Can Writ Petitions under article 226 and 227 Challenge Arbitration Decisions in India? Examining the Constitutional and Statutory Framework

INTRODUCTION

Arbitration offers structured and collaborative approach to resolving disputes arising from contractual relationships, both domestic and international. Parties can voluntarily agree to arbitrate by including an “Arbitration Clause” within their contract. This clause outlines the process for resolving conflicts outside of traditional court systems. Arbitration offers several advantages over traditional litigation generally on the grounds of more efficiency and reliable due to its streamlined procedures and faster resolution times, often at a lower cost.

In India the concept of alternative dispute resolution is firmly established. The Arbitration and Conciliation Act 1996 (Arbitration Act) serves as the cornerstone of arbitration law in India, emphasising the principles of party autonomy and minimal judicial interference. The constitutional courts have consistently held that a writ petition (a legal action seeking a court order to address the violation of rights) is not maintainable if an alternative legal remedy, such as arbitration, is available.

However a writ petition is an extraordinary remedy designed to protect citizens rights, and its use is generally restricted to exceptional circumstances and this constitutional power is granted to High Court under Articles 226 and 227 which brings up a potential conflict between the Arbitration Act and the scope of judicial oversight. This tension becomes particularly relevant when analyzing the interaction of these provisions with the Commercial Courts Act, 2015, which aims to streamline commercial dispute resolution.

This article explores whether writ petitions can challenge arbitration decisions in India, particularly considering the Arbitration Act, the Commercial Courts Act, and the constitutional framework provided by Articles 226 and 227.

THE ROLE OF WRIT PETITIONS UNDER ARTICLES 226 AND 227

Articles 226 and 227 of the Indian Constitution empower High Courts to issue writs, including Habeas Corpus, Mandamus, Prohibition, Certiorari and Quo Warranto, to enforce fundamental rights or legal rights and prevent injustice. These provisions have been broadly interpreted, expanding the scope of judicial review.

• Article 226: Enables High Courts to issue writs for the enforcement of fundamental rights and for any other purpose. The phrase “any other purpose” extends the scope of writ jurisdiction to include legal violations, procedural irregularities, and broader issues of justice.
• Article 227: Grants High Courts supervisory jurisdiction over subordinate courts and tribunals within their territorial jurisdiction. High Courts can intervene to correct Jurisdictional errors, procedural irregularities or instances of manifest injustice.

While Article 226 empowers courts to protect and enforce fundamental as well legal rights, Article 227 confers on them the power of superintendence over all courts and tribunals within their jurisdiction. [1]

ARBITRATION AND CONCILIATION ACT, 1996

The Arbitration Act is a self-contained legislation designed to ensure autonomy efficiency and minimal judicial intervention in arbitration proceedings which is crafted for the Indian arbitration practices with international norms and expectations. Section 5 of the Arbitration Act enshrines a key principle that judicial interference in arbitral proceedings is strictly limited. Courts are prohibited from intervening unless expressly permitted by the Act itself. This legislative intent underscores the importance of preserving the autonomy of arbitration as a preferred dispute resolution method. By minimizing judicial intervention, the Act aims to empower Arbitral Tribunals to function independently, thereby fostering fair and impartial awards.

Section 34 of the Arbitration Act outlines grounds for challenging an arbitral award which also reflects a restrictive approach, with courts required to assess procedural and jurisdictional issues rather than merits. These grounds include:

• the invalidity of the arbitration agreement under applicable law;
• violations of principles of natural justice, such as denial of a fair hearing;
• the award being contrary to the public policy of India; and
• the arbitral tribunal exceeding its powers.

Section 37 of the Arbitration Act outlines the appellate remedies available to parties dissatisfied with certain orders issued under the Act, notably orders refusing to set aside arbitral awards. The appellate process, as defined in Section 37, further emphasizes the principle of limited judicial intervention in arbitral matters.

