Orissa High Court
M/S Hotel Sea Point Pvt. Ltd vs M/S Blueline Resorts Pvt. Ltd on 11 April, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 15-Apr-2025 16:40:34
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No. 32426 of 2022
(In the matter of an application under Articles 226 and 227 of the
Constitution of India, 1950).
M/S Hotel Sea Point Pvt. Ltd., Puri .... Petitioner (s)
-versus-
M/s Blueline Resorts Pvt. Ltd., .... Opposite Party (s)
Bhubaneswar
Advocates appeared in the case through Hybrid Mode:
For Petitioner(s) : Mr. Surendra Routray, Adv.
For Opposite Party (s) : Mr. D.P. Nanda, Sr. Adv.
along with
Mr. Avijit Pal, Adv.
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-14.02.2025
DATE OF JUDGMENT: -11.04.2025
Dr. S.K. Panigrahi, J.
1. This Writ Petition is preferred by the Petitioner against order dated 1.8.2022 passed by the Ld. Sole Arbitrator purporting the same to be an award wherein the Petitioner was directed to pay a sum of Rs.4,31,94,711/- along with cost of Rs.15,00,00/- within two months from the date of the award to the Respondent on the basis of breach of the Lease Agreement dated 01.05.2012.
Page 1 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 I. FACTUAL MATRIX OF THE CASE:
2. The Petitioner is a company which has taken on lease the land from one, Mr. Durga Charan Rautray on which the hotel premises are located. The Opposite Party was desirous of taking the hotel premises on lease and therefore, Lease Agreement dated 1.5.2012 was entered into between the Petitioner and the Opposite Party. The Agreement dated 1.5.2012 was valid for a period of 10 years, further extendable by 10 years which would commence from 1.5.2012. Accordingly, monthly rental was provided for in the Agreement dated 1.5.2012 itself which was payable during the entire duration of the lease period. It is pertinent to mention here that the Lease Agreement was signed by the parties on a Rs.100 stamp paper, and was not registered.
3. Disputes arose over non-payment of the rent as prescribed in the Agreement and therefore, the Petitioner approached this Court for appointment of an Arbitrator u/s 11 of the Arbitration and Conciliation Act.
4. During the pendency of the Section 11 application, the Opposite Party filed C.S No. 598/2015 before the Civil Judge at Puri claiming specific performance and damages with respect to alleged breach of Agreement dated 1.5.2012.
5. Meanwhile, vide order dated 5.11.2015, this Court was pleased to appoint the Ld. Sole Arbitrator for adjudication of the dispute between the parties. Accordingly, the parties appeared before the Ld. Arbitrator and filed their respective claim and counter claim. Page 2 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34
6. At this juncture, the Petitioner filed an application before the Ld. Arbitrator praying for impound of the Agreement dated 1.5.2012 and abeyance of proceedings as the said Agreement was not sufficiently stamped nor registered as required in law.
7. The Ld. Arbitrator vide order dated 13.4.2017, rejected the prayer of impounding the Agreement as prayed for by the Petitioner. Aggrieved, the Petitioner approached this Court in W.P.(C) No. 7893/2017 challenging the refusal order of the Ld. Arbitrator. This Court vide order dated 8.5.2017 in W.P.(C) No. 7893/2017 was pleased to direct the Ld. Arbitrator to impound the Agreement in line with the Supreme Court's judgment in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd1.
8. In compliance with this Court's order dated 8.5.2017 in W.P.(C) No. 7893/2017, the Ld. Arbitrator vide order dated 20.7.2017 was pleased to impound the Agreement. However, the order was passed ex-parte without hearing the Petitioner and the onus of payment of the deficit stamp duty was placed on the Petitioner. This was challenged by the Petitioner before this Court, where it was prayed that the onus be shifted to the Respondent who was liable to bear the same in terms of the Agreement.
9. Here, now, the litigation gets even more chequered. The Opposite Party did not bring the orders of this Court with regards to the impounding to the attention of this Court and managed to secure an order directing the Ld. Arbitrator to conclude the arbitration proceedings within 3 1 (2011) 14 SCC 66 Page 3 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 months. This was then challenged by the Petitioner, and the same was stayed vide this Court's order dated 11.8.2017.
