Delhi High Court
Ahmedabad Municipal Corporation vs Sgs India Private Limited on 29 May, 2025
Author: Sachin Datta
Bench: Sachin Datta
$~85
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 29.05.2025
+ W.P.(C) 7800/2025
AHMEDABAD MUNICIPAL CORPORATION .....Petitioner
Through: Ms. Aastha Tushar Mehta, Ms. Prerna
Mohapatra, Ms. Prina Sharma, Advs.
versus
SGS INDIA PRIVATE LIMITED .....Respondent
Through: Mr. Dayan Krishnan, Sr. Advocate
along with Mr. Rohit Gupta, Mr.
Kunal Vyas, Mr. Himanshu Satija,
Mr. Harsh Saxena and Ms. Ridhi
Ranjan, Advocates.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
SACHIN DATTA, J. (ORAL)
CM APPL.34440/2025 (Exemption)
1. Allowed, subject to all just exceptions.
2. The application stands disposed of.
W.P.(C) 7800/2025
3. The present petition under Article 226 and 227 of the Constitution of
India assails an order dated 28.04.2025 passed by the learned sole arbitrator
in arbitration titled "SGS India Private Ltd. v. Ahmedabad Municipal
Corporation", whereby the arbitral tribunal dismissed the application of the
petitioner seeking termination of the mandate of the arbitration proceedings
pending before it.
4. It is the case of the petitioner that by virtue of notification dated
16.12.2024 passed by the State Government of Gujarat, the petitioner was
declared as "public undertaking" under the Gujarat Public Works Contract
Dispute Arbitral Tribunal Act, 1992 and therefore a special arbitral tribunal
constituted under the said act would have jurisdiction for adjudicating the
disputes between the parties to the present petition. It is contended that the
arbitral tribunal constituted prior to the date of the notification for
adjudicating the disputes between the parties will cease to have jurisdiction
and consequently, its mandate is liable to be terminated.
5. A perusal of the impugned order dated 28.04.2025 passed by the
learned arbitrator reveals that the entire factual gamut has been taken note of
by the learned sole arbitrator before dismissing the application filed by the
petitioner.
6. In the present proceedings, this Court is not inclined to get into the
labyrinth of factual issues and/or issue as to whether the provisions of the
notification relied upon by the petitioner can be applied retrospectively or
not. Suffice it to say, even assuming that the arbitral tribunal has wrongly
assumed jurisdiction, in terms of Section 16(6) r/w Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter "the A&C Act"), it shall
be open to the petitioner to take appropriate pleas/make challenges at the
relevant stage. It is impermissible for the petitioner to take recourse to
proceedings under Article 226, to circumvent the procedures / remedies
prescribed under the Arbitration and Conciliation Act, 1996.
7. It has been held in a catena of cases that the scope of Article 226/227
of the Constitution of India, vis-a-vis the arbitration proceedings are
extremely narrow. The Supreme Court in Bhaven Construction vs
Executive Engineer, Sardar Sarovar Narmada Nigam Limited and Anr.,
(2022) 1 SCC 75 while limiting judicial interference under Article 226 or
227 of the Constitution of India to 'exceptional rarity' held as under:
"12. We need to note that the Arbitration Act is a code in itself. This
phrase is not merely perfunctory, but has definite legal consequences.
One such consequence is spelled out under Section 5 of the Arbitration
Act, which reads as under
"5. Extent of judicial intervention.--Notwithstanding anything contained
in any other law for the time being in force, in matters governed by this
Part, no judicial authority shall intervene except where so provided in
this Part." (emphasis supplied)
The non obstante clause is provided to uphold the intention of the
legislature as provided in the Preamble to adopt Uncitral Model Law
and Rules, to reduce excessive judicial interference which is not
contemplated under the Arbitration Act.
