The Hon’ble Supreme Court in a recent ruling held that the powers under articles 226/227 should be used cautiously and in exceptional cases when it comes to intervening in the arbitral
process.
Case of the Appellant
Appellant, Bhaven Construction had entered into a contract with the Respondent, Executive Engineer of Sardar Sarovar Narmada Nigam to manufacture and supply bricks. The contract had an arbitration clause. When the dispute arose between the two, the appellant appointed an arbitrator independently to settle the dispute.
Case of the Respondent
The Respondent contested on the subject of jurisdiction of the arbitrator appointed by the Appellant and moved an application under Section 16 of the Arbitration and Conciliation Act 1996. The arbitrator dismissed the same, consequently the Respondent moved to the Gujarat High Court via special leave petition under Article 226 and 227 of the Constitution.
The single judge bench dismissed the same; however the respondent now via Letters Patent Appeal approached the High Court which was allowed by the Bench. The Bench passed an order in the favor of the Respondent and sets aside the appointment of sole arbitrator by the Appellant.
Cause of Action
Aggrieved by the order passed by the Division Bench with respect to the appointment of independent arbitrator by the Appellant, compelled the Appellant to approach to the Supreme Court to seek relief.
Observation of the Court
The Court prima facie held that the Arbitration Act gives various procedures and forums to the challenge the appointment of an arbitrator. The statue vividly address most of the issues, hence there is no need of any such other mechanism to look into such concerns.
The Court also noted that a legislative enactment cannot restrict a Constitutional right. The Court reiterated 2014 judgment in the case of Nivedita Sharma v. Cellular Operators Association of India and on a 2019 judgment in M/s. Deep Industries Limited v. Oil and Natural Gas Corporation Limited.
In the words of the Court:
“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. If the Courts are allowed to interfere with the arbitral process beyond the ambit of the enactment, then the efficiency of the purpose will be diminished.”
Therefore, the High Court judgment was set aside, however the remedy and opportunity was given to the Respondent to raise any objections within the legal ambit concerning the jurisdiction issues in the pending Section 34 proceedings.
Case Details
Before: Hon’ble Supreme Court
Case Title: Bhaven Construction v. Sardar Sarovar
Coram: Hon’ble Mr. Justice N.V. Ramana, Hon’ble Mr. Justice Surya Kant and Hon’ble Mr. Justice Hrishikesh Roy
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