Supreme Court Upholds Statutory Remedy in Arbitration Dispute: M/s. Kelkar & Kelkar vs. M/s. Hotel Pride Executive Pvt. Ltd. (2022)

Date of the Judgment: May 04, 2022
Citation: [NON-REPORTABLE] IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.3479 OF 2022
Judges: M. R. Shah, J. and B.V. Nagarathna, J.
Can a High Court bypass the statutory appeal process and directly intervene in an arbitration matter through a writ petition? The Supreme Court of India recently addressed this critical question, emphasizing the importance of adhering to established legal procedures. This case revolves around a dispute where the High Court of Judicature at Bombay entertained a writ petition against an arbitral award, despite the availability of a statutory appeal under the Arbitration Act, 1940. The Supreme Court bench, comprising Justices M.R. Shah and B.V. Nagarathna, overturned the High Court’s decision, reinforcing the principle that statutory remedies should be exhausted before invoking extraordinary jurisdiction.

Case Background

The dispute originated between M/s. Kelkar & Kelkar (the appellant), and M/s. Hotel Pride Executive Pvt. Ltd. (the respondent). This dispute was referred to arbitration. The learned Arbitrator declared an award in favor of M/s. Kelkar & Kelkar, directing M/s. Hotel Pride Executive Pvt. Ltd. to pay Rs. 12,46,663/-. Subsequently, M/s. Kelkar & Kelkar filed an application in Regular Civil Suit No. 1022/1996, and the trial court passed a decree in terms of the arbitral award.

M/s. Hotel Pride Executive Pvt. Ltd., instead of filing an appeal under the Arbitration Act, 1940, directly filed a writ petition before the High Court of Judicature at Bombay under Articles 226 and 227 of the Constitution of India. The primary ground for the writ petition was the alleged non-compliance with Clause 56 of the Articles of Agreement before the appointment of the Arbitrator. The High Court allowed the writ petition, set aside the arbitral award, and remanded the matter for fresh consideration.

Timeline

Course of Proceedings

The High Court of Judicature at Bombay, in its judgment dated 06.08.2015, allowed the writ petition filed by M/s. Hotel Pride Executive Pvt. Ltd. The High Court set aside the arbitral award and remanded the matter for a fresh hearing, citing non-compliance with Clause 56 of the Articles of Agreement. M/s. Kelkar & Kelkar, aggrieved by this decision, appealed to the Supreme Court.

Legal Framework

The Supreme Court considered the provisions of the Arbitration Act, 1940, which provides a mechanism for challenging an arbitral award through a statutory appeal. The Court also considered Articles 226 and 227 of the Constitution of India, which grant High Courts the power to issue writs. The Court emphasized that the writ jurisdiction is an extraordinary remedy and should not be invoked when an alternative statutory remedy is available.

The relevant legal provisions are:

• The Arbitration Act, 1940: This Act provides the legal framework for arbitration proceedings in India, including the procedure for challenging arbitral awards.
• Articles 226 and 227 of the Constitution of India: These articles empower the High Courts to issue writs for the enforcement of fundamental rights and for other purposes, including judicial review of decisions by subordinate courts and tribunals.

Arguments

The appellant, M/s. Kelkar & Kelkar, argued that the High Court should not have entertained the writ petition when a statutory remedy of appeal was available under the Arbitration Act, 1940. They contended that the High Court’s intervention was inappropriate given the existence of an alternative remedy.

The respondent, M/s. Hotel Pride Executive Pvt. Ltd., argued that the arbitral award was invalid due to non-compliance with Clause 56 of the Articles of Agreement, which they claimed was a fundamental procedural flaw. They justified their direct approach to the High Court by asserting that the violation of Clause 56 was a matter of grave concern that warranted immediate intervention.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the High Court was justified in entertaining a writ petition under Articles 226 and 227 of the Constitution of India against an arbitral award when a statutory remedy of appeal was available under the Arbitration Act, 1940?

Treatment of the Issue by the Court

Authorities

The Supreme Court did not explicitly cite any specific cases or books in its judgment. However, it relied on the general principle that statutory remedies should be exhausted before invoking writ jurisdiction.

Judgment

The Supreme Court did not cite any authorities in the judgment.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that statutory remedies should be exhausted before resorting to extraordinary remedies like writ petitions. The Court emphasized the importance of adhering to the procedural framework established by law. The main points that weighed in the mind of the court are:

• The availability of a statutory remedy of appeal under the Arbitration Act, 1940.
• The High Court’s failure to direct the respondent to avail the statutory remedy.
• The principle that writ jurisdiction should not be invoked when an alternative remedy is available.

The Supreme Court observed that,
“When the statute provides a further remedy by way of appeal against the award and even against the order passed by the learned trial Court making the award a decree of the court, the High Court ought not to have entertained the writ petition.”

The Court also noted,
“the impugned judgment and order passed by the High Court is unsustainable and the same deserves to be quashed and set aside.”

The Court further stated,
“liberty is reserved in favour of the respondent to take further recourse to law under the provisions of the Arbitration Act, 1940 and in accordance with law against an award made by the learned Arbitrator and the order passed by the learned trial Court.”

Key Takeaways

• Statutory remedies must be exhausted before invoking the writ jurisdiction of High Courts under Articles 226 and 227 of the Constitution of India.
• High Courts should not entertain writ petitions against arbitral awards when a statutory appeal is available under the Arbitration Act, 1940.
• Parties aggrieved by an arbitral award must follow the prescribed statutory procedures for challenging the award.

Directions

The Supreme Court set aside the judgment of the High Court. However, liberty was granted to the respondent to pursue statutory remedies under the Arbitration Act, 1940, within four weeks from the date of the judgment. The Court also directed that any amount already paid to the appellant would be subject to the final outcome of the proceedings initiated by the respondent.

Development of Law

The judgment reinforces the established principle that statutory remedies must be exhausted before invoking extraordinary remedies like writ petitions. It clarifies that High Courts should not interfere with arbitral awards through writ jurisdiction when a specific statutory remedy is available. This decision upholds the integrity of the statutory framework for arbitration in India.

Conclusion

The Supreme Court’s decision in M/s. Kelkar & Kelkar vs. M/s. Hotel Pride Executive Pvt. Ltd. emphasizes the importance of adhering to statutory procedures in arbitration matters. The Court held that the High Court erred in entertaining a writ petition against an arbitral award when a statutory remedy of appeal was available. This judgment reinforces the principle that statutory remedies should be exhausted before invoking the extraordinary jurisdiction of High Courts under Articles 226 and 227 of the Constitution of India.