10.In the meanwhile, it is pertinent to note that the Petitioner had filed C.S. No. 462/2017 seeking recovery of possession, mesne profits and damages from the Respondent alleging breach of the Agreement dated 1.5.2012.
11.While the arbitration proceeding had hit a pause, the Parties were pursuing their respective Civil Suits. Then, the Respondent filed an application under Section 8 of the A&C Act for reference of the matter to the arbitrator even though its own Civil Suit was pending on 20.11.2017. Thereafter, the Respondent sought to withdraw its C.S. No. 598/2018 seeking pursuing the arbitration under Order 23 Rule 1 CPC on 16.2.2018.
12.Pursuant to the order dated 15.1.2018, both the Civil Suits are directed to be heard analogously by the Ld. Civil Judge, Sr. Div., Puri with the consent of both Parties. The application under Section 8 of the A&C Act is rejected by the Ld. Civil Judge, Sr. Div. ,Puri vide its order dated 17.5.2018.
13.Aggrieved, the Opposite Party approached this Court in W.P.(C) No.13136/2018 challenging the rejection of its application under Section 8 of the A&C Act.
14.On 5.12.2019, the Opposite Party was permitted to withdraw its Civil Suit upon payment of cost of Rs.500/- to the Petitioner.
15.In all this, the Opposite Party has consistently approached either this Court or the Ld. District Judge seeking extension of time for passing an award in favour of the Ld. Sole Arbitrator. These efforts culminated Page 4 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 finally in the Opposite Party's application under Section 29A of the A&C Act in ARBP No.123/2017 which was rejected by the Ld. District Judge, Puri for suppression of facts and forum hunting vide order dated 27.12.2021.
16.The same was challenged by the Opposite Party in W.P.(C) No. 3203/2022 before this Court. However, this Court deemed it appropriate to decline to allow the application under Section 29A of the A&C Act, it appears vide order dated 6.7.2022, this Court directed the Ld. Arbitrator to continue the arbitration expeditiously.
17.Thereafter, the Ld. Arbitrator passed the impugned order purported to be an Award on 1.8.2022.
18.Aggrieved by the Impugned Order, the instant Petition has been preferred. As the facts leading up to the instant Petition have been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised to seek the exercise of this Court's writ jurisdiction.
II. PETITIONER'S SUBMISSIONS:
19.The Ld. Counsel for the Petitioner Mr. Surendra Routray contends that there has been a complete failure by the Ld. Sole Arbitrator in rendering the impugned order as the Lease Agreement on the basis of which the impugned order was passed, or the arbitration was kickstarted still remained unstamped and unregistered despite this Court's direction. Not to mention that the Ld. Arbitrator had himself impounded the Agreement for being insufficiently stamped, and without the defect Page 5 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 being cured, had surprisingly proceeded to pass the Impugned Order. Insofar as the maintainability of the petition is concerned, it is urged by him that the provisions of the Act cannot oust the jurisdiction of the High Courts and under Article 226 and 227. While the said power ought to be exercised sparingly, the jurisdiction of High Courts can not to be ousted especially when there is a manifest error by the Arbitral Tribunal in which case, the High Courts ought to exercise jurisdiction under Article 227.
20.Ld. Counsel for the Petitioner Mr. Routray referred to the judgments in Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd.2 and Bhaven Construction through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd.3. Relying upon the judgment in Deep Industries (supra) his submission was that in the said case, also, the Supreme Court categorically held that the jurisdiction of the writ court under Article 227 cannot be ousted. III. OPPOSITE PARTY'S SUBMISSIONS:
21.On the other hand, Ld. Sr. Counsel Mr. D.P. Nanda appearing for the Opposite Party, submits that the orders of an Arbitral Tribunal are not amenable to writ jurisdiction. It is further submitted that if the parties have entered into an agreement to arbitrate their disputes, the court must decline to exercise its extraordinary jurisdiction under the Constitution and leave the parties to avail the remedies under the 2 2019 SCC OnLine SC 1602 3 (2022) 1 SCC 75 Page 6 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 special enactment which in itself is a self-contained code. The object of minimal judicial intervention under the 1996 Act, will be defeated at the High Court exercises its jurisdiction under Article 226 or 227 with any orders of the arbitral tribunal.
IV. ISSUES FOR CONSIDERATION:
22.Having heard the parties and perused the materials available on record, this Court has identified herein the following issues to be determined:
A. Whether this Court can exercise its writ jurisdiction to interfere with the Impugned Order passed by the Ld. Sole Arbitrator?
