Article 227 In Arbitration-Related Commercial Disputes: Scope And Judicial Boundaries

Section 34 of the A&C Act plays a very vital role in the arbitration framework in India by providing limited grounds for judicial intervention in arbitral awards. This section delineates specific circumstances under which a court may set aside an arbitral award based on procedural irregularities, incapacity of parties, or conflicts with public policy. The main thrust of Section 34 is to preserve the finality of arbitration awards without losing sight of the need for procedural justice. However, to make disposal of arbitration-related disputes lean and more efficient, Commercial Courts Act designates specific courts that may hear applications referred under Section 34 of the A&C Act. These specific courts have the necessary provisions for complex commercial disputes under which arbitration falls, for an even more efficient rendering of decisions on such arbitration cases.

Article 226 gives powers to the High Courts to issue writs for the protection of fundamental rights or "for any other purpose." On the other hand, Article 227 empowers the High Courts with supervisory power over subordinate courts and tribunals to ensure they are within their jurisdiction and that all such tribunals comply with the laws of the land. In the matter of M/S Deep Industries Limited v. Oil and Natural Gas Corporation Limited, AIR Online 2019 SC 1958, the Supreme Court held that High Courts should only exercise their supervisory jurisdiction under Article 227 in exceptional circumstances, particularly when jurisdictional errors significantly alter the proceedings. The Court emphasized the A&C Act is self-contained nature, which includes a non-obstante clause (Section 5) and limited appeal provisions (Section 37), indicating that errors of law or fact should be resolved by arbitrators and not by the High Court. This is consistent with the Court's prior finding in ONGC Ltd. v. Western Geco International Ltd., AIR 2015 Supreme Court 363, which emphasizes that there should be little judicial interference in arbitral matters unless there are evident violations. Furthermore, the Supreme Court in the matter of Ramesh Chandra Sankla v. Vikram Cement, 2008 (14) SCC 58, held that the High Courts have very wide and discretionary supervisory power under Article 227 of the Constitution. Such power allows High Courts to supervise all courts and tribunals in their territorial jurisdiction so that justice is administered fairly and properly. The Court held this jurisdiction to be discretionary and equitable in nature, so as to allow High Courts to go beyond the strict confine of a court of law, and embody principles of equity. Exercising this power “ex debito justitiae” or "to meet the ends of justice," the High Court's role extends into correcting any judicial error or injustice in the lower courts.

However, when a Commercial Court rejects a Section 34 application under the A&C Act, parties are severely left with limited options of challenging an arbitral award. Although Section 37 is available as a statutory route to appeal, it limits appeals only to decisions on merits regarding the award itself. It leaves little scope to redress procedural errors or jurisdictional misunderstandings or a potential denial of natural justice. Whether this provides a further choice for appeal against an order made under Section 37 either upholding or setting aside an arbitral award is what decides whether there is an alternative route through writ jurisdiction under Article 227 of the Constitution. Thus, the key question that arises is that under what circumstances, if any, Article 227 may be brought to bear to effectively enforce an order from a Commercial Court dismissing a Section 34 petition by striking an appropriate balance between finality in arbitration and necessary judicial oversight.

Recently in the matter of Ms. C.P.Rama Rao (Sole Proprietor) v. National Highways Authority of India, 2024 LiveLaw (Del) 1170, the Delhi High Court provided a detailed clarification on the scope of its supervisory powers under Article 227 of the Constitution, especially in the context of arbitration and commercial disputes. The High Court held that the restriction under Section 8 of the Commercial Courts Act, which bars civil revision applications or petitions against interlocutory orders of the Commercial Court, does not extend to petitions filed under Article 227 of the Constitution. The Court clarified that Article 227 is a constitutional provision that gives the High Court's supervisory powers over all subordinate courts and tribunals operating under their jurisdiction. These powers, therefore, cannot be restricted or overridden by any statute. This judgment was further strengthened by the observations of the Supreme Court in Surya Dev Rai v. Ram Chander Rai, (2003) 6 SCC 675, that curtailment of the revisional jurisdiction of the High Court does not take away or whittle down the constitutional jurisdiction of the High Court to issue a writ of certiorari to a civil court. The Delhi High Court, thus held that the District Judge erred in treating the Section 11 petition as one made to a court, which he applied in the garb of Section 42 of the A&C Act. Thus, it requires correction in the interests of manifest injustice. Further granting the writ petition.

