Article 227 Is A Constitutional Provision Which Remains Untouched By Non-Obstante Clause Of S. 5 Of Arbitration Act: Allahabad HC

Brief Facts

The dispute stemmed between Sanjeev Kumar Agarwal, the petitioner and Sudhir Mohan Agrawal, the respondent over the assets of the firm situated in Etmadpur, Agra. The dispute was referred to arbitration on September 13, 2022. The examination of a sole to coversion deed executed on April 1, 2005 was sought by the petitioner during the arbitral proceedings. An application was filed to summon the witness on May 19, 2023. Thereafter, the summon was issued on the same date. Subsequently, an application under section 27 of the arbitration act was also filed by the petitioner seeking enforcement of the summon. However, this application was rejected by the commercial court , Agra on the ground that no prior approval of the tribunal was taken before filing the application. This order has been challenged under Article 227 of the Indian Constitution.

Contentions

The petitioner submitted that the court was not justified in rejecting the application as the term prior approval under section 27 is not used. It was further contended that the term approval means ratification which can obtained later. They relied on the judgment of the Supreme Court in Bajaj Hindustan Limited v. State of Uttar Pradesh (2016) to support their contentions. It was further argued that a petition under article 227 is maintainable and not barred by section 5 of the arbitration act. They relied on the Supreme Court judgment in Deep Industries Limited v. Oil and Natural Gas Corporation Limited (2020) to support this contention.

Per contra, the respondent submitted that a petition under article 227 is not maintainable since efficacious remedies are available under arbitration act in the form of section 34 and 37. In addition that, the arbitration act is a self-contained code. It was further argued that section 5 of the arbitration act prohibits judicial intervention into arbitration matters therefore writ petition cannot be maintained against an order passed under the arbitration act.

Court's Analysis

The court agreed with the contention of the petitioner and agreed with the law laid down by the Supreme Court in Bajaj Hindustan Limited vs. State of Uttar Pradesh and others (2016). In this judgment , the court held that the word approval includes ratification and the ratification can also be obtained subsequent to the act. It is not mandatory that it has to be taken prior to any action being taken. The court further noted that the word prior approval is conspicuous by its absence under section 27 of the act therefore the application could not be dismissed on this ground. It was held that the Apex Court has clearly stated that after and before the word 'approval' prior is not mentioned. The word 'approval' includes ratifying of the action or approval can be granted later but on the that basis it would not mean that before filing the application under section 27 prior approval is mandatory

The court further observed that section 5 of the arbitration act does not affect the constitutional provisions like article 227. They remain unaffected by the non-obstante clause in section 5. The court again referred to the Supreme Court judgment in Bajaj Hindustan Limited (supra) wherein it was held that 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 herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction.

Conclusion

The court concluded that it is clear that Article 226/227 is a constitutional provision which remains untouched by the nonobstante clause of Section 5 of the Act, therefore, the present writ petition is maintainable. In view of the above, the impugned order cannot be sustained and is hereby quashed. The writ petition succeeds and is allowed.

Case Title: - Sanjeev Kumar Agarwal v. Sudhir Mohan Agrawal

Case Reference: 2024:AHC:162344

Court: Allahabad High Court

Judgment Date: 04/10/2024

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