# Trading Engineers International Ltd v. U.P. Power Transmission Corp

- **Citation:** (2022) 9 ILRA 795
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-08-24
- **Case number:** Matters Under Article 227 No. 23908 of 2021
- **Bench:** Mrs. Sangeeta Chandra
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/trading-engineers-international-ltd-v-u-p-power-transmission-corp-49277
- **Pages:** 32

## Headnote

Civil Law-The Insolvency and Bankruptcy
Code 2016 - Section 14 - The Arbitration
and Conciliation Act, 1996 - Sections 16 &
34 - Petitioner filed an application before
the Learned Tribunal for rejection of the
counterclaim
stating
that
it had
no
jurisdiction
to
adjudicate
as
the
moratorium ordered by the NCLT was still
in operation-The Arbitration Act is a Code
in itself-The Arbitration Act provides for a
mechanism of challenge under Section 34-
Under Article 227 of the Constitution of
India, the supervisory role assigned to this
Court is extremely limited. The Supreme
Court has repeatedly emphasised in its
judgements the importance of keeping
handsoff
approach
where
arbitration
matters are concerned. This Court finds
that the learned Tribunal has decided an
application made to it by the petitioner
and the orders squarely falls under the
provisions of Section 16 of the Act of

## Text

_Characters 0–39,970 of 111,615. This is a partial read: ask again with offset=39970 for what follows._

9 All. Trading Engineers International Ltd. Vs. U.P. Power Transmission Corp.
795
land shall be real be released every year
from him by the lessor and if from the date
of imposition of the said charge a further
period of five years elapses the lease shall
stand forfeited and the lessor shall re-enter
upon the land.

11. The same stipulation exists in
the lease deed.

.........भूखंि पर सनमाषण एग्रीमेंर्ट की सतसि से 05
वर्ष के अंदर पूणष करना होगा। शेर् सनयम व शते ब्रोशर के
अनुसार होगी।

12. The notice under reference
seeks to cancel the allotment, without
allowing
the
society
to
undertake
construction of the school in the extended
period, against payment of charge prescribed
under section 18(4A) of the Act ibid. The
proposed action is bad in law as it tends to
curtail the statutory right of the Society
vested under the Act under which the
Authority is created.

13. A reference to clause 15 of the
sale deed in, isolation, rendering other
stipulations redundant and leading to an
inference violative of section 18(4) of the Act
ibid is not in conformity with the general
principles of jurisprudence.

47. The fact that G.D.A. has treated the
document to be a lease is also apparent from
the fact that notice has been issued to
respondent no.2 under Section 111(g) of the
Act, 1882.

48. In such view of the fact, this Court
does not find any illegality in the order
impugned.

49. Thus, for the reason given above, the
writ petition lacks merit and is accordingly,
dismissed with no order as to costs.
----------
(2022) 9 ILRA 795
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 24.08.2022
BEFORE

THE HON'BLE MRS. SANGEETA CHANDRA, J.

Matters Under Article 227 No. 23908 of 2021

Trading Engineers International Ltd.
 ...Petitioner
Versus
U.P. Power Transmission Corp.
 ...Respondent

Counsel for the Petitioner:
Gantavya, Dhanesh Relan, Kumar Abishek,
Mayur Narang, Meha Rashmi, Utkarsh
Kumar

Counsel for the Respondent:
Puneet Chandra, Sunil Sharma

Civil Law-The Insolvency and Bankruptcy
Code 2016 - Section 14 - The Arbitration
and Conciliation Act, 1996 - Sections 16 &
34 - Petitioner filed an application before
the Learned Tribunal for rejection of the
counterclaim
stating
that
it had
no
jurisdiction
to
adjudicate
as
the
moratorium ordered by the NCLT was still
in operation-The Arbitration Act is a Code
in itself-The Arbitration Act provides for a
mechanism of challenge under Section 34-
Under Article 227 of the Constitution of
India, the supervisory role assigned to this
Court is extremely limited. The Supreme
Court has repeatedly emphasised in its
judgements the importance of keeping
handsoff
approach
where
arbitration
matters are concerned. This Court finds
that the learned Tribunal has decided an
application made to it by the petitioner
and the orders squarely falls under the
provisions of Section 16 of the Act of
1966. Therefore, it cannot be said to be an
order patently lacking in jurisdiction and
therefore
perverse
and
liable
to
be
interfered with by this Court under Article
227 of the Constitution.

