Parties in Contract Cannot Invoke Article 226 to Avoid Arbitration: Telangana HC
The dispute concerned the concession agreement executed in 2007 between the HMDA and Hyderabad Expressway Limited (HEL)
Hyderabad: The Telangana High Court has held that parties which have voluntarily agreed to resolve disputes through arbitration cannot subsequently invoke the writ jurisdiction of the High Court under Article 226 of the Constitution to challenge the very process they had contractually accepted.
A division bench comprising Justice Moushumi Bhattacharya and Justice Gadi Praveen Kumar dismissed two writ petitions filed by the HMDA and Hyderabad Growth Corridor Limited (HGCL), challenging notices issued by the Indian Council of Arbitration (ICA) in connection with arbitration proceedings arising out of the Outer Ring Road (ORR) concession agreement. The bench also vacated the interim stay orders granted earlier, paving the way for the arbitration to continue.
The dispute concerned the concession agreement executed in 2007 between the HMDA and Hyderabad Expressway Limited (HEL) for the build-operate-transfer (BOT) project relating to the ORR. Clause 39 provided that "any dispute" arising between the parties would be resolved through arbitration in accordance with the rules of the Indian Council of Arbitration.
HMDA later opposed the initiation of arbitration, contending that subsequent changes in the consortium's shareholding, proceedings under the corporate insolvency resolution process (CIRP), and transfer of shares without prior approval rendered the arbitration proceedings untenable.
The ICA responded by issuing procedural notices, advising the parties that such objections should be raised before the arbitral tribunal itself. Aggrieved by those communications, HMDA and HGCL approached the High Court.
Rejecting the challenge, the division bench observed that parties who have consciously entered into an arbitration agreement cannot later contend that arbitration is being imposed upon them.
The court held that disputes relating to changes in shareholding, consortium restructuring, transfer of shares and even allegations of fraud fall within the broad expression "any dispute" contained in the arbitration clause, making them matters to be decided by the arbitral tribunal rather than the writ court.
The court reiterated that intervention under Article 226 in arbitration matters was permissible only in exceptional situations involving public law elements, patent lack of jurisdiction, gross illegality, violation of principles of natural justice or infringement of fundamental rights. None of those circumstances existed in the present case, the court found.
