SUPREME COURT OF INDIA
Rohinton Fali Nariman, Aniruddha Bose, V. Ramasubramanian, JJ.
Deep Industries Limited - Appellant
Versus
Oil And Natural Gas Corporation Limited & Anr. - Respondents
Civil Appeal No. 9106 of 2019 (Arising out of Special Leave Petition (C) No. 22324/2018)
Decided On : 28-11-2019
Article 227 - High Courts exercise of jurisdiction under Article 227 of the Constitution of India - Arbitration and Conciliation Act, 1996 - Section 5, Section 37 - The judgment discusses the exercise of jurisdiction under Article 227 in matters decided under the Arbitration and Conciliation Act, 1996. It highlights the statutory provisions of Section 5 and Section 37, emphasizing the limited judicial intervention and appealable orders under the Act. The judgment also emphasizes the statutory policy of speedy disposal of arbitration cases and the non-obstante clause in Section 5, restricting judicial intervention.
Fact of the Case:
The respondent-Oil and Natural Gas Corporation Limited (ONGC) terminated a contract with the appellant for supply of equipment, leading to disputes. The appellant invoked the arbitration clause, and various applications were filed before the Arbitrator. The City Civil Court upheld the Arbitrator's order, but a Special Civil Application was filed before the High Court Gujarat at Ahmedabad under Article 227 of the Constitution of India, challenging the City Civil Court's order.
Finding of the Court:
The High Court set aside the City Civil Court's order, holding that the ban order was passed under a General Contract Manual and not under the Agreement, and that no stay could have been granted under Section 17 of the ban order. The Supreme Court set aside the High Court's judgment, emphasizing the statutory policy of speedy disposal of arbitration cases and the limited judicial intervention under the Arbitration and Conciliation Act, 1996.
Issues: The issues revolved around the exercise of jurisdiction under Article 227, the interpretation of statutory provisions of the Arbitration and Conciliation Act, 1996, and the High Court's interference with the arbitral process.
Ratio Decidendi: The judgment emphasizes the statutory policy of speedy disposal of arbitration cases, the limited judicial intervention under the Arbitration and Conciliation Act, 1996, and the non-obstante clause in Section 5, restricting judicial intervention.
Final Decision: The appeal was allowed, and the arbitration proceedings were directed to be disposed of expeditiously, in accordance with the mandate contained in the Act.
ORDER
R.F. Nariman, J. - Leave granted.
2. The present appeal raises important questions relating to the High Courts exercise of jurisdiction under Article 227 of the Constitution of India when it comes to matters that are decided under the Arbitration and Conciliation Act, 1996 ("the Act" for short).
3. In the present case, the respondent-Oil and Natural Gas Corporation Limited (for short "ONGC") awarded a contract to the appellant for supply of one Mobile Air Compressor for a period of five years. Shortly after entering into the contract, the contract was terminated on 11.10.2017 by the ONGC on the ground that some part of the equipment was not new but only second hand. This position was disputed by the appellant. On the very next day, i.e. on 12.10.2017, the Vendor Code of the appellant was blocked, meaning thereby, that the appellant would be unable to bid for any other further bids floated by the ONGC. On 18.10.2017, a Show Cause Notice was issued by the ONGC to the appellant asking the appellant why it should not be put "on Holiday" i.e. black listed for a period of two years.
4. Since disputes had arisen between the parties, the appellant invoked the arbitration clause contained in the contract on 02.11.2017. This notice is the subject-matter of dispute before the Arbitrator as well as before this Court and will be adverted to subsequently. Pursuant to the notice, one Justice J.C. Upadhyaya (Retd. High Court Judge) was appointed as a Sole Arbitrator to decide the disputes between the parties on 21.12.2017. On 02.02.2018, a claim petition was filed by the appellant before the learned Arbitrator in which the termination of the contract/show cause notice was challenged and damages claimed. After this claim petition was filed, on 15.02.2018, the appellant was blacklisted by an order passed by the ONGC with effect from 11.10.2017 for a period of two years. Meanwhile, a Section 17 application was also been moved before the learned Arbitrator. Applications were then moved by the appellant to amend both the petition as well as the Section 17 application to challenge this order dated 15.02.2018, which amendments were granted by the learned Arbitrator on 10.03.2018.
5. Meanwhile, a Section 16 application was before the learned Arbitrator basically on the ground that since the arbitration notice was confined only to termination of the agreement, blacklisting would be outside the Arbitrators ken. This Section 16 application was dismissed on 09.05.2018 by the learned Arbitrator, in which the learned Arbitrator held that the notice dated 02.11.2017 was not merely confined to termination of the contract but was also in respect of the two year ban that was sought to be imposed at that time. He further held that the ban order was relatable to Clause 18 of the contract and that therefore the validity of the 15.02.2018 office order could be decided by him, and consequently dismissed the Section 16 application filed by the respondent.
6. On the same day i.e. 09.05.2018, the Section 17 application was separately disposed of by the learned Arbitrator, in which the learned Arbitrator stayed the operation of the order dated 15.02.2018 on condition that the two year ban will only operate if the appellant ultimately loses in the final arbitration proceedings.
7. An appeal against the Section 17 Order was filed and disposed of by the City Civil Court, Ahmedabad on 31.05.2018 by which the learned Arbitrators order was upheld. Consequently, the first appeal filed under Section 37 was dismissed. At this stage, and which is the major bone of contention between the parties before us, a Special Civil Application being Application No. 9305/2018 was filed under Article 227 of the Constitution of India before the High Court Gujarat at Ahmedabad in which the City Civil Courts order was challenged. By the impugned judgment dated 25.07.2018, the High Court of Gujarat referred to a preliminary contention raised on behalf of the petitioner that the petition fi
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