Case: M/S DEEP INDUSTRIES LTD Vs. OIL AND NATURAL GAS CORPORATION LTD

3. In the present case, the respondent-Oil and Natural Gas Corporation Limited (for short ONGC) awarded a contract to the appellant for supply of one Mobile Air Compressor for a period of five years. Shortly after entering into the contract, the contract was terminated on 11.10.2017 by the ONGC on the ground that some part of the equipment was not new but only second hand. This position was disputed by the appellant. On the very next day, i.e. on 12.10.2017, the Vendor Code of the appellant was blocked, meaning thereby, that the appellant would be unable to bid for any other further bids floated by the ONGC. On 18.10.2017, a Show Cause Notice was issued by the ONGC to the appellant asking the appellant why it should not be put on Holiday i.e. black listed for a period of two years4. Since disputes had arisen between the parties, the appellant invoked the arbitration clause contained in the contract on 02.11.2017. This notice is the subject-matter of dispute before the Arbitrator as well as before this Court and will be adverted to subsequently. Pursuant to the notice, one Justice J.C. Upadhyaya (Retd. High Court Judge) was appointed as a Sole Arbitrator to decide the disputes between the parties on 21.12.2017. On 02.02.2018, a claim petition was filed by the appellant before the learned Arbitrator in which the termination of the contract/show cause notice was challenged and damages claimed. After this claim petition was filed, on 15.02.2018, the appellant was blacklisted by an order passed by the ONGC with effect from 11.10.2017 for a period of two years. Meanwhile, a Section 17 application was also been moved before the learned Arbitrator. Applications were then moved by the appellant to amend both the petition as well as the Section 17 application to challenge this order dated 15.02.2018, which amendments were granted by the learned Arbitrator on 10.03.20185. Meanwhile, a Section 16 application was before the learned Arbitrator basically on the ground that since the arbitration notice was confined only to termination of the agreement, blacklisting would be outside the Arbitrators ken. This Section 16 application was dismissed on 09.05.2018 by the learned Arbitrator, in which the learned Arbitrator held that the notice dated 02.11.2017 was not merely confined to termination of the contract but was also in respect of the two year ban that was sought to be imposed at that time. He further held that the ban order was relatable to Clause 18 of the contract and that therefore the validity of the 15.02.2018 office order could be decided by him, and consequently dismissed the Section 16 application filed by the respondent6. On the same day i.e. 09.05.2018, the Section 17 application was separately disposed of by the learned Arbitrator, in which the learned Arbitrator stayed the operation of the order dated 15.02.2018 on condition that the two year ban will only operate if the appellant ultimately loses in the final arbitration proceedings7. An appeal against the Section 17 Order was filed and disposed of by the City Civil Court, Ahmedabad on 31.05.2018 by which the learned Arbitrators order was upheld. Consequently, the first appeal filed under Section 37 was dismissed. At this stage, and which is the major bone of contention between the parties before us, a Special Civil Application being Application No. 9305/2018 was filed under Article 227 of the Constitution of India before the High Court Gujarat at Ahmedabad in which the City Civil Courts order was challenged. By the impugned judgment dated 25.07.2018, the High Court of Gujarat referred to a preliminary contention raised on behalf of the petitioner that the petition filed under Article 227 should be dismissed at the threshold as it did not raise any jurisdictional issue. The High Court, without answering this question, then went on to state that the ban order had, in fact, been passed under a General Contract Manual and not under Clause 18 of the Agreement as a result of which serious disputes arose as to the jurisdiction of the Arbitrator to deal with the same. It was also held on a reading of the notice for arbitration that the notice did not raise the issue of the ban for two years and was confined only to illegal termination. The High Court finally held that no stay could possibly have been granted under Section 17 of the ban order as an injunction cannot be granted in cases where the party can be compensated later in damages. This being the case, the Writ Petition was allowed and the Ahmedabad City Civil Courts order was set aside.

Court's reasoning:
11. Given the aforesaid statutory provision and given the fact that the 1996 Act repealed three previous enactments in order that there be speedy disposal of all matters covered by it, it is clear that the statutory policy of the Act is that not only are time limits set down for disposal of the arbitral proceedings themselves but time limits have also been set down for Section 34 references to be decided. Equally, in Union of India vs. M/s Varindera Const. Ltd., dated 17.09.2018, disposing of SLP (C) No. 23155/2013, this Court has imposed the self-same limitation on first appeals under Section 37 so that there be a timely resolution of all matters which are covered by arbitration awards12. Most significant of all is the non-obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this Part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed (See Section 37(2) of the Act)13. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdictionIn SBP & Co. (supra), this Court while considering interference with an order passed by an arbitral tribunal under Article 226/227 of the Constitution laid down as follows:-45. 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. 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, a 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. Such an intervention by the High Courts is not permissible46. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 or under Article 226 of the Constitution against every order made by the arbitral tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stageWhile the learned Additional Solicitor General is correct in stating that this statement of the law does not directly apply on the facts of the present case, yet it is important to notice that the seven-Judge Bench has referred to the object of the Act being that of minimizing judicial intervention and that this important object should always be kept in the forefront when a 227 petition is being disposed of against proceedings that are decided under the Act15. It is true that in Punjab Agro Industries Corporation Limited (supra), this Court distinguished SBP & Co. (supra) stating that it will not apply to a case of a non- appointment of an Arbitrator. This Court held:9. We have already noticed that though the order under Section 11(4) is a judicial order, having regard to Section 11(7) relating to finality of such orders and the absence of any provision for appeal, the order of the Civil Judge was open to challenge in a writ petition under Article 227 of the Constitution. The decision in SBP & Co. does not bar such a writ petition. The observations of this Court in SBP & Co. that against an