Arbitral Tribunal ought to decide Section 16 objection as soon as possible as a preliminary ground: Delhi High Court

The Delhi High Court has ruled that an arbitral tribunal ought to decide the objection under Section 16 of the Arbitration & Conciliation Act as soon as possible, as a preliminary ground (Surender Kumar Singhal vs Arun Kumar Bhalotia). .The Court also laid down the following factors that can be borne in mind by the tribunal when objections are raised:- If the issue of jurisdiction can be decided on the basis of admitted documents on record, the tribunal ought to proceed to hear the matter/ objections at the inception itself;- If the tribunal is of the opinion that the objections under Section 16 of the Act cannot be decided at the inception and would require further enquiry into the matter, it could consider framing a preliminary issue and deciding the same as soon as possible;- If the tribunal is of the opinion that objections under Section 16 would require evidence to be led then it could direct limited evidence to be led on the said issue and adjudicate the same;- If the tribunal is of the opinion that detailed evidence needs to be led both written and oral, then after the evidence is concluded, the objections under Section 16 would have to be adjudicated first before proceeding to passing of the award..The order was passed by a single-judge Bench of Justice Prathiba M Singh. ."The statute contemplates that the party raising the objection has to raise it with alacrity and hence by an overall reading of Section 16 and especially Section 16(5) of the Act, there is no doubt that the Tribunal also ought to decide the objection with a sense of urgency. Such dispensation would be favoured especially in order to ensure that parties to whom the arbitral proceedings may not even be applicable are not entangled to long drawn arbitral proceedings with substantial costs being incurred," the Court observed. .In the present case, a writ petition was preferred by the petitioner against an order of the arbitrator refusing to rule on its jurisdiction to entertain any claims..The arbitrator opined that a final decision on the application of the Petitioners under Section 16 could not be taken without further evidence in the matter and therefore, would be decided at the final stage. .To arrive at its decision, the Court also analysed the scope its interference under Article 226 of the Constitution .It stated that although a petition under Article 226/227 would be maintainable against an arbitral tribunal, interference is permissible only if the order is completely perverse i.e., that the perversity must stare in the face..Sufficiency of the arbitral process, the Court said, ought not to be allowed to diminish. "For interference under Article 226/227, there have to be `exceptional circumstances’.. Though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction, the writ court would not interfere," the Court emphasised. .In view of the arbitrator's order, the Court held that the fact situation did not present an 'exceptional rarity’ requiring exercise of jurisdiction. ."Arbitrator was of the opinion that a final decision on the application of the Petitioners under Section 16 cannot be taken, without further evidence in the matter. The property which the Petitioners have purchased as per the Arbitrator is clearly subject matter of the arbitral proceedings and thus the ld. Arbitrator, after evidence being recorded may be required to mould relief in the same manner. Thus, the tests for interference under Article 226/227 being extremely strict, this Court does not deem it appropriate to interfere under Article 227.".It nonetheless said that the question of jurisdiction raised by the Petitioners would have to be adjudicated first, prior to the passing of the final award. "The ld. Arbitrator would proceed to adjudicate the disputes expeditiously and pass an award, preferably within a period of six months," the Court said. .The petition was accordingly disposed of..[Read Order]