BHAVEN CONSTRUCTION THROUGH AUTHORISED SIGNATORY PREMJIBHAI K. SHAHversusEXECUTIVE ENGINEER SARDAR SAROVAR NARMADA NIGAM LTD.& ANR.

                          [2021] 1 S.C.R. 1                                1


    BHAVEN CONSTRUCTION THROUGH AUTHORISED                                 A
          SIGNATORY PREMJIBHAI K. SHAH
                                   v.
  EXECUTIVE ENGINEER SARDAR SAROVAR NARMADA
                NIGAM LTD.& ANR.
                                                                           B
                   (Civil Appeal No. 14665 of 2015)
                         JANUARY 06, 2021
[N.V. RAMANA, SURYA KANT AND HRISHIKESH ROY, JJ.]
       Constitution of India, 1950 – Arts.226 and 227 – Interference
                                                                           C
with arbitral process – Scope – Dispute arising out of a contract
between appellant and respondent no.1 – Contract had an
arbitration clause – Appellant appointed respondent no.2 as the
sole arbitrator – Application of respondent no.1 u/s.16 of the
Arbitration Act disputing jurisdiction of the sole arbitrator, rejected
– Writ petition filed by respondent no.1 – Allowed by High Court –         D
Whether arbitral process could be interfered u/Art.226/227, and
under what circumstance – Held: Respondent No.1 chose to impugn
the order passed by arbitrator through a petition u/Art.226/227 when
in the usual course, the Arbitration Act provided for a mechanism
of challenge u/s.34 – When a statutory forum is created by law for
                                                                           E
redressal of grievances, a writ petition should not be entertained
ignoring the statutory dispensation – It is prudent for a Judge to
not 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       F
– On facts, no exceptional circumstance mandating interference by
High Court u/Arts. 226 and 227 – High Court should not have used
its inherent power to interject the arbitral process at a stage when
subsequent to the impugned order of sole arbitrator, a final award
was rendered by him on merits, which is already challenged by
                                                                           G
Respondent No. 1 in a separate s.34 application, and which is
pending – If Courts are allowed to interfere beyond ambit of the
enactment, then efficiency of the process will be diminished –
Impugned order of High Court set aside – Arbitration and
Conciliation Act, 1996.
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2            SUPREME COURT REPORTS                         [2021] 1 S.C.R.


A           Arbitration and Conciliation Act, 1996 – Framework of the
    Act – Non-obstante clause in s.5 of the Act – Interpretation and
    effect – Held: The Act is a code in itself – The non-obstante clause
    in s.5 of the Act 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
B
    contemplated under the Act – The framework clearly portrays an
    intention to address most of the issues within the ambit of the Act
    itself, without there being scope for any extra statutory mechanism
    to provide just and fair solutions.
          Allowing the appeal, the Court
C
           HELD : 1.1. The Arbitration and Conciliation Act, 1996 is
    a code in itself. The non-obstante clause in Section 5 of the
    Arbitration Act 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
D   which is not contemplated under the Arbitration Act. The
    Arbitration Act itself gives various procedures and forums to
    challenge the appointment of an arbitrator. The framework clearly
    portrays an intention to address most of the issues within the
    ambit of the Act itself, without there being scope for any extra
E   statutory mechanism to provide just and fair solutions. Any party
    can enter into an arbitration agreement for resolving any disputes
    capable of being arbitrable. Parties, while entering into such
    agreements, need to fulfill the basic ingredients provided under
    Section 7 of the Arbitration Act. Arbitration being a creature of
    contract, gives a flexible framework for the parties to agree for
F   their own procedure with minimalistic stipulations under the
    Arbitration Act. If parties fail to refer a matter to arbitration or to
    appoint an arbitrator in accordance with the procedure agreed by
    them, then a party can take recourse for court assistance under
    Section 8 or 11 of the Arbitration Act. [Paras 11, 12, 13 and 14]
G   [10-D-H; 11-A-B]
          2.1. The Appellant acted in accordance with the procedure
    laid down under the agreement to unilaterally appoint a sole
    arbitrator, without Respondent No.1 mounting a judicial challenge
    at that stage. Respondent No. 1 then appeared before the sole
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  BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v.             3
     EXEC. ENGR. SARDAR SAROVAR NARMADA NIGAM LTD.