B. Whether this Court ought to interfere with the Impugned Order?
V. ISSUE A: WHETHER THIS COURT CAN EXERCISE ITS' WRIT JURISDICTION TO INTERFERE WITH THE IMPUGNED ORDER PASSED BY THE LD. SOLE ARBITRATOR?
23.In India, the maintainability of writ petitions in respect of arbitration matters presents a nuanced legal challenge, requiring the balancing of the extraordinary powers of High Courts under Articles 226 and 227 of the Constitution of India with the objectives of the Arbitration and Conciliation Act, 1996 (Arbitration Act). Section 5 of the Arbitration Act minimises judicial interference in arbitral proceedings, confining intervention strictly to the circumstances outlined within the statute. However, courts have frequently grappled with situations where exercising the writ powers was deemed necessary to preserve the purity of justice. Over the years, landmark judgments have delineated the scope of judicial intervention, affirming two fundamental principles: (i) Page 7 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 the writ jurisdiction of High Courts remains intact despite Section 5 of the Arbitration Act; and (ii) its exercise must be limited to rare and exceptional cases, such as those involving a manifest lack of jurisdiction, bad faith, or violations of natural justice principles.
24.This question assumes greater importance as arbitration continues to gain prominence as an alternative dispute resolution mechanism in India. While Arbitral Tribunals are afforded significant autonomy to adjudicate disputes, judicial scrutiny is sometimes required to prevent the misuse of arbitration proceedings or a miscarriage of justice. Recent rulings of the Apex Court have further clarified the contours of this balance, emphasising that writ petitions should be entertained sparingly and in line with the objective of the Arbitration Act and its quest for an efficient and independent dispute resolution.
25.The extraordinary jurisdiction of High Courts in India, enshrined in Articles 226 and 227 of the Constitution, serves as a foundation for protecting fundamental rights and administering justice. Article 226 empowers High Courts to issue writs for the enforcement of fundamental rights, offering a remedy against both legislative and executive actions. Article 227, on the other hand, confers every High Court with supervisory powers over all courts and tribunals within the jurisdiction of such High Court. Together, these articles establish a robust framework for judicial review, reinforcing the rule of law and providing a mechanism to check the misuse of power.
26.The Arbitration Act establishes a robust legal framework designed to facilitate efficient dispute resolution mechanism through arbitration. Page 8 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 This landmark legislation was crafted to minimise judicial intervention and enhance party autonomy, thereby aligning Indian arbitration practices with international norms and expectations. Section 5 of the Arbitration Act embodies a fundamental principle: courts are expressly prohibited from interfering in matters governed by the Arbitration Act, except as explicitly stipulated within its framework. Through this provision, the legislature aims to preserve the integrity of arbitration as a preferred dispute resolution mechanism, ensuring that Arbitral Tribunals operate with the requisite independence to deliver fair and impartial awards. In addition to defining the limits of judicial oversight, the Act encompasses provisions that further reinforce the principle of minimal intervention. It grants arbitrators substantial discretion to determine procedural issues and the scope of their jurisdiction.
27.In Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.4, the Supreme Court of India characterised the Arbitration Act as a comprehensive and specialised law designed to facilitate quick and efficient dispute resolution through arbitration while reducing judicial interference.
28.One of the main objectives of the Arbitration Act is to minimise the supervisory role of Courts in the arbitral process. Party autonomy and settlement of disputes by an Arbitral Tribunal are the hallmarks of arbitration law. Section 5 gives effect to the true intention of the parties to have their disputes resolved through arbitration in a quick, efficient and effective manner by minimising judicial interference in the arbitral 4 (2011) 8 SCC 333 Page 9 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 proceedings5. Parliament enacted Section 5 to minimise the supervisory role of Courts in the arbitral process to the bare minimum, and only to the extent "so provided" under the Part I of the Arbitration Act. In doing so, the legislature did not altogether exclude the role of Courts or judicial authorities in arbitral proceedings, but limited it to circumstances where the support of judicial authorities is required for the successful implementation and enforcement of the arbitral process67. The Arbitration Act in fact, envisages the role of Courts to "support arbitration process"8 by providing necessary aid and assistance when required by law in certain situations.
