[Article 227] Writ Petition Can Be Entertained Only If There Is Patent Lack Of Inherent Jurisdiction In Arbitrator's Order: SC [Read Order]

The Supreme Court has observed that a petition under Article 227 of the Constitution of India against dismissal of a petition under Section 16 of the Arbitration and Conciliation Act can be entertained only when there is perversity in the order which leads to a patent lack of inherent jurisdiction.

Section 16 provides that an arbitral tribunal can rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement.  In this case, an application challenging the jurisdiction of the Arbitrator was dismissed by him. Thereafter, the party approached the High Court assailing this order by filing a writ petition under Article 227 of the Constitution. The High Court dismissed the petition on the ground that the order was challenged only 2½ years late and that the party filed the writ petition at the last minute after the arguments had concluded before the Arbitral Tribunal.

While considering the SLP filed against the High Court judgment, the bench comprising Justices RF Nariman, Navin Sinha and Indira Banerjee, referred to the decision in Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd., and said:

We are of the view that a foray to the writ Court from a section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever – it must be the perversity of the order that must stare one in the face."

While dismissing the SLP with costs of Rs. 50,000, the bench further observed:

Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things.

Case name: PUNJAB STATE POWER CORPORATION LIMITED vs. EMTA COAL LIMITED

Case no.: Special Leave to Appeal (C) No. 8482/2020

Coram: Justices RF Nariman, Navin Sinha and Indira Banerjee

Counsel: Sr. Adv K. V. Vishwanathan, Adv Abhimanyu Bhandar

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