13. The Arbitration Act itself gives various procedures and forums to
challenge the appointment of an arbitrator. The framework clearly
portrays an intention to address most of the issues within the ambit of the
Act itself, without there being scope for any extra statutory mechanism to
provide just and fair solutions.
xxx xxx xxx
18. In any case, the hierarchy in our legal framework, mandates that a
legislative enactment cannot curtail a constitutional right. In Nivedita
Sharma v. COAI [Nivedita Sharma v. COAI, (2011) 14 SCC 337: (2012)
4 SCC (Civ) 947] , this Court referred to several judgments and held :
(SCC p. 343, para 11)
"11. We have considered the respective arguments/submissions. There
cannot be any dispute that the power of the High Courts to issue
directions, orders or writs including writs in the nature of habeas corpus,
certiorari, mandamus, quo warranto and prohibition under Article 226 of
the Constitution is a basic feature of the Constitution and cannot be
curtailed by parliamentary legislation -- L. Chandra Kumar v. Union of
India [L. Chandra Kumar v. Union of India, (1997) 3 SCC 261 : 1997
SCC (L&S) 577] . However, it is one thing to say that in exercise of the
power vested in it under Article 226 of the Constitution, the High Court
can entertain a writ petition against any order passed by or action taken
by the State and/or its agency/instrumentality or any public authority or
order passed by a quasi-judicial body/authority, and it is an altogether
different thing to say that each and every petition filed under Article 226
of the Constitution must be entertained by the High Court as a matter of
course ignoring the fact that the aggrieved person has an effective
alternative remedy. Rather, it is settled law that when a statutory forum
is created by law for redressal of grievances, a writ petition should not
be entertained ignoring the statutory dispensation." (emphasis supplied)
It is therefore, prudent for a Judge to not exercise discretion to allow
judicial interference beyond the procedure established under the
enactment. This power needs to be exercised in exceptional rarity,
wherein one party is left remediless under the statute or a clear "bad
faith" shown by one of the parties. This high standard set by this Court is
in terms of the legislative intention to make the arbitration fair and
efficient.
19. In this context we may observe Deep Industries Ltd. v. ONGC [Deep
Industries Ltd. v. ONGC, (2020) 15 SCC 706] , wherein interplay of
Section 5 of the Arbitration Act and Article 227 of the Constitution was
analysed as under : (SCC p. 714, paras 16-17)
"16. Most significant of all is the non obstante clause contained in
Section 5 which states that notwithstanding anything contained in any
other law, in matters that arise under Part I of the Arbitration Act, no
judicial authority shall intervene except where so provided in this Part.
Section 37 grants a constricted right of first appeal against certain
judgments and orders and no others. Further, the statutory mandate also
provides for one bite at the cherry, and interdicts a second appeal being
filed [see Section 37(2) of the Act].
17. This being the case, there is no doubt whatsoever that if petitions
were to be filed under Articles 226/227 of the Constitution against orders
passed in appeals under Section 37, the entire arbitral process would be
derailed and would not come to fruition for many years. At the same
time, we cannot forget that Article 227 is a constitutional provision
which remains untouched by the non obstante clause of Section 5 of the
Act. In these circumstances, what is important to note is that though
petitions can be filed under Article 227 against judgments allowing or
dismissing first appeals under Section 37 of the Act, yet the High Court
would be extremely circumspect in interfering with the same, taking into
account the statutory policy as adumbrated by us hereinabove so that
interference is restricted to orders that are passed which are patently
lacking in inherent jurisdiction." (emphasis supplied)
20. In the instant case, Respondent 1 has not been able to show
exceptional circumstance or "bad faith" on the part of the appellant, to
invoke the remedy under Article 227 of the Constitution. No doubt the
ambit of Article 227 is broad and pervasive, however, the High Court
should not have used its inherent power to interject the arbitral process
at this stage. It is brought to our notice that subsequent to the impugned
order of the sole arbitrator, a final award was rendered by him on
merits, which is challenged by Respondent 1 in a separate Section 34
application, which is pending."