Settled law that once an order is passed under
Section 16 of the Act, 1996 then the same is
amenable to challenge under Section 34 of the
796 INDIAN LAW REPORTS ALLAHABAD SERIES
Act, 1996 and requires no interference of the
High Court under its supervisory jurisdiction as
the Act, 1996 is a complete code in itself. (Para
77)

Petition rejected. (E-3)

Case Law/ judgements relied upon:-

1. Deep Industries Ltd. Vs O.N.G.C Ltd & anr.
(2019) SCC online SC 1602

2. Bhaven Construction Vs Executive Engineer,
Sardar Sarovar Narmada Nigam Ltd. (2021) SCC
online SC

3. Surendra Kumar Singhal & ors. Vs Arun
Kumar Bhalotia & ors., (2021) SCC online DEL
3708

4. St. of U.P. Vs G.V.K. Emry (U.P) Pvt. Ltd. Writ
Petition No.16858 (MS) of 2021

5. Radheshyam Vs Chhabi Nath & ors. (2015) 5
SCC 423

6. UmmaJi Keshao Meshram Vs Radika Bai,
(1986) Supp. SCC 401

7. Alchemist Asset Reconstruction Comp. Ltd. Vs
M/s Hotel Godavari (Pvt.) Ltd., (2017) SCC
Online SC 1669

8. SBP and Co Vs Patel Engineering Ltd. &
anr.,(2005) 8 SCC 618

9. Fuerst Day Lawson Ltd. Vs Jindal Exports
Ltd., (2011) 8 SCC 333

10. Ghanshyam Mishra & Sons Pvt. Ltd. (thru
Authorised Signatory Versus Edelweiss Asset
Reconstruction Comp. Ltd. (through the Director)
& ors. (Civil Appeal No.8129 of 2019) SC.

11. Innoventive Industries Ltd. Vs ICICI Bank &
Anr. (2018) 1 SCC 407

12. Ebix Singapore (Pvt) Ltd Vs Committee of
Creditors of Educomp Solutions Ltd., Civil
Appeal No.3224 of 2020

13. P Mohan Raj & ors. Vs Shah Brothers Ispat
Pvt. Ltd, 2021 (6) SCC 258
14. Jharkhand Bijli Vitaran Nigam Ltd. Vs IVRCL
Ltd & anr. (Company Appeal (Insolvency)
285/2018 decided on 3 August 2018).

15. Surendra Kumar Singhal & ors. Vs Arun
Kumar Bhalotia & ors, Delhi High Court on
25.03.2021.

16. Punj. St. Power Corp. Ltd. Vs Emta Coal Ltd
& anr, (SLP decided on 18.09.2020)

17. Power Grid Corp. of India Ltd. Vs Jyoti
Structures 2017 SCC Online Del 12729

(Delivered by Hon'ble Mrs. Sangeeta
Chandra, J.)

1. This petition has been filed by the
petitioner a Private Limited company which
is under liquidation through its Insolvency
Resolution Professional (Hereinafter referred
to as "IRP") praying for quashing of the order
dated 19.09.2021 passed by the sole
Arbitrator (hereinafter referred to as the
"learned Tribunal") in arbitration proceedings
Trading Engineers (International) Ltd versus
U.P.
Power
Transmission
Corporation
Limited (UPPTCL).

The facts relevant for decision of
this petition in brief are that the petitioner
being under huge debt, several petitions
under Sections 7 & 9 of the Insolvency and
Bankruptcy
Code
2016
(hereinafter
referred to as the I & B Code) were filed
before the NCLT New Delhi. In one such
proceeding, Smt. Vijay Purohit versus
Trading Engineers, the NCLT initiated
Corporate
Insolvency
Resolution
proceedings by appointment of IRP by its
order dated 04.07.2019. In the meantime
the petitioner had issued a legal notice on
11.6.2019 to the respondent for initiation of
arbitration
proceedings
for
Rs.45,55,18,787/-
(Rupees
Forty
Five
Crores Fifty Five Lakhs Eighteen Thousand
Seven Hundred Eighty Seven) in terms of
the
Contracts
dated
15.4.2011
and
9 All. Trading Engineers International Ltd. Vs. U.P. Power Transmission Corp.
797
28.4.2011. On failure of the respondent to
reply
to
such
notice
the
petitioner
approached this Court for appointment of a
sole Arbitrator. This Court by its order
dated
17.03.2020
appointed
Justice
(Retired) Anurag Kumar. The petitioner
filed its Statement of Claim of more than
Rs.45
crores
on
14.09.2020.
The
respondent filed a Defence Statement and a
Counter
Claim
of
Rs.144,11,93,202/-
(Rupees One hundred Forty Four Crores
Eleven Lakhs Ninety Three Thousand Two
Hundred Two only) before the Learned
Tribunalon 16.11.2020. The petitioner also
filed a reply.

2.

In
a
connected
arbitration
proceedings pending before another sole
Arbitrator, Justice (Retired) Anil Kumar, a
preliminary
objection
was
taken
on
25.03.2021 by the respondent that the
arbitration proceedings cannot proceed in
view of the provisions of Section 14 of the
I&B Code.

