“Order Passed by Sole Arbitrator Cannot Be Said to Be Perverse”: Telangana High Court Dismisses Writ Against Section 16 Decision, Says Remedy Lies Under Section 34 or 37
Safiya Malik
The High Court of Telangana dismissed a writ petition filed by the State of Telangana challenging an order passed by a Sole Arbitrator under Section 16 of the Arbitration and Conciliation Act, 1996. The Division Bench comprising Justice P. Sam Koshy and Justice Namavarapu Rajeshwar Rao recorded that the findings of the Arbitrator did not disclose any jurisdictional error and could not be construed as perverse. The Court noted that the issue of limitation had been examined with reference to relevant judicial precedents and that the reasoning provided by the Arbitrator was sufficient to decline interference at the current stage. Observing that the matter was still pending before the Arbitral Tribunal, the Court found no justification to exercise its writ jurisdiction under Articles 226 and 227 of the Constitution and disposed of the petition accordingly.
The writ petition was filed by the State of Telangana challenging the order passed by the Sole Arbitrator on 30 October 2024 in I.A. No.1 of 2024 in Arbitration File No.6. The petitioners sought quashing of the order whereby the Sole Arbitrator rejected their application under Section 16 of the Arbitration and Conciliation Act, 1996 on the ground that the claims raised by the respondents were barred by limitation.
The dispute arose from a joint venture cum shareholders agreement between the State and the respondents for construction and maintenance of a hotel and spa in Hyderabad through a Special Purpose Vehicle. Respondent No.2 was the SPV, in which Respondent No.1 held 74 percent shares and the State held 26 percent. The land allotted for the project was 14.94 acres.
The respondents contended that the State had agreed to transfer its 26 percent shareholding to Respondent No.2 for ₹12,69,90,000, along with a return on investment at 12 percent per annum from the date of execution of the sale deed until repurchase of all shares. A letter requesting the share transfer was sent by the respondents on 26 September 2008, which the State rejected on 2 June 2009. The respondents claimed that the last categorical rejection was communicated by the State on 7 August 2019.
An arbitration notice was issued by the respondents on 15 September 2022. Following this, a petition under Section 11(6) of the Arbitration Act was filed and Mr. P. Naveen Rao, former Acting Chief Justice, was appointed as the Sole Arbitrator. After the respondents filed their statement of claim, the petitioners submitted an application under Section 16 of the Act, raising a preliminary objection on the ground that the claims were barred by limitation.
This application was rejected by the Sole Arbitrator, which led to the filing of the present writ petition.
The counsel for the petitioners submitted that the rejection of the Section 16 application was not appealable under Section 37 of the Arbitration Act, and therefore the writ petition was maintainable. It was argued that the claim arose from events between 2005 and 2009 and that even if the last rejection dated 7 August 2019 were considered, the limitation period of three years ended on 7 August 2022. Since the arbitration notice was issued on 15 September 2022, it was contended that the claims were barred.
In support of their submissions, the petitioners referred to the judgment of the Supreme Court in Suo Motu Writ Petition (Civil) No. 3 of 2020 and other decisions, including Delhi Development Authority v. Tejpal, Arif Azim Company Ltd. v. Aptech Ltd., OPG Power Corporation Pvt. Ltd. v. Enexio Power Cooling Solutions India Pvt. Ltd., and State of Andhra Pradesh v. Kopparla Santhi.
It was submitted that in accordance with the judgment in the Suo Motu Writ Petition, “the period between 01.03.2022 to 02.08.2022 alone would be excluded. Neither the earlier period would get waived, nor would the party get a fresh period of limitation after 02.08.2022.”
The respondents, through their senior counsel, opposed the maintainability of the writ petition. It was submitted that the Sole Arbitrator had recorded reasons for rejecting the limitation plea and that such orders were not subject to judicial review under Article 226 at an intermediate stage of arbitration. The respondents submitted that the petitioners had an alternative remedy available after the award, as per Sections 34 and 37 of the Arbitration Act.
