Supreme Court: High Courts May Interfere Under Article 226/227 Only If The Arbitral Tribunal's Order Is Glaringly Perverse

The Supreme Court of India ("Supreme Court"), vide its Judgement on January 3, 2025, in the case titled 'Serosoft Solutions Private Limited vs. Dexter Capital Advisors Private Limited' while discussing the extent of the High Court's jurisdiction over Arbitral Orders, held that the High Court's interference under Article 226/227 of the Constitution is permitted only if the Order passed is patently perverse.

Factual background of the matter:

1. Serosoft Solutions Private Limited ("Appellant"), a startup providing educational software and related services and Dexter Capital Advisors Private Limited ("Respondent"), a provider of capital advisory services to various companies, entered into a Client Service Agreement.
2. Under the Agreement, the Respondent was to provide advisory services to the Appellant.
3. Disputes arose between the parties with respect to the non-payment of fee for the services provided by the Respondent to the Appellant under the Agreement.
4. In view of the above failure by the Appellant in making the payments, the Respondent was constrained to initiate arbitration proceedings against the Appellant.

Procedural backround of the case:

1. Following the constitution of the Arbitral Tribunal, the arbitral proceedings commenced, and parties submitted their respective pleadings being the Statements of Claim and Defence. Further, the Arbitral Tribunal, by its order dated September 6, 2023, formulated the specific issues for consideration that needed to be addressed, by the parties to proceedings.
2. Following the said order, Respondent produced two witnesses being CW-1 and CW-2. Thereafter, the counsel for the Appellant cross-examined CW-1 on November 17, 2023, and on November 21, 2023, and the cross-examination of CW-1 was completed. Thereafter, on the very day cross of CW-2 was taken up and completed over the course of two sessions.
3. After the cross-examination of Respondent's witnesses got concluded, cross-examination of Appellant's witness RW-1 commenced. On December 9, 2023, a total of 9 (nine) questions were put to RW-1, as is evident from the record of proceedings of the Tribunal. The cross-examination of RW-1 was then deferred to February 10, 2024. On February 10, 2024, though the cross commenced at 11:00 AM and continued till 07:00 PM, Respondent's counsel sought permission of the Arbitral Tribunal to defer the cross-examination of RW-1 to some other day and sought an additional hour for completing the cross-examination of RW-1.
4. By its Order dated February 10, 2024, the Arbitral Tribunal acceded to Respondent's request reluctantly for additional one hour for the conclusion of the cross-examination.
5. Thereafter, it is alleged by the Appellant that due to various applications for discoveries and interrogatories filed by the Respondent, the cross-examination of RW-1 was cancelled on April 6, 2024.
6. The proceedings kept on being delayed and the parties consensually extended the mandate of the Tribunal by 6 (six) months which was due to expire on May 16, 2024, as per Section 29A of the Act. Ultimately, the proceedings resumed with cross-examination of RW-1 on October 1, 2024,, where a total 28 (twenty-eight) questions were put to him. The Tribunal in the record of proceedings noted that the cross-examination of RW-1 stands concluded and accordingly, the witness was discharged.

Application seeking extension of time for cross-examination

1. After two days of the conclusion of the cross-examination and the discharge of the Witness, i.e., on October 3, 2024, Respondent moved an Interlocutory Application before the Arbitral Tribunal seeking extension of time for cross-examination of RW-1.
2. The Arbitral Tribunal heard the parties on the said application and by its Order dated October 9, 2024, and noted that arbitral proceedings were time bound and in fact the extended mandate was also to expire soon.
3. The Arbitral Tribunal also noted that despite exhausting twice the allotted time for cross-examination of RW-1, the Respondent's approach reflected lack of preparedness and a non-serious attitude.
4. With this view of the matter the Arbitral Tribunal rejected the application and directed that final arguments should conclude by November 2024, so that there is sufficient time for preparation and making of the award.

Proceedings before the High Court

1. The Respondent thereafter challenged the above referred Order of the Arbitral Tribunal by filing a petition under Article 227 of the Constitution and sought a direction to the Arbitral Tribunal for providing further opportunity to cross-examine RW-1.
2. The High Court while noting that judicial interference in such type of matter was least warranted, ultimately came to the conclusion that in view of the exceptional circumstances there can be a direction to the Arbitral Tribunal to grant further opportunity to the Respondent to cross-examine RW-1 on the date and time fixed by the Arbitral Tribunal
3. The matter thereafter reached the Supreme Court impugning the above Order passed by the High Court.

Analysis by the Supreme Court:

1. The Supreme Court noted that the Section 11 application was allowed by the High Court on May 08, 2025, leading to the constitution of the Arbitral Tribunal which held the first hearing on May 19, 2025.
2. The Supreme Court, further noted that it was evident that the cross-examination of the Appellant's witness i.e., RW-1 commenced on December 09, 2023, when the Respondent's counsel asked 9 questions on that very day and the cross was adjourned for February 10, 2024. On February 10, 2024, the record shows that the cross-examination commenced at 11 am and was concluded by 7 pm during which time the Respondent's counsel asked as many as 104 questions to the said witness. It was further noted that after a long lapse of almost 8 (Eight) months, during which period the mandate of the Arbitral Tribunal was exhausted, the cross-examination commenced on October 01, 2024. Even on that day the cross-examination was commenced at 5.35 PM and concluded at 7.40 PM, which, the Supreme Court duly noted was more than two (2) hours.
3. The Supreme Court observed that it is in the above-referred background that the legality and the propriety of the Respondent's application for further time to cross-examine RW-1 was to be considered by the Arbitral Tribunal.
4. The Supreme Court further observed that the first principle that governs 'conduct of arbitral proceedings' under Chapter V of the Act is the obligation of equal treatment of parties. The Supreme Court referred to Section 18 of the Act, which states that it is the statutory duty of the Arbitral Tribunal to ensure that the parties are treated with equality and each party is given full opportunity to present its case.
5. The Supreme Court further noted that, there is yet another statutory obligation, which is imposed on the judicial authorities being that the statutory incorporation of judicial restraint in interfering with matters governed under Part I of the Act relating to arbitration agreement, composition, and jurisdiction of Arbitral Tribunal, coupled with the conduct of the proceedings and making, challenge and enforcement of the award. This objection of restraint on the judicial authority is overriding and notwithstanding anything contained in any other law for the time being in force.

Conclusion and directions of the Supreme Court:

1. The Supreme Court having looked into the matter, was of the opinion that the Arbitral Tribunal gave full opportunity to all parties, which was amply evident from the record. It was further noted that the cross-examination of RW-1 by the Respondent had already exceeded 12 (twelve) hours, but the Respondent was still not satisfied with it.
2. The Supreme Court further observed that in any event of the matter when the Arbitral Tribunal by its order dated October 09, 2024, held, 'that far and no further', to the Respondent's endeavour to cross-examine RW-1, the High Court should have restrained itself from interfering. It was further noted that in order to justify its interference and extension of time, the High Court has referred to and relied on a Judgement titled 'Kelvin Air Conditioning and Ventilation System Private Limited v. Triumph Reality Private Limited' (2024 SCC Online Del 7137) of the High Court wherein certain conditions for exercising jurisdiction under Articles 226/227 have been propounded. It was observed that the Conditions (v) and (vi) of the said Judgement could have provided sufficient guidance for the High Court to consider whether interference is warranted or not. The Conditions (v) to (x) are as provided in the above Judgement is quoted hereinbelow for reference:

3. The Supreme Court in view of the above observed that it was evident from the Judgement being relied upon itself that interference under Article 226/227 is 'permissible only if the order is completely perverse i.e. that the perversity must stare in the face.' The above provided conditions highlight the reason why High Courts ought not to interfere with orders passed by the Arbitral Tribunals.
4. The other parts were also delved into in order to see if the High Court had in fact found any perversity in the decision of the Arbitral Tribunal. However, no such perversity was found by the Supreme Court for the High Court to interfere. It was observed that the High Court has failed to indicate under what circumstances the order passed by the Arbitral Tribunal is perverse as all that the High Court has said is that cross-examination is one of the most valuable and effective means of discovering the truth. The Supreme Court noted that the same is a normative statement, and nobody disputes the said principle. The only enquiry required was whether there is denial of opportunity for an effective cross-examination of the witness.

Decision of the Supreme Court:

1. The Supreme Court having considered the matter in detail, found no justification in the order passed by the High Court in interfering with the directions of the Arbitral Tribunal holding that full and sufficient opportunity to cross-examine RW-1 has already been given, and no further extension of time is warranted.
2. For the above stated reasons, the Supreme Court allowed the appeals and was pleased to set aside the orders passed by the High Court in CM(M) 3711/2004 and CM Appl. 63047/2024 dated October 25, 2024. It was further directed that the Arbitral Tribunal shall resume the proceedings and conclude the proceedings expeditiously.

Analysis of the Judgement:

1. The Supreme Court vide the above Judgement has reinforced the principle of minimal judicial interference in arbitral proceedings, in consonance with the legislative intent to uphold arbitral autonomy under the Arbitration and Conciliation Act, 1996. The above decision has once again emphasized that High Courts' intervention under Article 226/227 of the Constitution is only permissible when an arbitral order is "completely perverse", and the perversity is glaringly obvious. Therefore, this Judgement is a welcome move in maintaining the sanctity of arbitral autonomy, especially in procedural matters.
2. The Supreme Court's analysis of the High Court's failure to identify any perversity in the Arbitral Tribunal's order shows the careful and critical approach adopted by the Supreme Court in interfering with arbitral decisions. The Supreme Court, in the Para 16 of the above Judgement, noted that the High Court's reliance on the normative statement about the value of cross-examination— being "one of the most valuable and effective means of discovering the truth"—was insufficient to justify interference. While this principle is widely accepted and undisputed, the key issue at hand was not the general importance of cross-examination, but whether the Arbitral Tribunal had provided an adequate opportunity for it. In this case, the High Court had not pointed to any actual denial of the opportunity to cross-examine the witness, but instead made a broad, normative statement about the utility of cross-examination. The Supreme Court by highlighting the absence of any specific finding of perversity, emphasized that judicial intervention should be based on a glaring perversity in the arbitral process.
3. The above Judgement of the Supreme Court thus reinforces the principle that for a High Court to intervene under Articles 226/227, it must identify a clear and substantive reason, such as a manifest error, glaring perversity or unfairness, rather than relying on abstract legal principles. Only in exceptional cases where a tangible injustice is evident should courts step in to alter the course of arbitral proceedings. The said approach serves to preserve the integrity of the arbitral process and prevents unwarranted judicial interference.

Please find a copy of the judgement, here.

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