3. On 08.04.2021, taking a cue from
the application of the Respondent in the
other arbitration proceedings the petitioner
filed an application before the Learned
Tribunalfor rejection of the counterclaim
stating that it had no jurisdiction to
adjudicate as the moratorium ordered by
the NCLT was still in operation. The
NCLT's orders were open to challenge
before the NCLAT or the Supreme Court of
India. The respondent had not challenged
the moratorium declared by the NCLT on 4
July 2019. The respondent filed its reply
before the Learned Tribunalon 29.05.2021
stating
that
the
determination
of
counterclaim is not barred under Section 14
of the I&B Code, and the question of
violation of Section 14 would only arise
when execution proceedings are initiated
after
determination
of
dispute
and
adjudication
of
claim
as
well
as
counterclaim. The petitioner filed another
application on 15.06.2021 reiterating its
prayer for rejection of counterclaim filed
by
the
respondent.
The
petitioner's
application was made mainly on the ground
that the claim and counter claim had been
filed during the period of moratorium under
Section 14 of the I&B Code. The claimant
had submitted that after initiation of
Corporate Insolvency Resolution Process
all creditors are required to file their claims
before the Resolution Professional and the
only option which was available with the
respondent was to file a claim before the
IRP. No counterclaim could be filed as
under paragraph 238 of the I&B Code, the
Code has been given overriding effect over
all other laws and procedure under
Arbitration
Act
would
not,
more
specifically apply where a moratorium has
been issued under the provisions of Section
14 of the said Code.

4. The Learned Tribunalrejected the
application dated 08.04.2021 by its order
dated 19.09.2021. Hence this petition. The
grounds for challenge to the order dated
19.09.2021 by the petitioners being that it
is perverse as the learned Tribunal has
decided that it will adjudicate both the
claim and the counterclaim together in
terms of the mandate given to it under
section 23 (2-A) of the Act of 1996.

5. Sri Sanjay Bhasin, learned Senior
Advocate assisted by Shri Sunil Sharma
and Sri Puneet Chandra, has raised a
preliminary
objection
as
to
the
maintainability of this writ petition under
Article 227 of the Constitution and learned
Senior Counsel has referred to the interim
order passed by this court on 23.12.2021 in
this
Petition.
The
counsel
for
the
respondent had placed reliance upon
798 INDIAN LAW REPORTS ALLAHABAD SERIES
several judgments of the Supreme Court
and has argued that this court had
entertained the petition without going into
the question of maintainability because it
was of the opinion that it is related to
disputed questions of fact that could be
decided at the time of final hearing. It had
nevertheless granted an interim order to the
petitioner to the extent that the matter was
directed to be listed on 17.01.2022 and till
such date, arbitrator was directed not to
proceed
with
the
arbitration.
The
respondents were directed to file their
counter affidavit in the matter. Against this
order granting interim relief
to the
petitioner the petitioner had approached the
Supreme Court for modification of the
order of interim relief to the extent that the
arbitrator may continue to hear the claim of
the petitioner on its merits but ignore the
counterclaim of the respondent as it
amounted to an institution of a suit against
the corporate debtor which is prohibited
under Section 14 (1)(A) of the I&B Code.
It has been argued that the Supreme Court
did not think it appropriate to pass any
order on such application being made to it.
It had only clarified that not only the
application of the petitioner should be
considered but the maintainability of the
petition should also be considered by this
court on the next date of hearing.

6. The Learned Senior Advocate has
pointed out the prayer clause in this petition
under Article 227 which is for quashing of
the order dated 19.09.2021 passed by the
learned Tribunal in arbitration proceedings
pending before him in the matter of
Trading Engineers (International) Limited
versus
U.P.
Power
Transmission
Corporation Limited. The interim relief
application prays for stay of adjudication of
the counterclaim raised by the respondent
before the learned Tribunal.

7. The Learned Senior Advocate has
pointed out that the respondent did not go
to the Supreme Court challenging the
interim order granted by this court on
23.12.2021. The petitioner had itself gone
to the Supreme Court for modification of
the interim order. The Supreme Court
instead of modifying and directing the
Learned tribunal to continue to adjudicate
the claim of the petitioner against the
respondent, had directed this court to
consider the maintainability of the petition
under Article 227 of the Constitution.

8. It has been argued that the High
Court under Article 227 of the Constitution
should no adjudicate upon an order passed
by the Arbitral Tribunal deciding its
jurisdiction to continue with the arbitration
proceedings. The learned counsel for the
respondent has placed reliance upon
Section 5, Section 16, and Section 34 of the
Act of 1996, and has also referred to the
Statement of Objects and Reasons of the
Act of 1996 as amended by the Act of
2015. It has been argued that the legislative
intent has been made clear that arbitration
proceedings
should
continue
without
unnecessary and undue interference at each
and every stage by the courts including
extraordinary jurisdiction as exercised by
the High Court under Article 226 and
supervisory jurisdiction under Article 227
of the Constitution.

