Bhaven Construction v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. & Anr.
Background
A 1991 contract to manufacture and supply bricks for a government project contained an arbitration clause. When a payment dispute arose, Bhaven Construction appointed a sole arbitrator, but the respondent (a state public-sector nigam) objected, arguing the dispute instead fell under a special Gujarat statute governing works-contract disputes. The arbitrator rejected this objection, and instead of waiting for the final arbitral award and challenging it through the normal statutory route, the respondent went directly to the Gujarat High Court under Articles 226/227 of the Constitution, which ultimately ruled in the respondent's favour and halted the arbitration mid-stream.
Decision Breakdown
The Supreme Court held that the Arbitration and Conciliation Act, 1996 is a self-contained code, and Section 5 bars judicial intervention except where the Act itself permits it, including a built-in mechanism (Section 16) for the arbitrator to first rule on their own jurisdiction, challengeable only later under Section 34 after the final award. While a High Court's constitutional writ power under Articles 226/227 cannot be completely ousted by ordinary legislation, it held that courts should exercise this power only in "exceptional rarity," such as a complete remedilessness or bad faith: neither of which was shown here, especially since the respondent had already submitted to the arbitrator's jurisdiction and a final award had since been passed. The High Court's interference was set aside, and the respondent was left free to raise its jurisdictional objections in the pending Section 34 challenge to the final award.
Lesson Learnt
Parties to an arbitration agreement generally cannot bypass the arbitration statute's own built-in checks by rushing to a High Court's writ jurisdiction mid-arbitration: such extraordinary interference is reserved for rare cases of bad faith or a party being left with absolutely no other remedy.