arbitrator and challenged the jurisdiction of the sole arbitrator,     A
in terms of Section 16(2) of the Arbitration Act. Thereafter,
Respondent No.1 chose to impugn the order passed by the
arbitrator under Section 16(2) of the Arbitration Act through a
petition under Article 226/227 of the Indian Constitution. In the
usual course, the Arbitration Act provides for a mechanism of
                                                                       B
challenge under Section 34. The opening phase of Section 34
reads as ‘Recourse to a Court against an arbitral award may be
made only by an application for setting aside such award in
accordance with sub-section (2) and sub-section (3)’. The use of
term ‘only’ as occurring under the provision serves two purposes
of making the enactment a complete code and lay down the               C
procedure. [Paras 15, 16][11-B-E]
       2.2. Though the hierarchy in our legal framework, mandates
that a legislative enactment cannot curtail a Constitutional right,
however, it is one thing to say that in exercise of the power vested
in it under Article 226 of the Constitution, the High Court can        D
entertain a writ petition against any order passed by or action
taken by the State and/or its agency/ instrumentality or any public
authority or order passed by a quasi-judicial body/authority, and
it is an altogether different thing to say that each and every
petition filed under Article 226 of the Constitution must be
entertained by the High Court as a matter of course ignoring the       E
fact that the aggrieved person has an effective alternative remedy.
Rather, it is settled law that when a statutory forum is created by
law for redressal of grievances, a writ petition should not be
entertained ignoring the statutory dispensation. It is therefore,
prudent for a Judge to not exercise discretion to allow judicial       F
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. This high standard set by
this Court is in terms of the legislative intention to make the
arbitration fair and efficient. [Para 17][11-E-H; 12-A-D]              G

      2.3. In the instant case, Respondent No.1 has not been able
to show exceptional circumstance or ‘bad faith’ on the part of the
Appellant, to invoke the remedy under Article 227 of the

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4            SUPREME COURT REPORTS                      [2021] 1 S.C.R.


A   Constitution. No doubt the ambit of Article 227 is broad and
    pervasive, however, the High Court should not have used its
    inherent power to interject the arbitral process at a stage when
    subsequent to the impugned order of the sole arbitrator, a final
    award was rendered by him on merits, which is challenged by
    Respondent No. 1 in a separate Section 34 application, which is
B
    pending. [Para 19][13-B-D]
           3.1. Viewed from a different perspective, the arbitral process
    is strictly conditioned upon time limitation and modeled on the
    ‘principle of unbreakability.’ According to this “unbreakability”
    of time-limit and true to the “certainty and expediency” of the
C   arbitral awards, any grounds for setting aside the award that
    emerge after the three month time-limit has expired cannot be
    raised. If the Courts are allowed to interfere with the arbitral
    process beyond the ambit of the enactment, then the efficiency
    of the process will be diminished. The High Court did not
D   appreciate the limitations under Articles 226 and 227 of the
    Constitution and reasoned that the Appellant had undertaken to
    appoint an arbitrator unilaterally, thereby rendering Respondent
    No. 1 remediless. However, a plain reading of the arbitration
    agreement points to the fact that the Appellant had actually acted
    in accordance with the procedure laid down without any mala fides.
E   [Paras 20, 21][13-D-H; 14-A-E]
          3.2. Respondent No.1 did not take legal recourse against
    the appointment of the sole arbitrator, and rather submitted
    themselves before the tribunal to adjudicate on the jurisdiction
    issue as well as on the merits. In this situation, Respondent No.
F   1 has to endure the natural consequences of submitting
    themselves to the jurisdiction of the sole arbitrator, which can be
    challenged, through an application under Section 34. In the
    present case, the award has already been passed during the
    pendency of this appeal, and Respondent No. 1 has already
G   preferred a challenge under Section 34 to the same. Respondent
    No. 1 has not been able to show any exceptional circumstance,
    which mandates the exercise of jurisdiction under Articles 226
    and 227 of the Constitution. [Para 22][14-E-G]


