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Punjab State Power Corporation Limited v. Emta Coal Limited And Another
Factual and Procedural Background
The petitioner had filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 before an Arbitral Tribunal. After the Tribunal rejected that application on 8-1-2017, the petitioner waited approximately two and a half years and then approached the High Court directly under Article 227 of the Constitution, challenging the arbitral order. The High Court, by judgment dated 10-12-2019 (reported as 2019 SCC OnLine P&H 6029), dismissed the writ petition, noting both the delay and the petitioner’s failure to follow the statutory “drill” prescribed by Section 16. The petitioner thereafter filed the present special leave petition (SLP) before the Supreme Court of India.
Legal Issues Presented
- Whether the High Court erred in dismissing an Article 227 petition that challenged a Section 16 order of an Arbitral Tribunal on the ground of delay, without examining if the arbitral order suffered from a “patent lack of inherent jurisdiction.”
- Whether the arbitral order in question was so perverse as to fall within the “extremely exceptional” category permitting writ interference under the principle laid down in Deep Industries Ltd. v. ONGC (2020) 15 SCC 706.
Arguments of the Parties
Petitioner’s Arguments
- Reliance on paragraph 17 of Deep Industries Ltd. v. ONGC, asserting that writ interference is permissible where an order is passed with “patent lack of inherent jurisdiction.”
- Contended that the joint-venture agreement and its arbitration clause did not refer to the third party involved, thereby establishing a jurisdictional defect that squarely fits the Deep Industries exception.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706 | Article 227 interference should be “extremely circumspect” and limited to cases where the impugned order is patently lacking in inherent jurisdiction. | The Court held that the present matter does not exhibit such patent lack; therefore, Article 227 interference was unwarranted and the SLP must be dismissed. |
Court's Reasoning and Analysis
The Supreme Court reiterated that an immediate recourse to Article 227 against a Section 16 determination is justified only when the arbitral order is so perverse that a patent lack of jurisdiction “stares one in the face.” Merely labelling an order as jurisdictionally defective is insufficient. The Court observed that litigants have begun invoking the terminology from Deep Industries to justify writ petitions even in routine matters. Such practices must be discouraged.
Applying this strict standard, the Court found no evident perversity or jurisdictional void in the arbitral order. Accordingly, the High Court’s dismissal—although grounded on delay rather than on the Deep Industries principle—came to the correct result. The Supreme Court further remarked that the High Court should have both relied on Deep Industries and imposed heavy costs to deter similar litigation. To reinforce this deterrence, the Supreme Court itself imposed costs.
Holding and Implications
Holding: The special leave petition is DISMISSED with costs of Rs 50,000 payable to the Supreme Court Legal Services Committee within two weeks; all pending applications were disposed of.
Implications: The decision reaffirms the highly restricted scope of Article 227 review over arbitral orders, emphasizing that only orders displaying an obvious, facial absence of jurisdiction warrant writ intervention. It signals to High Courts and litigants alike that routine challenges to arbitral determinations under the guise of “patent lack of jurisdiction” will attract dismissal and monetary sanctions, thereby safeguarding the efficiency of the arbitral process.
Order
1. The impugned judgment dated 10-12-2019 2019 SCC OnLine P&H 6029 is grounded on the fact that the impugned order passed by the Arbitral Tribunal on 8-1-2017 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 dismissed, filed under Article 227 of the Constitution directly against a Section 16 application without following the drill of Section 16 of the Arbitration Act.
2. Shri K.V. Viswanathan, learned Senior Counsel appearing for the petitioner, has argued before us, based on our judgment in Deep Industries Ltd. v. ONGC (2020) 15 SCC 706, and para 17 in particular, which is set out hereinbelow:
“17. 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 hereinabove so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction.”
3. According to Shri Viswanathan, 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 para 17 of Deep Industries Ltd. (2020) 15 SCC 706
4. 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.
5. Unfortunately, the parties are using this expression which is in our judgment in Deep Industries Ltd. (2020) 15 SCC 706, to go to the Article 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. (2020) 15 SCC 706 and dismiss the Article 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.
6. In any case, now that Shri Viswanathan 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.
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