9. The learned counsel appearing for
the respondent has placed reliance upon the
following -

(1) SBP and Co. versus Patel
Engineering Ltd and Another (2005) 8 SCC
618 and paragraph 45, 46 and 47 as also
paragraph 103 and 108.

(2) Deep Industries Ltd Versus
Oil and Natural Gas Corp Ltd and another
9 All. Trading Engineers International Ltd. Vs. U.P. Power Transmission Corp.
799
(2019
SCC
online
SC
1608)
and
paragraphs 13, 16, 17, 22 and 24.

(3) Bhaven Construction through
Authorised Signatory Premji Bhai K Shah
versus Executive Engineer Sardar Sarovar
Narmada Nigam Ltd and another (2021
SCC online SC 8) and paragraphs 11, 16,
18, 20 and 21

(4)
Punjab
State
Power
Corporation Limited versus Emta Coal Ltd
and another (2020 SCC online SC 1165)
paragraph 5;

(5) Navayuga Engineering Co
versus Bangalore Metro Rail Corp Ltd
(2021 SCC online SC 469);

(6)
Essar
Steel
India
Ltd
Committee of Creditors versus Satish
Kumar Gupta 2020 (8) SCC 531;

(7) P. Mohan Raj v Shah
Bros.Ispat (Pvt) Ltd 2021 (6) SCC 258.

10. In response to the arguments made
by the learned counsel for the respondent, the
learned counsel for the petitioner had
submitted that the company is under
liquidation and a CIRP is pending before the
National
Company
Law
Tribunal,
Adjudicating Authority, under the Insolvency
and Bankruptcy Code 2006 and and
Insolvency Resolution Professional has been
appointed on 04.07.2020 therefore no
counterclaim by the respondent against the
petitioner could be entertained by the
Arbitrator. The learned counsel for the
petitioner has referred to Section 14 of the
I&B Code and sub-clause 1(a) thereof to say
that both the institution of proceedings and
the hearing in pending proceedings including
execution is barred and this argument was
raised before the Learned Tribunal that a
moratorium had come into being as soon as
the Adjudicating Authority entertained the
insolvency proceedings. The Learned counsel
for the petitioner has referred to the language
of sub-clause (a) of Section 14 (1) of the I&B
Code where it prohibits the institution of suits
or
continuation
of
pending
suits
or
proceedings against the corporate debtor
including execution of any judgement, decree
or order in any Court of law, Tribunal,
Arbitration
panel
or
other
Authority.
Although arbitration proceedings are not
specifically mentioned in the language of
Section 14(1)(a), proceedings relating to
"transactions" entered into by the corporate
debtor
before
the
imposition
of
the
moratorium are also included. The definition
of "transaction" in Section 3 (33) of the I&B
Code being an inclusive one, it is extremely
wide in nature and would include a
transaction evidencing a debt or liability.

11. The learned counsel for the
petitioner has also placed reliance upon:-

(i) Deep industries Ltd versus
Oil and Natural Gas Corp Ltd and
another (2019) SCC online SC 1602 Para
13;

2) Bhaven Construction versus
Executive
Engineer,
Sardar
Sarovar
Narmada Nigam Limited (2021) SCC
online SC 8, paras 17 to 20 & 25;

3) Surendra Kumar Singhal and
others versus Arun Kumar Bhalotia and
others, (2021) SCC online DEL 3708;
paras 17 to 21 & 24;

4) State of U.P. versus G.V.K.
Emry (U.P) Private Limited Writ Petition
No.16858 (MS) of 2021;

5) Radheshyam versus Chhabi
Nath and others (2015) 5 SCC 423; paras
24 & 25;

6) UmmaJi Keshao Meshram
versus Radika Bai, (1986) Supplement
SCC 401; paras 85, 91, 100 to 103; and

7)
Alchemist
Asset
Reconstruction Company Limited Vs. M/s
Hotel Godavari (Pvt.) Ltd., (2017) SCC
Online SC 1669.
800 INDIAN LAW REPORTS ALLAHABAD SERIES

