Just Because Interlocutory Order Of Arbitral Tribunal Is Not Challengeable Under Section 34 Of A&C Act, Remedy Is Not Writ Under Article 226 And 227: Delhi High Court
The Delhi High Court has ruled that merely because an interlocutory order passed by the Arbitral Tribunal is not amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), the remedy under Article 226 and Article 227 of the Constitution of India would not be available against the said order. The Single Bench of Justice C. Hari Shankar held that...
The Delhi High Court has ruled that merely because an interlocutory order passed by the Arbitral Tribunal is not amenable to challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act), the remedy under Article 226 and Article 227 of the Constitution of India would not be available against the said order.
The Single Bench of Justice C. Hari Shankar held that a party can approach the Court against an interim order passed in the arbitral proceedings only if the order is appealable under Section 37 of the A&C Act; and that in all other cases, the party has to wait for the conclusion of the arbitral proceedings and the rendition of the arbitral award.
In the arbitral proceedings between the petitioner Easy Trip Planners Ltd. and the respondent One97 Communications Ltd., the Arbitral Tribunal passed an interlocutory order rejecting an application filed by the petitioner under Order VII Rule 14 of the Code of Civil Procedure, 1908 (CPC), to bring on record additional documents. Against this, the petitioner filed a petition before the Delhi High Court under Article 227 of the Constitution of India.
The petitioner Easy Trip Planners submitted before the High Court that since the interlocutory order passed by the Arbitral Tribunal is not challengeable under Section 34, therefore, the said interlocutory order can be challenged under Articles 226 and 227 of the Constitution.
Section 37 of the A&C Act provides that an appeal shall lie only from the orders specified therein, and not from any other orders, which include – an order refusing to refer the parties to arbitration under Section 8, an order granting or refusing to grant any interim measures under Section 9, and an order setting aside or refusing to set aside an arbitral award under Section 34.
Section 37 (2) of the A&C Act enumerates the orders of the arbitral tribunal from which an appeal shall lie to a Court, which include the order of the Tribunal accepting the plea contesting its jurisdiction under Section 16(2) and Section 16(3) of the A&C Act, and from an order granting or refusing to grant interim measures under Section 17 of the A&C Act.
The Court observed that the Supreme Court in SBP & Co. versus Patel Engineering Ltd. (2005) has held that unless the party has a right of appeal under Section 37 of the A&C Act, the party who is aggrieved by any order of the Arbitral Tribunal has to wait until the award is passed by the Tribunal. The Supreme Court had ruled that not any order passed by the Arbitral Tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India and that such an intervention by the High Courts is not permissible.
Hence, the High Court ruled that a party can approach a Court against an interim order in arbitral proceedings only if the order is appealable under Section 37 of the A&C Act; and that in all other cases, the party has to wait for the conclusion of the arbitral proceedings and the rendition of the arbitral award.
The Court noted that the interlocutory order challenged by the petitioner was passed under Order VII Rule 14 of the CPC, and is thus not relatable to any of the provisions specified in Section 37.
The Court observed that Section 34 of the A&C Act permits a challenge against an arbitral award only by an application for setting aside such award. The Court further noted that under Section 2(1)(c) of the A&C Act, the Arbitral award is defined as including an interim award, and that Section 31(6) empowers the arbitral tribunal to make an interim arbitral award on any matter with respect to which it may make a final arbitral award.
The Court noted that the Supreme Court in the case of IFFCO versus Bhadra Products (2018) has clarified that an interim award is an award that finally adjudicates an issue between the parties, which could have been decided in the final award, however, it is made at an interim stage.
The Court ruled that the said interlocutory order challenged by the petitioner does not constitute an "interim award" within the meaning of Section 2(1)(c) read with Section 31(6) of the A&C Act, and thus, it is not amenable to challenge under Section 34.
The Court observed that the petitioner had relied on a particular observation made by the Supreme Court in the case of SBP & Co. versus Patel Engineering Ltd. (2005), which is- "under Section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under Section 16 of the Act".
Relying on the said observation, the petitioner contended that the maintainability of a remedy under Articles 226 and 227 of the Constitution of India would be barred only in cases where the order challenged by the party is amenable to challenge under Section 34 of the A&C Act. Since the said interlocutory order was not amenable to challenge under Section 34, therefore, the petitioner averred that the bar of maintainability of a remedy under Articles 226 and 227 of the Constitution of India would not operate.
The Court refuted the said contention of the petitioner, and ruled that the raison d'etre behind the said observation made in SBP & Co. versus Patel Engineering Ltd. (2005) is not Section 34 but Section 5 of the A&C Act, which specifically disapproves judicial interference with the arbitral process.
"The words "under Section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under Section 16 of the Act", occurring in para 45 of SBP1, on which Mr Rao laid especial emphasis, do not, in my opinion, seek to delimit the applicability of the passage to cases where the order under challenge is amenable to challenge under Section 34 of the 1996 Act, as Mr Rao would seek to contend. They merely underscore the position that all grievances that the arbitral litigant may nurse against any interim order or orders that the arbitral tribunal may come to pass during the course of the arbitral proceedings would always be open to being canvassed as grounds of challenge to the final award that may come to be passed in the arbitral proceedings. To maintain the current and flow of the arbitral proceedings, therefore, the Supreme Court has proscribed, by judicial fiat, challenges to such interlocutory orders midstream. That, in my view, is what these words intend to convey."
The Court ruled that the decision rendered in SBP & Co. versus Patel Engineering Ltd. (2005), is based on the philosophy that in order to minimise interference with the arbitral process, the party would have to be relegated to avail its remedy against the final or interim arbitral award, under Section 34 of the A&C Act.
The Court further noted that the Supreme Court in Bhaven Construction versus Executive Engineer Sardar Sarovar Narmada Nigam Ltd. (2021) provided that the remedy under Articles 226 and 227 of the Constitution of India is available in rare and exceptional cases, which are limited to two exigencies, which are- where the order suffers from bad faith; and secondly, where, if the challenge is not permitted, the party would be rendered remediless.
The Court ruled that the governing principle behind the said decision in Bhaven Construction (2021) is that a party should not be left remediless and it is predicated on the right to legal redress. "Bhaven Construction5, therefore, is more in the nature of a cautionary note, and is not intended to provide a haven for launching a challenge, in writ proceedings, against every interlocutory arbitral order.", the Court said.
The Court observed that the petitioner is not remediless, however, the remedy would lie against the interim award or the final award that the Arbitral Tribunal would subsequently choose to pass. The Court added that it would always be open to the petitioner to vent its ire against the said interlocutory order as one of the grounds on which it could challenge the interim or the final arbitral award passed by the Tribunal, under Section 34 of the A&C Act.
"It is only, therefore, that the remedy available to the litigant is deferred to a later stage of proceedings, so as to ensure that the arbitral stream continues to flow unsullied and undisturbed by any eddies that may impede its path.". the Court said.
The Court, thus dismissed the petition as not maintainable.
Case Title: Easy Trip Planners Ltd. versus One97 Communications Ltd.
Citation: 2022 LiveLaw (Del) 717
Dated: 25.07.2022 (Delhi High Court)
Counsel for the Petitioner: Mr. Rajshekhar Rao, Sr. Adv. with Mr. Kushagra Bansal, Adv
Counsel for the Respondent: Mr. Aman Nandrajog, Mr. Dhruv Wadhwa, Advs