Gauhati High Court
WP(C)/1076/2024 on 31 August, 2024
Author: Soumitra Saikia
Bench: Soumitra Saikia
GAHC010021402024
IN THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
PRINCIPAL SEAT
W.P(C) NO. 1076/2024
1. Union of India, represented by the General Manager, NF
Railway, Maligaon, Guwahati-781011, District-Kamrup (M),
Assam
2. The Chief Engineer, Construction-2, N.F. Railway,
Maligaon, Guwahati-781011, District- Kamrup (M), Assam
3. The Deputy Chief Engineer/Construction-8, N.F.
Railway, Maligaon, Guwahati-781011, District-Kamrup(M),
Assam
-Versus-
M/s GSR Ventures Private Limited, A Company having its
registered office at 103, Srinivasa, 6-3-1187, Begumpet,
Hyderabad-500016, Andhra Pradesh, Represented by its
authorized signatory K. Mohammed Rafi, S/o K.C Imam
Saheb, F.No. 519, Block A May Flyover Heights, Mallapur,
Mallapur Uppal, K.V. Reddy, Rangareddy, Telangana-
560076
-BEFORE-
HON'BLE MR. JUSTICE SOUMITRA SAIKIA
Advocate for the petitioners : Mr. H. Gupta, CGC
Advocate for the respondent : Mr. A.K. Saraf, Senior Advocate assisted by
Ms. S. Bhattacharjee, Advocate
Dates of Hearing : 18.07.2024
Date of Judgment & Order : 31.08.2024
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JUDGMENT AND ORDER (CAV)
This writ petition has been filed under Article 227 of the Constitution
of India by the Union of India as the writ petitioners. By the instant writ
proceedings, the Union of India as the writ petitioners is put into
challenge the orders dated 11.11.2023 passed by the learned Arbitrator
in Arbitration Proceeding No. AH-02/2022 and the arbitration
proceeding No. AH-03/2022.
2. The respondent was allotted two contracts relating to Earthwork
Filling to Form Embankment/Sub-Bank and construction of Minor
Bridges, Retaining Wall, Pucca Approach Road, Alignment and other
Ancillary Works in connection with Construction of the New BG Railway
line from Bairabi to Sairang (Miroram) under contract Agreement
bearing No. CON/B-S/1917 dated 02.03.2015 and Contract Agreement
No. CON/B-S/2079 dated 24.11.2015. The said works were terminated
by the writ petitioners/Railways leading to the disputes arising between
the petitioners/Railways and the respondent. The respondent issued a
notice for arbitration as per clause 64 (1)(i) of the Arbitration Clause.
The said notice was replied to by the Railway authorities rejecting the
demand for arbitration on the ground that Clause 47 of the Contract
Agreement bars claims for arbitration beyond 20% of the SCA. Similar
reply was issued by the Railways in respect of both the contracts.
Thereafter, the respondent submitted a second notice demanding
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arbitration purportedly under arbitration Clause 48 & 49 of the
Agreement treating the same to be additional special conditions or
contract. The second notice however was issued only in respect of one
contract work namely, CON/B-S/1917 dated 02.03.2015. Since the
Railways declined to refer the matter to the arbitration, the respondent
approached this Court by filing Arbitration Petition No. 20/2021;
Arbitration Petition No. 22/2021 and Arbitration Petition No. 28/2021 in
respect of each of the contract. The petitions were filed under Section
11(6) of the Arbitration and Conciliation Act and accordingly the matter
was urged before the Court seeking appointment of an arbitrator in
respect both the arbitrations relating to both the contract works. While
opposing the maintainability of the petitions filed under Section 11(6) of
the Arbitration and Conciliation Act, 1996 by the respondent, it was
urged by the Railways before the Co-ordinate Bench, the arbitration
proceedings sought for is not maintainable in view of the specific clause
No. 47 of the agreement which bars arbitration. It was submitted that
as per Clause 47 of the agreement, settlement of claims of dispute
between the parties by ways of arbitration is permissible only where the
value is less than or equal to 20% of the value of the contract and
when the claims of dispute are of value more than 20% of the value of
the contract, provisions of Clause 63 & 64 and other relevant clauses of
the general conditions of the contract will not be applicable and
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arbitration will not be a remedy for settlement of such disputes. It was
submitted that since the dispute itself is not open to arbitration in terms
of the specific provisions contained in the agreement, there was no
question for appointment of an arbitrator under Section 11(6) of the
Arbitration and Conciliation Act, 1996. Accordingly, it was submitted by
the Railways before the Co-ordinate Bench that the petitions filed by
the respondent under Section 11(6) of the Arbitration and Conciliation
Act, 1996 are not maintainable and the same should therefore be
dismissed.
3. The Co-ordinate Bench by the order dated 18.11.2022 disposed of
these three applications. The Co-ordinate Bench by order dated
18.11.2022 came to the conclusion that where the contentious issued
have arisen because of incorrect use of clauses which are admitted by
the Railway authorities himself, Court was of the view that it would be
best left to be decided by the Arbitral Tribunal and as to whether the
claim raised before is arbitrable or not and not by this Court at the
referral stage. The Co-ordinate Bench held that as per the terms of the
contract between the parties, two views are possible. In view of the
contentions raised before the Court by the respondent that Clause 47
will not operate as a bar as individual items of work where disputes
arise are required to be considered independently by referring the same
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to arbitration and the bar of 20% of the value of contract is not to
operate on the aggregate value of all the items but it has to be decided
individually item-wise, the Co-ordinate Bench by referring to several
Judgments of the Apex Court held that the question of arbitrability can
be decided by the Court only where the facts are very clear and glaring.
The Co-ordinate Bench concluded that in the proceedings before it, the
facts are not clear and glaring so as to warrant intervention by the
Court at the referral stage and accordingly, the Court proceeded to
appoint Hon’ble Mrs. Justice Anima Hazarika (Retired), Former Judge of
this Court to act as a sole arbitrator to decide the disputes including the
issue of arbitrability in respect of Arbitration Petition No. 20/2021;
Arbitration Petition No. 22/2021 and Arbitration Petition No. 28/2021
subject to her willingness and disclosure and/or absence of any
impediment as contemplated under Section 12 of the Arbitration and
Conciliation Act, 1996.
