High Court Cannot Re-examine Contracts to Override Arbitrator's Section 16 Ruling, Supreme Court Holds

A Supreme Court bench of Justices J.K. Maheshwari and Atul S. Chandurkar holds that writ courts cannot interpret contracts to displace an arbitrator's stamp-duty ruling under Section 16 of the Arbitration and Conciliation Act, 1996.

The Supreme Court has dismissed a challenge to a Division Bench order of the Orissa High Court, holding that a Single Judge exceeded jurisdiction when he set aside an arbitrator's ruling on stamp duty by independently interpreting the agreements in dispute. The case arose from a 2004 iron ore sale agreement between mine owner M/s Tarini Prasad Mohanty and M/s Sunflag Iron and Steel Company Limited. When the arbitrator rejected a stamp-duty objection under Section 16 of the Arbitration and Conciliation Act, 1996, the mine owner took the matter to the High Court in writ jurisdiction. The Single Judge allowed the petition and directed impounding of the agreements. The Division Bench reversed that order. The Supreme Court, on 27 May 2026, agreed with the Division Bench and confirmed that the statutory remedy under Section 34 read with Section 16(6) of the Act is the correct avenue for such grievances.

How the Dispute Reached the Supreme Court

An agreement for sale of iron ore was executed on 12 February 2004 between the mine owner and SISCO. Supplementary agreements followed. Disputes arose during the contractual engagement and were referred to a Sole Arbitrator under the arbitration clause in the 2004 agreement.

SISCO, as claimant, made various claims. The mine owner filed a counter-claim. On 5 February 2024, during the arbitration proceedings, the mine owner filed an application under Section 16 of the Act contending that the 2004 agreement and the supplementary agreements had been insufficiently stamped. The mine owner's position was that the transaction was in the nature of “conveyance” and therefore required stamping under Article 23 of Schedule I to the Indian Stamp Act, 1899. Unless the agreements were impounded and properly stamped, the arbitration could not continue.

SISCO replied that the agreements had been duly stamped under Article 5(c) of Schedule I to the Stamp Act, that the objection had not been raised when the counter-claim was filed, and that it was belated. The arbitrator, by order dated 30 May 2024, rejected the objection. He held that the agreement was “an agreement to sell” and not a conveyance or sale, and that it had been properly stamped.

The mine owner challenged this order by filing a writ petition under Articles 226 and 227 of the Constitution before the Orissa High Court. The Single Judge, by judgment dated 25 February 2025, found an “exceptional” case for interference, set aside the arbitrator's order, and directed the Arbitral Tribunal to impound the agreements for determination of deficit stamp duty. SISCO preferred a writ appeal under Clause 10 of the Letters Patent Act, 1992. The Division Bench allowed the appeal and set aside the Single Judge's order as being in excess of jurisdiction. The mine owner then approached the Supreme Court.

Whether the Writ Appeal Was Maintainable

The mine owner argued before the Supreme Court that the Single Judge had exercised only supervisory jurisdiction under Article 227 of the Constitution, not Article 226, and therefore no writ appeal lay. The Supreme Court rejected this argument.

The Court examined the writ petition filed by the mine owner, including its prayers and pleadings. Paragraph 27 of the writ petition showed that the mine owner had specifically invoked the extraordinary jurisdiction of the High Court under Article 226. The Single Judge had not restricted himself to any single article. Relying on Lokmat Newspapers Pvt. Ltd. v. Shankar Prasad (1999 INSC 279) and the earlier Constitution Bench decision in Umaji Keshao Meshram v. Radhikabai, the Court held that where a party invokes both Articles 226 and 227 and the facts justify either, the court ought to treat the petition as one under Article 226 so as not to deprive the party of the right of appeal.

The Court also noted that the mine owner himself had invoked both articles and had succeeded before the Single Judge. Having done so, he could not now contend that the petition was only under Article 227 in order to question the maintainability of the writ appeal. The Court further observed that before the Division Bench, the mine owner had not specifically questioned the maintainability of the writ appeal — the contest had been on the scope of jurisdiction under Articles 226 and 227 and the legal propriety of the Single Judge's exercise of that jurisdiction.

The writ appeal was therefore held to be maintainable and SISCO could not be non-suited on that count.

The Core Question: Scope of Writ Jurisdiction Over Section 16 Orders

Having resolved the maintainability question, the Court turned to whether the Division Bench was right to set aside the Single Judge's order. This required examining what the Single Judge had actually done when he entertained the challenge to the arbitrator's Section 16 ruling.