The Delhi High Court in the matter of BlackDiamond Trackparts Pvt. Ltd. v. Black Diamond Ltd.,2022 LiveLaw (Del) 164, has held that Section 8 of the Commercial Courts Act does not prohibit the exercise of jurisdiction under Article 227. It is well-established law that constitutional provisions can neither be overridden by enactments nor by statutory action. The power of superintendence under Article 227 does not exist to correct every erroneous decision, but in the case of serious dereliction of duty or gross violation of law as explained by the court in Estralla Rubber v. Dass Estate [Pvt.] Ltd, (2001) 8 SCC 97.

Various High Courts have clarified that, while petitions under Article 227 challenging Commercial Court orders are technically maintainable, the scope for interference is extremely limited and exercised with great restraint. For instance, in Pravinchandra v. Hemant Kumar, Writ Petition No. 2099/2023, the Bombay High Court emphasized that Article 227 powers remain unaffected by Section 8 of the Commercial Courts Act, which bars revisions against interlocutory orders. The Court clarified that Article 227 should only be used to address grave procedural or jurisdictional errors resulting in injustice, not routine mistakes. Likewise, the Delhi and Jharkhand High Courts, in cases like Gourav Samsukha v. M/S Raj Plastic, CM APPL. 45725/2023, and Government @ State of Jharkhand v. M/S K.S Softnet Solution Private Ltd., C.M.P. No.875 of 2023, further highlighted that the jurisdiction under Article 227 is meant for exceptional circumstances involving serious jurisdictional errors or manifest injustice. These courts stressed that the Commercial Courts Act and the A&C Act are self-contained, efficient frameworks for resolving commercial disputes with minimal judicial interference.

Therefore, the upshot of the aforesaid discussion is that the writ jurisdiction under Article 227 of the Constitution can be invoked against the order of a Commercial Court dismissing a Section 34 petition, but such a power is exercised with much restraint and only in some specific, exceptional circumstances. In general, Article 227 jurisdiction is exercised to correct grave procedural irregularities or jurisdictional errors rather than to review the merits of the case itself. The High Courts are thus careful not to interfere with the order of the Commercial Court except where it reflects a clear departure from well-settled principles of natural justice or there is manifest jurisdictional error which cannot be rectified by the appeal structure. Given that Section 37 of the A&C Act, provides a statutory route to appeals in some cases, this mechanism remains the single most important avenue for bringing substantive aspects of arbitral awards under correction. However, where orders dismissing a Section 34 petition are passed due to procedural errors, over-reaching of jurisdiction, or where the law has been quite manifestly and grossly misapplied, making it a grave miscarriage of justice, Article 227 may remain an invaluable remedial avenue to hold the scales of procedural fair play.

Thus, Article 227 of the Constitution grants supervisory power on all judicial authorities exercising any jurisdiction within the territory of that State for such purpose to the High Courts. The provision, therefore, ensures that there is respect for the principles of legality, fairness, and justice. It prevents a procedural or jurisdictional error being perpetrated with the consequence of injustice by the subordinate court and fortifies the principle of constitutional supremacy. Though Parliament can enact procedural law to enable the cases to be disposed of expeditiously, it cannot take away from the High Court's their residuary powers to correct a serious error of jurisdiction. Accordingly, Article 227 also becomes important in the arbitration procedure because it prevents procedural failure or misdirection in the proceedings of the Commercial Courts.

Chetna Alagh is an Advocate practicing before the High Court of Delhi .Views are personal.