Name of the case:  Bhaven Construction through Authorised Signatory Premjibhai K. Shah Vs. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd. & Anr. 

 Case number: Civil Appeal No. 14665 of 2015

Judges name: Hon’ble Judges N.V. RAMANA J, SURYA KANT J, HRISHIKESH ROY J.  

Order dated:  06.01.2021

“Arbitration can only be challenged before the courts once the award is passed. The High Court’s Power under Article 226/227 to interfere with the arbitration process needs to be exercised in exceptional rarity”. 

Facts of the Case:

• Executive Engineer of Sardar Sarovar Narmada Nigam (Respondent) entered into a contract with the Bhaven Construction (Appellant)  to manufacture and supply bricks. The aforesaid contract had an arbitration clause. As some dispute arose regarding payment in furtherance of manufacturing and supplying of bricks, the Appellant issued a notice dated 13.11.1998, seeking appointment of sole arbitrator in terms of the agreement. 
• The Respondent preferred an application under Section 16 of the Arbitration and Conciliation Act of 1996 and challenging the sole arbitrator’s jurisdiction. The sole-arbitrator dismissed the Respondent’s application under Section 16, and then the Respondent preferred a special civil application under Articles 226 and 227 of the Constitution before the Gujarat High Court. 
• The matter was presided by a single-judge who dismissed the same, and the Appellant preferred a Letters Patent Appeal which was allowed by a Division Bench of the High Court. 
• The Division Bench in its order passed on September 2012, set aside the appointment of a sole arbitrator. The Respondent moved the Supreme Court aggrieved by order of the Division Bench of the Gujarat High Court.

Supreme Court held:

• The Court referred the judgment in Nivedita Sharma v. Cellular Operators Association of India where it was held that it is one thing to say that in the exercise of the power vested in it under Article 226 of the Constitution. It was laid that the High Court can entertain a writ petition against any order passed by or action taken by the State and its agency/ instrumentality or any public authority or order given by a quasi-judicial body/authority. It is an altogether different thing to say that the High Court must entertain every petition filed under Article 226 of the Constitution as a matter of course ignoring the fact that the aggrieved person has an adequate alternative remedy. The Nivedita Sharma case law categorically stated that it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. 
• The Supreme Court held that the High Court should not have used its inherent power to interject the arbitral process at this stage. If the Courts are allowed to interfere with the arbitral operation beyond the enactment’s ambit, then the efficiency of the process will be diminished. The Supreme Court held that the Arbitration Act lays down procedures and forums to challenge an arbitrator’s appointment. The legislative framework portrays an intention to address most of the issues within the ambit of the Act itself, without there being scope for any extra-statutory mechanism to provide just and fair solutions, the apex court observed. 
• It further held that any party could enter into an arbitration agreement for resolving any disputes capable of being arbitrable. While entering into such contracts, parties need to fulfil the essential ingredients provided under Section 7 of the Arbitration Act. 
• Arbitration, being a contract creature, gives the parties a flexible framework to agree for their procedure with minimalistic stipulations under the Arbitration Act. 
• Suppose parties fail to refer a matter to arbitration or appoint an arbitrator according to the procedure agreed by them. In that case, a party can take recourse for court assistance under Section 8 or 11 of the Arbitration Act. 
• Therefore, the Supreme Court opinioned that the High Court erred in utilizing its discretionary power available under Articles 226 and 227 of the Constitution herein. Thus, the court allowed the appeal and set aside the impugned Order of the High Court. The Court further granted liberty to the Respondent to raise any legally permissible objections regarding the jurisdictional question in the pending Section 34 proceedings.