4. Pursuant to the orders passed by the Co-ordinate Bench in
Arbitration Petition No. 20/2021; Arbitration Petition No. 22/2021 and
Arbitration Petition No. 28/2021, the Arbitral Tribunal assumed its
jurisdiction and by a detailed order dated 11.11.2023 passed in
Arbitration proceeding No. AH-02/2022 (arising out of Arbitration
Petition No. 20/2021) and Arbitration Proceeding No. AH-03/2022
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(arising out of Arbitration Petition No. 22/2021) upheld the contentions
on the respondents. It was held that the disputes in both the
proceedings namely AH-02/2022 (arising out of Arbitration Petition No.
20/2021) and Arbitration Proceeding No. AH-03/2022 (arising out of
Arbitration Petition No. 22/2021) to be arbitrable. These orders passed
by the Arbitral Tribunal are presently being assailed by the petitioner by
filing an application under Article 227 of the Constitution of India.
5. It is submitted on behalf of the petitioner that as per the Clause 47
of the Contract Agreement, the disputes raised by the respondent are
not arbitrable as the exceed more than 20% of the contract value.
There being a clear provision under the contract agreement entered by
and between the writ petitioner and the respondents, it is clear that the
disputes raised by the respondent are not arbitrable. As such the
Arbitral Tribunal committed grave error of law and on facts in coming to
a conclusion that the disputes raised by the respondents are arbitrable
and had thereby proceeded to exercise the jurisdiction of the Tribunal
to decide upon the dispute urged by the respondents. It is submitted
that before the Arbitral Tribunal, it was urged that Contract Agreement
containing Arbitration Clause is binding on both the parties. In view of
the fact that the claim amount is more than 20% of the value of the
contract, as per Clause 64.7 (Clause 47, 48 & 49) of the Contract
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Agreement, the disputes raised are not arbitrable. Clause 16.2 and
Clause 16.3 and 16.4 are altogether different clauses not relating to
Arbitration. Railway authorities has stated before High Court that due to
over-sight in the contents of Clauses 48 and 49 of the present contract,
reference had been made to Clauses 16.2 and 16.3 instead of referring
to Clauses 47 and 48. But in any view of the matter making reference
of Clause 48 for arbitration is prima facie a wrong interpretation. It is
submitted on behalf of the Railway Department that the interpretation
of Clauses 48 & 49 with reference to Clause 16.2 & 16.3 would only
mean that Special Conditions stated in Clause 16.2 and 16.3 has to be
fulfilled before invoking arbitration and the scope of the arbitration
would be confined to the Schedule of Programme and Detailed
Programme submitted by the Contractor for completion of the Contract
which was admittedly not adhered to in the present case as the
Arbitration was invoked before the completion of the Contract Work.
The Contractor has admittedly not completed the Works and hence
could not have resorted to arbitrate any dispute before the completion
of the work. However, the Tribunal went on to hold that the relevant
clauses of arbitration are Clauses 63 and 64 of the General Conditions
of the Contract but a slight misunderstanding has been created in the
contract agreement itself when it sought to incorporate some of the
modified clauses of General conditions of contract into the Additional
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Special Condition of Contract forming parts of the Contract Agreement.
The Tribunal further held that in simple words, the claimants are using
two alternative avenues to claim that the dispute is arbitrable, one, by
means of invoking Clause 64(1)(i) of the General Conditions of Contract
which the respondents have rejected citing Clause 47 of the Additional
Special Conditions of Contract and, another, by invoking Clause 48 & 49
of the same Additional Special Conditions of Contract. The Tribunal
continued to hold that essentially this dispute regarding arbitrability
turns on whether the claimant has a right to invoke Clause 64(1)(i) of
the General Conditions of Contract, failing which, the claimant has a
right to invoke Clause 48 & 49 of the same Additional Special Conditions
of Contract.
6. It is submitted on behalf of the petitioners that the view adopted
by the Tribunal is erroneous on a plain reading of the provisions of the
agreement. It is submitted on behalf of the petitioner that as per Clause
45.0, the opening paragraph clearly states that Arbitration and
Settlement of disputes shall be governed vide clause 63 & 64 of the
General Conditions of Contract, N.F. Railway, 1998 edition which are
reproduced below subject to any correction made prior to the opening
of this tender. There is no term “Additional Special Condition of
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Contract” in the Arbitration Clause forming part of the Contract
Agreement.
7. It is further submitted that there is no Additional Special Conditions
of Contract. In fact, Clause 47, 48 and 48 are under Clause 64.7 and it
has to be read together while giving interpreting Clauses 47, 48 and 49.
Clauses 47, 48 and 49 if read together, prima facie makes the dispute
non-arbitrable. Rejection of the plea of non-arbitrability of dispute
cannot be agitated again under Section 34 of the Arbitration and
Conciliation Act, 1996. Decision of the arbitrability of the dispute goes
to root of the subject matter of arbitration which is different from the
jurisdiction of the tribunal under Section 16 of the Arbitration and
Conciliation Act, 1996.
8. It is further contended on behalf of the petitioner that the Tribunal
upheld the rejection of the demand for arbitration as invoked by the
Contractor under Clause 64(1)(i) of the GCC on the ground that Clause
47 of the GCC provides that provisions of Clause 64 of the GCC will be
applicable only in settlement of claims or disputes for value less than or
equal to 20% of the value of the contract and when the claims of the
disputes are of value more than 20% of the value of contract,
provisions of Clauses 63 & 64 and other relevant clause of the GCC will
not be applicable and arbitration will not be a remedy for settlement of
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such dispute. However, surprisingly on the other hand it went on to
examine in Paragraph 19 at page 134 of the impugned Judgment, right
of the claimant to seek arbitration under Clause 48 and 49 of the
Additional Special Conditions of Contract.
