Inspector General showing that power evacuation was not possible until a significantly later date, contradicting the claimant’s claim of readiness.
Subsequently, the respondent filed an application to amend its Statement of Defense to include this newly discovered material. The tribunal allowed filing additional affidavits but rejected the amendment application, leading to the present petition challenging the tribunal’s decision.
Contentions of the Petitioner:
The petitioner contended that the tribunal erred in rejecting the amendment application and alleged malafide conduct by the claimant in submitting incorrect statements regarding the commissioning certificate. It argued that the newly discovered documents were crucial and went to the root of the matter. The petitioner maintained that the amendment application was filed promptly after the discovery of these documents and would not prejudice the claimant. It also submitted that the tribunal wrongly relied on procedural provisions from the Civil Procedure Code instead of the Arbitration Act’s broader amendment powers.
Contentions of the Respondent:
The respondent opposed the petition, arguing that writ jurisdiction should not be invoked to interfere with arbitration proceedings. It contended that the tribunal correctly rejected the amendment application due to gross delay and lack of due diligence on the petitioner’s part, as the documents were available or accessible earlier. The respondent denied any suppression of facts or fraud and characterized the tribunal’s order as a well-reasoned exercise of discretion.
Court’s Observations:
The Court considered the scope for writ jurisdiction under Article 226 and Article 227 of the Constitution in challenging arbitral tribunal orders, observing that such interference is limited and permissible only under exceptional circumstances. The Court observed, “Interference is permissible only if the order is completely perverse i.e. that the perversity must stare in the face. High Courts ought to discourage litigation which necessarily interfere with the arbitral process… The power should be exercised in ‘exceptional rarity’ or if there is ‘bad faith’ which is shown. Efficiency of the arbitral process ought not to be allowed to diminish and hence interdicting the arbitral process should be completely avoided.”
Applying these principles, the Court held that the tribunal’s order was a plausible exercise of discretion, stating, “The impugned order does not pass the litmus test of being either ‘perverse’ or passed in ‘bad faith’ so as to warrant judicial interference of this Court. Apart from the order being a plausible view of the Learned Arbitral Tribunal, the same can by no stretch of imagination be termed as an order that is so ‘exceptional’ or ‘rare’ that it would shock the conscience of a reasonable person."
The Court cautioned against excessive judicial oversight of procedural orders in arbitration and stated, “If writ jurisdiction either under Article 226 or under Article 227 of Constitution of India is exercised to supervise or rectify procedural lapses of the arbitral tribunals, then it would open a pandora’s box where each procedural order prejudicial to the aggrieved party would be challenged.”
Regarding due diligence, the Court agreed with the tribunal that the petitioner failed to explain why the new pleas and documents were not brought earlier. The Court observed, “In respect of due diligence, Learned Senior Advocate submitted that the original respondent had thoroughly failed in proving that it had exercised due diligence since the original respondent had not explained why these pleas were not taken earlier, despite being aware of the same set of facts since filing of SOC.”
The decision of the Court:
In the light of the foregoing discussion, the Court dismissed the petition as not entertainable under Article 226 and Article 227 of the Constitution, holding that the order challenged was neither perverse nor tainted by bad faith. It recognized the need to preserve arbitration’s autonomy and efficiency by limiting judicial intervention to exceptional cases only. The parties were at liberty to pursue remedies under the Arbitration and Conciliation Act, 1996, at appropriate stages.
Case Title: Gujarat Power Corporation Limited Vs. Tata Power Renewable Energy Limited
Case No: R/Special Civil Application No. 6910 of 2025
Coram: Justice Mauna M. Bhatt
Advocate for Appellant: Advs. Kamal Trivedi, Anal S Shah, Vinay Bairahra, Pranjal Buch
Advocate for Respondent: Advs. Mihir Thakore, Shaan M Munshaw, Shryeshth Sharma, Aakash Lamba, Kunal Veer
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