2021 Supreme(SC) 3

SUPREME COURT OF INDIA
N.V. RAMANA, SURYA KANT, HRISHIKESH ROY, JJ.
Bhaven Construction through Authorised Signatory Premjibhai K. Shah – Appellant
Versus
Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Another – Respondents
Civil Appeal No. 14665 of 2015
Decided On : 06-01-2021

IMPORTANT POINT
(1) Arbitration Act is a code in itself. Arbitration Act itself gives various procedures and Fora to challenge appointment of Arbitrator.
(2) A legislative enactment cannot curtail a Constitutional right. If Courts are allowed to interfere with arbitral process beyond ambit of enactment, then efficiency of process will be diminished.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Sections 16 and 34 – Arbitration – Public Works Contract – Jurisdiction of sole Arbitrator to adjudicate dispute – Arbitration Act is a code in itself – Arbitration Act itself gives various procedures and Fora to challenge appointment of Arbitrator – Framework clearly portrays intention to address most of issues within ambit of Act itself, without there being scope for any extra statutory mechanism to provide just and fair solutions – Any party can enter into arbitration agreement for resolving any disputes capable of being arbitrable – Parties, while entering into such agreements, need to fulfill basic ingredients provided under Section 7 of Arbitration Act – Arbitration being a creature of contract, gives a flexible framework for parties to agree for their own procedure with minimalistic stipulations under Arbitration Act. (Paras 11, 12, 13 and 14)

(B) Arbitration and Conciliation Act, 1996 – Section 34 – Constitution of India – Articles 226 and 227 – Challenge to Arbitral Award – Appellant acted in accordance with procedure laid down under agreement to unilaterally appoint a sole Arbitrator, without Respondent No. 1 mounting a judicial challenge at that stage – Respondent No. 1 chose to impugn order passed by Arbitrator under Section 16(2) of Arbitration Act through a petition under Article 226/227 of Indian Constitution – In usual course, Arbitration Act provides for a mechanism of challenge under Section 34 – A legislative enactment cannot curtail a Constitutional right – It is prudent for a Judge to not exercise discretion to allow judicial interference beyond 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 parties – This high standard set by this Court is in terms of legislative intention to make arbitration fair and efficient – Respondent No. 1 has not been able to show exceptional circumstance or ‘bad faith’ on part of Appellant, to invoke remedy under Article 227 of Constitution – Ambit of Article 227 is broad and pervasive, however, High Court should not have used its inherent power to interject arbitral process at this stage – Subsequent to impugned order of sole Arbitrator, a final award was rendered by him on merits, which is challenged by Respondent No. 1 in a separate Section 34 application, which is pending – Arbitral process is strictly conditioned upon time limitation and modeled on ‘principle of unbreakability – If Courts are allowed to interfere with arbitral process beyond ambit of enactment, then efficiency of process will be diminished – Mere fact that Gujarat Act might apply may not be sufficient for writ courts to entertain plea of Respondent No. 1 to challenge ruling of Arbitrator under Section 16 of Arbitration Act – High Court erred in utilizing its discretionary power available under Articles 226 and 227 Constitution – Impugned Order of High Court set aside. [Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 – Section 2(k)] (Paras 15, 16, 17, 19, 20 and 26)

Facts of the Case:

Present Civil Appeal raises an important question of law concerning arbitration law in India and special enactments enacted by States concerning public works contract. Question which needs to be answered is whether the arbitral process could be interfered under Article 226/227 of Constitution, and under what circumstance?

Findings of Court:

High Court did not appreciate the limitations under Articles 226 and 227 of the Constitution and reasoned that the Appellant had undertaken to appoint an arbitrator unilaterally, thereby rendering the Respondent No. 1 remediless. However, a plain reading of the arbitration agreement points to the fact that the Appellant herein had actually acted in accordance with the procedure laid down without any mala fides.

Result : Appeal allowed.