9. It is strenuously submitted on behalf of the petitioner that Clause
47 of the GCC provides that provisions of Clause 64 of the GCC will be
applicable only in settlement of claims or disputes for value less than or
equal to 20% of the value of the contract and when the claims of the
disputes are of value more than 20% of the value of contract,
provisions of Clauses 63 & 64 and other relevant clause of the GCC will
not be applicable and arbitration will not be a remedy for settlement of
such dispute. The Tribunal on the other hand, while interpreting Clause
48 of the same Clause 64.7 held that dispute is arbitrable under Clause
48. Such interpretation, would be conflicting to the decision already
reached by the Tribunal in the forgoing paragraphs of the impugned
orders holding the disputes to be non-arbitrable in view of the Clause
47. Further, the Arbitration Clauses have to be read together to form an
interpretation consistent with each other. The interpretation of an
arbitration clause, as indeed of all contractual provisions, must be
predicted upon a construction of the contract as a whole, and no
particular word or phrase should be unduly emphasized to negate the
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clause of its true meaning. If the dispute is held to be arbitrable under
64.7- Clause 48 of the Contract Agreement, 64.7-Clause 47 of the
Contract Agreement would become meaningless and redundant.
10. The final limb of the argument on behalf of the petitioner is
that since under the provisions of Arbitration and Conciliation Act, 1996,
there is no specific provision for filing an appeal against such orders
deciding the arbitrability of the matter by then arbitrator, the petitioner
has approached this Court under Article 227 in the absence of any other
appropriate statutory remedy available. It is submitted that since on a
plain reading of the agreement, it is apparent that the disputes are not
arbitrable and/or that the disputes are completely barred and that the
purported disputes cannot be referred to arbitration under the clauses
of the agreement entered by and between the petitioners and the
respondent, the impugned orders passed by the Arbitral Tribunal are
required to be interfered with, set aside and quashed and this Court be
pleased to hold that the disputes referred for arbitration are not
arbitrable in view of the specific terms and conditions of the agreement.
11. In support of his contentions, the learned counsel for the
petitioner relies upon the following Judgments:
“1. ATW (India) Pvt. Ltd. Vs. Union of India, reported in (2024)
SCC Online Gau 260W.P(C) No. 1076/2024 [Union of India & Ors Vs. M/S GSR Ventures Pvt. Ltd] Page 11 of 38
2. NTPC Limited Vs. SPML Infra Limited, reported in (2023) 9
SCC 385;
3. M.D. Creations & Others Vs. Ashok Kumar Gupta, C.O
2545/2022;
4. Bhaven Consruction Vs. Executive Engineer, Sardar Sarovar
Narmada Nigam Limited and Anr, reported in (2022) 1 SCC 75;
5. Deep Industries Limited Vs. Oil and Natural Gas Corporation
Limited and Anr., reported in (2020) 15 SCC 706;
6. United India Insurance Company Limited and Anr Vs. Hyundai
Engineering and Construction Company Limited and Ors,
reported in (2018) 17 SCC 607;
7. Panasonic India Private Limited Vs. Shah Aircon through its
Proprietorship Shadab Raza, reported in (2022) SCC Online Del
3288; and
8. Oriental Insurance Company Limited Vs. Niarbheram Power
and Steel Private Limited, reported in (2018) 6 SCC 534″.
11. The learned Senior counsel for the respondent on the other
hand strongly objects the submissions made by the writ petitioners. It
is submitted that Co-ordinate Bench by Judgment and Order dated
18.11.2022 by Arbitration Petition No. 20/2021; Arbitration Petition No.
22/2021 and Arbitration Petition No. 28/2021 has elaborately discussed
on the issues including the interpretation of the Clauses and did not
come to a finding that on a plain reading of the terms and conditions of
the agreement, it can be held conclusively held that the matters cannot
be referred for arbitration. It is submitted that the Co-ordinate Bench
upon careful perusal of all the records and upon due consideration of
the submissions made by both the parties passed an order appointing
the learned sole Arbitrator in exercise of its power under Section 11(6)
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of the Arbitration and Conciliation Act, 1996. It is submitted that the
order dated 18.11.2022 by the learned Co-ordinate Bench has attained
finality and the said appointment of the Arbitrator was never assailed
by the present writ petitioners before the Apex Court. It is further
submitted that pursuant to the learned sole Arbitrator being appointed
and the Arbitrator having assumed jurisdiction, the writ petitioners have
filed their written statement of defence. No objection was raised by the
writ petitioners regarding the jurisdiction of the sole Arbitrator. It is
submitted that when the petitioners have accepted the jurisdiction of
the Arbitral Tribunal and have filed its written statement of defence, it
is now not open to the writ petitioners to assail the jurisdiction of the
Tribunal by filing the instant writ petition. It is further submitted that in
terms of Section 16 of the Arbitration Act, there is a clear provision
prescribed under the Statute for the Arbitral Tribunal to decide on its
own jurisdiction. The learned Senior counsel appearing for the
respondent submits that the Act clearly empowers the Arbitral Tribunal
to rule on its jurisdiction and that having been done by the Arbitral
Tribunal by order dated 11.11.2023 passed in Arbitral Proceedings No.
AH-02/2022 (arising out of Arbitration Petition No. 20/2021) and
Arbitration Proceedings No. AH-03/2022 (arising out of Arbitration
Petition No. 22/2021), the only remedy for the writ petitioner is to
prefer an appeal against the award under Section 34 of the Act.
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12. It is argued that the grounds which are urged by the writ petitioner
before this Court were already urged before the Co-ordinate Bench
during the proceedings initiated by the respondent seeking appointment
of Arbitrator under Section 11(6). The Co-ordinate Bench upon due
consideration of all the materials placed before it as well as the
submissions made came to the conclusion that question of arbitrability
of the issue can be decided by the Court at the time of appointment of
an Arbitrator only where the facts are clear and distinct. The Co-
ordinate Bench held that since the facts are not clear and glaring, the
Co-ordinate Bench correctly exercised its jurisdiction and appointed the
sole Arbitrator and further directed the sole Arbitrator to decide on the
question of arbitrability. This order having not been further challenged
by the writ petitioners, the same has attained finality. Consequently,
the present writ petition filed under Article 227 ought not to be
entertained as the same would amount to seeking a review of the
directions of the Co-ordinate Bench vide Judgment and Order dated
18.11.2022 appointing the Arbitrator.
