Sanchayita Lahkar

The Kerala High Court single bench of Justice Basant Balaji held that a petition under Article 227 of the Constitution of India challenging an order passed under Section 34 of the Arbitration and Conciliation Act, 1996 is not maintainable. The Court recorded that the remedy available to the aggrieved party is under Section 37 of the Arbitration and Conciliation Act and intervention under Article 227 of the Constitution is not permissible. The Court dismissed the original petition as not maintainable.

The petitioner, a government contractor, entered into an agreement dated 31 July 2013 with M/s. HLL Life Care Ltd., a Government of India enterprise, for construction of a Multidisciplinary Research Laboratory and Animal House at the Medical College, Thiruvananthapuram. The total contract value was ₹23,90,36,760 and the stipulated completion period was 18 months, ending on 2 June 2015. The work was completed only on 15 May 2018.

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The petitioner sent a letter dated 31 December 2015 informing the respondents that due to delay on their part, the petitioner was entitled to market rates for the additional period beyond the stipulated contract term. Although the respondents compelled the petitioner to continue the work, they refused to pay at market rates. Due to failure in payment, the petitioner filed W.P.(C) No. 36322 of 2018 before the High Court which resulted in a direction to settle the admitted sums within three months. Partial payments were made. Contempt proceedings were initiated through W.P.(C) No. 3199 of 2024.

The petitioner raised a demand of ₹7,11,41,406 for unpaid works through a letter dated 12 June 2019. The respondents constituted a Dispute Redressal Committee as per Clause 25 of the contract. The Committee denied the claim on 24 January 2020. Thereafter, the petitioner issued a letter dated 31 January 2020 (Exhibit P1) requesting the first respondent to provide a panel of three retired Judges of the High Court, in order to nominate one as the sole arbitrator. The first respondent responded on 7 March 2020 with a panel of three retired Judges (Exhibit P2).

The petitioner submitted a panel of three engineers for consideration (Exhibit P3), which was declined by the first respondent through a letter dated 11 March 2020 (Exhibit P4), insisting on selection from the panel of retired Judges. The petitioner nominated Justice M. Ramachandran (Retired) as sole arbitrator through letter dated 13 March 2020 (Exhibit P5). The first respondent confirmed the nomination and informed the arbitrator through letter dated 16 March 2020 (Exhibit P6).

The Sole Arbitral Tribunal issued an award dated 18 August 2021 (Exhibit P7) directing the respondents to pay ₹7,31,89,098 within three months and to release a retention amount of ₹1,10,45,050 on submission of a representation by the petitioner. The respondents’ counterclaims were rejected.

The respondents challenged the award by filing O.P. (Arbn) No. 127 of 2021 on 14 December 2021 under Section 34 of the Arbitration and Conciliation Act before the Commercial Court, Ernakulam. The petitioner filed a counter affidavit dated 16 August 2022 (Exhibit P8). The respondents submitted an amendment application dated 23 May 2023 (Exhibit P9), which was allowed. The amended original petition was submitted on the same date (Exhibit P10). The petitioner filed a counter affidavit to the amended petition dated 18 October 2023 (Exhibit P11).

The petitioner contended that there existed a written agreement under the proviso to Section 12(5) of the Arbitration and Conciliation Act, whereby the respondents accepted the request for a panel of retired Judges. It was submitted that the nomination made by the petitioner from the panel constituted a waiver of the bar under Section 12(5). The petitioner also referred to Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665.

The respondents argued that Section 12(5), read with the Seventh Schedule, prohibits certain persons from being appointed as arbitrators, and such prohibition renders the appointment of the arbitrator invalid. The respondents relied on TRF Limited v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, to support their submission that once a person becomes ineligible, he cannot nominate another arbitrator.

The Commercial Court, by order dated 29 November 2023 (Exhibit P12), set aside the arbitral award on the ground that the arbitrator was ineligible under Section 12(5) and declared the award null and void. Aggrieved by the said order, the petitioner filed the present original petition under Article 227 of the Constitution of India.

The Court considered the maintainability of the petition under Article 227 of the Constitution against an order passed under Section 34 of the Arbitration and Conciliation Act. The petitioner submitted that the Commercial Court had relied on Section 12(5) of the Act, and therefore the order passed was not covered under the grounds available in Section 34(2), making the order vulnerable to challenge under Article 227.

The petitioner contended that the respondent had supplied a panel of Judges on request and the nomination of the arbitrator was in accordance with the proviso to Section 12(5), constituting a valid waiver. It was submitted that the first respondent merely performed a “post office” function in confirming the petitioner’s nomination.

The Court recorded that the respondents invoked Section 34(2)(b)(ii) of the Act, which allows an award to be set aside if it is in conflict with the public policy of India. The respondents submitted that the award, made by an arbitrator disqualified under Section 12(5), violated the fundamental policy of Indian law.

The Court referred to SBP & Co. v. Patel Engineering, (2005) 8 SCC 618, wherein it was held that parties should not invoke writ jurisdiction when remedies under the Arbitration and Conciliation Act are available. The Court also referred to Hameed Kunju v. Nizam, (2017) 8 SCC 611, and held that petitions under Article 227 are not maintainable where a statutory appeal lies.

The Court further referred to Alexander Luke v. M/s. Aditya Birla Money Ltd., 2024 KHC 107, where it was held that arbitration disputes arising under the Commercial Courts Act are to be adjudicated by the commercial court and the remedy available to an aggrieved person is to approach the appellate forum under Section 37 of the Act, not by invoking Article 227 of the Constitution.

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The Court also cited Ansal Housing and Construction Limited v. State of Uttar Pradesh, (2016) 13 SCC 305, and Hindustan Coca Cola Beverages Pvt. Ltd. v. Union of India, (2014) 15 SCC 44, in support of the proposition that where a statute provides a specific remedy of appeal, such remedy must be availed and cannot be bypassed.

The Court dismissed the original petition on the ground that the petitioner had an effective statutory remedy under Section 37 of the Arbitration and Conciliation Act. It held that intervention under Article 227 was not permissible in the presence of such remedy.

The Court concluded:

“In the result, this O.P.(C) stands dismissed as not maintainable.”

Advocates Representing the Parties

For the Petitioners: K. Babu Thomas, Advocate; Marykutty Babu, Advocate; Drisya Dileep, Advocate

For the Respondents: Aju Mathew, Advocate; Nikhilesh Krishnan, Advocate; Abu Mathew, Advocate

Case Title: M.I. Mohammed vs. M/s. HLL Life Care Ltd. and Others

Neutral Citation: 2025:KER:26487

Case Number: OP(C) No. 316 of 2024

Bench: Justice Basant Balaji

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