Challenge To Rejected Jurisdiction Objection Must Ordinarily Await Arbitral Award: Karnataka High Court

The Karnataka High Court has recently held that an order rejecting a jurisdictional objection by an arbitral tribunal cannot ordinarily be challenged through a writ petition while arbitral proceedings are pending. Such a challenge must ordinarily await the arbitral award stage.

Justice Suraj Govindaraj delivered the ruling while declining to interfere with an order of a sole arbitrator who had rejected a challenge to the tribunal's jurisdiction in a dispute arising from an Agreement of Sale.

“Thus, until an arbitral award is passed, an order rejecting a plea under Section 16 of the A & C Act is ordinarily not amenable to an independent challenge. The statutory scheme clearly postpones such a challenge to the stage of proceedings under Section 34,” the court held.

The challenge before the High Court arose after G.S. Sridevi questioned the authenticity of the Agreement of Sale relied upon in the arbitration and contended that the arbitral tribunal lacked jurisdiction to proceed. The sole arbitrator rejected that objection.

After examining the law, the court observed that an arbitral tribunal is empowered to rule on objections relating to its own jurisdiction, including challenges concerning the existence or validity of an arbitration agreement.

“The provision embodies the well-recognised principle of kompetenz-kompetenz, whereby the Arbitral Tribunal is competent to determine questions relating to the existence, validity and scope of the arbitration agreement. The said provision specifically authorises the Tribunal to rule on any objection concerning the existence or validity of the arbitration agreement,” the court observed.

The court noted that where a jurisdictional objection is accepted, arbitral proceedings come to an end. Where such an objection is rejected, however, the tribunal must continue with the proceedings and render an award. The aggrieved party can then challenge that finding while seeking to set aside the award.

“The legislative policy underlying the aforesaid provisions is to minimise judicial intervention during the pendency of arbitral proceedings and to prevent fragmentation of challenges at interlocutory stages. If every order rejecting a plea under Section 16 were permitted to be independently challenged before constitutional courts, the very object of expeditious dispute resolution through arbitration would stand defeated,” the court held.

The court also observed that the challenge before it was founded on allegations requiring examination of evidence. Such issues could not be conclusively determined at the jurisdictional stage without resulting in a “virtual trial within a trial”.

Finding no infirmity in the arbitrator's decision, the court declined to interfere and disposed of the petition.

For Petitioner: Senior Advocate M.B Nargund and Advocate Sona Vakkund

For Respondent: Senior Advocate S Basavaraju and Advocate Vijay B.K