BHAVEN CONSTRUCTION THROUGH AUTHORISED SIGNATORY PREMJIBHAI K. SHAH versus EXECUTIVE ENGINEER SARDAR SAROVAR NARMADA NIGAM LTD.& ANR.

BHAVEN CONSTRUCTION THROUGH AUTHORISEDSIGNATORY PREMJIBHAI K. SHAH

EXECUTIVE ENGINEER SARDAR SAROVAR NARMADANIGAM LTD.& ANR.

(Civil Appeal No. 14665 of 2015)

JANUARY 06, 2021

[N.V. RAMANA, SURYA KANT AND HRISHIKESH ROY, JJ.]

Constitution of India, 1950 – Arts.226 and 227 – Interferencewith arbitral process – Scope – Dispute arising out of contractbetween appellant and respondent no.1 – Contract had anarbitration clause – Appellant appointed respondent no.2 as thesole arbitrator – Application of respondent no.1 u/s.16 of theArbitration Act disputing jurisdiction of the sole arbitrator, rejected– Writ petition filed by respondent no.1 – Allowed by High Court –Whether arbitral process could be interfered u/Art.226/227, andunder what circumstance – Held: Respondent No.1 chose to impugnthe order passed by arbitrator through petition u/Art.226/227 whenin the usual course, the Arbitration Act provided for mechanismof challenge u/s.34 – When statutory forum is created by law forredressal of grievances, writ petition should not be entertainedignoring the statutory dispensation – It is prudent for Judge tonot exercise discretion to allow judicial interference beyond theprocedure established under the enactment – This power needs tobe exercised in exceptional rarity, wherein one party is left remedilessunder the statute or clear ‘bad faith’ shown by one of the parties– On facts, no exceptional circumstance mandating interference byHigh Court u/Arts. 226 and 227 – High Court should not have usedits inherent power to interject the arbitral process at stage whensubsequent to the impugned order of sole arbitrator, final awardwas rendered by him on merits, which is already challenged byRespondent No. 1 in separate s.34 application, and which ispending – If Courts are allowed to interfere beyond ambit of theenactment, then efficiency of the process will be diminished –Impugned order of High Court set aside – Arbitration andConciliation Act, 1996.

AArbitration and Conciliation Act, 1996 – Framework of theAct – Non-obstante clause in s.5 of the Act – Interpretation andeffect – Held: The Act is code in itself – The non-obstante clausein s.5 of the Act is provided to uphold the intention of the legislatureas provided in the Preamble to adopt UNCITRAL Model Law andRules, to reduce excessive judicial interference which is notBcontemplated under the Act – The framework clearly portrays anintention to address most of the issues within the ambit of the Actitself, without there being scope for any extra statutory mechanismto provide just and fair solutions.

Allowing the appeal, the CourtC

HELD : 1.1. The Arbitration and Conciliation Act, 1996 isa code in itself. The non-obstante clause in Section 5 of theArbitration Act is provided to uphold the intention of thelegislature as provided in the Preamble to adopt UNCITRALModel Law and Rules, to reduce excessive judicial interferenceDwhich is not contemplated under the Arbitration Act. TheArbitration Act itself gives various procedures and forums tochallenge the appointment of an arbitrator. The framework clearlyportrays an intention to address most of the issues within theambit of the Act itself, without there being scope for any extraEstatutory mechanism to provide just and fair solutions. Any partycan enter into an arbitration agreement for resolving any disputescapable of being arbitrable. Parties, while entering into suchagreements, need to fulfill the basic ingredients provided underSection 7 of the Arbitration Act. Arbitration being creature ofcontract, gives flexible framework for the parties to agree forFtheir own procedure with minimalistic stipulations under theArbitration Act. If parties fail to refer matter to arbitration or toappoint an arbitrator in accordance with the procedure agreed bythem, then party can take recourse for court assistance underSection 8 or 11 of the Arbitration Act. [Paras 11, 12, 13 and 14]G[10-D-H; 11-A-B]2.1. The Appellant acted in accordance with the procedurelaid down under the agreement to unilaterally appoint solearbitrator, without Respondent No.1 mounting judicial challengeat that stage. Respondent No. 1 then appeared before the sole