WRIT PRTITIONS vs. ARBITRATION

High Courts possess inherent writ jurisdiction under Articles 226 and 227 of the Indian Constitution, a fundamental aspect of the constitutional framework. This power cannot be diminished by legislative enactments, including the Arbitration Act. Nevertheless, courts advocate for judicious exercise of this power. Where efficacious alternative remedies exist, such as those provided under Sections 34 or 37 of the Arbitration Act, courts generally discourage the invocation of writ jurisdiction to prevent unnecessary interference with the arbitral process.

Writ petitions in arbitration proceedings may be entertained in exceptional circumstances, such as when the arbitral tribunal lacks jurisdiction, fundamental rights or principles of natural justice are violated, or manifest injustice or procedural irregularities occur that cannot be corrected through the arbitration process itself.

CONDITIONS FOR CONSIDERING WRIT PETITIONS

While judicial precedents discourage routine interference in arbitration matters through writ petitions, certain exceptional circumstances justify the exercise of writ jurisdiction:

1. Lack of Jurisdiction – Section 34(2)(a)(iv): When the arbitral tribunal exceeds the scope of its authority as defined in the arbitration agreement, judicial review may be sought.
2. Violation of Natural Justice – Section 34(2)(a)(iii): Denial of due process, such as failure to provide adequate notice, an opportunity to be heard, or the right to present evidence, can justify judicial intervention.
3. Fundamental Rights Violation – Though not explicitly covered in the Arbitration Act, courts may invoke Article 226 or 227 of the Constitution of India in cases where arbitral decisions violate constitutional rights.
4. Manifest Injustice – Section 34(2)(b)(ii): Courts can set aside an award if it is against the “public policy of India,” which may include cases of extreme injustice.

However, the Supreme Court emphasized that, given the discretionary nature of writs under Article 226, High Courts should generally refrain from entertaining writ petitions that primarily involve the adjudication of disputed questions of fact, necessitating the evaluation of evidence from witnesses.

JUDICIAL PRECEDENTS

In State of Uttar Pradesh v. Mohammad Nooh[2], the Court held that the availability of alternative remedies does not categorically preclude the issuance of a writ. When exercising its discretion, the Court may acknowledge the existence of other potential avenues for redress. If a lower court or tribunal acts ultra vires, exceeds its jurisdiction, or violates principles of natural justice, a superior court may issue a writ of certiorari to rectify the situation, regardless of the availability or utilization of an appeal to another inferior court or tribunal.

In Maharashtra Chess Association v. Union of India & Ors [3] the Supreme Court, citing State of Uttar Pradesh v. Mohammad Nooh, held that the availability of alternative remedies does not automatically preclude the High Court from exercising its writ jurisdiction. The Court further emphasized that the existence of alternative dispute resolution mechanisms does not constitute an absolute bar to the exercise of the High Court’s inherently discretionary writ jurisdiction.

In Union of India v. Tantia Construction Pvt Ltd[4], the Supreme Court rejected the petitioner’s argument regarding the limitations on High Courts’ powers under Article 226, despite the presence of an arbitration clause in the agreement between the parties. The Court recognized that the availability of an alternative remedy (arbitration) did not automatically bar the High Court from exercising its writ jurisdiction. This was particularly true in cases where the facts demonstrated a significant degree of injustice.

The Supreme Court, in Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd[5] examined the interplay between arbitration and judicial review. The Court underscored the Arbitration Act’s intention to limit excessive judicial involvement in arbitral matters. Accordingly, courts are obligated to exercise restraint when intervening in arbitral proceedings. In Deep Industries Ltd. v. ONGC Ltd [6] the Supreme Court emphasized that writ jurisdiction should be exercised with caution, primarily in situations where the petitioner lacks alternative remedies or when evident bad faith is demonstrated by one party. Furthermore, the Court recognized a higher threshold for invoking writ powers in matters pertaining to arbitration, aligning with the legislative intent behind the Arbitration Act to minimize judicial intervention.

In Unitech Ltd. v. Telangana State Industrial Infrastructure Corporation[7], the Supreme Court revisited these principles, reaffirming those established in ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd [8]. The Court acknowledged that, in specific instances, writ petitions under Article 226 or Article 227 can be filed to enforce contractual rights against the State or its entities. Furthermore, the Supreme Court recognized an exceptional circumstance where writ jurisdiction may be invoked, even when effective alternative remedies exist, specifically when a state entity contravenes the constitutional mandate of fairness enshrined in Article 14.