29.Section 5 begins with the expression "notwithstanding anything contained in any other law for the time being in force." The non obstante clause is Parliament's addition to Article 5 of the Model Law. This is of a wide amplitude and sets forth the legislative intent of limiting judicial intervention during the arbitral process. In the context of Section 5, this means that the provisions contained in Part I of the Arbitration Act ought to be given full effect and operation irrespective of any other law for the time being in force. It is now an established proposition of law that the legislature uses non obstante clauses to remove all obstructions which might arise out of the provisions of any other law, which stand in 5 Food Corpn. of India v. Indian Council of Arbitration, (2003) 6 SCC 564. 6 Union of India v. Popular Construction Co., (2001) 8 SCC 470 7 P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539 8 Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677 Page 10 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 the way of the operation of the legislation which incorporates the non obstante clause.9
30.In Chandavarkar Sita Ratna Rao v. Ashalata S. Guram10, Sabyasachi Mukharji, J. explained the purport of non obstante clause in the following terms :
"67. A clause beginning with the expression "notwithstanding anything contained in this Act or in some particular provision in the Act or in some particular Act or in any law for the time being in force, or in any contract" is more often than not appended to a section in the beginning with a view to give the enacting part of the section in case of conflict an overriding effect over the provision of the act or the contract mentioned in the non obstante clause. It is equivalent to saying that in spite of the provision of the Act or any other Act mentioned in the non obstante clause or any contract or document mentioned the enactment following it will have its full operation or that the provisions embraced in the non obstante clause would not be an impediment for an operation of the enactment."
31.Although a non obstante clause must be allowed to operate with full vigour, its effect is limited to the extent intended by the legislature. In ICICI Bank Ltd. v. Sidco Leathers Ltd.11 the Court held that a non obstante clause must be interpreted by confining it to the legislative policy. Thus, even if a non obstante clause has wide amplitude, the extent of its impact has to be measured in view of the legislative intention and 9 State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh, (2005) 9 SCC 129 10 (1986) 4 SCC 447 11 (2006) 10 SCC 452 Page 11 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 legislative policy. In view of this settled legal position, the issue that arises for our consideration is the scope of the non obstante clause contained in Section 5 of the Arbitration Act.
32.Section 5 has two facets -- positive and negative. The positive facet vests judicial authorities with jurisdiction over arbitral proceedings in matters expressly allowed in or dealt with under Part I of the Arbitration Act. The flip side to this approach is that judicial authorities are prohibited from intervening in arbitral proceedings in situations where the Arbitral Tribunal has been bestowed with exclusive jurisdiction. This is the negative facet of Section 5. The non obstante clause limits the extent of judicial intervention in respect of matters expressly provided under the Arbitration Act. In Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. (supra), the Apex Court observed that the:
"12. ... non obstante clause is provided to uphold the intention of the legislature as provided in the Preamble to adopt Uncitral Model Law and Rules, to reduce excessive judicial interference which is not contemplated under the Arbitration Act."
33.The interplay between the legislative framework under the Arbitration Act and the constitutional powers of the High Courts under Articles 226 and 227 of the Constitution has been discussed in several cases. These rulings have not only elucidated the parameters within which High Courts may exercise their writ powers but have Page 12 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 also reinforced the fundamental principles underlining the Arbitration Act.