arbitrator and challenged the jurisdiction of the sole arbitrator,in terms of Section 16(2) of the Arbitration Act. Thereafter,Respondent No.1 chose to impugn the order passed by thearbitrator under Section 16(2) of the Arbitration Act through apetition under Article 226/227 of the Indian Constitution. In theusual course, the Arbitration Act provides for mechanism ofchallenge under Section 34. The opening phase of Section 34reads as ‘Recourse to Court against an arbitral award may bemade only by an application for setting aside such award inaccordance with sub-section (2) and sub-section (3)’. The use ofterm ‘only’ as occurring under the provision serves two purposesof making the enactment complete code and lay down theprocedure. [Paras 15, 16][11-B-E]

2.2. Though the hierarchy in our legal framework, mandatesthat legislative enactment cannot curtail Constitutional right,however, it is one thing to say that in exercise of the power vestedin it under Article 226 of the Constitution, the High Court canentertain writ petition against any order passed by or actiontaken by the State and/or its agency/ instrumentality or any publicauthority or order passed by quasi-judicial body/authority, andit is an altogether different thing to say that each and everypetition filed under Article 226 of the Constitution must beentertained by the High Court as matter of course ignoring thefact that the aggrieved person has an effective alternative remedy.Rather, it is settled law that when statutory forum is created bylaw for redressal of grievances, writ petition should not beentertained ignoring the statutory dispensation. It is therefore,prudent for Judge to not exercise discretion to allow judicialinterference beyond the procedure established under theenactment. This power needs to be exercised in exceptional rarity,wherein one party is left remediless under the statute or clear‘bad faith’ shown by one of the parties. This high standard set bythis Court is in terms of the legislative intention to make thearbitration fair and efficient. [Para 17][11-E-H; 12-A-D]

2.3. In the instant case, Respondent No.1 has not been ableto show exceptional circumstance or ‘bad faith’ on the part of theAppellant, to invoke the remedy under Article 227 of the

AConstitution. No doubt the ambit of Article 227 is broad andpervasive, however, the High Court should not have used itsinherent power to interject the arbitral process at stage whensubsequent to the impugned order of the sole arbitrator, finalaward was rendered by him on merits, which is challenged byRespondent No. 1 in separate Section 34 application, which isBpending. [Para 19][13-B-D]

3.1. Viewed from different perspective, the arbitral processis strictly conditioned upon time limitation and modeled on the‘principle of unbreakability.’ According to this “unbreakability”of time-limit and true to the “certainty and expediency” of theCarbitral awards, any grounds for setting aside the award thatemerge after the three month time-limit has expired cannot beraised. If the Courts are allowed to interfere with the arbitralprocess beyond the ambit of the enactment, then the efficiencyof the process will be diminished. The High Court did notDappreciate the limitations under Articles 226 and 227 of theConstitution and reasoned that the Appellant had undertaken toappoint an arbitrator unilaterally, thereby rendering RespondentNo. 1 remediless. However, plain reading of the arbitrationagreement points to the fact that the Appellant had actually actedin accordance with the procedure laid down without any mala fides.E[Paras 20, 21][13-D-H; 14-A-E]3.2. Respondent No.1 did not take legal recourse againstthe appointment of the sole arbitrator, and rather submittedthemselves before the tribunal to adjudicate on the jurisdictionissue as well as on the merits. In this situation, Respondent No.F1 has to endure the natural consequences of submittingthemselves to the jurisdiction of the sole arbitrator, which can bechallenged, through an application under Section 34. In thepresent case, the award has already been passed during thependency of this appeal, and Respondent No. 1 has alreadyGpreferred challenge under Section 34 to the same. RespondentNo. 1 has not been able to show any exceptional circumstance,which mandates the exercise of jurisdiction under Articles 226and 227 of the Constitution. [Para 22][14-E-G]

4.1. The Division Bench of the High Court further opinedthat the contract between the parties was in the nature of workscontract as it held that the manufacturing of bricks, as requiredunder the contract, was only an ancillary obligation while theprimary obligation on the Appellant was to supply the bricks. TheDivision Bench therefore held that the Gujarat Public WorksContracts Disputes Arbitration Tribunal Act, 1992 holds the field,and not the Arbitration Act. [Para 23][14-G-H; 15-A-B]