13. The learned Senior counsel for the respondent strenuously submits
that the law laid down by the Apex Court in this regard is very clear
that it is impermissible for Courts to exercise jurisdiction under Article
226 or 227 of the Constitution on questions with respect to the
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jurisdictional competence of the Arbitral Tribunal. The only remedy
available in such a case would be the statutory remedy provided under
Section 34 or 37 of the Arbitration and Conciliation Act. In support of
his contentions, he relies on the following Judgments:
1. GTPL Hathway Vs. Strategic Marketing Pvt. Ltd, reported in AIR
2021 (NOC) 376 (GUJ) [Paragraph-16];
2. SBP Patel & Co. Vs. M/S Patel Engineering Ltd & Anr., reported in
2009 AIR SCW 6659 [Paragraph -47(vi) & (vii)];
3. Bhaven Construction Vs. Exe Engineer Sardar Sarovar Narmada,
reported in AIR Online 2021 SC 6 [Paragraph-22];
4. Deep Industries Limited Vs. Oil and Natural Gas Corporation
Limited & Anr, reported in (2020) 15 SCC 706 [Paragraph-8];
5. Intercontinental Hotels Groups (India) Pvt. Ltd & Anr Vs.
Waterline Hotels Private Ltd., reported in (2022) 7 SCC 662 [Paragraph
19 & 20];
6. State of West Bengal Vs. Sarkar and Sarkar, reported in (2018) 12
SCC 736 [Paragraph 11].
14. Pressing the above Judgments in support of his submissions, the
learned Senior counsel for the respondent sums up his arguments as
under:
a) that the petition filed by the petitioners is not maintainable as
they have not shown any bad faith, malafide, or patent lack of
inherent jurisdiction in the present case;
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b) that the order passed under Section 11(6) had attained finality
and thereby subsequent orders passed by the Arbitral tribunal are
beyond the scope of challenge under Articles 226 & 227;
c) that the Arbitration Act itself provides various mechanisms to
address grievances towards any injustice and the sections are
incorporated in a fair and just manner. In the present case, the
Arbitration Act and its salutary provisions under Sections 34 and
37 should be respected and not bypassed on vague contentions
by the petitioners;
d) that the Judgments relied upon by the petitioners have also
been discussed in a comprehensive during consideration of the
Section 11(6) petition i.e. Globe India Pvt Ltd etc. and thereby
any subsequent rulings as seen in case of ATW India Pvt Ltd. will
not have a retrospective effect on the order passed by this
Hon’ble Court on 18.11.2022 also no reference is being made to
the other clauses which are relevant in the present case and
thereby the factual aspects differ in the present case. The other
judgments do not have any relevance and interpretation of
clauses have been distinctively and in great details been discussed
by this Hon’ble court with regard to the interpretation of contract.
Reviewing the same is questionable and cannot be done by this
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court under Articles 226 and 227. The arguments by the
petitioners are untenable and the same is thereby not
maintainable;
e) that, the writ petition should therefore be dismissed with
exemplary costs as the petitioners have not shown bad faith, or
malafide in the order they have not challenged the Sec 11(6)
order nor raised jurisdictional issues under Sec 16 of the
Arbitration Act before the Arbitrator. It is submitted that any
issues with regard to jurisdiction the same should have been
raised before the appropriate forum. The petitioners have raised
questions again about the interpretation of the contract which
was an intricate issue at this stage under Articles 226 and 227
and the same was that has already been discussed and
adjudicated upon by this Hon’ble Court. Thus, they should refrain
from raising it again especially when the same can only be
challenged under Article 136 of the Constitution. During the
pendency of arbitral proceedings, the order cannot be challenged
under 226 and 227 of the Constitution of India as held by the
Hon’ble courts in various aforesaid Judgments.
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15. The rival submissions have been duly considered. The case laws
referred to by the contesting parties have also been carefully taken
note of.
16. Since the order passed by the Arbitral Tribunal dated 11.11.2023 in
Arbitration Proceeding No.AH-02/2022 and the Arbitration Proceeding
No. AH-03/2022 are being assailed in the present proceeding requiring
this Court to examine whether any interference is called for under
exercise of its jurisdiction under Article 226/227 of the Constitution of
India, it will be apposite to examine the law requiring invocation of the
powers of the High Court under such circumstances.
17. The case projected on behalf of the petitioners is that in view of
the plain reading of the terms of the contract and/or the agreement, it
is apparent that the dispute raised by the respondent could not have
been entered upon for arbitration by the Tribunal. As such, the Arbitral
Tribunal having failed to take note of the provisions of the terms of the
arbitration agreement and there being no statutory alternative remedy
at this stage, the petitioners have come before this Court seeking
issuance of a writ for interference of the impugned order dated
11.11.2023 passed by the learned Arbitrator in Arbitration Proceeding
No. AH-02/2022 and the arbitration proceeding No. AH-03/2022
respectively. The petitioners have urged before this Court that where
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the need arises, a writ Court is not denuded of its constitutional powers
passed effective orders interfering with orders passed by the Arbitral
Tribunal contrary to the provisions of the Arbitration Act.
18. The respondent on the other hand contends that once the Arbitral
Tribunal has invoked its jurisdiction, there is no occasion for a writ
Court to interference in any such orders as may be passed. In view of
the statutory remedy of appeal available under Section 34 and 37 as
the case may be in the Arbitration and Conciliation Act, 1996. The
question before this Court therefore is whether during the pendency of
the arbitration proceedings whether a writ Court can interfere with such
orders passed by the Arbitral Tribunal.
