2022 (5) TMI 248 - SC - Indian Laws

Arbitration Award - Maintainability of petition before the HC - availability of alternative remedy of appeal - non-compliance of Clause 56 of the Articles of Agreement - procedure as required under Clause 56 not followed - HELD THAT - Against the award made by the learned Arbitrator made under the Act and against an order passed by the learned trial Court making the award a decree and without availing the alternative statutory remedy available by way of appeal under the provisions of the Act, the High Court ought not to have entertained the writ petition under Articles 226 and 227 of the Constitution of India. When the statute provides a further remedy by way of appeal against the award and even against the order passed by the learned trial Court making the award a decree of the court, the High Court ought not to have entertained the writ petition and ought not to have set aside the award, in a writ petition under Articles 226 and 227 of the Constitution of India. In that view of the matter the impugned judgment and order passed by the High Court is unsustainable and the same deserves to be quashed and set aside. Impugned Judgment and Order passed by the High Court is set aside - Appeal allowed.

Summary

Issues:
1. Entertaining a writ petition under Articles 226 and 227 of the Constitution of India against an award made by an arbitrator without availing the statutory remedy of appeal.
2. Compliance with Clause 56 of the Articles of Agreement before the appointment of the arbitrator.

Analysis:

Issue 1: Entertaining a writ petition against an arbitrator's award without availing the statutory remedy of appeal
The dispute originated from an arbitration proceeding where the arbitrator passed an award in favor of the original claimant, directing the respondents to pay a specific amount. However, the respondents, instead of appealing under the Arbitration Act, 1940, filed a writ petition before the High Court under Articles 226 and 227 of the Constitution of India. The High Court set aside the arbitrator's award, citing noncompliance with Clause 56 of the Articles of Agreement. The Supreme Court held that when statutory remedies like an appeal are available against an arbitrator's award, the High Court should not entertain a writ petition under Articles 226 and 227. Consequently, the Supreme Court quashed the High Court's judgment, emphasizing the importance of following the statutory appeal process.

Issue 2: Compliance with Clause 56 of the Articles of Agreement
The High Court set aside the arbitrator's award based on the ground that there was noncompliance with Clause 56 of the Articles of Agreement before the arbitrator's appointment. The Supreme Court did not delve into the specifics of the alleged noncompliance but focused on the procedural aspect of entertaining a writ petition instead of pursuing the statutory remedy of appeal. The Supreme Court emphasized the significance of adhering to the procedures outlined in agreements, but the primary focus of the judgment was on the appropriate legal recourse rather than the substantive issues surrounding Clause 56 compliance.

In conclusion, the Supreme Court allowed the appeal, setting aside the High Court's judgment and emphasizing the importance of availing statutory remedies like appeals provided under the Arbitration Act, 1940. The Court reserved liberty for the respondent to pursue further legal recourse under the Act within a specified timeframe. The judgment underscores the need for parties to follow the prescribed legal procedures and exhaust statutory remedies before seeking extraordinary remedies like writ petitions under constitutional provisions.