4.2. The Gujarat Act was enacted in 1992 with the object toprovide for the constitution of tribunal to arbitrate disputesparticularly arising from works contract to which the StateGovernment or public undertaking is party. works contractis defined under Section 2(k) of the Gujarat Act. The definitionincludes within itself contract for supply of goods relating tothe execution of any of the works specified under the section.However, plain reading of the contract between the partiesindicates that it was for both manufacturing as well as supply ofbricks. Importantly, contract for manufacture simpliciter is nota works contract under the definition provided under Section2(k). The pertinent question therefore is whether the presentcontract, which is composite in nature, falls within the ambit of aworks contract under Section 2(k) of the Gujarat Act. This is aquestion that requires contractual interpretation, and is matterof evidence, especially when both parties have taken contradictorystands regarding this issue. It is settled law that theinterpretation of contracts in such cases shall generally not bedone in the writ jurisdiction. Further, the mere fact that the GujaratAct might apply may not be sufficient for the writ courts toentertain the plea of Respondent No. 1 to challenge the ruling ofthe arbitrator under Section 16 of the Arbitration Act. [Para 24][15-A-E]

5. Section 16 of the Arbitration Act, necessarily mandatesthat the issue of jurisdiction must be dealt first by the tribunal,before the Court examines the same under Section 34.Respondent No. 1 is therefore not left remediless, and hasstatutorily been provided chance of appeal. The drill of Section16 of the Act is that where Section 16 application is dismissed,

Ano appeal is provided and the challenge to the Section 16application being dismissed must await the passing of final awardat which stage it may be raised under Section 34. The High Courttherefore erred in utilizing its discretionary power available underArticles 226 and 227 of the Constitution. The impugned Orderof the High Court is set aside. However, Respondent No. 1 is atBliberty to raise any legally permissible objections regarding thejurisdictional question in the pending Section 34 proceedings.[Paras 25, 26][15-E-H; 16-A-C]

Nivedita Sharma v. Cellular Operators Association ofIndia (2011) 14 SCC 337 ; M/s.Deep Industries LimitedCv. Oil and Natural Gas Corporation Limited (2019) SCCOnline SC 1602 ; P. Radha Bai v. P. Ashok Kumar(2019) 13 SCC 445 : [2018] 12 SCR 143 – relied on.

From the Judgment and Order dated 17.09.2012 OF the HighECourt of Gujarat at Ahmedabad in Letters Patent Appeal No. 182 of2006 in Special Civil Application No. 400 of 2002.

Purvish Jitendra Malkan, Ms. Dharita Purvish Malkan, Ms. DeepaGorasia, Jitendra Manilal Malkan, Ms. Jesal Wahi, Ms. Hemantika Wahifor the appearing parties.

FThe Judgment of the Court was delivered by

N. V. RAMANA, J.

1. This Civil Appeal raises an important question of law concerningarbitration law in India and special enactments enacted by Statesconcerning public works contract.G

2. brief reference to facts in this case is necessary for thedisposal of the case. On 13.02.1991, Respondent No. 1 entered into acontract with the Appellant to manufacture and supply bricks. Theaforesaid contract had an arbitration clause. As some dispute arose

regarding payment in furtherance of manufacturing and supplying ofbricks, the Appellant issued notice dated 13.11.1998, seekingappointment of sole arbitrator in terms of the agreement. Clause 38 ofthe agreement provide for arbitration as under:

Clause 38 – Arbitration

All disputes or differences in respect of which the decisionhas not been settled, shall be referred for arbitration to solearbitrator appointed as follows:

Within thirty days of receipt of notice from the Contractorof his intention to refer the dispute to arbitration the Chief Engineershall send to the Contractor list of three officers from the list ofarbitrator appointment by the Government. The Contractor shallwithin fifteen days of receipt of this list select and communicateto the Chief Engineer the name of the person from the list whoshall then be appointed as the sole arbitrator. If Contractor fails tocommunicate his selection of name, within the stipulated period,the Chief Engineer, shall without delay select one officer from thelist and appoint him as the sole arbitrator. If the Chief Engineerfails to send such list within thirty days, as stipulated, the contractorshall send similar list to the Chief Engineer within fifteen days.The Chief Engineer shall then select one officer form the list andappoint him as the sole arbitrator within fifteen days.If the ChiefEngineer fails to do so the contractor shall communicate tothe Chief Engineer the name of one Officer from the list,who shall then be the sole arbitrator.

