Arbitration Award Cannot Be Set Aside By HCs Invoking Writ Jurisdiction, Reiterates SC [Read Order]

The Supreme Court has reiterated that any award passed by the Arbitral Tribunals cannot be set aside by the High Courts invoking its writ jurisdiction under Article 226 & 227 of the Constitution of India.

The bench comprising Justice SA Bobde, Justice R. Subhash Reddy and Justice BR Gavai was dealing with an appeal against the Allahabad High Court order that had set aside a partial award made under Section 16 of the Arbitration and Conciliation Act.

In this case [Sterling Industries vs. Jayprakash Associates Ltd.], the partial award passed by the Arbitral Tribunal was assailed by filing an application before the District Judge. The Apex Court bench observed that such an application was not tenable in view of Section 16 (6) of the Arbitration Act, which provides that the party aggrieved by an arbitral award can only make an application for setting aside such an arbitral award in accordance with section 34 of the Act. The bench said:

Since such an application was not tenable, we fail to understand how in a writ petition filed against an order made by the District Judge in an untenable application, the High Court could have set aside the partial award. This is clearly contrary to law.

While setting aside the High Court order, the bench reproduced the following observation made by Seven Judge bench in SBP & Co. vs. Patel Engineering Ltd. judgment.

"It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. 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. The party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The arbitral tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that 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. Such an intervention by the High Courts is not permissible." 

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