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  BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v.               5
     EXEC. ENGR. SARDAR SAROVAR NARMADA NIGAM LTD.


      4.1. The Division Bench of the High Court further opined           A
that the contract between the parties was in the nature of a works
contract as it held that the manufacturing of bricks, as required
under the contract, was only an ancillary obligation while the
primary obligation on the Appellant was to supply the bricks. The
Division Bench therefore held that the Gujarat Public Works
                                                                         B
Contracts Disputes Arbitration Tribunal Act, 1992 holds the field,
and not the Arbitration Act. [Para 23][14-G-H; 15-A-B]
       4.2. The Gujarat Act was enacted in 1992 with the object to
provide for the constitution of a tribunal to arbitrate disputes
particularly arising from works contract to which the State
Government or a public undertaking is a party. A works contract          C
is defined under Section 2(k) of the Gujarat Act. The definition
includes within itself a contract for supply of goods relating to
the execution of any of the works specified under the section.
However, a plain reading of the contract between the parties
indicates that it was for both manufacturing as well as supply of        D
bricks. Importantly, a contract for manufacture simpliciter is not
a works contract under the definition provided under Section
2(k). The pertinent question therefore is whether the present
contract, which is composite in nature, falls within the ambit of a
works contract under Section 2(k) of the Gujarat Act. This is a
question that requires contractual interpretation, and is a matter       E
of evidence, especially when both parties have taken contradictory
stands regarding this issue. It is a settled law that the
interpretation of contracts in such cases shall generally not be
done in the writ jurisdiction. Further, the mere fact that the Gujarat
Act might apply may not be sufficient for the writ courts to             F
entertain the plea of Respondent No. 1 to challenge the ruling of
the arbitrator under Section 16 of the Arbitration Act. [Para 24]
[15-A-E]
      5. Section 16 of the Arbitration Act, necessarily mandates
that the issue of jurisdiction must be dealt first by the tribunal,      G
before the Court examines the same under Section 34.
Respondent No. 1 is therefore not left remediless, and has
statutorily been provided a chance of appeal. The drill of Section
16 of the Act is that where a Section 16 application is dismissed,

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6            SUPREME COURT REPORTS                          [2021] 1 S.C.R.


A   no appeal is provided and the challenge to the Section 16
    application being dismissed must await the passing of a final award
    at which stage it may be raised under Section 34. The High Court
    therefore erred in utilizing its discretionary power available under
    Articles 226 and 227 of the Constitution. The impugned Order
    of the High Court is set aside. However, Respondent No. 1 is at
B
    liberty to raise any legally permissible objections regarding the
    jurisdictional question in the pending Section 34 proceedings.
    [Paras 25, 26][15-E-H; 16-A-C]
          Nivedita Sharma v. Cellular Operators Association of
          India (2011) 14 SCC 337 ; M/s.Deep Industries Limited
C         v. Oil and Natural Gas Corporation Limited (2019) SCC
          Online SC 1602 ; P. Radha Bai v. P. Ashok Kumar
          (2019) 13 SCC 445 : [2018] 12 SCR 143 – relied on.
                       Case Law Reference
    (2011) 14 SCC 337         Para 17              relied on
D
    [2018] 12 SCR 143         Para 20              relied on
          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 14665
    of 2015.
          From the Judgment and Order dated 17.09.2012 OF the High
E   Court of Gujarat at Ahmedabad in Letters Patent Appeal No. 182 of
    2006 in Special Civil Application No. 400 of 2002.
           Purvish Jitendra Malkan, Ms. Dharita Purvish Malkan, Ms. Deepa
    Gorasia, Jitendra Manilal Malkan, Ms. Jesal Wahi, Ms. Hemantika Wahi
    for the appearing parties.
F         The Judgment of the Court was delivered by
          N. V. RAMANA, J.
           1. This Civil Appeal raises an important question of law concerning
    arbitration law in India and special enactments enacted by States
    concerning public works contract.
G
          2. A brief reference to facts in this case is necessary for the
    disposal of the case. On 13.02.1991, Respondent No. 1 entered into a
    contract with the Appellant to manufacture and supply bricks. The
    aforesaid contract had an arbitration clause. As some dispute arose

