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Supreme Court Warns Against Bypassing Statutory Route in Arbitration

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Published on: October 22, 2023 at 10:45 IST

In a significant legal development, the Supreme Court has issued a clear warning against circumventing the statutory procedures laid out by Parliament, emphasizing that doing so could create more uncertainty within the arbitration process.

The Supreme Court made this observation while deliberating on a miscellaneous application filed by Chennai Metro Rail Limited, a joint venture between the Central Government and the Tamil Nadu Government.

The application pertained to a contract awarded to M/s. Transtonnelstroy Afcons, with a total value of Rs. 1,566 crores, following a public tender.

A two-Judge Bench comprising Justice S. Ravindra Bhat and Justice Aravind Kumar stated, “The attempt by Chennai Metro to claim de jure ineligibility, not based on statutory provisions in Section 12(5) but on other grounds, cannot be upheld. Deviating from the statutory route devised by Parliament may result in an explosion of litigation and added uncertainty in the arbitration process.”

The Bench stressed that de jure conditions should not be used to challenge arbitrators mid-process on grounds other than those explicitly outlined in the statutory framework of the Arbitration and Conciliation Act, 1996.

The case revolved around a contract dispute and the subsequent arbitration proceedings. Notably, during the arbitration process, one of the tribunal members passed away and had to be replaced.

The Supreme Court’s decision is significant as it reinforces the importance of following the statutory provisions, which were carefully designed by Parliament to prevent ambiguities and ensure transparency in arbitration proceedings.

The Court highlighted that the statutory framework, including eligibility conditions, serves to clarify the requirements and consequences, making it essential for parties to adhere to these regulations.

In conclusion, the Supreme Court’s ruling serves as a reminder of the importance of abiding by statutory routes and provisions in arbitration proceedings, which play a crucial role in maintaining clarity and fairness in the legal process.