?CASE ANALYSIS WITH RESPECT TO SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 The success of arbitration largely depends upon the selection of fair, impartial and competent arbitrator. The arbitrator is a creature of agreement between the parties. The parties are given the choice to agree between them, the procedure of appointment of Arbitrator and the number of Arbitrators to be appointed. It is subject to some regulations by law. In the absence of an agreement between the parties with respect to appointment of Arbitrator, the law provides a body of rules to fill the void.
The Act of 1940 provided for appointment of Arbitrator or Umpire under Section 8 on various grounds by Court. The important changes made, apart from removing the role of Civil Court from the appointed procedure, in the new Act. In the present Act, there is no provision for notice and hearing by the Court. The same is done away with. It would imply that challenge regarding the services of notices or ancillary matters would not at all require the judicial scrutiny before the appointment is made. The cases regarding the same are as follows: 1) Konkan Railway Corporation Limited v. Rani Construction Ltd In Ador Samia Private Limited Vs.
Peekay Holdings Limited & Ors. , the court had held that the order of the Chief Justice or his designate in exercise of the power under Section 11 of the Arbitration Act was an administrative order and that such order was not amenable to the jurisdiction of Supreme Court under Article 136. The decision of the Bench of the three learned Judges affirmed this view in Konkan Railway Corporation Ltd. & Ors. Vs. Mehul Construction Co. , . Thereafter, in the present case, a Bench of two learned Judges referred to a larger Bench the decision of the three learned Judges for re-consideration.
This is how the matter came to before a Constitution Bench. Two issues which were to be decided in this case was- Whether such an order was a judicial order or an administrative order Does the Chief Justice or his nominee, acting under Section 11, have the authority to decide any contentious issues between the parties to the alleged arbitration agreement? A related question was- Even if the said order is held to be administrative in nature what is the remedy open to the person concerned if his request for appointment of an arbitrator is turned down by the learned Chief Justice or his nominee, for some reason or other? HELD:
The Court observed- The three Judge Bench noted that the Act was based upon the UNCITRAL Model framed by the Commission on International Trade Law established by the United Nations. It said that if a comparison was made between the language of Section 11 of the Act and Article 11 of the Model Law it was apparent that the Act had designated the Chief Justice of a High Court in cases of domestic arbitration and the Chief Justice of India in cases of international commercial arbitration to be the authority to perform the function of appointment of an arbitrator whereas under the Model Law that power had been vested in the court.
When the matter is placed before the Chief Justice or his designate under Section 11 it was not appropriate for the Chief Justice or his designate to entertain any contentious issues between the parties and decide the same. The only function of the Chief Justice or his designate under section 11 is, to fill the gap left by a party to the arbitration agreement or by the two arbitrators appointed by the parties and nominate an arbitrator. This is to enable the Arbitral Tribunal to be expeditiously constituted and arbitration proceedings to commence.
A bare reading of Sections 13 and 16 made it clear that questions with regard to the qualifications, independence and impartiality of the arbitrator and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator, who would decide the same. If a contingency arose where the Chief Justice or his designate refused to make an appointment of the arbitrator, the party seeking the appointment had the remedy of ‘mandamus.
’ An intervention was possible by a court in the same way as an intervention was possible against an administrative order of the executive. The nature and function performed by the Chief Justice or his designate being essentially to aid the constitution of the arbitral tribunal, it could not be held to be a judicial function. It was, therefore, held that an order under Section 11 refusing to appoint an arbitrator was not amenable to the jurisdiction of this Court under Article 136 of the Constitution.
Section 11 does not contemplate a decision on any controversy, the party other than the requesting party may raise. Facts that nomination is to be made after expiry of 30 days and qualifications of arbitrators along with considerations likely to secure nomination of independent and impartial arbitrator are to be taken into account, do not mean that an adjudicatory function is to be carried out.
To put it concisely, for an order properly to be the subject of a petition for special leave to appeal under Article 136 it must be an adjudicatory order, an order that adjudicates upon the rival contentions of parties, and it must be passed by an authority constituted by the State by law for the purpose in discharge of the State’s obligation to secure justice to its people. Hence, the bench dismissed the appeal. 2) S. B. P. & Co v. Patel Engineering.
This decision of the Supreme Court was again challenged in challenged in the case of S. B. P. & Co v. Patel Engineering & Anr. , where the question before the Honourable Supreme Court was the nature of the function of the Chief Justice or his designate under S. 11 of the Arbitration and Conciliation Act, 1996. The main issues which were examined in this case are: What is the nature of the function of the Chief Justice or his designate under S. 11 (6) of the Arbitration and Conciliation Act, 1996?
What is the scope and power of the Chief Justice under S. 11? The Hon’ble Supreme Court examined the aforementioned issues in detail and held that the power exercised by the Chief Justice or his designate under S. 11 of the Act is a judicial power and not an administrative power. The ratio decidendi of the aforementioned case: The power exercised by the Chief Justice of the High Court or the Chief Justice of India under S. 11(6) of the Act is not an administrative power. It is a judicial power. The power under S.
11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another judge of that court and by the Chief Justice of India to another judge of the Supreme Court. In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated, judge would be that of the Chief Justice as conferred by the statute. The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment.
These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of S. 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate.
Designation of a district judge as the authority under S. 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act. Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of S. 34 of the Act.
Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court. There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under S. 11(6) of the Act. In a case where an arbitral tribunal has been constituted by the parties without having recourse to S.
11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by S. 16 of the Act. Since all were guided by the decision of this Court in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd23 and orders under S. 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under S. 16 of the Act.
As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act. Where District Judges had been designated by the Chief Justice of the High Court under S. 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the concerned High Court or a Judge of that court designated by the Chief Justice. The decision in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd. is overruled.