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BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v. EXEC.                      7
ENGR. SARDAR SAROVAR NARMADA NIGAM LTD. [N. V. RAMANA, J.]


regarding payment in furtherance of manufacturing and supplying of                  A
bricks, the Appellant issued a notice dated 13.11.1998, seeking
appointment of sole arbitrator in terms of the agreement. Clause 38 of
the agreement provide for arbitration as under:
      Clause 38 – Arbitration
             All disputes or differences in respect of which the decision           B
      has not been settled, shall be referred for arbitration to a sole
      arbitrator appointed as follows:
              Within thirty days of receipt of notice from the Contractor
      of his intention to refer the dispute to arbitration the Chief Engineer
      shall send to the Contractor a list of three officers from the list of        C
      arbitrator appointment by the Government. The Contractor shall
      within fifteen days of receipt of this list select and communicate
      to the Chief Engineer the name of the person from the list who
      shall then be appointed as the sole arbitrator. If Contractor fails to
      communicate his selection of name, within the stipulated period,              D
      the Chief Engineer, shall without delay select one officer from the
      list and appoint him as the sole arbitrator. If the Chief Engineer
      fails to send such a list within thirty days, as stipulated, the contractor
      shall send a similar list to the Chief Engineer within fifteen days.
      The Chief Engineer shall then select one officer form the list and
      appoint him as the sole arbitrator within fifteen days. If the Chief          E
      Engineer fails to do so the contractor shall communicate to
      the Chief Engineer the name of one Officer from the list,
      who shall then be the sole arbitrator.
             The arbitration shall be conducted in accordance with the
      provision of the Indian Arbitration Act, 1940 or any statutory                F
      modification thereof. The decision of the sole arbitrator shall be
      final and binding on the parties thereto. The Arbitrator shall
      determine the amount of costs of arbitration to be awarded to
      either parties.
             Performance under the contract shall continue during the               G
      arbitration proceedings and payments due to the contractor by
      the owner shall not be withheld, unless they are the subject matter
      of the arbitration proceedings.

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A               All awards shall be in writing and in case of awards
          amounting to Rs. 1.00 lakh and above, such awards, shall state
          reasons for the amounts awards.
                Neither party is entitled to bring a claim to arbitration if the
          Arbitrator has not been appointed before the expiration of thirty
B         days after defect liability period.
                                                       (emphasis supplied)
          3. Respondent No. 1, by replies dated 23.11.1998 and 04.01.1999,
    did not agree to the Appellant’s request on two main grounds:

C               a. That the arbitration was agreed to be conducted in
                   accordance with the provision of the Indian Arbitration
                   Act and any statutory modification thereof. Accordingly,
                   the State of Gujarat had passed the Gujarat Public Works
                   Contracts Disputes Arbitration Tribunal Act, 1992
                   (hereinafter referred to as “theGujarat Act”).
D                  Therefore, the disputes between the parties were to be
                   adjudicated in accordance with the aforesaid statute.
                b. That the arbitration was time barred, as Clause 38
                   mandated that neither party was entitled to claim if the
                   arbitrator has not been appointed before the expiration
E                  of thirty days after the defect liability period.
           4. In any case, the Appellant appointed Respondent No. 2 to act
    as a sole arbitrator for adjudication of the disputes. Respondent No. 1
    preferred an application under Section 16 of the Arbitration and
    Conciliation Act of 1996 (hereinafter referred to as “the Arbitration
F   Act”) disputing the jurisdiction of the sole arbitrator. On 20.10.2001, the
    sole arbitrator rejected the application of the Respondent No. 1 and held
    that the sole arbitrator had jurisdiction to adjudicate the dispute.
           5. Aggrieved by the order of the sole arbitrator, Respondent No. 1
    preferred Special Civil Application No. 400 of 2002, under Articles 226
G   and 227 of the Constitution of India before the High Court of Gujarat.
    The Single Judge, while dismissing the Special Civil Application, held as
    under:
          “……At this stage, the judgment of the Hon’ble Supreme Court
          in the case of Konkan Railway Corporation Limited v. Mehul
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BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v. EXEC.                9
ENGR. SARDAR SAROVAR NARMADA NIGAM LTD. [N. V. RAMANA, J.]


      Construction Company, (2000) 7 SCC 201 is also required to              A
      be considered along with the judgment of the Hon’ble Supreme
      Court in the case of SBP & Co. v. Patel Engineering Ltd., (2005)
      8 SCC 618. Considering the aforesaid two judgments of the
      Hon’ble Supreme Court and the order passed by the learned sole
      arbitrator passed under Section 16(4) of the Act dismissing the
                                                                              B
      application submitted by the petitioner challenging the jurisdiction
      of respondent no. 2 as a sole arbitrator and challenging his
      appointment as a sole arbitrator, it is to be held that the petition
      under Articles 226 and 227 of the Constitution of India against the
      said order is not maintainable and/or the same is not required to
      entertained and the only remedy available to the petitioner is to       C
      wait till the award is passed by the learned Sole Arbitrator and to
      challenge the same under Section 34 of the Act…”
       6. Aggrieved by the order of the Single Judge, Respondent No. 1
preferred Letters Patent Appeal No. 182 of 2006 in Special Civil
Application No. 400 of 2002. The High Court of Gujarat, by the impugned       D
order dated 17.09.2012, allowed the appeal and observed the following:
      “11. As discussed hereinabove, ‘the contract’ is a “works
      Contract” and a dispute is raised by the petitioner at the earliest
      available opportunity about the ‘forum’ in which the dispute be
      adjudicated. It was as early as on 23.11.1998, the appellant denied     E
      that in view of Clause-38, wherein it is provided that, ‘provision of
      Indian Arbitration Act, 1940 and any statutory modification thereof
      will be applicable’, the respondent cannot appoint a sole arbitrator
      and thereafter cannot contend that now that the Arbitrator is already
      appointed and he (the arbitrator) has already exercised power
      under the provisions of the Arbitration and Conciliation Act, 1996,     F
      the petitioner has to wait till the arbitration award is passed, to
      challenge the same under Section 34 and Section 37 of the 1996
      Act.”
       7. Aggrieved, the Appellant filed this appeal by way of special
leave petition.                                                               G
      8. Counsel for the Appellant argued that the Division Bench of
the High Court erred in interfering with the order of the Single Judge
under Articles 226 and 227 of the Constitution. The fact that the final