12. It has been argued that Article 227
gives the High Court the power of
superintendence
over
all
courts
and
tribunals in relation to which it exercises
territorial
jurisdiction.
This
includes
Arbitration Tribunal. This supervisory
jurisdiction is intended to ensure that the
subordinate courts and tribunals act within
the limits of their authority and in
accordance with law. Since Article 227 is a
constitutional provision therefore no fetters
can be placed on the jurisdiction conferred
on the High Court by any ordinary
legislation like the Arbitration Act 1996,
hence existence of a statutory remedy in an
ordinary legislation cannot take away or
limit the right to exercise constitutional
power under Article 227. While it had been
held by the Supreme Court that the High
Court should be extremely circumspect in
exercising its discretion under Article 227,
it has been emphasised repeatedly that if
there is an exceptional circumstance which
would justify the exercise of these powers,
the same ought to be exercised even if there
is an alternate statutory remedy. The High
Court ought to interfere under Article 227
where there is a patent lack of inherent
jurisdiction, or where a party is left
remedyless, or a Tribunal has acted in bad
faith, or the tribunal has not acted within
the limits of its authority resulting in grave
injustice or failure of justice, where the
Tribunal has assumed a jurisdiction it does
not have, failed to exercise a jurisdiction it
does have, or exercised jurisdiction in a
manner which tantamounts to overstepping
the limits of its jurisdiction.

13. The learned counsel for the
petitioner has placed reliance upon Ummaji
Keshao Meshram and others versus
Radhika Bai and another (supra) and
paragraph 85 thereof wherein the Supreme
Court had observed that the insertion of
Article
226,
227
and
228
in
the
Constitution without making them subject
to any law to be made by the appropriate
legislature put these Articles beyond the
legislative reach of Parliament and the
State legislatures with the result that the
jurisdiction conferred by these Articles can
only be curtailed or excluded with respect
to
any
matter
by
a
constitutional
amendment and not by ordinary legislation.
The power of superintendence conferred
upon every High Court by Article 227 is a
supervisory jurisdiction intended to ensure
that subordinate courts and Tribunals act
within the limits of their authority and
according to law. 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.

14. The learned counsel for the
petitioner has also relied upon judgement
rendered by the Supreme Court in the case
of Radheshyam versus Chhabi Nath and
others (supra) to say that proceedings
under Article 226 are in exercise of the
original jurisdiction of the High Court
while proceedings under Article 227 of the
Constitution are not original but only
supervisory. Article 227 is intended to be
used sparingly and the power may be
exercised in cases occasioning grave
injustice or failure of justice such as when
(i) the court or Tribunal has assumed a
jurisdiction which it does not have, (ii) has
failed to exercise a jurisdiction which it
does have, such failure occasioning a
failure of justice, and (iii) The jurisdiction
though available is being exercised in a
manner which tantamount to overstepping
the limits of its jurisdiction. In exercise of
supervisory jurisdiction the High Court
9 All. Trading Engineers International Ltd. Vs. U.P. Power Transmission Corp.
801
may not only quash or set aside the
impugned proceedings, judgement or order
but it may also make such directions as the
facts and circumstances of the case may
warrant, maybe, by way of guiding the
inferior court or Tribunal as to the manner
in which it should now proceed further or
afresh as commended to it or guided by the
High Court. In appropriate cases the High
Court,
while
exercising
supervisory
jurisdiction, may substitute such impugned
decision by a decision of its own, as the
inferior court or Tribunal should have
made. Lastly, the jurisdiction under Article
226 of the Constitution is capable of being
exercised on a prayer made by or on behalf
of the party aggrieved; the supervisory
jurisdiction is capable of being exercised
Suo Moto as well.

15. On the basis of such judgments,
submissions have been made by the Counsel
that the High Court under Article 227 can
exercise jurisdiction over private Tribunals as
well, such as arbitral Tribunals to ensure that
such Tribunals act within the limits of their
authority and according to law. Article 227
being a constitutional provision no fetters can
be placed on the jurisdiction conferred by such
Article by any ordinary legislation like the
Arbitration Act. The High Court should
exercise its jurisdiction under Section 227
where there is a patent lack of inherent
restriction, or a party is left remedyless, or a
party has acted in bad faith, or a Tribunalhas not
acted within the limits of their authority, or
there is a grave injustice or failure of justice
such as when the Tribunal has assumed a
jurisdiction it does not have or failed to exercise
a jurisdiction that it does have or exercised a
jurisdiction in a manner which tantamount to
overstepping the limits of jurisdiction.

16. The learned counsel for the
petitioner has argued that even though in
paragraph 22 of its order, the learned
Tribunal has observed that strictly speaking
a counterclaim is in the nature of a suit
against the corporate debtor under Section
14(1)(a) of the I&B Code 2016 and strictly
speaking is a "proceeding" during the
moratorium period, yet he concludes that
he must still go on with such proceedings
because of Section 23(2) A of Act of 1996.
The
learned
Tribunal
has
failed
to
appreciate that an act done after prohibition
that is statutorily imposed, is non-est in
law. The counterclaim is a proceeding
against the corporate debtor. It is filed after
imposition of moratorium and is thus nonest. Adjudication of such a non-est
counterclaim would be illegal and perverse
and therefore needs to be set aside.

