High Court Under Article 226 And 227 Should Be Extremely Circumspect In Interfering With Orders Passed Under Arbitration Act: Supreme Court

The Supreme Court reiterated that a High Court while exercising jurisdiction under Article 226 and 227 should be extremely circumspect in interfering with orders passed under the Arbitration and Conciliation Act.

Such interference can be made only in cases of exceptional rarity or cases which are stated to be patently lacking in inherent jurisdiction, the bench comprising Justices RF Nariman and BR Gavai observed.

The court observed that in spite of making this clear through decision in Deep Industries Ltd. Vs. ONGC & Anr. (2020) 15 SCC 706, High Courts are still making such interference.

In this case, an Arbitral Award was made in favour of the appellant. A sum of Rs. 122.76 Crores amounting to Rs. 56.23 Crores principal and Rs. 66.53 Crores on various heads was ordered to be paid. In Section 34 petition filed by the respondent, the execution of the said Award was stayed on deposit of 60% of the figure of Rs. 122.76 Crores and security being given for the balance. Both parties filed writ petitions against the aforesaid order. The writ petition filed by the appellant was dismissed. The writ petition filed by the respondent was allowed in which a deposit of 50% of the principal amount of Rs. 56.23 Crores was ordered.

In appeal, the Apex Court bench observed thus:

Despite this Court repeatedly referring to Section 5 of the Arbitration Act in particular and the Arbitration Act in general 2 and despite this Court having laid down in Deep Industries Ltd. Vs. ONGC & Anr. (2020) 15 SCC 706 that the High Court under Article 226 and 227 should be extremely circumspect in interfering with orders passed under the Arbitration Act, such interference being only in cases of exceptional rarity or cases which are stated to be patently lacking in inherent jurisdiction, we find that High Courts are interfering with deposit orders that have been made. This is not a case of exceptional rarity or of any patent lack of inherent jurisdiction.

Setting aside the High Court order, the bench directed that the deposit of 60% and security for the remainder has to be made within four weeks.

Case: Navayuga Engineering Company Vs. Bangalore Metro Rail Corporation Limited [CA 1098-1099 OF 2021]

Coram: Justices RF Nariman and BR Gavai

Citation: LL 2021 SC 203

Click here to Read/Download Order

Click here to Read/Download Order