In Surendra Kumar Singhal v. Arun Kumar Bhalotia[9], the Delhi High Court examined several Supreme Court judgments to establish key principles governing judicial intervention in arbitration proceedings under Article 226 or Article 227 of the Constitution. The Court determined that, in exceptional circumstances, orders issued by an Arbitral Tribunal may be subject to a writ petition. However, the writ court’s intervention would be limited to instances where the Tribunal’s order is demonstrably flawed or exceeds its jurisdiction. Furthermore, the High Court clarified that Section 5 of the Arbitration Act does not restrict the inherent powers of writ courts under Article 227, which is a constitutional provision. Nevertheless, the Court emphasized the importance of preserving the integrity of the arbitral process.

In SBP & Co. v. Patel Engineering Ltd[10]., the Supreme Court strongly criticized excessive judicial interference in arbitral proceedings. The Court condemned the practice of High Courts entertaining writ petitions challenging orders of arbitral tribunals. It held that aggrieved parties must utilize the remedies provided under Sections 34 and 37 of the Arbitration Act to challenge final or interim orders, respectively. The Court emphasized that allowing frequent recourse to writ jurisdiction under Articles 227 and 226 of the Constitution would undermine the objective of minimizing judicial intervention during the arbitral process. The Court reasoned that Section 34 provides a mechanism for challenging not only the final award but also any interim orders issued prior to its rendition. Furthermore, the Court held that once arbitration proceedings commence, parties are generally expected to await the final award before seeking judicial intervention, unless the right to appeal arises under Section 37.[11]

The Court has repeatedly underscored that parties to an arbitration agreement must primarily rely on the Arbitration Act, adhering to the principle of minimal judicial intervention. It has clarified that other legislative remedies, such as writ petitions, should be pursued only in situations of helplessness or when bad faith is evident. While recognizing the extensive and overarching powers conferred on it under Articles 226 and 227 of the Constitution, the Court has stressed that these powers should be exercised sparingly and only in exceptional cases.

THE IMPACT OF THE COMMERCIAL COURTS ACT

The Commercial Courts Act 2015 was enacted to improve the efficiency and quality of adjudication in commercial disputes, including arbitration related matters. The main features of this act are:

• Jurisdiction over Arbitration Matters: Commercial Cours and Commercial Divisions of High Courts handle applications under sections 9, 34 and 37 of the Arbitration Act in commercial cases. The Act clarifies the jurisdiction of commercial courts over arbitration matters, particularly those of a commercial nature, thereby minimizing jurisdictional conflicts. The Act also facilitates the transfer of arbitration applications pending in civil courts to the designated commercial courts, streamlining proceedings and ensuring that these matters are handled by courts with specialized expertise in commercial law.
• Specialized Mechanism: The Act streamlines commercial dispute resolution, including arbitration matters. This is achieved through expedited procedures to minimize delays and by establishing specialized commercial courts and divisions within High Courts. These dedicated forums enhance efficiency and expertise in handling commercial cases.
• Impact on Writ Jurisdiction: The Availability of specialized forums under the Commercial Courts Act narrows the scope for invoking writ jurisdiction, as parties are encouraged to exhaust statutory remedies. It limits the scope for writ petitions to challenge arbitration decisions, effectively restricting them to exceptional circumstances.
• Statutory Remedies: The Act emphasizes the use of statutory remedies, particularly Section 34 of the Arbitration and Conciliation Act, 1996, for challenging arbitral awards. Section 34 outlines specific grounds for setting aside awards, such as fraud or exceeding the tribunal’s powers. By providing clear statutory avenues, the CC Act aims to discourage the reliance on writ petitions under Articles 226 and 227 of the Constitution.
• Efficient Disposal of Cases: The Act aims to ensure timely resolution of disputes, aligning with the Arbitration Act’s objectives.