19. In this context, the law governing the Arbitration and Conciliation
Act needs to be referred to examine the extent of interference that may
be called for by a writ Court in orders passed by the Arbitral Tribunal or
proceedings before it. The Apex Court in a Constitution Bench
comprising of seven (7) Hon’ble Judges in a very recent Judgment while
answering a reference pertaining to the validity of an Arbitration
agreement which was insufficiently stamped or under stamped and the
consequences thereof, had authoritatively answered the reference by
examining several earlier precedents of the Supreme Court of India as
well as other Courts across the globe. In Re: Interplay Between
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Arbitration Agreements under the Arbitration Act, 1996 and the Indian
Stamp Act, 1899, reported in (2024) 6 SCC 1, the Apex Court was
called upon to resolve an issue which arose in the context of three
statutes- the Arbitration and Conciliation Act, 1996; the Stamp Act,
1899 and the Contract Act, 1872. The reference arose in the context of
the facts involved that when an application is made for appointment of
an Arbitrator, an objection was raised on the ground that the arbitration
agreement is inadmissible because it is an instrument which is
unstamped or inadequately stamped. The primary issue that arose for
consideration of the Apex Court is whether such arbitration agreement
would be non-existent, unenforceable or invalid if the underlying
contract is not stamped. Although in the facts of the present
proceedings, there is no dispute or objection raised that the underlying
agreement containing the arbitration clause/agreement is unstamped or
inadequately stamped, a reference to this Judgment is felt necessary by
this Court in view of the exhaustive references made tracing the history
of Arbitration Law in India and across the globe and in that context
examined the extent of Court interferences in matters where the parties
have agreed to resolve their disputes through arbitration. The Apex
Court upon examination of the earlier precedents arrived at a finding
that in the event of shortfall of stamp duty on an agreement or in the
underlying contract containing an Arbitration Agreement although the
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same would not be admissible in evidence but the said document is not
rendered invalid or void ab-initio because the failure to stamp and
instrument is a curable defect. After discussing several precedents on
the subject, the Apex Court held that an Arbitration Agreement is
separate from the underlying contract. The separability of their
arbitration agreement from the underlying contract is based on four
factors;- (i) the intention of the parties to require arbitration of any
dispute; (ii) preventing any unwilling party from avoiding its earlier
commitments; (iii) the underlying contract if insufficiency stamped
would not result in invalidating of the arbitration agreement; and (iv) if
the separability presumption is discarded, the Courts will have to rule
on the merits of the disputes instead of the Arbitral Tribunals.
20. The Apex Court held that the separability presumption
ensures that an arbitration agreement survives a termination/
repudiation or frustration of a contract to give effect to the true
intention of the parties and ensure sanctity of the arbitral proceedings.
It was held that under the doctrine of Kompetenz-Kompetenz
empowers the Arbitral Tribunal to decide on all substantive issues
including the existence of an arbitration agreement as well as the
arbitrability of the issues raised. This doctrine empowers the Arbitral
Tribunal to decide whether there is a valid agreement, whether the
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Tribunal is properly constituted, whether the matters which have been
submitted to arbitration is in accordance with the arbitration agreement.
All these issues are capable of being decided by the Arbitral Tribunal
constituted in terms of the doctrine of kompentz-kompetenz. The
consistent view by the Apex Court and Courts of India as well as across
the world is that where the parties have agreed to resolve their
disputes through arbitration and an Arbitral Tribunal is properly
constituted, there should be minimal interference by Courts except as
otherwise provided under the statute. Unless there is a claim that the
Arbitration Agreement or the underlying contract where the arbitration
clause is present was obtained by fraud perhaps the interference by
Courts in respect of the orders passed by the Arbitral Tribunal should
be the minimum and only as per the provisions prescribed under the
statute.
21. In SBP Patel & Co. Vs. M/S Patel Engineering Ltd & Anr, reported in
2009 AIR SCW 6659, it was held that once the matter reaches the
Arbitral Tribunal or the sole arbitrator, the High Court would not
interfere with the orders passed by the arbitrator or the Arbitral
Tribunal during the course of arbitration proceedings and the parties
could approach the Court only in terms of section 37 of the act or in
terms with section 34 of the act. In this Judgment also, the Apex Court
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did not warrant orders of the Arbitral Tribunal to be assailed in 226/227
proceedings in view of the statutory provisions under Sections 34 & 37
of the Arbitration and Conciliation Act. The Apex Court held that the
aggrieved party has to wait until the award by the Arbitral Tribunal
before it can go for an appeal under Sections 34 & 37.
22. In Bhaven Construction Vs. Exec Engineer Sardar Sarovar Narmada,
reported in (2022) 1 SCC 7, the Apex Court held as under:
19. In this context we may observe Deep Industries Ltd. v. ONGC [Deep
Industries Ltd. v. ONGC, (2020) 15 SCC 706] , wherein interplay of Section 5
of the Arbitration Act and Article 227 of the Constitution was analysed as
under : (SCC p. 714, paras 16-17)
“16. Most significant of all is the non obstante clause contained in
Section 5 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.
Section 37 grants a constricted right of first appeal against certain
judgments and orders and no others. Further, the statutory mandate also
provides for one bite at the cherry, and interdicts a second appeal being
filed [see Section 37(2) of the Act].
17. This being the case, there is no doubt whatsoever that if petitions
were to be filed under Articles 226/227 of the Constitution against orders
passed in appeals under Section 37, the entire arbitral process would be
derailed and would not come to fruition for many years. At the same time,
we cannot forget that Article 227 is a constitutional provision which
remains untouched by the non obstante clause of Section 5 of the Act. In
these circumstances, what is important to note is that though petitions can
be filed under Article 227 against judgments allowing or dismissing first
appeals under Section 37 of the Act, yet the High Court would be
extremely circumspect in interfering with the same, taking into account the
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statutory policy as adumbrated by us hereinabove so that interference is
restricted to orders that are passed which are patently lacking in inherent
jurisdiction.”
(emphasis supplied)
23. In Deep Industries Limited Vs. Oil and Natural Gas Corporation
Limited and Anr, reported in (2020) 15 SCC 706, the Apex Court held as
under:
“16. Most significant of all is the non obstante clause contained in Section
5 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. Section 37
grants a constricted right of first appeal against certain judgments and
orders and no others. Further, the statutory mandate also provides for one
bite at the cherry, and interdicts a second appeal being filed [see Section
37(2) of the Act].
17. This being the case, there is no doubt whatsoever that if petitions
were to be filed under Articles 226/227 of the Constitution against orders
passed in appeals under Section 37, the entire arbitral process would be
derailed and would not come to fruition for many years. At the same time,
we cannot forget that Article 227 is a constitutional provision which
remains untouched by the non obstante clause of Section 5 of the Act. In
these circumstances, what is important to note is that though petitions
can be filed under Article 227 against judgments allowing or dismissing
first appeals under Section 37 of the Act, yet the High Court would be
extremely circumspect in interfering with the same, taking into account
the statutory policy as adumbrated by us hereinabove so that interference
is restricted to orders that are passed which are patently lacking in
inherent jurisdiction.”
The Apex Court further held that serious disputes as to jurisdiction
would not amount to lack of jurisdiction. At best it there can be stated
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to be a mere error of law, which could not, in any case, be interfered
with under Article 227 of the Constitution of India.
