Patent Lack of Jurisdiction, only Ground to Challenge Arbitration Award in Writ Court-SC

While delivering its judgement in the case of Power State Corporation Limited vs Emta Coal Limited the Supreme Court observed that approaching writ courts against arbitration application can only be entertained if prima facie there was a patent lack of inherent jurisdiction

Brief Facts of Power State Corporation Limited vs Emta Coal Limited (SPL (C) 8482 of 2020):-

The Arbitral Tribunal first took up the case of the petitioner. As the order was not in favour of the petitioners, they challenged the order and moved the High Court.

The petitioners approached the Supreme Court when their case in the High Court was dismissed on the grounds that the drill of section 16 as enshrined in the Arbitration Act was not followed.

Contention of the Petitioner

The Counsel for the Petitioner, Mr. K.V Vishwanathan, referred to Supreme Court Judgement in Deep Industries Ltd. v. Oil and Natural Gas Corporation Ltd. & Anr. (2019) SCC Online SC 1602, and argued that in the present case, the third party was not referred to at all and so because of it there was a patent lack of inherent jurisdiction.

Decision of the Court

The Supreme Court disagreed with the arguments of the petitioner and held that writ courts can only be approached for appeals against the dismissal of an application by an Arbitrator if the order passed is so unreasonable that only patent lack of inherent jurisdiction might be the conclusion. The court concluded that

 “it must be the perversity of the order that must stare one in the face.”

Bench of Justice R.F. Nariman, Justice Navin Sinha and Justice Indira Banerjee

The court also observed that the High Court should have dismissed the application of the petitioner with a heavy cost in order to discourage other litigations where parties approach the court by pleading similar defence. 

The court dismissed the instant petition and imposed a cost of Rs.50000 on the petitioner.

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