HC Can Invoke Article 227 To Interfere With Commercial Court's Order If It Suffers From Erroneous Interpretation Of Law: Delhi High Court

Factual Overview:

A Section 34 petition was filed by the writ petitioner before the District Judge, who held that the petition was not maintainable before the concerned commercial Court. The District Judge construed Section 42 as requiring the Section 34 petition to be filed before the High Court because, on an early occasion, a Section 11(6) petition was filed in the High Court. Since the Section 11 petition would constitute a prior application made to a court, it is that Court that holds the jurisdiction to be petitioned for the setting aside the award.

When the petition was first considered, the Court expressed doubts regarding the maintainability under Article 227 of the Constitution. The reservations arise from concerns regarding the maintainability of the writ petition in the context of the remedy provided under Section 37 of the A&C Act. The Court was requested to treat the impugned order of the District Judge as one refusing to set aside an arbitral award, therefore falling within the ambit of Section 31(1)(c). In this factual background, the Court doubted the right of the writ petitioner to invoke the supervisory jurisdiction under Article 227.

Submissions:

The amicus curiae made the following submission:

• Concerning whether the order passed by the District Judge would fall within the ambit of Section 37, the relevant findings of the Supreme Court in BGS SGS Soma JV v. NHPC Limited (2020) were highlighted. It was categorically held that the orders refused to be set aside under Section 34 would be covered under Section 37(1)(c). BGS SGS Soma addressed a jurisdictional question: whether the Special Commercial Court at Gurugram returned a Section 34 petition because of a perceived lack of jurisdiction. The Court held that the same would not fall within Section 37(1)(c).
• A remedy under Section 37 read with Section 13 of the Commercial Courts Act not being available, the petitioner would be justified in invoking the Court's supervisory jurisdiction under Article 227.
• Article 227 extends the Court's jurisdiction to exercise judicial review. The Court must exercise this constitutional authority of superintendence and supervise the validity of the orders passed by the district courts in Black Diamond Trackparts Pvt. Ltd. & Ors. v. Black Diamond Motors Pvt. Ltd.(2021), the High Court had laid down principles to be followed when dealing with the power of the power under Article 227 to correct the orders made by a commercial court.

Analysis of the Court:

The Court observed that the District Judge, in the light of the Section 11 petition, had been filed before the High Court, and this fact is pertinent for the application of Section 42; the petition to set aside the award could only have been filed in the High Court. The impugned order does not amount to a refusal to set aside an award based on the grounds outlined in Section 34(2) of the A&C Act. However, the submission of the Amicus on this aspect, along with the decision of this Court in Black Diamond Trackparts, which is also followed in the decision rendered by the Bombay High Court in Pravinchandra v. Hemant Kumar (2023: BHC-NAG: 16159), where it has been held that the Article 227 petition concerning the orders of the Commercial Courts at District Judge level, is maintainable. The jurisdiction and powers of the High Court remain unaffected by Section 8 of the Commercial Courts Act. The power of superintendence under Article 227 is not unrestricted or meant to rectify every mistake made by the subordinate Court or tribunal. It is consciously placed to be exercised when a failure to rectify an error would result in grave injustice. The Supreme Court in Estralla Rubber v. Dass Estate [Pvt.] Ltd. (2001) has held that the exercise of this power to interfere with the orders of the courts and tribunals is restricted to cases of serious dereliction of duty and blatant violations of principles of law.

The Court observed that the issue of whether a Section 11 petition would fall within the ambit of Section 42 is well settled. The Supreme Court in State of West Bengal v. Associated Contractors (2015) has held that a Section 11 application is not moved before a “court” but before the Chief Justice of either the High Court or the Supreme Court. This is despite the fact that the Chief Justice or their delegate makes decisions in a judicial capacity rather than an administrative one. Furthermore, Section 42 would not apply to applications presented before the Chief Justice or their delegate, as the Chief Justice or delegate does not qualify as a "court" as defined under Section 2(1)(e) of the A&C Act. Section 42 applies to applications made under Part I of the A&C Act if they are made to a court as defined in the A&C Act. Since Section 11 application is not made to a court as defined, it would fall outside the ambit of Section 42. The Supreme Court has held that a petition u/s 11 for the constitution of an arbitral tribunal cannot be recognised as an application made to a court. The District Judge erred in returning the petition filing before the High Court based on an entirely unsustainable interpretation of Section 42. If not rectified, this apparent error would lead to grave injustice, and the correct legal position flowing from Section 42 must be enunciated.

Therefore, the Court allowed the writ petition and set aside the impugned order of the District Judge.

Case Title: Ms CP Rama Rao Sole Proprietor v. National Highways Authority Of India

Citation: 2024 LiveLaw (Del) 1170

Case Number: W.P.(C) 11484/2023

Counsel for the Petitioner: Mr. Angad Mehta, Mr. Rupin Bahl, and Mr. Ansh, Advocates.

Counsel for the Respondent: Mr. Manank Grover and Ms. Pratibha Vyas, Advocates.

Amicus Curiae: Dr Amit George, with Mr Rishabh Dheer, Mr Arkaneil Bhaumik & Mr Dushyant Kishan Kaul, Advocates.