Introduction:

In the case of Shri Guru Gobind Singhji Institute of Engineering and Technology v. M/s. Kay Vee Enterprises (WRIT PETITION NO. 9868 / 2024), the Bombay High Court deliberated on the scope of judicial review under Article 226/227 of the Constitution concerning interlocutory orders passed by an arbitrator. The petitioner, a prestigious engineering institute, had entered into a contract with M/s. Kay Vee Enterprises for construction work. However, after the completion of the work, disputes arose regarding payment, which led the respondent to invoke the arbitration clause of the contract. A sole arbitrator was appointed to resolve the dispute.

The petitioner filed an application under Section 16(2) of the Arbitration and Conciliation Act, 1996, seeking a preliminary issue on the limitation of the claims made by the respondent. This application was rejected by the arbitrator. Dissatisfied with this decision, the petitioner approached the High Court through a writ petition (No. 7278 of 2023), which was also rejected. The petitioner then moved to the Supreme Court, which dismissed the Special Leave Petition but allowed the petitioner to raise the plea before the arbitrator.

Subsequently, the arbitrator issued several interim orders that the petitioner sought to challenge in the present writ petition, particularly those concerning payments and the mandate of the arbitral tribunal. The petitioner argued that judicial review under Article 226/227 is an integral part of the Constitution’s basic structure and cannot be excluded by statutory provisions, such as the Arbitration Act. The respondent, on the other hand, contended that the Supreme Court’s ruling in M/s. S.B.P & Co. v. Patel Engineering Ltd. (2005) had established that the High Court has no jurisdiction to interfere with interim orders passed during arbitration proceedings and that the appropriate remedy would be under Section 34 of the Arbitration and Conciliation Act after the final award is delivered.

The petitioner further argued that the arbitrator’s conduct was biased and that the interlocutory orders were unjust and harmful, creating hardships that could not be remedied by a Section 34 application. The respondent, however, maintained that the challenge to these orders was premature and that the judicial review could only take place after the final award.

Arguments of Both Sides:

The petitioner’s counsel contended that the jurisdiction of the High Court under Article 226/227 is an essential safeguard to protect the fundamental rights of parties, particularly in cases where an arbitrator’s conduct might be unreasonable or biased. They asserted that judicial review is critical to ensure the principles of natural justice are adhered to, and that remedies under the Arbitration Act, such as Section 34, would not suffice to address the immediate injustice caused by the arbitrator’s interim orders. The petitioner’s counsel highlighted that the arbitrator’s orders appeared to be retaliatory and were not based on fair or neutral grounds.

On the other hand, the respondent’s counsel argued that the judicial intervention sought by the petitioner was contrary to the principles laid down in M/s. S.B.P & Co. (supra), where the Supreme Court emphasized minimal judicial interference in arbitration proceedings. The respondent further emphasized that Section 34 of the Arbitration Act provides a mechanism for challenging the final award, and any challenge to interlocutory orders would disrupt the arbitration process, causing unnecessary delays and undermining the autonomy of the arbitrator.

Court’s Judgment:

The Bombay High Court, in its judgment, referred to the principles outlined in M/s. S.B.P & Co. acknowledged the Supreme Court’s emphasis on limiting judicial intervention during the arbitration process. However, the Court also clarified that the jurisdiction of the High Court under Article 226/227 is not entirely excluded from examining the validity of interlocutory orders passed by an arbitrator. The Court emphasized that judicial review is an inherent part of the constitutional structure and cannot be entirely excluded by statutory provisions, including those in the Arbitration and Conciliation Act.

The Court noted that the issues raised by the petitioner, particularly the claims of bias and unfair treatment by the arbitrator, were serious enough to warrant examination under the supervisory jurisdiction of the High Court. The Court emphasized that even if the arbitration process was ongoing, the principles of natural justice and fairness must not be overlooked. The Court acknowledged that the judicial review of interlocutory orders, in certain circumstances, is necessary to protect the parties from potential misuse of the arbitration process, especially when there are allegations of bias or a violation of fundamental rights.

The Court also addressed the specific claims made by the petitioner, including the assertion of bias and malice on the part of the arbitrator. The Court opined that while the final resolution of these allegations should take place during the arbitration process, the petitioner’s grievances were valid enough to be considered under Article 226/227. The Court concluded that the High Court’s jurisdiction to examine interlocutory orders is not precluded by the Arbitration Act, and the matter would be examined on its merits.

The Court ultimately overruled the preliminary objections raised by the respondent regarding the maintainability of the writ petition. The Court made it clear that the case would be examined on its merits, particularly about the allegations of bias and the appropriateness of the interim orders passed by the arbitrator.

Conclusion:

The Bombay High Court’s ruling reinforces the critical role of judicial review in arbitration proceedings, emphasizing that the High Court’s jurisdiction under Articles 226/227 is not excluded when allegations of bias, unfair conduct, or violations of natural justice arise. While arbitration is intended to be an alternative dispute resolution mechanism with minimal judicial interference, the Court held that fundamental rights and fairness cannot be compromised, particularly when there are serious allegations against the arbitrator. The judgment serves as a reminder that arbitration must be conducted by the principles of justice and fairness and that courts retain the power to intervene when necessary to uphold these principles.