Supreme Court Restrains High Court Interference in Arbitration Proceedings: Serosoft Solutions Pvt. Ltd. vs. Dexter Capital Advisors Pvt. Ltd. (2025)

Date of the Judgment: January 03, 2025. Citation: 2025 INSC 26. Judges: Pamidighantam Sri Narasimha, J. and Manoj Misra, J. Can a High Court interfere with an Arbitral Tribunal’s decision regarding the cross-examination of a witness? The Supreme Court addressed this crucial question, emphasizing the need for judicial restraint in arbitration matters. The core issue revolved around whether the High Court correctly exercised its supervisory jurisdiction under Article 227 of the Constitution by granting a party another opportunity to cross-examine a witness, despite the Arbitral Tribunal denying the same. The judgment was delivered by a bench of Justices Pamidighantam Sri Narasimha and Manoj Misra, with Justice Pamidighantam Sri Narasimha authoring the opinion.

Case Background

Serosoft Solutions Pvt. Ltd. (appellant), a company providing educational software, and Dexter Capital Advisors Pvt. Ltd. (respondent), a capital advisory services provider, entered into a Client Service Agreement. Disputes arose regarding non-payment of fees for services rendered by the respondent, leading to the invocation of arbitration. Following the constitution of the Arbitral Tribunal, both parties submitted their statements of claim and defense. The Tribunal framed issues on 06.09.2023. The respondent presented two witnesses (CW-1 and CW-2). The appellant cross-examined CW-1 on 17.11.2023 and 21.11.2023, and CW-2 on 21.11.2023.

The appellant’s witness (RW-1) was then examined. On 09.12.2023, 9 questions were posed to RW-1, and cross-examination was deferred to 10.02.2024. On 10.02.2024, the cross-examination of RW-1 continued from 11:00 AM to 7:00 PM, with the respondent’s counsel requesting additional time, which the Tribunal granted, adjourning the case to 06.04.2024. Due to applications for discoveries and interrogatories, the cross-examination was delayed. The parties extended the Tribunal’s mandate by six months, which was to expire on 16.05.2024 as per Section 29A of the Arbitration and Conciliation Act, 1996. The cross-examination of RW-1 resumed on 01.10.2024, where 28 questions were asked, and the Tribunal concluded the cross-examination, discharging the witness.

On 03.10.2024, the respondent filed an application seeking further time to cross-examine RW-1. The Tribunal rejected this application on 09.10.2024, citing time constraints and the respondent’s lack of preparedness. The High Court, however, allowed the respondent’s petition under Article 227 of the Constitution, directing the Tribunal to grant further opportunity for cross-examination. Aggrieved, the appellant approached the Supreme Court.

Timeline:

Course of Proceedings

The High Court allowed the Section 11 application on 08.05.2023, leading to the constitution of the Arbitral Tribunal, which held its first hearing on 19.05.2023. The cross-examination of the appellant’s witness, RW-1, began on 09.12.2023. The High Court, while acknowledging that judicial interference was least warranted, directed the Tribunal to grant further opportunity to the respondent to cross-examine RW-1, citing exceptional circumstances. The appellant challenged this order before the Supreme Court.

Legal Framework

The Supreme Court referred to Section 18 of the Arbitration and Conciliation Act, 1996, which mandates equal treatment of parties and full opportunity to present their case. It also emphasized the statutory obligation of judicial authorities to exercise restraint in interfering with matters governed under Part I of the Arbitration and Conciliation Act, 1996, which relates to the arbitration agreement, composition and jurisdiction of the Arbitral Tribunal, conduct of proceedings, and making, challenging, and enforcement of the award. This restraint is overriding, notwithstanding any other law.

The relevant legal provisions are:

• Section 18 of the Arbitration and Conciliation Act, 1996: “Equal treatment of parties.—The parties shall be treated with equality and each party shall be given a full opportunity to present his case.”

Arguments

Appellant’s Submissions:

• The Arbitral Tribunal had provided sufficient opportunity to the respondent to cross-examine the witness, RW-1.
• The respondent had already cross-examined RW-1 for over 12 hours.
• The High Court should have refrained from interfering with the Tribunal’s decision, as there was no perversity in the Tribunal’s order.
• The High Court’s interference undermined the efficiency of the arbitral process.