order under Section 11 of the Act, only an appeal under Article 136 of the Constitution would lie, is with reference to the orders made by the Chief Justice of a High Court or by the designate Judge of that High Court. The said observations do not apply to a subordinate court functioning as designate of the Chief JusticeWhat is important to note is that the observations of this Court in this judgment were for the reason that no provision for appeal had been given by statute against the orders passed under Section 11, which is why the High Courts supervisory jurisdiction should first be invoked before coming to this Court under Article 136. Given the facts of the present case, this case is equally distinguishable for the reason that in this case the 227 jurisdiction has been exercised by the High Court only after a first appeal was dismissed under Section 37 of the Act16. One other feature of this case is of some importance. As stated herein above, on 09.05.2018, a Section 16 application had been dismissed by the learned Arbitrator in which substantially the same contention which found favour with the High Court was taken up. The drill of Section 16 of the Act is that where a Section 16 application is dismissed, no appeal is provided and the challenge to the Section 16 application being dismissed must await the passing of a final award at which stage it may be raised under Section 34. What the High Court has done in the present case is to invert this statutory scheme by going into exactly the same matter as was gone into by the arbitrator in the Section 16 application, and then decided that the two year ban was no part of the notice for arbitration issued on 02.11.2017, a finding which is directly contrary to the finding of the learned Arbitrator dismissing the Section 16 application. For this reason alone, the judgment under appeal needs to be set aside. Even otherwise, as has been correctly pointed out by Mr. Rohatgi, the judgment under appeal goes into the merits of the case and states that the action of putting the Contractor and his Directors on holiday is not a consequence of the termination of the agreement. This is wholly incorrect as it is only because of the termination that the show cause notice dated 18.10.2017 proposing to impose a two year ban was sent. Even otherwise, entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected. Therefore to state that the ban order was passed under a General Contract Manual and not Clause 18 of the Agreement, besides being incorrect, would also be incorrect for the reason that the General Contract Manual does not mean that such order was issued as an administrative order invoking the executive power, but was only as an order which emanated from the contract itself. Further to state that serious disputes as to jurisdiction seem to have cropped up is not the same thing as saying that the Arbitral Tribunal lacked inherent jurisdiction in going into and deciding the Section 17 application. In point of fact, the Arbitral Tribunal was well within its jurisdiction in referring to the contract and the ban order and then applying the law and finally issuing the stay order. Even if it be accepted that the principle laid down by Section 41(e) of the Specific Relief Act was infracted, in that damages could have been granted, as a result of which an injunction ought not to have been issued, is a mere error of law and not an error of jurisdiction, much less an error of inherent jurisdiction going to the root of the matter. Therefore, even otherwise, the High Court judgment cannot be sustained and is set asideWhat becomes clear is that had the High Court itself disposed of the first appeal in the present case, no article 227 petition could possibly lie - all that could perhaps have been done was to file an LPA before a Division Bench of the same High Court. This, as we have seen, has specifically been interdicted by Fuerst Day Lawson Limited (supra). Merely because, on the facts of this case, the first appeal was disposed of by a court subordinate to the High Court, an article 227 petition ought not to have been entertained18. Mr. Rohatgi is also correct in pointing out that the legislative policy qua the general revisional jurisdiction that is contained by the amendments made to Section 115 C.P.C. should also be kept in mind when High Courts dispose of petitions filed under under article 227. The legislative policy is that no revision lies if an alternative remedy of appeal is available. Further, even when a revision does lie, it lies only against a final disposal of the entire matter and not against interlocutory ordersThese amendments were considered in Tek Singh vs. Shashi Verma and Another, 2019 SCC OnLine SC 168 in which this Court adverted to these amendments and then stated:7. A reading of this proviso will show that, after 1999, revision petitions filed under Section 115 CPC are not maintainable against interlocutory orders8. Even otherwise, it is well settled that the revisional jurisdiction under Section 115 CPC is to be exercised to correct jurisdictional errors only. This is well settled. In D.L.F. Housing & Construction Company Private Ltd., New Delhi v. Sarup Singh and Others (1970) 2 SCR 368  this Court held:The position thus seems to be firmly established that while exercising the jurisdiction under Section 115, it is not competent to the High Court to correct errors of fact however gross or even errors of law unless the said errors have relation to the jurisdiction of the Court to try the dispute itself. Clauses (a) and (b) of this section on their plain reading quite clearly do not cover the present case. It was not contended, as indeed it was not possible to contend, that the learned Additional District Judge had either exercised a jurisdiction not vested in him by law or had failed to exercise a jurisdiction so vested in him, in recording the order that the proceedings under reference be stayed till the decision of the appeal by the High Court in the proceedings for specific performance of the agreement in question. Clause (c) also does not seem to apply to the case in hand. The words illegally and with material irregularity as used in this clause do not cover either errors of fact or of law; they do not refer to the decision arrived at but merely to the manner in which it is reached. The errors contemplated by this clause may, in our view, relate either to breach of some provision of law or to material defects of procedure affecting the ultimate decision, and not to errors either of fact or of law, after the prescribed formalities have been complied with. The High Court does not seem to have adverted to the limitation imposed on its power under Section 115 of the Code. Merely because the High Court would have felt inclined, had it dealt with the matter initially, to come to a different conclusion on the question of continuing stay of the reference proceedings pending decision of the appeal, could hardly justify interference on revision under Section 115 of the Code when there was no illegality or material irregularity committed by the learned Additional District Judge in his manner of dealing with this question. It seems to us that in this matter the High Court treated the revision virtually as if it was an appeal. at Pg.373