24. In Intercontinental Hotels Group (India) Pvt. Ltd & Anr Vs.
Waterline Hotels Private Ltd., reported in (2022) 7 SCC 662, the Apex
Court referring to Vidya Drolia Vs. Durga Trading Corp, reported in
(2021) 2 SCC 1 had accepted the view that Courts have very limited
jurisdiction under Section 11(6) of the Act of 1996. The Courts are to
take a “prima facie” view as explained therein, on issues relating to
existence of the arbitration agreement. Usually, the issues of
arbitrability/validity are matters to be adjudicated by the arbitrators.
The only narrow exception curved out was that Courts could adjudicate
to “cut the deadwood”. Ultimately, the Apex Court held that the
watchword for the Courts is “when in doubt, do refer”. The Apex Court
from a study of the precedents came to the following conclusions, with
respect to adjudication of subject matter arbitrability under Section 8 or
11 of the Act, are pertinent:
225.1 In line with the categories laid down by the earlier judgment
of Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P)
Ltd., (2009) 1 SCC 267] the Courts were examining ‘subjectmatter
arbitrability’ at the pre-arbitral stage, prior to the 2015 amendment.
225.2 Post the 2015 amendment, judicial interference at the reference
stage has been substantially curtailed.
225.3 Although subject matter arbitrability and public policy objections are
provided separately Under Section 34 of the Act, the Courts herein haveW.P(C) No. 1076/2024 [Union of India & Ors Vs. M/S GSR Ventures Pvt. Ltd] Page 25 of 38
understood the same to be interchangeable under the Act. Further,
subject matter arbitrability is interlinked with in rem rights.
225.4 There are special classes of rights and privileges, which ensure to
the benefit of a citizen, by virtue of constitutional or legislative instrument,
which may affect the arbitrability of a subjectmatter.”
The further conclusions arrived at by the Apex Court are indicated at
Paragraph 244 as under:
“244. Before we part, the conclusions reached, with respect to question
No. 1, are:
244.1 Sections 8 and 11 of the Act have the same ambit with respect to
judicial interference.
244.2 Usually, subject matter arbitrability cannot be decided at the stage
of Sections 8 or 11 of the Act, unless it’s a clear case of deadwood.244.3 The Court, Under Sections 8 and 11, has to refer a matter to
arbitration or to appoint an arbitrator, as the case may be, unless a party
has established a prima facie (summary findings) case of nonexistence of
valid arbitration agreement, by summarily portraying a strong case that he
is entitled to such a finding.
244.4 The Court should refer a matter if the validity of the arbitration
agreement cannot be determined on a prima facie basis, as laid down
above, i.e., ‘when in doubt, do refer’.
244.5 The scope of the Court to examine the prima facie validity of an
arbitration agreement includes only:
244.5.1 Whether the arbitration agreement was in writing? Or
244.5.2 Whether the arbitration agreement was contained in exchange of
letters, telecommunication etc?
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244.5.3 Whether the core contractual ingredients qua the arbitration
agreement were fulfilled?
244.5.4 On rare occasions, whether the subject matter of dispute is
arbitrable?”
25. Coming to the facts of the present proceedings what is
required to be taken note of is that the petitioners have also submitted
to the jurisdiction of the Arbitral Tribunal and filed its counter claim. In
this context, the Apex Court in the State of West Bengal Vs. Sarkar and
Sarkar, reported in (2018) 12 SCC 736 held as under:
“In any case, even Section 7(4)(c) of the Arbitration act, in such
factual circumstances would lead to the same conclusion. Therefore, in
the facts and circumstances of this case, there is also no dispute about
the fact, that as against the claim raised by the respondent Sarkar &
Sarkar before the arbitrator, the appellant State of West Bengal, had
indeed raised a counter-claim and having done so, it must be deemed
to have submitted before the arbitrator, a request to adjudicate its
claim as well. When both the parties, had approached the arbitrator,
and submitted themselves to the arbitrator’s jurisdiction, independent
of all other factual and legal consideration, the arbitrability of the
disputes was clearly made out under Section 7(4)(c) of the Arbitration
Act.”
26. In Waryam Singh and Another vs. Amarnath and Another reported
in (1954) 1 SCC 51, the Apex Court held that “
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This power of superintendence conferred by article 227 is, as pointed out by
Harries C. J., in Dalmia Jain Airways Ltd. v. Sukumar Mukherjee(2), to be
exercised most sparingly and only in appropriate cases in order to keep the
Subordinate Courts within the bounds of their authority and not for correcting
mere errors. As rightly pointed out by the Judicial Commissioner in the case
before us the lower courts in refusing to make an order for ejectment acted
arbitrarily. The lower courts realised the legal position but in effect declined to
do what was by section 13 (2) (i) incumbent on them to do and thereby
refused to exercise jurisdiction vested in them by law. It was, therefore, a
case which called for an interference by the court of the Judicial Commissioner
and it acted quite properly in doing so. In our opinion there is no ground on
which in an appeal by special leave under article 136 we should interfere. The
appeal, therefore, must stand dismissed with costs.
27. Again in Achutananda Baidya vs. Prafullya Kumar Gayen and Others
reported in (1997) 5 SCC 76 the Apex Court held as follows:
” 9. We are, however, unable to accept such contention of Mr.
Bhattacharya. In this case, the High Court has rightly held that the
appellate authority came to the finding of non-existence of oral
agreement of reconveyance without considering the evidence on
record. If the appellate authority does not consider the materials on
record having a bearing on a finding of fact and makes the finding of
fact, such finding of fact arrived without consideration of relevant
materials on record cannot be sustained in law. The High Court, in
such circumstances, will be competent to consider the validity of the
finding of fact assailed before it with reference to materials on record.