17. It has been argued that the learned
Tribunal has observed in para 23 of the
impugned order that after determination of
the counterclaim when the amount is
determined and the execution proceeding
starts at that stage the provisions of Section
14 of the I&B Code is to be looked into. It
has been argued on the basis of the
language of Section 14 (1) that it not only
prohibits execution but also prohibits the
institution
but
also
continuation
of
proceedings against the corporate debtor. It
has been argued that the learned Tribunal
has proceeded on conjectures and surmises
and observed in paragraph 25 that it may be
possible that by now the proceedings
before the Adjudicating Authority may
have come to an end which shows that the
Tribunal recognised that a moratorium
under Section 14 poses a hurdle in
proceeding with the counterclaim against
the corporate debtor, yet instead of
ascerting
the
current
status
of
the
moratorium, the Tribunal has assumed that
the moratorium must have ended after lapse
of 330 days. It has been argued that the
802 INDIAN LAW REPORTS ALLAHABAD SERIES
learned Tribunal ought to have reckoned
that in the CIRP before the Adjudicating
authority, either the Resolution Plan may
have been allowed or it may have been
rejected, in both these scenarios the alleged
counterclaim of the respondent could not
have been adjudicated and would have
stood extinguished as they were not
submitted
before
the
Resolution
Professional at the relevant time as per the
mandate of the I&B Code. The learned
Tribunal
erroneously
stated
that
the
moratorium under Section 14 would apply
only at the stage of execution and not at the
stage of mere adjudication of claims and
counterclaims. In the present case the
arbitration
clause
was
invoked
on
11.06.2019. The moratorium was declared
by
the
Adjudicating
Authority
on
04.07.2019. The counterclaim was filed on
16.11.2020 at a time when the moratorium
was in force and such counterclaim being
in the nature of a Suit could not have been
instituted much less adjudicated.

18. In Deep Industries Ltd. Versus
Oil and Natural Gas Corporation Ltd. and
Another (supra), a three judges bench of
the Supreme Court was considering the
question as to whether High Court could
have exercised its jurisdiction under Article
227 of the Constitution of India when it
comes to matters that are decided under the
Arbitration and Conciliation Act 1996. The
respondent ONGC had awarded a contract
to the Appellant for a period of five years.
The contract was terminated much earlier.
The Appellant invoked the arbitration
clause contained in the contract on
02.11.2017 and a sole Arbitrator was
appointed on 21.12.2017. On 02.02.2018
claim was filed by the Appellant. On
15.02.2018 Show Cause Notice was issued
to the appellant and it was a blacklisted.
The Appellant had earlier challenged the
termination of its contract and the Show
Cause Notice regarding blacklisting and
had
claimed
damages.
It
filed
an
application for amendment in the pending
petition challenging blacklisting order as
well. Meanwhile a Section 16 application
was filed before the Arbitrator on the
ground that since arbitration notice was
confined only to termination of agreement,
blacklisting
would
be
outside
the
Arbitrators' jurisdiction. This Section 16
application
was
dismissed
by
the
Arbitrator. On the same day a Section 17
application was separately disposed of by
the Arbitrator in which he stayed the
operation of the order of blacklisting/two
year ban which it said would operate only
if the Appellant ultimately loses the final
arbitration proceedings. The First Appeal
was filed against this order passed under
Section 17 which was dismissed. The
ONGC then filed a petition under Article
227 of the Constitution before the High
Court
of
Gujarat.
The
High
Court
entertained
the
petition
ignoring
the
preliminary objection that such petition was
not maintainable. It passed an order in
favour of ONGC not only setting aside the
Civil Court's order but also the order passed
by the Arbitrator under Section 17 of the
Act.

19. It was argued before the Supreme
Court that once a preliminary objection had
been raised before the High Court it should
have dealt with it first. The language of
Section 5 and Section 37 of the Act were
also pointed out and it was argued that
although a constitutional provision such as
Article 227 cannot be fettered, yet the
statutory scheme ought to be taken into
account in order to deny relief in almost
every case. The appellant placed reliance
upon
SBP
and
Co
versus
Patel
Engineering Ltd. and Another reported in
9 All. Trading Engineers International Ltd. Vs. U.P. Power Transmission Corp.
803
(2005) 8 SCC 618, and Fuerst Day
Lawson Ltd. Versus Jindal Exports
Limited reported in (2011) 8 SCC 333, to
say that the Act is a self contained Code
and since Second Appeals have been
interdicted expressly under Section 37 (2)
of the Act an Article 227 petition should
also not be entertained. It was argued that
even under Section 115 of the CPC as
amended, Revision would lie only in cases
where no Appeal lies but such orders
should not be interlocutory orders which do
not decide the matter in issue finally. It was
held that the High Court should not have
entertained the petition under Article 227
as any observations made by the Arbitrator
while entertaining a Stay Application and
granting interim relief would amount to a
mere error of law and not amount to lack of
jurisdiction.