CHALLENGES AND CRITICISMS

1. Overlapping Jurisdiction and Forum Shopping– The coexistence of constitutional powers (Articles 226 & 227) and statutory remedies under the Arbitration Act creates overlapping jurisdictions, enabling parties to circumvent statutory mechanisms by invoking writ jurisdiction. This leads to forum shopping, inconsistent judicial decisions, and undermines the efficiency of the Arbitration Act by encouraging frivolous challenges to arbitral awards.
2. Judicial Overreach and Lack of Restraint- Despite the Supreme Court’s emphasis on minimal judicial interference, courts sometimes overstep their bounds by entertaining writ petitions that effectively re-examine arbitral awards. This judicial overreach, including delving into factual and legal issues already addressed by the tribunal, undermines the legislative intent of the Arbitration Act. Such interventions dilute the autonomy of arbitration, erode the finality of awards, and create uncertainty, deterring parties from choosing arbitration as a preferred dispute resolution method.
3. Delay in Arbitration Process- The frequent invocation of writ jurisdiction significantly delays the enforcement of arbitral awards and the resolution of disputes. This undermines the core advantage of arbitration: its speed and efficiency. Filing writ petitions, even those lacking merit, can halt award enforcement. Lengthy hearings in writ proceedings and subsequent appeals further exacerbate delays. These delays burden the judiciary, diverting resources from other pressing matters, and ultimately undermine the very purpose of arbitration.
4. Misuse of Writ Jurisdiction- Parties frequently misuse writ petitions as a tactical tool to obstruct arbitration proceedings or delay the enforcement of arbitral awards. This includes filing frivolous petitions challenging tribunal jurisdiction or alleging minor procedural irregularities. Moreover, some parties file writ petitions solely to delay the execution of awards or gain leverage in settlement negotiations. Such misuse undermines the credibility of arbitration as a reliable dispute resolution mechanism and significantly increases litigation costs, particularly for businesses that rely on arbitration for efficient commercial dispute resolution.

CONCLUSION

The Commercial Courts Act, 2015, has significantly impacted the role of writ jurisdiction in relation to arbitration awards in India. By prioritizing statutory remedies under the Arbitration and Conciliation Act, 1996, and establishing specialized commercial courts, the Act seeks to expedite the resolution of commercial disputes, including arbitration matters, while upholding the sanctity of arbitral awards. While writ jurisdiction remains available in exceptional circumstances, such as violations of fundamental rights or clear jurisdictional excesses by arbitral tribunals, the Act encourages parties to primarily utilize the statutory framework for challenging awards. This approach promotes the finality of arbitral awards and fosters a more efficient and predictable dispute resolution process within the commercial sphere.

It is important to acknowledge that the legal landscape surrounding writ jurisdiction and arbitration is constantly evolving. Continued judicial interpretation and refinement of the Act’s provisions will further shape the interplay between these areas of law.

[1] https://images.assettype.com/barandbench/import/2018/10/Bombay-HC-challenge-to-Commercial-Courts-Act.pdf.

[2] State of Uttar Pradesh v. Mohammad Nooh,1 SCR 595 (1958).

[3] Maharashtra Chess Association v. Union of India & Ors, 2019 SC 708.

[4] Union of India v. Tantia Construction Pvt Ltd , 2011 SC 530.

[5] Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd, 1 SCC 75 (2022).

[6] Deep Industries Ltd. v. ONGC Ltd, 15 SCC 706 (2020).

[7] Unitech Ltd. v. Telangana State Industrial Infrastructure Corporation, 16 SCC 35 (2021)

[8] ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd, 3 SCC 553 (2004)

[9] Surendra Kumar Singhal v. Arun Kumar Bhalotia, 2021 DEL 415.

[10] SBP & Co. v. Patel Engineering Ltd, 8 SCC 618 (2005).

[11] In The High Court of Gujarat at Ahmedabad R/Special Civil Application No. 4524 of 2019, https://images.assettype.com/barandbench/202005/5538e565024d4e10a73e88be6e78cfb7/GTPL_Hathway_Ltd__v__Strategic_Markering_Pvt__Ltd.pdf.