Respondent’s Submissions:

• The respondent contended that they were not given sufficient opportunity to effectively cross-examine RW-1.
• The respondent sought additional time to discover the truth through cross-examination.
• The High Court was justified in exercising its supervisory jurisdiction under Article 227 of the Constitution to ensure a fair hearing.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was:

1. Whether the High Court correctly exercised its supervisory jurisdiction under Article 227 of the Constitution in granting the respondent/claimant one more opportunity to cross-examine the appellant/respondent’s witness, despite the Arbitral Tribunal rejecting such a prayer.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authority:

Judgment

How each authority was viewed by the Court?

Kelvin.Air.Conditioning.and.Ventilation.System.Pvt.Ltd. v. Triumph.Reality.Pvt.Ltd., 2024 SCC Online Del 7137: The Supreme Court noted that the High Court should have followed the principles laid down in this case, which emphasized judicial restraint in interfering with arbitral proceedings. The Supreme Court observed that the conditions mentioned in this case should have guided the High Court to consider whether interference was warranted or not.

The Supreme Court allowed the appeals, setting aside the High Court’s order. The Court held that the Arbitral Tribunal had provided sufficient opportunity for cross-examination, and the High Court should not have interfered. The Court directed the Arbitral Tribunal to resume proceedings and conclude them expeditiously.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of judicial restraint in arbitration matters. The Court emphasized that High Courts should be cautious in interfering with orders of Arbitral Tribunals. The Court also considered the need to maintain the efficiency of the arbitral process and found that the respondent had been given sufficient opportunity to cross-examine the witness. The absence of any perversity in the Tribunal’s order also weighed heavily in the Court’s decision.

The Court’s reasoning was based on the following points:

The Court considered the respondent’s argument that they were not given sufficient opportunity for cross-examination, but rejected it based on the facts of the case. The Court emphasized that the respondent had already cross-examined the witness for over 12 hours, and there was no justification for further extending the cross-examination. The Court also considered the High Court’s reliance on the judgment of Kelvin.Air.Conditioning.and.Ventilation.System.Pvt.Ltd. v. Triumph.Reality.Pvt.Ltd., 2024 SCC Online Del 7137, and noted that the High Court should have been guided by the principles of judicial restraint outlined in that judgment.

The Supreme Court’s decision was unanimous, with both judges concurring on the need to set aside the High Court’s order. The Court’s reasoning was primarily based on the principle of judicial restraint in arbitration matters, the need to maintain the efficiency of the arbitral process, and the fact that the respondent had been given sufficient opportunity to cross-examine the witness. The Court’s decision did not introduce any new doctrines or legal principles but reaffirmed the existing principles of judicial restraint in arbitration matters.

“Interference is permissible only if the order is completely perverse i.e. that the perversity must stare in the face.”

“High Courts ought to discourage litigation which necessarily interfere with the arbitral process.”

“Excessive judicial interference in the arbitral process is not encouraged.”

Key Takeaways

• High Courts should exercise restraint in interfering with orders passed by Arbitral Tribunals.
• Sufficient opportunity for cross-examination does not mean unlimited time.
• The efficiency of the arbitral process should not be undermined by excessive judicial interference.
• Parties must be prepared and diligent in presenting their case before the Arbitral Tribunal.
• The supervisory jurisdiction of the High Court under Article 227 of the Constitution should be exercised sparingly in arbitration matters.

Directions

The Supreme Court directed the Arbitral Tribunal to resume the proceedings and conclude them as expeditiously as possible.

Development of Law

The ratio decidendi of the case is that High Courts should exercise judicial restraint and not interfere with the orders of the Arbitral Tribunal unless there is a clear case of perversity. This judgment reinforces the principle that the arbitral process should be efficient and free from unnecessary judicial interference. There is no change in the previous position of law, but this judgment reinforces the existing principles.

Conclusion

The Supreme Court’s judgment in Serosoft Solutions Pvt. Ltd. vs. Dexter Capital Advisors Pvt. Ltd. emphasizes the importance of judicial restraint in arbitration matters. The Court held that the High Court erred in interfering with the Arbitral Tribunal’s decision regarding the cross-examination of a witness. This judgment reinforces the principle that the arbitral process should be efficient and free from unnecessary judicial interference, and that parties must be diligent in presenting their case before the Arbitral Tribunal.