The arbitration shall be conducted in accordance with theprovision of the Indian Arbitration Act, 1940 or any statutorymodification thereof. The decision of the sole arbitrator shall befinal and binding on the parties thereto. The Arbitrator shalldetermine the amount of costs of arbitration to be awarded toeither parties.

Performance under the contract shall continue during thearbitration proceedings and payments due to the contractor bythe owner shall not be withheld, unless they are the subject matterof the arbitration proceedings.

All awards shall be in writing and in case of awardsamounting to Rs. 1.00 lakh and above, such awards, shall statereasons for the amounts awards.

Neither party is entitled to bring claim to arbitration if theArbitrator has not been appointed before the expiration of thirtyBdays after defect liability period.

(emphasis supplied)

3. Respondent No. 1, by replies dated 23.11.1998 and 04.01.1999,did not agree to the Appellant’s request on two main grounds:

a.That the arbitration was agreed to be conducted inaccordance with the provision of the Indian ArbitrationAct and any statutory modification thereof. Accordingly,the State of Gujarat had passed the Gujarat Public WorksContracts Disputes Arbitration Tribunal Act, 1992(hereinafter referred to as “theGujarat Act”).Therefore, the disputes between the parties were to beadjudicated in accordance with the aforesaid statute.

b.That the arbitration was time barred, as Clause 38mandated that neither party was entitled to claim if thearbitrator has not been appointed before the expirationEof thirty days after the defect liability period.

4. In any case, the Appellant appointed Respondent No. 2 to actas sole arbitrator for adjudication of the disputes. Respondent No. 1preferred an application under Section 16 of the Arbitration andConciliation Act of 1996 (hereinafter referred to as “the ArbitrationFAct”) disputing the jurisdiction of the sole arbitrator. On 20.10.2001, thesole arbitrator rejected the application of the Respondent No. 1 and heldthat the sole arbitrator had jurisdiction to adjudicate the dispute.

5. Aggrieved by the order of the sole arbitrator, Respondent No. 1preferred Special Civil Application No. 400 of 2002, under Articles 226Gand 227 of the Constitution of India before the High Court of Gujarat.The Single Judge, while dismissing the Special Civil Application, held asunder:

“……At this stage, the judgment of the Hon’ble Supreme Courtin the case of Konkan Railway Corporation Limited v. Mehul

Construction Company, (2000) 7 SCC 201 is also required tobe considered along with the judgment of the Hon’ble SupremeCourt in the case of SBP & Co. v. Patel Engineering Ltd., (2005)8 SCC 618. Considering the aforesaid two judgments of theHon’ble Supreme Court and the order passed by the learned solearbitrator passed under Section 16(4) of the Act dismissing theapplication submitted by the petitioner challenging the jurisdictionof respondent no. 2 as sole arbitrator and challenging hisappointment as sole arbitrator, it is to be held that the petitionunder Articles 226 and 227 of the Constitution of India against thesaid order is not maintainable and/or the same is not required toentertained and the only remedy available to the petitioner is towait till the award is passed by the learned Sole Arbitrator and tochallenge the same under Section 34 of the Act…”

6. Aggrieved by the order of the Single Judge, Respondent No. 1preferred Letters Patent Appeal No. 182 of 2006 in Special CivilApplication No. 400 of 2002. The High Court of Gujarat, by the impugnedorder dated 17.09.2012, allowed the appeal and observed the following:

“11. As discussed hereinabove, ‘the contract’ is “worksContract” and dispute is raised by the petitioner at the earliestavailable opportunity about the ‘forum’ in which the dispute beadjudicated. It was as early as on 23.11.1998, the appellant deniedthat in view of Clause-38, wherein it is provided that, ‘provision ofIndian Arbitration Act, 1940 and any statutory modification thereofwill be applicable’, the respondent cannot appoint sole arbitratorand thereafter cannot contend that now that the Arbitrator is alreadyappointed and he (the arbitrator) has already exercised powerunder the provisions of the Arbitration and Conciliation Act, 1996,the petitioner has to wait till the arbitration award is passed, tochallenge the same under Section 34 and Section 37 of the 1996Act.”7. Aggrieved, the Appellant filed this appeal by way of specialleave petition.