The Single Judge had himself catalogued the settled principles governing writ interference with arbitral tribunal orders, including that interference is permissible only in “exceptional rarity” or where there is patent lack of inherent jurisdiction, that perversity must stare one in the face, and that excessive judicial interference in the arbitral process is not encouraged. Having stated these principles, he then proceeded to examine the 2004 agreement and the second agreement dated 9 January 2011, concluded that an exceptional case had been made out, and re-interpreted the agreements to find that the transaction amounted to conveyance.

The Supreme Court found this approach to be impermissible. The arbitrator had examined the agreements and their relevant clauses and concluded, after prima facie interpretation, that they were merely agreements to sell and not conveyance. The Single Judge then re-examined the same agreements, determined the true intention of the parties, and reached the opposite conclusion. In doing so, he entered into the merits of the dispute.

The Court referred to the Constitution Bench decision in M/s S.B.P. and Company v. M/s Patel Engineering Ltd. (2005 INSC 526), which had held that a party aggrieved by the rejection of a Section 16 objection must wait until the award is made and then challenge it under Section 34. The Constitution Bench had disapproved of the approach of some High Courts that any order of an arbitral tribunal could be corrected under Articles 226 or 227.

The Court also relied on M/s Deep Industries Ltd. v. Oil and Natural Gas Corporation Limited (2019 INSC 1299), which had held that a foray to the writ court from a dismissed Section 16 application is permissible only if the order is so perverse that the only possible conclusion is a patent lack of inherent jurisdiction — and that such perversity must stare one in the face. In Deep Industries, the High Court had gone into exactly the same matter as the arbitrator and reached a contrary finding; the Supreme Court had set that order aside for that reason alone.

The three-judge bench decision in Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Nigam Limited (2021 INSC 9) was also cited for the proposition that interpretation of contracts should not generally be undertaken while exercising writ jurisdiction, particularly where both parties have taken contradictory stands and the question is one of evidence.

Why the Single Judge's Order Was Unsustainable

The Court identified two distinct errors in the Single Judge's approach.

First, the arbitrator had arrived at his conclusion under Section 16 after examining and prima facie interpreting the agreements. That exercise — determining whether the agreements were agreements to sell or conveyances — was one that fell within the arbitrator's jurisdiction, particularly after the Constitution Bench in Re: Interplay Between Arbitration Agreements Under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 (2023 INSC 1066) had held that the issue of stamping of a document fell within the ambit of the Arbitral Tribunal. It was impermissible for the Single Judge to entertain a challenge to that adjudication by proceeding to interpret the agreements afresh. Even if the arbitrator had erred in concluding that the agreement was an agreement to sell, that would not make the case “exceptional” for the purposes of writ interference.

Second, the arbitration proceedings were still pending and the parties had yet to lead evidence. Determining the nature of the agreements at that stage would cause prejudice to the parties. The question of whether the 2004 agreement and the supplementary agreements constituted conveyance required meaningful interpretation of those agreements alongside other supplementary agreements, and that exercise touched the merits of the dispute. It was not an exercise to be undertaken in extraordinary jurisdiction.

The Court expressly declined to express any view on whether the agreements were in fact conveyances as contended by the mine owner, or merely agreements for sale as contended by SISCO. That question was left open.

The Stamp Duty Question Preserved for Section 34

The Court clarified that the issue of stamping of the 2004 agreement and the subsequent agreements was kept open. Section 16(6) read with Section 34 of the Act takes care of such contingency. The aggrieved party may raise all contentions at the stage of a challenge under Section 34, if the need arises after the award is pronounced.

The Court also noted that SISCO's Senior Advocate, Mr. Gopal Subramanium, had himself submitted that undertaking the exercise of determining the true nature of the agreements at this stage would be premature, given that the arbitration proceedings were pending and adjudication of the issue required interpretation of various terms after evidence was led.

Outcome

The Civil Appeal filed by M/s Tarini Prasad Mohanty was dismissed with no order as to costs. The Division Bench's order setting aside the Single Judge's judgment was upheld. The Supreme Court confirmed that the Single Judge was not justified in exercising writ jurisdiction under Articles 226 and 227 of the Constitution to examine and set aside the arbitrator's order under Section 16 of the Act. The Division Bench was justified in entertaining the writ appeal and setting aside the Single Judge's order as being in excess of jurisdiction. Pending applications were also disposed of.