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A    award has been passed by the sole Arbitrator and is now challenged
     under Section 34 of the Arbitration Act clearly shows the attempt of
     Respondent No. 1 to bypass the framework laid down under the
     Arbitration Act. He points out that Section 16(2) of the Arbitration Act
     mandates that the sole arbitrator had the jurisdiction to adjudicate the
     preliminary issue of jurisdiction, which can only be challenged under
B
     Section 34 of the Arbitration Act.
            9. On the other hand, learned counsel for Respondent No. 1
     contended that since the enactment of the Gujarat Act, the Arbitration
     Act was substituted with respect to the disputes arising out of the works
     contract. It was contended that under Articles 226 and 227 of the
C    Constitution, it was always open for Respondent No. 1 to invoke the
     writ jurisdiction of the High Court to set aside an arbitration which was
     a nullity as it was in conflict with the State enactment.
            10. Having heard both parties and perusing the material available
     on record, the question which needs to be answered is whether the
D    arbitral process could be interfered under Article 226/227 of the
     Constitution, and under what circumstance?
            11. We need to note that the Arbitration Act is a code in itself.
     This phrase is not merely perfunctory, but has definite legal consequences.
     One such consequence is spelled out under Section 5 of the Arbitration
E    Act, which reads as under “Notwithstanding anything contained in
     any other law for the time being in force, in matters governed by
     this Part, no judicial authority shall intervene except where so
     provided in this Part.” The non-obstante clause is provided to uphold
     the intention of the legislature as provided in the Preamble to adopt
F    UNCITRAL Model Law and Rules, to reduce excessive judicial
     interference which is not contemplated under the Arbitration Act.
            12. The Arbitration Act itself gives various procedures and forums
     to challenge the appointment of an arbitrator. The framework clearly
     portrays an intention to address most of the issues within the ambit of
G    the Act itself, without there being scope for any extra statutory mechanism
     to provide just and fair solutions.
            13. Any party can enter into an arbitration agreement for resolving
     any disputes capable of being arbitrable. Parties, while entering into such
     agreements, need to fulfill the basic ingredients provided under Section
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BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v. EXEC.                   11
ENGR. SARDAR SAROVAR NARMADA NIGAM LTD. [N. V. RAMANA, J.]


7 of the Arbitration Act. Arbitration being a creature of contract, gives a      A
flexible framework for the parties to agree for their own procedure with
minimalistic stipulations under the Arbitration Act.
       14. If parties fail to refer a matter to arbitration or to appoint an
arbitrator in accordance with the procedure agreed by them, then a party
can take recourse for court assistance under Section 8 or 11 of the              B
Arbitration Act.
       15. In this context, we may state that the Appellant acted in
accordance with the procedure laid down under the agreement to
unilaterally appoint a sole arbitrator, without Respondent No. 1 mounting
a judicial challenge at that stage. Respondent No. 1 then appeared before        C
the sole arbitrator and challenged the jurisdiction of the sole arbitrator, in
terms of Section 16(2) of the Arbitration Act.
       16. Thereafter, Respondent No. 1 chose to impugn the order passed
by the arbitrator under Section 16(2) of the Arbitration Act through a
petition under Article 226/227 of the Indian Constitution. In the usual          D
course, the Arbitration Act provides for a mechanism of challenge under
Section 34. The opening phase of Section 34 reads as ‘Recourse to a
Court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2)
and sub-section (3)’. The use of term ‘only’ as occurring under the
provision serves two purposes of making the enactment a complete code            E
and lay down the procedure.
        17. In any case, the hierarchy in our legal framework, mandates
that a legislative enactment cannot curtail a Constitutional right. InNivedita
Sharma v. Cellular Operators Association of India, (2011) 14 SCC
337, this Court referred to several judgments and held:                          F
       “11. We have considered the respective arguments/submissions.
       There cannot be any dispute that the power of the High Courts to
       issue directions, orders or writs including writs in the nature of
       habeas corpus, certiorari, mandamus, quo warranto and prohibition
       under Article 226 of the Constitution is a basic feature of the           G
       Constitution and cannot be curtailed by parliamentary legislation -
       L. Chandra Kumar v. Union of India, (1997) 3 SCC 261.
       However, it is one thing to say that in exercise of the power
       vested in it under Article 226 of the Constitution, the High
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12            SUPREME COURT REPORTS                            [2021] 1 S.C.R.


