Case Note & Summary
The appeal arose from a dispute between M/s Deep Industries Limited (appellant) and Oil and Natural Gas Corporation Limited (ONGC) (respondent) concerning a contract for supply of a Mobile Air Compressor. ONGC terminated the contract on 11.10.2017 alleging use of second-hand equipment, blocked the appellant's vendor code on 12.10.2017, and issued a show cause notice on 18.10.2017 proposing a two-year holiday (blacklisting). The appellant invoked arbitration on 02.11.2017, leading to appointment of a sole arbitrator. The arbitrator dismissed ONGC's Section 16 application challenging jurisdiction and granted interim relief under Section 17 staying the blacklisting order. ONGC's appeal under Section 37 was dismissed by the City Civil Court, Ahmedabad. ONGC then filed a petition under Article 227 before the Gujarat High Court, which allowed the petition and set aside the interim order. The Supreme Court considered whether the High Court's intervention under Article 227 was justified given the limited scope of judicial intervention under the Arbitration Act. The Court held that the High Court erred in interfering with the interim order without addressing the preliminary objection regarding maintainability. It emphasized that the Arbitration Act is a self-contained code with limited avenues for appeal, and Article 227 should be exercised sparingly, only in cases of patent lack of jurisdiction or grave injustice. The Court allowed the appeal, set aside the High Court's order, and restored the arbitrator's interim order, directing expeditious disposal of the arbitration.
Headnote
A) Arbitration Law - Judicial Intervention - Section 5, Arbitration and Conciliation Act, 1996 - The non-obstante clause in Section 5 mandates that no judicial authority shall intervene in matters governed by Part I of the Act except where so provided, emphasizing limited judicial intervention. (Paras 10-12) B) Arbitration Law - Appealable Orders - Section 37, Arbitration and Conciliation Act, 1996 - Section 37 provides a constricted right of first appeal against specified orders and prohibits a second appeal, reinforcing the Act's policy of minimal judicial interference. (Paras 10-12) C) Arbitration Law - Interim Measures - Section 17, Arbitration and Conciliation Act, 1996 - The Arbitrator's power to grant interim measures under Section 17 is subject to limited appellate review under Section 37, and further interference under Article 227 is permissible only in cases of patent lack of jurisdiction or grave injustice. (Paras 7-9, 12) D) Constitutional Law - Supervisory Jurisdiction - Article 227 of the Constitution of India - While Article 227 cannot be ousted by statute, the High Court must exercise it sparingly, particularly in arbitration matters, and should not interfere with interim orders unless there is a jurisdictional error or perversity. (Paras 2, 8-9, 12)
Issue of Consideration
Whether the High Court, in exercise of its jurisdiction under Article 227 of the Constitution of India, can interfere with an order passed under Section 17 of the Arbitration and Conciliation Act, 1996, which was upheld by the first appellate court under Section 37 of the Act, and what is the scope of such interference.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's order dated 25.07.2018, and restored the arbitrator's order dated 09.05.2018 granting interim relief under Section 17. The Court directed the arbitrator to expedite the arbitration proceedings and dispose of the matter within six months.
Law Points
- Article 227 of the Constitution of India
- Section 5 of the Arbitration and Conciliation Act
- 1996
- Section 37 of the Arbitration and Conciliation Act
- Section 17 of the Arbitration and Conciliation Act
- Section 16 of the Arbitration and Conciliation Act
- Limited judicial intervention
- Self-contained code
- Speedy disposal of arbitration matters