10. The power of superintendence of the High Court under Article
227 of the Constitution is not confined to administrative
superintendence only but such power includes within its sweep the
power of judicial review. The power and duty of the High Court
under Article 227 is essentially to ensure that the Courts and
Tribunals, inferior to High Court, have done what they were required
to do. Law is well settled by various decisions of this Court that the
High Court can interfere under Article 227 of the Constitution in
cases of erroneous assumption or acting beyond its jurisdiction,W.P(C) No. 1076/2024 [Union of India & Ors Vs. M/S GSR Ventures Pvt. Ltd] Page 28 of 38
refusal to exercise jurisdiction, error of law apparent on record as
distinguished from a mere mistake of law, arbitrary to capricious
exercise of authority or discretion, a patent error in procedure,
arriving at a finding which is perverse or based on no material, or
resulting in manifest injustice. As regards finding of fact of the
inferior court, the High Court should not quash the judgment of the
subordinate court merely on the ground that its finding of fact was
erroneous but it will be open to the High Court in exercise of the
powers under Article 227 to interfere with the finding of fact if the
subordinate court came to the conclusion without any evidence or
upon manifest misreading of the evidence thereby indulging in
improper exercise of jurisdiction or if its conclusions are perverse.
11. If the evidence on record in respect of a question of fact is not
at all taken into consideration and without reference to such
evidence, the finding of fact is arrived at by inferior court or Tribunal,
such finding must be held to be perverse and lacking in factual basis.
In such circumstances, in exercise of the jurisdiction under Article
227, the High Court will be competent to quash such perverse
finding of fact.”
28. In Jasbir Singh vs. State of Punjab reported in (2006) 8 SCC 294,
the Apex Court held that the power of superintendence over all the
subordinate courts and tribunals is given to the High Court under Article
227 of the Constitution. The said power is both of administrative and
judicial nature and it could be exercised suo motu also. However, such
power of superintendence does not imply that the High Court can
influence the subordinate judiciary to pass any order or judgment in a
particular manner. While invoking the provisions of Article 227 the High
Court would exercise such powers most sparingly and only in
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appropriate cases in order to keep the subordinate courts within the
bounds of their authority. It cannot intervene in the judicial functions of
the lower judiciary. The independence of the subordinate courts in the
discharge of their functions is of paramount importance, just as the
independence of the superior courts in the discharge of their judicial
functions is. It is the members of the subordinate judiciary who directly
interact with the parties in the course of proceedings of the case and,
therefore, it is no less important that their independence should be
protected effectively to the satisfaction of the litigants. The
independence of the judiciary has been considered as a part of the
basic structure of the Constitution and such independence is postulated
not only from the executive, but also from all other sources of pressure.
The apex Court also held that in the course of inspection, the High
Court Judge is required to examine whether the courts are functioning
within the norms laid down by the High Court. Mostly the inspection is
to be confined to the administrative functioning of the courts and its
officers. If any member of the administrative staff is not doing the work
assigned to him or is causing any delay in the process of administration
of justice, the Inspecting Judge can give proper direction and see that
the courts function smoothly. But under no circumstances, the
Inspecting Judge, as part of his administrative duty enjoys the power to
interfere with the judicial functions of the subordinate courts in
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individual cases. In the course of inspection, a High Court Judge cannot
pass any order on interim applications, such as bail petitions or transfer
applications or applications for interim injunction, howsoever justified
they may be. Orders on bail applications are passed under the
provisions of the Code of Criminal Procedure or under various other
enactments, which provide for grant of bail and such orders are passed
as part of the judicial work. The Inspecting Judge is not supposed to
pass any judicial order in individual cases in the course of inspection. Of
course, he can give administrative directions to the presiding officer or
to any of the subordinate staff, if such directions are pertinent in the
context of administration of justice. Except giving general directions
regarding any matter concerning administration of justice, any
interference in the judicial functions of the presiding officer would
amount to interference with the independence of the subordinate
judiciary.
29. In the State of Orissa and Others. Vs. Gokulananda Jena reported
in (2003) 6 SCC 465, the Apex Court held that
” In view of Section 16 read with Sections 12 and 13 of the Act, as
interpreted in Konkan Rly. Case (2002) 2 SCC 388, almost all disputes
which could be presently contemplated can be raised and agitated
before the arbitrator appointed by the Designated Judge under Section
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11(6) of the Act. From the perusal of the said provisions of the Act, it
follows that there is hardly any area of dispute which cannot be decided
by the arbitrator appointed by the Designated Judge. So, since an
efficacious alternative remedy is available before the arbitrator, a writ
court normally would not entertain a challenge to an order of
Designated Judge made under Section 11(6) of the Act which includes
considering the question of jurisdiction of the arbitrator himself.
Therefore, even though a writ petition under Article 226 of the
Constitution is available to an aggrieved party, ground available for
challenge in such a petition is limited because of the alternative remedy
available under the Act itself.”
On the facts of that case the Apex Court therefore declined to
exercise its power under Article 226 of the Constitution of India.
30. In Mohd. Yunus vs. Mohd. Mustaqim and Ors. reported in (1983) 4
SCC 566 the nature and scope of a High Court’s jurisdiction under
Article 227 was considered. The Apex Court held that the supervisory
jurisdiction conferred on the High Courts under Article 227 of the
Constitution of India ” to seeing that an inferior court or tribunal
functions within the limits of its authority”, and not to correct an error
apparent on the face of the records, much less an error of law. In this
case there was, in our opinion, no error of law much less an error
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apparent on the fact of the record. There was no failure on the part of
the learned Subordinate Judge to exercise jurisdiction nor did he act in
disregard of principles of natural justice. Nor was the procedure
adopted by him not in consonance with the procedure established by
law. In exercising the supervisory power under Article 227, the High
Court does not act as an appellant court or tribunal. It will not review or
re-weigh the evidence upon which the determination of the inferior
court or tribunal purports to be based or to correct errors of law in the
decision.
31. Upon careful examination of the precedents discussed above, it is
evident that the consistent view of the Courts is that under the scheme
of the Arbitration and Conciliation Act, 1996, minimal Court interference
is prescribed and at the stage of orders being passed under Section
11(6), the only requirement for the Courts is to see the existence of a
valid arbitration agreement. Even an improperly or an understamped
underlying contract containing an arbitration clause or an agreement
would not hinder referring the parties to an arbitration agreement as
the arbitration agreement has been presumed to be a separate contract
from the underlying contract which may contain such an arbitration
clause. Under such circumstances, there is no gainsaying that the
legislative wisdom as is discernable from the provisions of the statue of
the Act of 1996 is that where the parties agree to refer the disputes to
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an arbitration and an Arbitral Tribunal is validly constituted under
orders of the Court under Section 11, the Jurisdiction of the Tribunal
including the arbitrability of the dispute at the first instances is to be
decided by the Arbitral Tribunal.