34. In Union of India v. R. Gandhi, President Madras Bar Association12 the Supreme Court observed on the question as to what constitutes 'Courts' and 'Tribunals' as under:
"38. The term 'Courts' refers to places where justice is administered or refers to Judges who exercise judicial functions. Courts are established by the state for administration of justice that is for exercise of the judicial power of the state to maintain and uphold the rights, to punish wrongs and to adjudicate upon disputes. Tribunals on the other hand are special alternative institutional mechanisms, usually brought into existence by or under a statute to decide disputes arising with reference to that particular statute, or to determine controversies arising out of any administrative law. Courts refer to Civil Courts, Criminal Courts and High Courts. Tribunals can be either private Tribunals (Arbitral Tribunals), or Tribunals constituted under the Constitution (Speaker or the Chairman acting under Para 6(1) of the Tenth Schedule) or Tribunals authorized by the Constitution (Administrative Tribunals under Article 323A and Tribunals for other matters under Article 323B) or Statutory Tribunals which are created under a statute (Motor Accident Claims Tribunal, Debt Recovery Tribunals and consumer fora). Some Tribunals are manned exclusively by Judicial Officers (Rent Tribunals, Motor Accidents Claims Tribunal, Labour Courts and Industrial Tribunals). Other statutory Tribunals have Judicial and Technical Members (Administrative Tribunals, TDSAT, Competition 12 (2010) 11 SCC 1 Page 13 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 Appellate Tribunal, Consumer fora, Cyber Appellate Tribunal, etc)." (emphasis is ours)
35. Similar observations were made by the Supreme Court in Srei Infrastructure Finance Ltd. v. Tuff Drilling (P) Ltd.13,as under:
"14. Arbitration is a quasi judicial proceeding, equitable in nature or character which differs from a litigation in a Court. The power and functions of arbitral tribunal are statutorily regulated. The tribunals are special arbitration with institutional mechanism brought into existence by or under statute to decide dispute arising with reference to that particular statute or to determine controversy referred to it. The tribunal may be a statutory tribunal or tribunal constituted under the provisions of the Constitution of India. Section 9 of the Civil Procedure Code vests into the Civil Court jurisdiction to entertain and determine any civil dispute. The constitution of tribunals has been with intent and purpose to take out different categories of litigation into the special tribunal for speedy and effective determination of disputes in the interest of the society. Whenever, by a legislative enactment jurisdiction exercised by ordinary civil court is transferred or entrusted to tribunals such tribunals are entrusted with statutory power. The arbitral tribunals in the statute of 1996 are no different, they decide the lis between the parties, follows Rules and procedure conforming to the principle of natural justice, the adjudication has finality subject to remedy provided under the 1996 Act. Section 8 of the 1996 Act obliges a judicial authority in a matter which is a subject of an agreement to refer the parties to arbitration. The reference to arbitral tribunal thus can be made by judicial authority or an arbitrator can be appointed in accordance 13 (2018) 11 SCC 470 Page 14 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 with the arbitration agreement under Section 11 of the 1996 Act." (emphasis is ours)
36.Thus, the Supreme Court has time and again held that arbitral tribunals are private tribunals unlike those tribunals set up under the statute or specialized tribunals under the Constitution of India. Thus, a Petition under Article 227 challenging orders of an Arbitral Tribunal would be maintainable.
Scope and extent of interference
37.Coming now to the question as to what would be the scope of interference under Article 226/227 against orders passed by the Arbitral Tribunals, though, a number of judgments have been cited by both parties, recent decisions of the Supreme Court and of this Court have settled the issue.
38.In 2019, a Three Judge Bench of the Supreme Court in a judgement authored by Justice R.F Nariman in the case of M/S Deep Industries Ltd. v Oil And Natural Gas Corporation (supra) held that it is possible to challenge such a dismissal order through a writ at a High Court under Articles 226 and 227 of the Constitution of India, but the same laid down some stringent terms to challenge a Section 16 dismissal order.
39.In Deep Industries (supra) decided on 28th November, 2019, the Supreme Court considered S.B.P. & Company v. Patel Engineering Page 15 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 Ltd.14 and Fuerst Day Lawson Limited v. Jindal Exports Limited15 and observed as under:
"15. 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 v. 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 awards.
16. 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).
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 14 (2005) 8 SCC 618 15 (2011) 8 SCC 333 Page 16 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 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 jurisdiction." (emphasis is ours)
40.It is, therefore, prudent for a Judge not to exercise discretion to allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear 'bad faith' shown by one of the parties or in case which allowed to go unchecked would result in a situation of patent illegality being perpetuated. This high standard set by the Apex Court is in terms of the legislative intention to make the arbitration fair and efficient.
41. In this context, a reference may be made to Deep Industries (supra) wherein interplay of Section 5 of the Arbitration Act and Article 227 of the Constitution was analyzed very succinctly:
"15. Most significant of all is the nonobstante 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 Page 17 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 at the cherry, and interdicts a second appeal being filed (See Section 37(2) of the Act)
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 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 jurisdiction."