20. On the other hand the counsel for
the respondent had argued that SBP and Co
(Supra) applied only at a stage where an
order of Arbitral Tribunal was sought to be
interfered with directly under Article
226/227. In the present case the Tribunal's
orders was challenged in a First Appeal
which was dismissed. Such order came to
be challenged in a petition under Article
227 praying for exercise of supervisory
jurisdiction which vested in the High Court.
The
Supreme
Court
considered
the
language of Section 5 of the Act of 1966 as
also Section 37 and held that it was
important to note that under Section 29A of
the Act inserted by Amendment in 2016, a
time limit was given within which Arbitral
Awards must be made. Even in so far as
Section 34 applications are concerned,
Subsection
(6)
added
by
the
same
Amendment stated that these applications
are to be disposed of expeditiously. The
Supreme Court observed in paragraph 11
thus:-

"given the aforesaid statutory
provision and given the fact that the 1996
Act repealed the 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 a
time limit is set down for disposal of
Arbitral proceedings themselves, but time
limits have also been set down for Section
34 references to be decided. Equally in
Union of India Versus Messers Varindera
Construction Ltd. Reported in (2020) 2
SCC 111, this Court had imposed self same
limitation on First Appeals under Section
37 so that there be timely resolution of all
matters
which
are
covered
by
the
arbitration Award.."

21. The Supreme Court further
observed in paragraph 12-

"most significant of all is a nonobstante clause contained in Section 5
which is 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 judgements 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).

22. It observed in paragraph 13 thus:-

"this being the case, there is no
doubt whatsoever that if petitions were to
be filed under Article 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
804 INDIAN LAW REPORTS ALLAHABAD SERIES
Article 227 is a constitutional provision
which remains untouched by the nonobstante clause of Section 5 of the Act. In
these circumstances what is important to
note is that petitions can be filed under
Article 227 against judgements 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 hereinabove so
that interference is restricted to orders that
are passed which are patently lacking in
inherent jurisdiction."

23. The Supreme Court in Paragraph14 onwards referred to its judgement in
Nivedita
Sharma
Versus
Cellular
Operators Association of India and Others
reported in (2011) 14 SCC 337; wherein
several judgements including L. Chandra
Kumar Versus Union of India reported in
1997 (3) SCC 261, Thansingh Nath Mal
Versus Superintendent of Taxes reported
in AIR 1964 Supreme Court 1419,
Titaghur Paper Mills Co. Ltd. Versus
State of Orissa reported in (1983) 2 SCC
433; Mafatlal Industries Ltd. Versus
Union of India reported (1997) 5 SCC
536, were cited and observed that "the High
Court will not entertain a petition under
Article 226 of the Constitution if an
effective alternative remedy is available to
the aggrieved person or the statute under
which the action complained of has been
taken, itself contains a mechanism for
redressal of grievance still hold the field".

24. The Supreme Court referred to
the judgement rendered by the larger
bench of seven judges in SBP and
Company (Supra), where the Court was
considering interference with an order
passed by an Arbitral Tribunal by the
High Court under Article 226/227 and
had observed in paragraph 45 and 46 as
follows:"

"It is seen that some High
Courts have proceeded on the basis that
any order passed by an Arbitral Tribunal
during arbitration, would be capable of
being challenged under Article 226 or
227 of the Constitution. We see no
warrant for such an approach. Section 37
makes certain orders of the Arbitrator
appealable
under
Section
34,
the
aggrieved party has an avenue for
ventilating his grievances against the
Award including any in between orders
that might have been passed by the
Arbitral Tribunal acting under Section 16
of the Act. The party aggrieved by any
order of the Arbitral Tribunal has a right
of Appeal under Section 37 of the Act,
has to wait until the Award is passed by
the Tribunal. This appears to be the
scheme of the Act. The Arbitral Tribunal
is, after all, a creature of contract
between the parties, the arbitration
agreement, even though, if the occasion
arises, the Chief Justice may constitute it
based on the contract between the
parties. But that would not alter the
status of the Arbitral Tribunal. It will still
be a forum chosen by the parties by
agreement. We, therefore, disapprove of
the stand adopted by some of the High
Courts that any order passed by the
Arbitral Tribunal is capable of being
corrected by the High Court under
Article 226 or 227 of the Constitution.
Such an intervention by the High Court is
not permissible.

"46. The object of minimising
judicial intervention while the matter is in
the process of being arbitrated upon, will
certainly be defeated if the High Court
could be approached under Article 227 or
under Article 226 of the Constitution
9 All. Trading Engineers International Ltd. Vs. U.P. Power Transmission Corp.
805
against every order made by the Arbitral
Tribunal. Therefore, it is necessary to
indicate that once the arbitration has
commenced in the Arbitral Tribunal,
parties have to wait until the Award is
pronounced unless, of course, right of
Appeal is available to them under Section
37 of the Act even at an earlier stage."