8. Counsel for the Appellant argued that the Division Bench ofthe High Court erred in interfering with the order of the Single Judgeunder Articles 226 and 227 of the Constitution. The fact that the final

Aaward has been passed by the sole Arbitrator and is now challengedunder Section 34 of the Arbitration Act clearly shows the attempt ofRespondent No. 1 to bypass the framework laid down under theArbitration Act. He points out that Section 16(2) of the Arbitration Actmandates that the sole arbitrator had the jurisdiction to adjudicate thepreliminary issue of jurisdiction, which can only be challenged underBSection 34 of the Arbitration Act.

9. On the other hand, learned counsel for Respondent No. 1contended that since the enactment of the Gujarat Act, the ArbitrationAct was substituted with respect to the disputes arising out of the workscontract. It was contended that under Articles 226 and 227 of theCConstitution, it was always open for Respondent No. 1 to invoke thewrit jurisdiction of the High Court to set aside an arbitration which wasa nullity as it was in conflict with the State enactment.

10. Having heard both parties and perusing the material availableon record, the question which needs to be answered is whether theDarbitral process could be interfered under Article 226/227 of theConstitution, and under what circumstance?

11. We need to note that the Arbitration Act is code in itself.This phrase is not merely perfunctory, but has definite legal consequences.One such consequence is spelled out under Section 5 of the ArbitrationEAct, which reads as under “Notwithstanding anything contained inany other law for the time being in force, in matters governed bythis Part, no judicial authority shall intervene except where soprovided in this Part.” The non-obstante clause is provided to upholdthe intention of the legislature as provided in the Preamble to adoptFUNCITRAL Model Law and Rules, to reduce excessive judicialinterference which is not contemplated under the Arbitration Act.

12. The Arbitration Act itself gives various procedures and forumsto challenge the appointment of an arbitrator. The framework clearlyportrays an intention to address most of the issues within the ambit ofGthe Act itself, without there being scope for any extra statutory mechanismto provide just and fair solutions.

13. Any party can enter into an arbitration agreement for resolvingany disputes capable of being arbitrable. Parties, while entering into suchagreements, need to fulfill the basic ingredients provided under Section

7 of the Arbitration Act. Arbitration being creature of contract, gives aflexible framework for the parties to agree for their own procedure withminimalistic stipulations under the Arbitration Act.

14. If parties fail to refer matter to arbitration or to appoint anarbitrator in accordance with the procedure agreed by them, then partycan take recourse for court assistance under Section 8 or 11 of theArbitration Act.

15. In this context, we may state that the Appellant acted inaccordance with the procedure laid down under the agreement tounilaterally appoint sole arbitrator, without Respondent No. 1 mountinga judicial challenge at that stage. Respondent No. 1 then appeared beforethe sole arbitrator and challenged the jurisdiction of the sole arbitrator, interms of Section 16(2) of the Arbitration Act.

16. Thereafter, Respondent No. 1 chose to impugn the order passedby the arbitrator under Section 16(2) of the Arbitration Act through apetition under Article 226/227 of the Indian Constitution. In the usualcourse, the Arbitration Act provides for mechanism of challenge underSection 34. The opening phase of Section 34 reads as ‘Recourse to aCourt against an arbitral award may be made only by an applicationfor setting aside such award in accordance with sub-section (2)and sub-section (3)’. The use of term ‘only’ as occurring under theprovision serves two purposes of making the enactment complete codeand lay down the procedure.