8. A Division Bench of this Court in Sadbhav Engineering Ltd. vs
Micro and Small Enterprises Facilitation Council and Ors., 2025 SCC
OnLine Del 319 has held that when an alternate efficacious remedy is
available under Arbitration and Conciliation Act, 1996, courts shall not
interfere and interdict such proceeding/s under Article 226 of the
Constitution of India. The relevant portion of the said judgment reads as
under:
"6...............It is trite that once the proceedings under the Arbitration
Act have commenced and are underway, Courts would not interfere and
interdict such proceedings, particularly, when appropriate and
efficacious remedies are indeed available under the Arbitration Act. In
this context, it would be apposite to refer to the judgment of the Supreme
Court in SBP & Co. v. Patel Engineering Limited, (2005) 8 SCC 618 and
the same judgment has been followed by the Supreme Court in its recent
judgment - Sterling Industries v. Jayprakash Associates Ltd., (2021) 18
SCC 367. The relevant paragraphs of Sterling Industries (supra) quoting
the judgment of the Supreme Court in SBP & Co. (supra) reads thus:
"3. This Court in SBP & Co. v. Patel Engg. Ltd. [SBP & Co. v. Patel
Engg. Ltd., (2005) 8 SCC 618] in para 45 held as follows: 45. It is seen
that some High Courts have proceeded on the basis that any order
passed by an Arbitral Tribunal during arbitration, would be capable of
being challenged under Article 226 or 227 of the Constitution. We see no
warrant for such an approach. Section 37 makes certain orders of the
Arbitral Tribunal appealable. Under Section 34, the aggrieved party has
an avenue for ventilating its grievances against the award including any
in between orders that might have been passed by the Arbitral Tribunal
acting under Section 16 of the Act. The party aggrieved by any order of
the Arbitral Tribunal, unless has a right of appeal under Section 37 of
the Act, has to wait until the award is passed by the Tribunal. This
appears to be the scheme of the Act. The Arbitral Tribunal is, after all, a
creature of a contract between the parties, the arbitration agreement,
even though, if the occasion arises, the Chief Justice may constitute it
based on the contract between the parties. But that would not alter the
status of the Arbitral Tribunal. It will still be a forum chosen by the
parties by agreement. We, therefore, disapprove of the stand adopted by
some of the High Courts that any order passed by the Arbitral Tribunal is
capable of being corrected by the High Court under Article 226 or 227 of
the Constitution. Such an intervention by the High Courts is not
permissible.
xxx xxx xxx
46. The object of minimising judicial intervention while the matter is in
the process of being arbitrated upon, will certainly be defeated if the
High Court could be approached under Article 227 or under Article 226
of the Constitution against every order made by the Arbitral Tribunal.
Therefore, it is necessary to indicate that once the arbitration has
commenced in the Arbitral Tribunal, parties have to wait until the award
is pronounced unless, of course, a right of appeal is available to them
under Section 37 of the Act even at an earlier stage."
7. That apart, as rightly and aptly observed by the learned single Judge,
the Supreme Court in Bhaven Construction v. Executive Engineer,
Sardar Sarovar, (2022) 1 SCC 75 has succinctly held that an order in
exercise of powers under section 16 of the Arbitration Act can be
assailed only by way of challenge to the final award under the provisions
of section 34 of the said Arbitration Act. Thid would proscribe any other
remedy to the aggrieved party."
9. Further, this Court in Surender Kumar Singhal and Ors. vs Arun
Kumar Bhalotia and Ors., 2021 SCC OnLine Del 3798 laid down
circumstances in respect to the scope and ambit of interference under Article
226 of the Constitution of India with order/s passed by the arbitral tribunal.
The said circumstances read as under:
"25. A perusal of the above-mentioned decisions, shows that the
following principles are well settled, in respect of the scope of
interference under Article 226/227 in challenges to orders by an arbitral
tribunal including orders passed under Section 16 of the Act.
(i) An arbitral tribunal is a tribunal against which a petition under
Article 226/227 would be maintainable;
(ii) The non-obstante clause in section 5 of the Act does not apply in
respect of exercise of powers under Article 227 which is a Constitutional
provision;
(iii) For interference under Article 226/227, there have to be 'exceptional
circumstances';
(iv) Though interference is permissible, unless and until the order is so
perverse that it is patently lacking in inherent jurisdiction, the writ court
would not interfere;
(v) Interference is permissible only if the order is completely perverse
i.e., that the perversity must stare in the face; (vi) High Courts ought to
discourage litigation which necessarily interfere with the arbitral
process;
(vii) Excessive judicial interference in the arbitral process is not
encouraged;
(viii) It is prudent not to exercise jurisdiction under Article 226/227;
(ix) The power should be exercised in 'exceptional rarity' or if there is
'bad faith' which is shown;
(x) Efficiency of the arbitral process ought not to be allowed to diminish
and hence interdicting the arbitral process should be completely
avoided."
10. Given that the petitioner is not precluded from filing an appropriate
application under Section 34 of the Arbitration and Conciliation Act, 1996 at
the relevant stage, this Court is not inclined to entertain the present petition
or issue peremptory direction/s which interdicts with the arbitral
proceedings.
11. Consequently, the present petition is dismissed.
SACHIN DATTA, J
MAY 29, 2025/at
