Article 227 of Constitution against the dismissal of Arbitration Application can be invoked only if there is Patent Lack of Jurisdiction

ITEM NO.9 Court 3SECTION IV B S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS Petition(s) for Special Leave to AppealNo. 8482 2020 Arising out of impugned final judgment and order dated 10 12 2019 in CWP No. 12700 2019 passed by the High Court of Punjab & Haryana PUNJAB STATE POWER CORPORATION LIMITED Petitioner(s EMTA COAL LIMITED & ANR. Respondent(s FOR ADMISSION and I.R. and IA No.63395 2020 EXEMPTION FROM FILING C C OF THE IMPUGNED JUDGMENT and IA No.69953 2020 PERMISSION TO FILE ADDITIONAL DOCUMENTS FACTS ANNEXURES Date : 18 09 2020 This petition was called on for hearing today CORAM : HON BLE MR. JUSTICE ROHINTON FALI NARIMAN HON BLE MR. JUSTICE NAVIN SINHA HON BLE MS. JUSTICE INDIRA BANERJEE Mr. K. V. Vishwanathan Sr. Adv Ms. Uttara Babbar AOR Mr. Vinod Bharadwaj Adv Ms. Bhavana Duhoon Adv Mr. R. Venkataraman Adv Mr. Manan Bansal Adv Mr. Abhimanyu Bhandari Adv Mr. Sangram S. Saron Adv Ms. Nattasha Garg Adv Ms. Rooh e hina Dua AOR UPON hearing the counsel the Court made the following O R D E R The impugned judgment dated 10.12.2019 is grounded on the fact that the impugned order passed by the Arbitral Tribunal on 08.01.2017 was challenged only 2½ years late and the petitioner filed the writ petition at the last minute after the arguments had concluded before the Arbitral Tribunal. Based on this ground the writ petition has been SLPNo. 8482 2020 dismissed filed under Article 227 directly against a section 16 application without following the drill of section 16 of the Arbitration Act Shri K. V. Vishwanathan learned senior counsel appearing for the petitioner has argued before us based on our judgment in Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd. & Anr. SCC Online SC 1602 and paragraph 16 in particular which is set out hereinbelow “16. 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 provisions 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 According to Shri Vishwanathan one look at the Joint Venture Agreement and the arbitration clause therein would make it clear that the third party in this case had not been referred to at all as a result of which there is a patent lack of inherent jurisdiction within the meaning of paragraph 16 of the Deep Industries Ltd.No. 8482 2020 can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever it must be the perversity of the order that must stare one in the face Unfortunately parties are using this expression which is in our judgment in Deep Industries Ltd. to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things. In any case now that Shri Vishwanathan has argued this matter and it is clear that this is not a case which falls under the extremely exceptional category we dismiss this special leave petition with costs of Rs.50 000 to be paid to the Supreme Court Legal Services Committee within two weeks Pending applications stand disposed of NIDHI AHUJA) (NISHA TRIPATHI AR cum PS BRANCH OFFICER

Summary: The Hon’ble Supreme Court of India in Punjab State Power Corporation V. EMTA Coal Ltd. &amp;Anr. [Special Leave to Appeal (C) No. 8482/2020]  held that approaching writ courts against dismissal of an arbitration application by an arbitrator can only be entertained if it is clear that there was a patent lack of inherent jurisdiction. 
The Bench of Hon’ble Justices Rohinton Nariman, Navin Sinha and Indira Banerjee noted that parties to arbitration agreements are invoking Article 227 jurisdiction of the High Courts even where there is no patent lack in inherent jurisdiction.

Background –
The petitioner is Punjab State Power Corporation, and had invoked the High Court’s writ jurisdiction to challenge an order passed by an arbitral tribunal. The High Court had dismissed the writ on the ground that the “drill of Section 16” of the Arbitration Act was not fully followed and that the plea was filed at a time when the arguments before the tribunal had concluded, the petitioner filed an appeal against this order in Supreme Court.

Held/Observation –
It was held by the Hon’ble Court that “ We are of the view that a foray to the writ Court from a section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever – it must be the perversity of the order that must stare one in the face.”

It was further expounded by the court “Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things.”

The Hon’ble Court while dismissing the petition imposed a cost of Rs. 50,000 on the Petitioners and noted that it is clear that this is not a case which falls under the extremely exceptional category.
Click to Read Order 
 The Bench of Hon’ble Justices Rohinton Nariman, Navin Sinha and Indira Banerjee noted that parties to arbitration agreements are invoking Article 227 jurisdiction of the High Courts even where there is no patent lack in inherent jurisdiction. 
Background –
The petitioner is Punjab State Power Corporation, and had invoked the High Court’s writ jurisdiction to challenge an order passed by an arbitral tribunal. The High Court had dismissed the writ on the ground that the “drill of Section 16” of the Arbitration Act was not fully followed and that the plea was filed at a time when the arguments before the tribunal had concluded, the petitioner filed an appeal against this order in Supreme Court.

Held/Observation –
It was held by the Hon’ble Court that “ We are of the view that a foray to the writ Court from a section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever – it must be the perversity of the order that must stare one in the face.”

It was further expounded by the court “Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things.”

The Hon’ble Court while dismissing the petition imposed a cost of Rs. 50,000 on the Petitioners and noted that it is clear that this is not a case which falls under the extremely exceptional category.
Click to Read Order 
 Background – The petitioner is Punjab State Power Corporation, and had invoked the High Court’s writ jurisdiction to challenge an order passed by an arbitral tribunal. The High Court had dismissed the writ on the ground that the “drill of Section 16” of the Arbitration Act was not fully followed and that the plea was filed at a time when the arguments before the tribunal had concluded, the petitioner filed an appeal against this order in Supreme Court. 
Held/Observation –
It was held by the Hon’ble Court that “ We are of the view that a foray to the writ Court from a section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever – it must be the perversity of the order that must stare one in the face.”

It was further expounded by the court “Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things.”

The Hon’ble Court while dismissing the petition imposed a cost of Rs. 50,000 on the Petitioners and noted that it is clear that this is not a case which falls under the extremely exceptional category.
Click to Read Order 
 Held/Observation – It was held by the Hon’ble Court that “ We are of the view that a foray to the writ Court from a section 16 application being dismissed by the Arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction. A patent lack of inherent jurisdiction requires no argument whatsoever – it must be the perversity of the order that must stare one in the face.” 
It was further expounded by the court “Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things.”

The Hon’ble Court while dismissing the petition imposed a cost of Rs. 50,000 on the Petitioners and noted that it is clear that this is not a case which falls under the extremely exceptional category.
Click to Read Order 
 It was further expounded by the court “Unfortunately, parties are using this expression which is in our judgment in Deep Industries Ltd., to go to the 227 Court in matters which do not suffer from a patent lack of inherent jurisdiction. This is one of them. Instead of dismissing the writ petition on the ground stated, the High Court would have done well to have referred to our judgment in Deep Industries Ltd. and dismiss the 227 petition on the ground that there is no such perversity in the order which leads to a patent lack of inherent jurisdiction. The High Court ought to have discouraged similar litigation by imposing heavy costs. The High Court did not choose to do either of these two things.” 
The Hon’ble Court while dismissing the petition imposed a cost of Rs. 50,000 on the Petitioners and noted that it is clear that this is not a case which falls under the extremely exceptional category.
Click to Read Order