Supreme Court disapproves of High Courts' interference with deposit orders passed under Arbitration Act

The Supreme Court noted with disapproval the trend of High Courts to exercise jurisdiction under Articles 226 and 227 to interfere with deposit orders made by arbitral tribunals under the Arbitration Act (Navayuga Engineering Company v. Bangalore Metro Rail Corporation)..Interference with orders of arbitral tribunals by exercising jurisdiction under Articles 226 and 227 should be only in cases of exceptional rarity, the Court underscored.“Despite this Court repeatedly referring to Section 5 of the Arbitration Act in particular and the Arbitration Act in general and despite this Court having laid down in Deep Industries Ltd. Vs. ONGC & Anr. that the High Court under Article 226 and 227 should be extremely circumspect in interfering with orders passed under the Arbitration Act, such interference being only in cases of exceptional rarity or cases which are stated to be patently lacking in inherent jurisdiction, we find that High Courts are interfering with deposit orders that have been made. This is not a case of exceptional rarity or of any patent lack of inherent jurisdiction,” the Court noted..The Court, therefore, set aside an order passed by the Karnataka High Court which had reduced the deposit required to be made by one of the parties to an arbitration..An arbitral award dated August 16, 2018 was made in favour of the appellant, Navayuga Engineering Company, allowing 10 out of 16 claims which amounted to Rs. 175.32 crore.The award was made of a sum of Rs. 122.76 crore amounting to Rs. 56.23 crores principal and Rs. 66.53 crores under various heads.A Section 34 petition was filed by the respondent Bangalore Metro Rail Corporation before the learned Additional City Civil and Sessions Judge at Bengaluru..On December 21, 2019 execution of the said award was stayed on deposit of 60 per cent of the figure of Rs. 122.76 crore and security being given for the balance.Both parties filed writ petitions against that order. The writ petition filed by the appellant was dismissed. The writ petition filed by the respondent was allowed, with the High Court ordering the deposit of 50 per cent of the principal amount of Rs. 56.23 crore..The appellant moved the Supreme Court against the same. The appeal was allowed by the Bench, which disapproved the High Court’s interference with deposit orders.“The impugned order of the High Court of Karnataka is set aside and that of the learned Additional City Civil and Sessions Judge is restored. The deposit of 60% and security for the remainder is to be made within four weeks from the date of our order,” the apex court ordered..Senior Advocate KV Viswanathan along with Advocates Saurav Agrawal and Sahil Tagotra represented the appellant.Solicitor General Tushar Mehta appeared for the respondent..[Read Order]

Supreme Court disapproves of High Courts' interference with deposit orders passed under Arbitration Act

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