42.Furthermore, the Apex Court in Estralla Rubber v. Dass Estate (P) Ltd.16, has observed that:
"6. The scope and ambit of exercise of power and jurisdiction by a High Court under Article 227 of the Constitution of India is examined and explained in a number of decisions of this Court. The exercise of power under this article involves a duty on the High Court to keep inferior courts and tribunals within the bounds of their authority and to see that they do the duty expected or required of them in a legal manner. The High Court is not vested with any unlimited prerogative to correct all kinds of hardship or wrong decisions made within the limits of the jurisdiction of the subordinate courts or 16 (2001) 8 SCC 97 Page 18 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 tribunals. Exercise of this power and interfering with the orders of the courts or tribunals is restricted to cases of serious dereliction of duty and flagrant violation of fundamental principles of law or justice, where if the High Court does not interfere, a grave injustice remains uncorrected. It is also well settled that the High Court while acting under this article cannot exercise its power as an appellate court or substitute its own judgment in place of that of the subordinate court to correct an error, which is not apparent on the face of the record. The High Court can set aside or ignore the findings of facts of an inferior court or tribunal, if there is no evidence at all to justify or the finding is so perverse, that no reasonable person can possibly come to such a conclusion, which the court or tribunal has come to.
7. This Court in Ahmedabad Mfg. & Calico Ptg. Co.
Ltd. v. Ram Tahel Ramnand [(1972) 1 SCC 898 : AIR 1972 SC 1598] in AIR para 12 has stated that the power under Article 227 of the Constitution is intended to be used sparingly and only in appropriate cases, for the purpose of keeping the subordinate courts and tribunals within the bounds of their authority and, not for correcting mere errors. Reference also has been made in this regard to the case Waryam Singh v. Amarnath [AIR 1954 SC 215 : 1954 SCR 565] . This Court in Bathutmal Raichand Oswal v. Laxmibai R. Tarte [(1975) 1 SCC 858 : AIR 1975 SC 1297] has observed that the power of superintendence under Article 227 cannot be invoked to correct an error of fact which only a superior court can do in exercise of its statutory power as a court of appeal and that the High Court in exercising its jurisdiction under Article 227 cannot convert itself into a court of appeal when the legislature has not conferred a right of appeal. Judged by these pronounced principles, the High Court clearly exceeded its jurisdiction under Article 227 in passing the impugned order."
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43.A perusal of the above-mentioned decisions, shows that the following principles are well settled, in respect of the scope of interference under Article 226/227 in challenges to orders by an arbitral tribunal including orders passed under Section 16 of the Act:
(i) An arbitral tribunal is a tribunal against which a petition under Article 226/227 would be maintainable;
(ii) The non-obstante clause in section 5 of the Act does not apply in respect of exercise of powers under Article 227 which is a Constitutional provision;
(iii) For interference under Article 226/227, there have to be 'exceptional circumstances';
(iv) Though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction, the writ court would not interfere;
(v) Interference is permissible only if the order is completely perverse i.e., that the perversity must stare in the face;
(vi) High Courts ought to discourage litigation which necessarily interfere with the arbitral process;
(vii) Excessive judicial interference in the arbitral process is not encouraged;Page 20 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
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(viii) It is prudent not to exercise jurisdiction under Article 226/227;
(ix) The power should be exercised in 'exceptional rarity' or if there is 'bad faith' which is shown;
(x) Efficiency of the arbitral process ought not to be allowed to diminish and hence interdicting the arbitral process should be completely avoided.
44.The Supreme Court, while acknowledging that the hierarchy in our legal framework mandates that a legislative enactment cannot curtail a Constitutional right and has observed that it is settled law that when a statutory forum is created by law for redressal of grievances, a Writ Petition would not 'ordinarily' be entertained ignoring the statutory dispensation. This power needs to be exercised in exceptional rarity, wherein the illegality or perversity in the order of the Ld. Sole Arbitrator stares one in the face.
45.Furthermore, it is also well settled that availability of an alternative remedy does not prohibit the High Courts from entertaining a writ petition in an appropriate case. The High Courts may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (i) where the writ petition seeks enforcement of a fundamental right, (ii) where there is failure of principles of natural justice, (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an act is under challenge. Page 21 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34
46.This Court concludes that the High Court "can" exercise its powers under writ jurisdiction in spite of Section 5 of the A&C Act, but whether it "ought" to exercise in this present case remains to be seen. VI. ISSUE B: WHETHER THIS COURT OUGHT TO INTERFERE WITH THE IMPUGNED ORDER?