32. Any party aggrieved by the award of the Arbitral Tribunal has a
right of appeal under Section 34 and further appeal under Section 37 as
prescribed under the Act of 1996. Furthermore, by the earlier order
dated 18.12.2022 passed in Arbitration Petition No. 20/2021; Arbitration
Petition No. 22/2021 and Arbitration Petition No. 28/2021 out of which
the order dated 11.11.2023 passed by the Arbitral Tribunal in
Arbitration Petition No. 20/2021 and Arbitration petition No. 22/2021 is
presently assailed in this writ petition.
33 A careful perusal of the order passed by the Co-ordinate Bench
revels that the Co-ordinate Bench had examined the provisions of the
contract in minute detailed and thereafter appointed the learned
arbitrator and left it to the learned arbitrator to decide the disputes
including the issue of arbitrability. The order dated 18.12.2022 passed
by the Co-ordinate Bench in Arbitration Petition No. 20/2021;
Arbitration Petition No. 22/2021 and Arbitration Petition No. 28/2021
was passed after hearing both the parties including the present writ
petitioners. Pursuant to the orders passed by the Co-ordinate Bench
appointing the arbitrator and directing the parties to appear before the
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arbitrator and leaving the question of arbitrability of the issue to be
decided by the arbitrator. The petitioner before this Court participated
in the arbitration proceedings. The said order was never assailed before
any other forum. As such the order dated 18.12.2022 passed in
Arbitration Petition No. 20/2021; Arbitration Petition No. 22/2021 and
Arbitration Petition No. 28/2021 appointing the learned arbitrator to
arbitrate on the issues and also to decide on the question of the
arbitrability of the issues had attained finality. It is also not in dispute
that the petitioners have in the meantime submitted to the jurisdiction
of the Arbitral Tribunal and besides filing written statement have also
filed counter claims.
34. Under such circumstances and in view of the elaborate discussion
of the precedents above, this Court does not find that there is any
infirmity which calls for exercise of a writ under Article 226 or 227 of
the Constitution of India. The issues before the Arbitral Tribunal
including the question of jurisdiction can be assailed by the petitioner
before the appellate forum prescribed under Sections 34 & 37 of the
Act of 1996. There is no allegation of fraud or forgery made against any
of the parties during the proceedings before the Arbitral Tribunal
leading to the orders passed by the Arbitral Tribunal which are
presently impugned in the present proceedings. The only question to be
decided is whether the disputes which the respondent has raised are
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capable of being decided in arbitration in the terms of the contract
agreement. There is no dispute on facts that the contract agreement
contained an arbitration clause. There is also no dispute that in respect
of the contract work differences had arisen between the parties which
had led to certain disputes.
35. In view of the arbitration clause available in the contract
agreement, these disputes are required to be resolved through
arbitration. Whether these disputes are capable of being resolved
through arbitration taking into consideration the various clauses and
conditions of the contract act was an issue which is left to be decided
by the Arbitral Tribunal by the Co-ordinate Bench vide order dated
18.12.2022 while exercising powers under Section 11(6) appointing the
arbitrator. By way of the impugned orders, the arbitrator has held that
the disputes are capable of being decided through arbitration and has
assumed jurisdiction accordingly. In view of the authoritative findings of
the Apex Court, more particularly, in view of the recent law laid down
by the Apex Court in RE:- Interplay between arbitration agreements
under Arbitration Act, 1996 and the Indian Stamp Act, 1899 reported in
2024 (6) SCC 1, the conclusions and the findings arrived at by the Co-
ordinate Bench in its order rendered in ATW (India Pvt. Ltd.) vs. Union
of India reported 2024 SCC Online Gau 2602 will no longer be binding
on this Court.
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As discussed above, the petitioners have also submitted to the
jurisdiction of the Tribunal by submitted counter claims.
36. The power of writ under the Article 227 is a constitutional power
which cannot be curtailed by any statute. The same is available to a
writ court in its supervisory jurisdiction to ensure subordinate courts
and tribunals function within their powers / jurisdiction conferred. When
any order is passed by such a tribunal exceeding their jurisdiction or
order is obtained by fraud or it fails to exercise its jurisdiction then a
writ court under Art 227 can certainly interfere. But such is not the case
here. The tribunal has been conferred its jurisdiction by this court under
sec 11(6) to decide the question of arbitrability of the dispute.
Therefore it cannot be said that the Tribunal has assumed jurisdiction it
did not have or that it failed to exercise its jurisdiction. The order dated
18.12.2022 passed by the Co-ordinate Bench under section 11(6) has
attained finality as no appeal has been preferred. The facts pleaded and
discussed above before this Court does not reveal any occasion which
calls for interference of the impugned order under the extra ordinary
powers under Article 226 or 227. No doubt, the powers of a writ Court
under Article 226 or 227 are being constitutional powers, the same
cannot be excluded by any non-obstantive clause under any statute
including that of the Arbitration and Conciliation Act of 1996, however,
in the facts pleaded and submitted before this Court, there is no
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occasion which warrants this Court to invoke its powers under Sections
226 or 227 to interfere with the orders dated 11.11.2023 passed by the
learned Arbitrator in Arbitration Proceeding No. AH-02/2022 and the
arbitration proceeding No. AH-03/2022. The parties have a forum for
appeal under Section 34 & 37 of the Act of 1996 and the same would
be available to be aggrieved party in the event of any award that is
being passed by the Arbitral Tribunal.
37. Under such circumstances, this Court is disinclined to invoke its
powers under Article 226 and 227 for issuances of a writ to interfere
with the orders dated 11.11.2023 passed by the learned Arbitrator in
Arbitration Proceeding No. AH-02/2022 and the Arbitration Proceeding
No. AH-03/2022. The writ petition is, therefore, devoid of merit and the
same is therefore dismissed. No order as to cost.
38. The Arbitral Tribunal is permitted to proceed in the Arbitration
Proceedings without any further delay. Interim order passed earlier
stands vacated. The parties will appear before the Arbitral Tribunal
forthwith.
JUDGE
Comparing Assistant
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