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

The Hon’ble Supreme Court of India in Punjab State Power Corporation V. EMTA Coal Ltd. &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.

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