In a case first appeal under Arbitration & Conciliation Act, 1996 disposed of by a Court subordinate to High Court, an article 227 petition should not be entertained.

Supreme Court while upholding the powers of the High Court under Article 226/227 of the Constitution of India has discouraged the use of the same in proceedings challenging  orders passed by civil Court in proceedings under Arbitration and Conciliation Act 1996 (hereinafter referred to as Act) considering the object of the Act is to minimize judicial intervention.

The above- mentioned observation was made by the Supreme Court of India in the matter M/s Deep Industries Limited Vs. ONGC & Anr. (Civil Appeal No. 9106/2019) dated 28.11.2019

Issue:

The question arises before the Supreme Court was whether the High Court should exercise jurisdiction under Article 227 of the Constitution of India when it comes to matters that are decided under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”).

Facts

In the present matter, the Appellant was the supplier of Respondent, however, due to the supply of second-hand product the contract was terminated. The arbitration proceedings commenced and meanwhile the Respondent blacklist the Appellant for a period of two years. The Appellant filed a petition under Section 17 of the Act before the arbitrator against the ban, which was disposed of by the Arbitrator with the condition that the two-year ban will only operate if the Appellant ultimately loses in the final arbitration proceedings.

The respondent challenged the Arbitrator order through an appeal under section 37 of the Act filed before the Civil Court. The Civil Court dismissed the appeal and upheld the learned Arbitrator’s order. Consequently, the first appeal filed under section 37 was also dismissed.

However, Respondent challenged the civil court order through a Special Civil Application filed under Article 227 of the Constitution of India before the High Court Gujarat at Ahmedabad. The High Court with respect to its power under Article 227 allowed the petition and set aside the civil court order. The High Court states that the ban order had been passed under a general contract manual and not under the terms of the supply contract as a result, a dispute arose as to the jurisdiction of the Arbitrator to deal with the same.

Thus, against the finding of the High Court Special Leave Petition was preferred.

Held:

The Supreme Court observed that petition filed under Article 227 should have been dismissed at the threshold as it did not raise any jurisdictional issue.

The Supreme Court held that the 1996 Act repealed three previous enactments in order to provide speedy disposal of all matters covered by it. Besides the non-obstante clause contained in Section 5 of the Act, 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.

Second, the reading of Section 37 makes it clear that only the said section grants a constricted right of the first appeal against certain judgments. This statutory mandate also interdicts a second appeal being filed against the order in the first appeal. Ultimately, the reading of the provisions clarifies that although, the constitutional provision remains untouched by the non-obstante clause of section 5, however, if a petition under article 226/227 is allowed it would derail the entire arbitral process. The Court held that the object of the Act is clear that to minimize the judicial intervention and this important object should always be kept in the forefront when a petition under Article 227 is being disposed of against proceedings that are decided under the Act. The Arbitration Act is a special law and a self-contained code dealing with arbitration.