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2024 Supreme(Guj) 2247
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
MAUNA M. BHATT, J.
Shakti Pumps (India) Ltd. – Petitioner
Versus
Dakshin Gujarat Vij Company Limited (Dgvcl) – Respondent
R/Special Civil Application No. 16286 Of 2024
Decided On : 16-12-2024
For The Petitioner:Mr Kg Sukhwani, Ld.Senior Advocate With Ms Shivani Rajpurohit
For The Respondent:Mr Maulik Nanavati, Ld. Advocate For Nanavati & Co.
Judicial intervention in arbitral proceedings under writ jurisdiction is limited to exceptional cases, such as when a party is left without statutory remedies or bad faith is demonstrated. Writs cannot be used to circumvent the specific procedural mechanisms provided for challenging the constitution of an arbitral tribunal.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 5, 11, 13, 14, 16, 21, and 34 - Constitution of India - Article 226 - Judicial intervention in arbitral proceedings - Writ petition challenging order passed under Section 16 of the Act on grounds of unilateral appointment - Arbitration being a creature of contract, is a self-contained code - Judicial authority shall not intervene except where so provided in the Act - Exceptional circumstances required for interference under writ jurisdiction include cases where a party is left remediless or bad faith is shown - Mere claim of unilateral appointment does not constitute an exceptional ground for such intervention when statutory remedies under Section 11, 13, or 14 remain available. (Paras 7.3, 7.4, 7.5, 7.6)
(B) Writ jurisdiction - Scope and ambit - Judicial interference in arbitral process should be in exceptional rarity - Court is not to exercise discretion to allow interference beyond the procedure established under the enactment - Unless a party is left without a remedy under the statute or clear bad faith is exhibited, judicial intervention is not permitted. (Para 7.3)
Facts of the case:
A petition was filed challenging an order passed by an arbitral tribunal dismissing an application regarding the validity of the tribunal's constitution. The petitioner alleged the appointment of the sole arbitrator was unilateral and lacked mutual agreement. The respondent contended that the request for arbitration was invoked by the petitioner, and subsequent proposals for arbitrators were exchanged, but the petitioner failed to act, leading the respondent to proceed with an appointment. The lower tribunal rejected the application, stating that jurisdictional challenges regarding the mandate of the tribunal must follow the statutory process rather than a premature challenge.
Findings of Court:
The court observed that the arbitration framework is a comprehensive scheme intending to minimize judicial interference. It held that the petitioner, having failed to utilize the specific statutory provisions for challenging the appointment of the tribunal, cannot use a writ petition as an alternative mechanism. The absence of allegations regarding the ineligibility of the tribunal under specific schedules of the Act, combined with the availability of alternative remedies, rendered the petition meritless.
Issues: Whether a writ petition under the Constitution is maintainable against an order passed by an arbitral tribunal under Section 16 of the Act on grounds of alleged unilateral appointment of an arbitrator.
Ratio Decidendi: Judicial interference in arbitral proceedings under writ jurisdiction is limited to exceptional cases where a party is left remediless under the governing statute or where there is evidence of bad faith. Where a party fails to avail itself of established statutory mechanisms to challenge the constitution or integrity of an arbitral tribunal, the court will not exercise its discretionary jurisdiction to intervene in ongoing arbitration.
Result: Petition rejected; Rule discharged.
| Table of Content |
|---|
| 1. procedural history and factual foundation regarding the arbitration appointment dispute. (Para 1 , 2 , 3 , 4) |
| 2. petitioner argues unilateral appointment of arbitrator violates impartiality and fundamental principles. (Para 5) |
| 3. respondent contends appointment followed due process and challenges maintainability of writ petition under section 16. (Para 6) |
| 4. judicial intervention in arbitration is limited to exceptional circumstances where statutory remedies are unavailable. (Para 7 , 8) |
JUDGMENT :
MAUNA M. BHATT, J.
1. Rule. l.earned advocate Mr.Maulik Nanavati waives service of notice of Rule on behalf of the respondent.
2. This petition is filed with the following prayers:
“7(a) Issue an appropriate writ, order or direction to quash and set aside the impugned order dated 05.10.2024, passed by the Hon’ble Arbitral Tribunal in Arbitration Case No.3 of 2024 (Annexure-H);
(b) Direct the Respondent to appoint an Arbitral Tribunal in accordance with the mutually agreed-upon procedure or, alternatively, appoint an independent Sole Arbitral Tribunal through this Hon’ble Court’s intervention, ensuring an impartial adjudication process.
(c) Pending the hearing and final disposal of this petition, the Petitioner prays for an interim stay on the proceedings before the Arbitral Tribunal.
(d) Pass any other or further orders this Hon’ble Court may deem just and proper in the interest of justice.”
3. What is sought to be challenged by way of the present petition filed under Article 226 of the Constitution of India is an order dated 05.10.2024 passed by the Learned Arbitral Tribunal, whereby application filed by the Petitioner under Section 16 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) is dismissed. It is the Petitioner’s primary contention that on account of the Learned Arbitral Tribunal having been constituted unilaterally, continuation of the arbitration proceedings is without jurisdiction and therefore bad in law.
4. Facts in brief as referred in the petition are stated as under:
(i) DGVCL (Respondent herein) issued a Tender and Expression of Intent on 29.05.2018 for the design, supply, installation, testing, commissioning and 7-year comprehensive maintenance of Distributed Grid-Connected Solar PV Plants with capacities from 5 KW to 150 KW. Following acceptance of bid, Respondent issued a Master Letter of Acceptance on 23.07.2018 to the Petitioner being an approved Vendor.
(ii) It is the Petitioner’s contention that reciprocal obligations were cast under the Agreement executed between the parties and even though the Petitioner performed all its obligations, the Respondent failed to adhere to most of its fundamental obligations and instead illegally penalized the Petitioner.
(iii) Owing to imposition of penalties and deduction on the Petitioner, the Petitioner sought recovery of the amounts orally on various dates. However, since the Respondent refused to make payment and/or withdraw the wrongful penalty and since the Agreement between the parties had an Arbitration clause, the Petitioner sent Demand cum Pre-Arbitration Notice dated 15.04.2024 (Page 16). In the said notice under Paragraph 15, the Petitioner called upon the Respondent to make payment of the Petitioner or else the Petitioner would escalate the matter to arbitration under the Arbitration and Conciliation Act, 1996.
(iv) It is stated that in response to notice dated 15.04.2024, the Respondent failed to provide a satisfactory reply and instead issued a response dated 22.04.2024, which was frivolous in nature. The response indicated that the Respondent had selected Shri A.C. Rao, Retired Judge of High Court of Gujarat, to be appointed as the Learned Arbitral Tribunal.
(v) That thereafter a notice dated 27.04.2024 was electronically sent by Shri A.C. Rao, Retired Judge of High Court of Gujarat to all the parties and their respective legal representatives informing them of scheduling the first arbitration meeting on 03.05.2024. However
