M/S Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd.

Civil Appeal · 2019 INSC 1299Decided 28 Nov 2019
Civil Appeal No. 9106 of 2019
Justice Rohinton Fali Nariman · Justice Aniruddha Bose · Justice V. Ramasubramanian

Background

ONGC terminated a supply contract with Deep Industries, blocked the company from bidding on future contracts, and later blacklisted it for two years. Deep Industries challenged this before an arbitrator, who ruled he had jurisdiction to examine the blacklisting as well (rejecting ONGC's objection under Section 16 of the Arbitration Act) and separately granted interim relief under Section 17 suspending the blacklisting pending arbitration. ONGC's appeal against the Section 17 relief was rejected by the City Civil Court, so ONGC then went to the Gujarat High Court under Article 227 of the Constitution (its general supervisory power over subordinate courts and tribunals) and succeeded in getting the arbitrator's orders overturned, prompting Deep Industries to appeal to the Supreme Court.

Decision Breakdown

The Supreme Court held that the Arbitration Act, 1996 is a self-contained code that deliberately limits court interference with ongoing arbitration to specific, narrow situations, and allowing a High Court to freely use its general Article 227 supervisory power to second-guess interlocutory arbitral orders (like Section 16 or Section 17 orders) would defeat this scheme and cause exactly the kind of delay the Act is meant to avoid. Article 227 jurisdiction over such orders should be exercised only in truly exceptional cases of patent lack of jurisdiction or similar extreme illegality, not as a routine substitute for the limited appeal and revision remedies the Act itself provides, and ordinary revision petitions under the Code of Civil Procedure also cannot be used against merely interlocutory orders. Finding no such exceptional circumstance here, the Court set aside the Gujarat High Court's interference and allowed the appeal, directing the arbitration to proceed to its conclusion as expeditiously as possible.

Lesson Learnt

Courts should be very reluctant to interrupt an ongoing arbitration by reviewing the arbitrator's interim or procedural rulings under their general supervisory powers; parties engaged in arbitration should generally let the arbitration run its course and raise their objections through the specific remedies the Arbitration Act itself provides, rather than detouring through separate High Court litigation.

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