17. In any case, the hierarchy in our legal framework, mandatesthat legislative enactment cannot curtail Constitutional right. InNiveditaSharma v. Cellular Operators Association of India, (2011) 14 SCC337, this Court referred to several judgments and held:

“11. We have considered the respective arguments/submissions.There cannot be any dispute that the power of the High Courts toissue directions, orders or writs including writs in the nature ofhabeas corpus, certiorari, mandamus, quo warranto and prohibitionunder Article 226 of the Constitution is basic feature of theConstitution and cannot be curtailed by parliamentary legislation -L. Chandra Kumar v. Union of India, (1997) 3 SCC 261.However, it is one thing to say that in exercise of the powervested in it under Article 226 of the Constitution, the High

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[2021] 1 S.C.R.

ACourt can entertain writ petition against any order passedby or action taken by the State and/or its agency/instrumentality or any public authority or order passed bya quasi-judicial body/authority, and it is an altogetherdifferent thing to say that each and every petition filed underArticle 226 of the Constitution must be entertained by theBHigh Court as matter of course ignoring the fact that theaggrieved person has an effective alternative remedy. Rather,it is settled law that when statutory forum is created by law forredressal of grievances, writ petition should not be entertainedignoring the statutory dispensation.

(emphasis supplied)

It is therefore, prudent for Judge to not exercise discretion toallow judicial interference beyond the procedure established under theenactment. This power needs to be exercised in exceptional rarity, whereinone party is left remediless under the statute or clear ‘bad faith’ shownDby one of the parties. This high standard set by this Court is in terms ofthe legislative intention to make the arbitration fair and efficient.

18. In this context we may observe M/s. Deep Industries Limitedv. Oil and Natural Gas Corporation Limited, (2019) SCC Online SC1602, wherein interplay of Section 5 of the Arbitration Act and ArticleE227 of the Constitution was analyzed as under:

“15. Most significant of all is the non-obstante clause containedin Section 5 which states that notwithstanding anything containedin any other law, in matters that arise under Part I of the ArbitrationAct, no judicial authority shall intervene except where so providedFin this Part. Section 37 grants constricted right of first appealagainst certain judgments and orders and no others. Further, thestatutory mandate also provides for one bite at the cherry, andinterdicts second appeal being filed (See Section 37(2) of theAct)

16. This being the case, there is no doubt whatsoever that if petitionswere to be filed under Articles 226/227 of the Constitution againstorders passed in appeals under Section 37, the entire arbitralprocess would be derailed and would not come to fruition formany years. At the same time, we cannot forget that Article 227

is constitutional provision which remains untouched by the non-obstante clause of Section 5 of the Act. In these circumstances,what is important to note is that though petitions can be filed underArticle 227 against judgments allowing or dismissing first appealsunder Section 37 of the Act, yet the High Court would beextremely circumspect in interfering with the same, takinginto account the statutory policy as adumbrated by us hereinabove so that interference is restricted to orders that arepassed which are patently lacking in inherent jurisdiction.”

19. In the instant case, Respondent No. 1 has not been able toshow exceptional circumstance or ‘bad faith’ on the part of the Appellant,to invoke the remedy under Article 227 of the Constitution. No doubt theambit of Article 227 is broad and pervasive, however, the High Courtshould not have used its inherent power to interject the arbitral processat this stage. It is brought to our notice that subsequent to the impugnedorder of the sole arbitrator, final award was rendered by him on merits,which is challenged by the Respondent No. 1 in separate Section 34application, which is pending.

20. Viewed from different perspective, the arbitral process isstrictly conditioned upon time limitation and modeled on the ‘principle ofunbreakability’. This Court in P. Radha Bai v. P. Ashok Kumar, (2019)13 SCC 445, observed:

36.3. Third, Section 34(3) reflects the principle of unbreakability.Dr Peter Binder in International Commercial Arbitration andConciliation in UNCITRAL Model Law Jurisdictions, 2nd Edn.,observed:

“An application for setting aside an award can only be made duringthe three months following the date on which the party makingthe application has received the award. Only if party has madea request for correction or interpretation of the award under Article33 does the time-limit of three months begin after the tribunal hasdisposed of the request. This exception from the three-month time-limit was subject to criticism in the working group due to fearsthat it could be used as delaying tactics. However, although “anunbreakable time-limit for applications for setting aside” was soughtas being desirable for the sake of “certainty and expediency” the

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Aprevailing view was that the words ought to be retained “sincethey presented the reasonable consequence of Article 33”.