47.The majority judgment of the Apex Court in N.N. Global (2)17 summed up its holding in the following terms:
"109. ... An agreement which is unstamped or insufficiently stamped is not enforceable, as long as it remains in the said condition. Such an instrument would be void as being not enforceable [see Section 2(g) of the Contract Act]."
The above observation conflates the distinction between enforceability and admissibility.
48.Section 35 of the Stamp Act is unambiguous. It stipulates, "No instrument chargeable with duty shall be admitted in evidence..." The term "admitted in evidence" refers to the admissibility of the instrument. Sub-section (2) of Section 42, too, states that an instrument in respect of which stamp duty is paid and which is endorsed as such will be "admissible in evidence". The effect of not paying duty or paying an inadequate amount renders an instrument inadmissible and not void. Non-stamping or improper stamping does not result in the instrument becoming invalid. The Stamp Act does not render such an instrument void. The non-payment of stamp duty is accurately characterised as a curable defect. The Stamp Act itself provides for the 17 N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 Page 22 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 manner in which the defect may be cured and sets out a detailed procedure for it. It bears mentioning that there is no procedure by which a void agreement can be "cured".
49.In N.N. Global (2) (supra), the Apex Court has held that the failure to stamp an arbitration agreement is not a "curable defect". Relying on the provisions of the Contract Act as well as Section 11(6-A) of the Arbitration Act, it has held that an unstamped arbitration agreement is void. The relevant paragraphs of the judgment of the majority are extracted below :
"103. ... It may not be apposite to merely describe an unstamped arbitration agreement as a "curable defect".
As long it remains an unstamped instrument, it cannot be taken notice of for any purpose, as contemplated in Section 35 of the Stamp Act. It remains unenforceable. ... It is "not enforceable in law". In the said sense, it also cannot exist in law. It would be void. Our view in this regard that voidness is conflated to unenforceability receives fortification from Section 2(j) of the Contract Act which renders a contract which ceases to be enforceable void."
50.However, the above observation of the Apex Court in N.N. Global (2) was held to be incorrect by the Apex Court in Interplay Between Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899, In re (supra).
51.The Stamp Act is a fiscal legislation which is intended to raise revenue for the Government. It is a mandatory statute. In Hindustan Steel Page 23 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 Ltd. v. Dilip Construction Co.18, Supreme Court dealt with the import of Sections 35, 36 and 42 of the Stamp Act very succinctly. One of the parties relied on the difference in the phraseology between Sections 35 and 36 to argue that an instrument which was insufficiently stamped or not stamped could be admitted in evidence upon the payment of duty and a penalty (if any) but that it could not be acted upon, once admitted. It was argued that Section 35 operates as a bar in two respects, namely, the admission of an instrument into evidence as well as acting upon that instrument. It was argued that Section 36, in contrast to Section 35, removed the bar in one respect alone -- the admissibility of the instrument into evidence. The Supreme Court rejected this argument and has held that the provisions of the Stamp Act clearly provide that an instrument could be admitted into evidence as well as it can be acted upon once the appropriate duty has been paid and the instrument is endorse. The Apex Court held that:
"6. ... The argument ignores the true import of Section
36. By that section an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on that account there is no bar against an instrument not duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of Section 42(2) which enact, in terms unmistakable, that every 18 (1969) 1 SCC 597 Page 24 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 instrument endorsed by the Collector under Section 42(1) shall be admissible in evidence and may be acted upon as if it has been duly stamped."
52.In so holding, the Supreme Court made a significant observation about the purpose of the Stamp Act and the manner in which it is to be interpreted by courts when it observed that the Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument.
53.The Stamp Act is a legislation which is enacted in the interest of the revenue. The statute must be interpreted with due regard to its purpose.
54.Now this Court refers to the Agreement in question. The Agreement as produced before us is signed by the Parties on Rs.100 stamp paper. Clause 19 of the Agreement reads as follows:
"19. Registration and Payment of Stamp Duty - The Lessee shall have the present lease duly registered at its own cost and pay the stamp duty applicable for the same. It shall be open to the Lessor to pay the stamp duty or the deficiency of the same and recover the same from the Lessee."
It is very apparent that the Parties were aware that their Lease Agreement was insufficiently stamped and that stamp duty would be payable on the same. In fact, the Parties had also gone so far in order to Page 25 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 ascribe who would bear the cost of the same, the answer to which is - the present Opposite Party.