25. The Supreme Court in Deep
Industries (Supra) further referred to the
attempt made by the Learned Additional
Solicitor
General
to
distinguish
the
judgement in SBP and Co. to say that the
same did not apply to the facts of the case,
and the Supreme Court observed - "- - - yet,
it is important to notice that the seven
judge bench has referred to the object of
the Act being that of minimising judicial
intervention and that this important object
should always be kept in the forefront when
a 227 petition is being disposed of against
proceedings that are decided under the
Act."

26. The three judges bench in Deep
Industries (Supra) also noticed that in
Punjab
Agro
Industries
Corporation
Limited Versus Kewal Singh Dhillon
reported in 2008 (10) SCC 128, the
Supreme Court had distinguished SBP and
Co (supra) but it held that the same was an
exceptional case where the statutory
provisions did not conceive of any appeal
against an order passed under Section 11
refusing to appoint an Arbitrator. In the
case of Deep Industries (supra) however,
the Supreme Court observed that the High
Court has entertained a 227 petition after
the First Appeal was dismissed by the Civil
Court whereas Section 37 of the Act did
not permit any Second Appeal and only one
bite at the cherry. It observed further-
"...,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 dismissed must await the passing of a
final Award at which stage it may be raised
under Section 34... Further to state that
serious disputes as to jurisdiction seem to
have cropped up is not the same thing as
saying that the Arbitral Tribunal lacked
inherent jurisdiction in going into and
deciding the Section 17 application. In
point of fact, the Arbitral tribunal was well
within its jurisdiction in referring to the
contract - - - - - even if it be accepted that
the principle laid down in Section 41 (e) of
the Specific Relief Act was infracted... is a
mere error of law and not an error of
jurisdiction, much less an error of inherent
jurisdiction going to the root of the matter.
Therefore, even otherwise, the High Court
judgement cannot be sustained and is set
aside."

27. In paragraph 17 the Supreme
Court further observed:-

"17. We reiterate that the policy
of the Act is speedy disposal of arbitration
Cases. The Arbitration Act is a Special Act
and a self contained Code dealing with
arbitration. This court in Fuerst Day
Lawson Ltd. (supra) has specifically held
as follows:

"89. It is thus to be seen that the
Arbitration Act 1940 from its inception and
right through to 2004 was held to be a self
contained Code - - - - - - once it is held that
Arbitration Act is a self contained Code
and exhaustive, then it must also be held,
using the lucid expression of Justice
Tulzapurkar, that if carries with it a
negative import that only "Such acts as are
mentioned in the Act are permissible to be
done and acts or things not mentioned
therein are not permissible to be done". In
other words- - - Where the special Act sets
806 INDIAN LAW REPORTS ALLAHABAD SERIES
out a self contained code the applicability
of the general law procedure would be
impliedly excluded."

What becomes clear is that the - -
- Merely because - - First Appeal was
disposed of by a Court subordinate to the
High Court, an Article 227 petition ought
not to have been entertained."

28. Another Three-judge bench of the
Supreme Court in Bhaven Construction
versus
Executive
Engineer
Sardar
Sarovar Narmada Nigam Limited, 2022
(1) SCC 75; was looking into the question -
"whether the arbitral process could be
interfered under Article 226/227 of the
Constitution,
and
under
what
circumstances?" The facts before the court
were that the respondent no.1 had entered
into a contract with the appellant. Dispute
arose regarding payment. The Appellant
issued a notice seeking appointment of
Arbitrator in terms of the agreement. The
respondent
refused
to
appoint
such
Arbitrator. The appellant instead appointed
respondent no. 2 to act as sole Arbitrator
for adjudication of the disputes. The
respondent no.1 preferred an application
under Section 16 of the Act disputing the
jurisdiction of the sole Arbitrator. The
Arbitrator rejected the application of the
respondent no.1 and held that it had
jurisdiction to adjudicate the dispute.
Aggrieved by such orders of the Arbitrator
the respondent no.1 preferred a petition
under Article 226/227 of the Constitution.
It was rejected by the Single Judge as not
maintainable by holding that remedy under
Section 34 of the Act was available and the
respondent no.1 should wait till the Award
is passed by the Learned Arbitrator. The
respondent no.1 further challenged such
order before the Division Bench in the
Letters Patent Appeal. Such appeal was
entertained and allowed. Aggrieved, the
appellant filed the Civil Appeal before the
Supreme Court saying that Section 16(2) of
the Act mandates that the sole Arbitrator
had the jurisdiction to adjudicate the
preliminary issue of jurisdiction, which can
only be challenged under Section 34 of the
Act.