A          Court can entertain a writ petition against any order passed
           by or action taken by the State and/or its agency/
           instrumentality or any public authority or order passed by
           a quasi-judicial body/authority, and it is an altogether
           different thing to say that each and every petition filed under
           Article 226 of the Constitution must be entertained by the
B
           High Court as a matter of course ignoring the fact that the
           aggrieved person has an effective alternative remedy. Rather,
           it is settled law that when a statutory forum is created by law for
           redressal of grievances, a writ petition should not be entertained
           ignoring the statutory dispensation.
C                                                        (emphasis supplied)
            It is therefore, prudent for a Judge to not 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
D    by one of the parties. This high standard set by this Court is in terms of
     the legislative intention to make the arbitration fair and efficient.
            18. In this context we may observe M/s. Deep Industries Limited
     v. Oil and Natural Gas Corporation Limited, (2019) SCC Online SC
     1602, wherein interplay of Section 5 of the Arbitration Act and Article
E    227 of the Constitution was analyzed as under:
           “15. 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
F          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)
G          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
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BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v. EXEC.                13
ENGR. SARDAR SAROVAR NARMADA NIGAM LTD. [N. V. RAMANA, J.]


      is a constitutional provision which remains untouched by the non-       A
      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
                                                                              B
      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.”
        19. In the instant case, Respondent No. 1 has not been able to
show exceptional circumstance or ‘bad faith’ on the part of the Appellant,
to invoke the remedy under Article 227 of the Constitution. No doubt the      C
ambit of Article 227 is broad and pervasive, however, the High Court
should not have used its inherent power to interject the arbitral process
at this stage. It is brought to our notice that subsequent to the impugned
order of the sole arbitrator, a final award was rendered by him on merits,
which is challenged by the Respondent No. 1 in a separate Section 34          D
application, which is pending.
        20. Viewed from a different perspective, the arbitral process is
strictly conditioned upon time limitation and modeled on the ‘principle of
unbreakability’. This Court in P. Radha Bai v. P. Ashok Kumar, (2019)
13 SCC 445, observed:                                                         E
      36.3. Third, Section 34(3) reflects the principle of unbreakability.
      Dr Peter Binder in International Commercial Arbitration and
      Conciliation in UNCITRAL Model Law Jurisdictions, 2nd Edn.,
      observed:
      “An application for setting aside an award can only be made during      F
      the three months following the date on which the party making
      the application has received the award. Only if a party has made
      a request for correction or interpretation of the award under Article
      33 does the time-limit of three months begin after the tribunal has
      disposed of the request. This exception from the three-month time-      G
      limit was subject to criticism in the working group due to fears
      that it could be used as a delaying tactics. However, although “an
      unbreakable time-limit for applications for setting aside” was sought
      as being desirable for the sake of “certainty and expediency” the

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14             SUPREME COURT REPORTS                            [2021] 1 S.C.R.


A           prevailing view was that the words ought to be retained “since
            they presented the reasonable consequence of Article 33”.
            According to this “unbreakability” of time-limit and true
            to the “certainty and expediency” of the arbitral awards,
            any grounds for setting aside the award that emerge after
B           the three-month time-limit has expired cannot be raised.
            37. Extending Section 17 of the Limitation Act would go contrary
            to the principle of “unbreakability” enshrined under Section 34(3)
            of the Arbitration Act.
                                                          (emphasis supplied)
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            If the Courts are allowed to interfere with the arbitral process
     beyond the ambit of the enactment, then the efficiency of the process
     will be diminished.
           21. The High Court did not appreciate the limitations under Articles
D    226 and 227 of the Constitution and reasoned that the Appellant had
     undertaken to appoint an arbitrator unilaterally, thereby rendering the
     Respondent No. 1 remediless. However, a plain reading of the arbitration
     agreement points to the fact that the Appellant herein had actually acted
     in accordance with the procedure laid down without any mala fides.
             22. Respondent No. 1 did not take legal recourse against the
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     appointment of the sole arbitrator, and rather submitted themselves before
     the tribunal to adjudicate on the jurisdiction issue as well as on the merits.
     In this situation, the Respondent No. 1 has to endure the natural
     consequences of submitting themselves to the jurisdiction of the sole
     arbitrator, which can be challenged, through an application under Section
F    34. It may be noted that in the present case, the award has already been
     passed during the pendency of this appeal, and the Respondent No. 1
     has already preferred a challenge under Section 34 to the same.
     Respondent No. 1 has not been able to show any exceptional
     circumstance, which mandates the exercise of jurisdiction under Articles
     226 and 227 of the Constitution.
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           23. The Division Bench further opined that the contract between
     the parties was in the nature of a works contract as it held that the
     manufacturing of bricks, as required under the contract, was only an