The respondents also submitted that interference by the writ court at this stage would be inconsistent with the scheme of the Act and the judgments of the Supreme Court. It was stated that “the petitioners can raise this issue if at all if the Arbitral Award goes against them while challenging the said award in an appeal under Section 34 and under Section 37 of the Act.”
The Court examined the issue of maintainability of the writ petition against an order passed under Section 16 of the Arbitration Act. The Court referred to several decisions of the Supreme Court including SPB Co. v. Patel Engineering Ltd. [(2005) 8 SCC 618], Deep Industries Ltd. v. ONGC Ltd. [(2020) 15 SCC 706], Punjab State Power Corporation Ltd. v. Emta Coal Ltd. [(2020) 17 SCC 93], Bhaven Constructions v. Executive Engineer, Sardar Sarovar Narmada Nigam Ltd. [(2021) SCC OnLine SC 8], and Serosoft Solutions Pvt. Ltd. v. Dexter Capital Advisors Pvt. Ltd. [(2025) SCC OnLine SC 22].
The Court cited SPB Co. to observe that “the Arbitral Tribunal is, after all, a creature of a contract between the parties” and “unless a right of appeal is available under Section 37 of the Act, parties have to wait until the award is pronounced.” The Bench recorded that “any order passed by the Arbitral Tribunal is [not] capable of being corrected by the High Court under Article 226 or 227 of the Constitution.”
In Deep Industries Ltd., the Court referred to the principle that “entering into the general thicket of disputes between the parties does not behove a court exercising jurisdiction under Article 227, where only jurisdictional errors can be corrected.”
In Punjab State Power Corporation Ltd., the Supreme Court had observed: “A foray to the writ court from a Section 16 application being dismissed by the arbitrator can only be if the order passed is so perverse that the only possible conclusion is that there is a patent lack in inherent jurisdiction.” The High Court stated that this test would apply to the present case.
With respect to the computation of limitation, the Court noted that “the Sole Arbitrator referring to certain judicial precedents which were laid down by the Hon’ble Supreme Court as also by other High Courts, has excluded the period between 01.03.2020 to 28.02.2022, which was otherwise commonly considered as lockdown period on account of COVID-19 pandemic.” The Arbitrator had relied on Suo Motu Writ Petition (Civil) No.3 of 2020 and subsequent decisions of the Supreme Court for this purpose.
The Court further stated: “Since there is justification provided by the Sole Arbitrator in reaching to the said conclusion, this Bench also has no hesitation in reaching to the conclusion that the order passed by the Sole Arbitrator cannot be said to perverse.” However, the Bench clarified that it was not expressing any view on the merits of the limitation issue: “we do not intend to hold that the conclusion arrived on the question of limitation to be correct on merits.”
The Court held that the objections as to limitation may be raised by the petitioners at a later stage if required. It was stated that “we would leave the question open to be agitated by the petitioners in the event if the Arbitral Award stands decided against them and they can raise this objection in an appeal under Section 34 as also under Section 37 of the Act if so need arises.”
The High Court concluded the matter by recording: “we refrain from entering into the merits of the case and dismiss the instant writ petition at this juncture reserving the right of the petitioners to avail the remedy if the need so arises finally under Section 34 and Section 37 of the Act.” The Court also stated that “miscellaneous applications pending if any, shall stand closed. However, there shall be no order as to costs.”
Advocates Representing the Parties
For the Petitioners: S. Rahul Reddy, representing the Office of the Additional Advocate General
Counsel
For the Respondents: Abhimanyu Bhandari, Senior Counsel, Keerthi Kiran Kota, Adv
Case Title: State of Telangana v. Ihhr Hospitality Private Limited and Another
Case Number: Writ Petition No. 1013 of 2025
Bench: Justice P. Sam Koshy, Justice Namavarapu Rajeshwar Rao
[Read/Download order]