55.The Petitioner filed an application before the Ld. Arbitrator praying for impound of the Agreement dated 1.5.2012 and abeyance of proceedings as the said Agreement was not sufficiently stamped nor registered as required in law. The Ld. Arbitrator vide order dated 13.4.2017, rejected the prayer of impounding the Agreement as prayed for by the Petitioner. Aggrieved, the Petitioner approached this Court in W.P.(C) No. 7893/2017 challenging the refusal order of the Ld. Arbitrator. This Court vide order dated 8.5.2017 in W.P.(C) No. 7893/2017 was pleased to direct the Ld. Arbitrator to impound the Agreement in line with the Apex Court's judgment in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd19.
56.In compliance with this Court's order dated 8.5.2017 in W.P.(C) No. 7893/2017, the Ld. Arbitrator vide order dated 20.7.2017 was pleased to impound the Agreement. However, the order was passed ex-parte without hearing the Petitioner and the onus of payment of the deficit stamp duty was placed on the Petitioner which is in direct contravention of the terms of the Agreement itself.
57.In any case, the Ld. Arbitrator itself held that "since it is found that the said lease deed in serial number 1 is compulsory, registerable requiring stamp duty and has not been properly stamped nor registered, the said lease deed is liable to be impounded". Without any Court's order altering this status, 19 (2011) 14 SCC 66 Page 26 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 how could the Ld. Arbitrator proceed to deliver an 'award' when the status of the Agreement was impounded.
58.It shocks the conscience of this Court, that this material fact was not brought to the conscious attention of this Court in W.P.(C) No. 3203 of 2022. Suppression or concealment of material facts is not advocacy. It is a jugglery, manipulation, manoeuvring or misrepresentation, which has no place in equitable and prerogative jurisdiction. If the Parties do not disclose all the material facts fairly and truly but state them in a distorted manner and mislead the court to obtain relief, the same tantamounts to an egregious abuse of process of this Court.
59.This Court is not a laboratory where parties come to experiment. Where the litigants will mix one document with one fact and wait with bated breath praying that the Court does not ask too many questions. This Court generally will never suspect things to be amiss, because this court would like to believe that "satya" & "dharma" are a society's guiding principles, but it is also equally true that time is changing. Apart from doing justice to the parties, Courts will have to remain on guard that justice is being done to this Court by those present before us.
60.Casting such disappointment aside, it is pertinent to note that in view of the law enunciated by the 7 Judge Bench of the Supreme Court in Interplay Between Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899, In re20, the Ld. Sole Arbitrator did not have jurisdiction to pass any award till the time the "existence and validity" of the Lease 20 (2024) 6 SCC 1 Page 27 of 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34 Agreement has been revived by the payment of appropriate stamp duty. This Court and the Ld. Sole Arbitrator is bound by the law declared by the Supreme Court.
61.Given this Court's conclusion in Issue A and the reasons discussed above, this Court believes that the present matter comes within the meaning of "exceptional" and writ jurisdiction ought to be exercised in the face of such patent illegality, which necessitates interference. VII. CONCLUSION:
62.Therefore, in light of the discussion above, keeping the settled principles of law in mind and for the reasons given above, this Court is of the considered view that the impugned order merits interference.
63.The Impugned Order/Award is set aside. The Arbitral Tribunal having impounded the instrument, which is not duly stamped as per the provisions of the Indian Stamp Act, 1899, shall forward it to the Collector, if the same has not already been done. The Collector then, shall, direct the collection of the appropriate stamp duty and levy penalty. In this regard, it is clarified that the stamp duty and any penalty thereupon shall be borne by the Parties in the manner stipulated in the Agreement. Upon payment, the Collector shall endorse that the proper stamp duty has been paid under Section 42 of the Indian Stamp Act, 1899. This endorsed instrument shall be returned to the Ld. Sole Arbitrator, after which the proceedings shall be conducted and concluded expeditiously. Till such time, the arbitration proceedings shall remain in abeyance.
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Location: ORISSA HIGH COURT, CUTTACK Date: 15-Apr-2025 16:40:34
64. Ordered accordingly. No order as to costs.
(Dr. S.K. Panigrahi) Judge Orissa High Court, Cuttack, Dated the 11th April, 2025/ Page 29 of 29