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BHAVEN CONST. THR. AUTH. SIGNATORY PREMJIBHAI K. SHAH v. EXEC.                  15
ENGR. SARDAR SAROVAR NARMADA NIGAM LTD. [N. V. RAMANA, J.]


ancillary obligation while the primary obligation on the Appellant was to       A
supply the bricks. The Division Bench therefore held that the Gujarat
Act holds the field, and not the Arbitration Act.
       24. The Gujarat Act was enacted in 1992 with the object to provide
for the constitution of a tribunal to arbitrate disputes particularly arising
from works contract to which the State Government or a public                   B
undertaking is a party. A works contract is defined under Section 2(k) of
the Gujarat Act. The definition includes within itself a contract for supply
of goods relating to the execution of any of the works specified under
the section. However, a plain reading of the contract between the parties
indicates that it was for both manufacturing as well as supply of bricks.
Importantly, a contract for manufacture simpliciter is not a works              C
contract under the definition provided under Section 2(k). The pertinent
question therefore is whether the present contract, which is composite
in nature, falls within the ambit of a works contract under Section 2(k)
of the Gujarat Act. This is a question that requires contractual
interpretation, and is a matter of evidence, especially when both parties       D
have taken contradictory stands regarding this issue. It is a settled law
that the interpretation of contracts in such cases shall generally not be
done in the writ jurisdiction. Further, the mere fact that the Gujarat Act
might apply may not be sufficient for the writ courts to entertain the plea
of Respondent No. 1 to challenge the ruling of the arbitrator under Section
16 of the Arbitration Act.                                                      E

       25. It must be noted that Section 16 of the Arbitration Act,
necessarily mandates that the issue of jurisdiction must be dealt first by
the tribunal, before the Court examines the same under Section 34.
Respondent No. 1 is therefore not left remediless, and has statutorily
been provided a chance of appeal. In Deep Industries case (supra),              F
this Court observed as follows:
      “22. One other feature of this case is of some importance. As
      stated herein above, on 09.05.2018, a Section 16 application had
      been dismissed by the learned Arbitrator in which substantially
      the same contention which found favour with the High Court was            G
      taken up. The drill of Section 16 of the Act is that where a
      Section 16 application is dismissed, no appeal is provided
      and the challenge to the Section 16 application being

                                                                                H
16              SUPREME COURT REPORTS                         [2021] 1 S.C.R.


A           dismissed must await the passing of a final award at which
            stage it may be raised under Section 34.”
                                                        (emphasis supplied)
            26. In view of the above reasoning, we are of the considered
     opinion that the High Court erred in utilizing its discretionary power
B    available under Articles 226 and 227 of the Constitution herein. Thus,
     the appeal is allowed and the impugned Order of the High Court is set
     aside. There shall be no order as to costs. Before we part, we make it
     clear that Respondent No. 1 herein is at liberty to raise any legally
     permissible objections regarding the jurisdictional question in the pending
C    Section 34 proceedings.

     Bibhuti Bhushan Bose                                         Appeal allowed.




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