No Writ Against Order Of Tribunal Rejecting Application U/S 16 Of The A&C Act Unless It Shocks The Conscience Of The Court: Delhi High Court

The bench of Justice Subramonium Prasad reiterated that to protect the sanctity of the arbitral process, the Courts would not ordinarily interfere with an order of the arbitral tribunal in exercise of their writ jurisdiction.

Facts

An agreement dated 1906.2021 was executed between the parties. The dispute under the agreement was referred to the arbitration.

During pendency of the arbitration proceedings, the petitioner moved an application under Section 16 of the A&C Act challenging the jurisdiction of the tribunal on the ground that the agreement was void ab initio, thus, there cannot be any arbitration out of an agreement which is void ab initio.

The tribunal disposed of the application by observing that the issue/objection entails examination of the merits of the case and can only be decided after the evidence is complete.

Aggrieved thereby, the petitioner challenged the order under Article 226 of the Constitution.

Submission by the Parties

The petitioner made the following submissions:

• That the arbitrator should not have decided on arbitrability and jurisdiction as a preliminary issue and not deferred the determination to after completion of evidence.
• The agreement is void ab initio, ergo, there can be no arbitration out of the agreement.

Analysis by the Court

The Court referred to previous judgments to explain the scope of Article 227 jurisdiction in arbitration cases. It noted that while the High Court can intervene in exceptional cases, it cannot act as an appellate court or correct errors that are not apparent on the face of the record.

The Court held that an order of the arbitral tribunal rejecting an application challenging its jurisdiction under Section 16 of the A&C Act cannot be challenged in a writ petition unless the order is so perverse that it shocks the conscience of the Court.

The Court held the tribunal's decision, to dispose of the application by observing that the issue/objection entails examination of the merits of the case and can only be decided after the evidence is complete, does not shocks the conscience of the Court.

Accordingly, the Court dismissed the petition.

Case Title: Oriel Financial Solutions v. Bestech Advisors Pvt Ltd

Citation: 2024 LiveLaw (Del) 380

Date: 20.03.2024

Counsel for the Petitioner: Mr. Kamal Sehgal, Mr. Satinder Singh Gulati and Mr. Charanjit Lal, Advocates.

Counsel for the Respondent: Mr. Raghavendra Mohan Bajaj and Mr. Shagun Agarwal, Advocates

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