According to this “unbreakability” of time-limit and trueto the “certainty and expediency” of the arbitral awards,any grounds for setting aside the award that emerge afterBthe three-month time-limit has expired cannot be raised.

37. Extending Section 17 of the Limitation Act would go contraryto the principle of “unbreakability” enshrined under Section 34(3)of the Arbitration Act.

(emphasis supplied)

If the Courts are allowed to interfere with the arbitral processbeyond the ambit of the enactment, then the efficiency of the processwill be diminished.

21. The High Court did not appreciate the limitations under ArticlesD226 and 227 of the Constitution and reasoned that the Appellant hadundertaken to appoint an arbitrator unilaterally, thereby rendering theRespondent No. 1 remediless. However, plain reading of the arbitrationagreement points to the fact that the Appellant herein had actually actedin accordance with the procedure laid down without any mala fides.

22. Respondent No. 1 did not take legal recourse against theEappointment of the sole arbitrator, and rather submitted themselves beforethe tribunal to adjudicate on the jurisdiction issue as well as on the merits.In this situation, the Respondent No. 1 has to endure the naturalconsequences of submitting themselves to the jurisdiction of the solearbitrator, which can be challenged, through an application under SectionF34. It may be noted that in the present case, the award has already beenpassed during the pendency of this appeal, and the Respondent No. 1has already preferred challenge under Section 34 to the same.Respondent No. 1 has not been able to show any exceptionalcircumstance, which mandates the exercise of jurisdiction under Articles226 and 227 of the Constitution.G

23. The Division Bench further opined that the contract betweenthe parties was in the nature of works contract as it held that themanufacturing of bricks, as required under the contract, was only an

ancillary obligation while the primary obligation on the Appellant was tosupply the bricks. The Division Bench therefore held that the GujaratAct holds the field, and not the Arbitration Act.

24. The Gujarat Act was enacted in 1992 with the object to providefor the constitution of tribunal to arbitrate disputes particularly arisingfrom works contract to which the State Government or publicundertaking is party. works contract is defined under Section 2(k) ofthe Gujarat Act. The definition includes within itself contract for supplyof goods relating to the execution of any of the works specified underthe section. However, plain reading of the contract between the partiesindicates that it was for both manufacturing as well as supply of bricks.Importantly, contract for manufacture simpliciter is not workscontract under the definition provided under Section 2(k). The pertinentquestion therefore is whether the present contract, which is compositein nature, falls within the ambit of works contract under Section 2(k)of the Gujarat Act. This is question that requires contractualinterpretation, and is matter of evidence, especially when both partieshave taken contradictory stands regarding this issue. It is settled lawthat the interpretation of contracts in such cases shall generally not bedone in the writ jurisdiction. Further, the mere fact that the Gujarat Actmight apply may not be sufficient for the writ courts to entertain the pleaof Respondent No. 1 to challenge the ruling of the arbitrator under Section16 of the Arbitration Act.

25. It must be noted that Section 16 of the Arbitration Act,necessarily mandates that the issue of jurisdiction must be dealt first bythe tribunal, before the Court examines the same under Section 34.Respondent No. 1 is therefore not left remediless, and has statutorilybeen provided chance of appeal. In Deep Industries case (supra),this Court observed as follows:

“22. One other feature of this case is of some importance. Asstated herein above, on 09.05.2018, Section 16 application hadbeen dismissed by the learned Arbitrator in which substantiallythe same contention which found favour with the High Court wastaken up. The drill of Section 16 of the Act is that where aSection 16 application is dismissed, no appeal is providedand the challenge to the Section 16 application being

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Adismissed must await the passing of final award at whichstage it may be raised under Section 34.”

(emphasis supplied)

26. In view of the above reasoning, we are of the consideredopinion that the High Court erred in utilizing its discretionary powerBavailable under Articles 226 and 227 of the Constitution herein. Thus,the appeal is allowed and the impugned Order of the High Court is setaside. There shall be no order as to costs. Before we part, we make itclear that Respondent No. 1 herein is at liberty to raise any legallypermissible objections regarding the jurisdictional question in the pendingCSection 34 proceedings.

Bibhuti Bhushan Bose

Appeal allowed.