Das Agrawal & Anr. Vs. Kiran Agrawal & Ors.  Insc 1173 (23 November 2007)
Mathur & P. Sathasivam
out of SLP (C) No. 1822 OF 2006) P. Sathasivam, J.
This appeal is directed against the order dated 09.12.2005 passed by the
Honble Chief Justice of the High Court of Judicature at Allahabad in
Arbitration Application No. 54 of 2003 appointing Honble Mr. Justice Giridhar
Malviya, a retired Judge of the Allahabad High Court as Arbitrator in respect
of the dispute between the parties.
Respondent Nos. 4 and 5 before the High Court are the appellants in this
appeal. According to them, late Hari Prakash Agrawal (father of respondent
No.7) and Rameshwar Das Agrawal (appellant No.1 herein) were very close relatives
and they decided to carry on business of electronics and electrical goods and
other items. They executed a partnership deed on 15.05.1992 which contains an
a dispute arose between the members of their two families and by agreement
dated 13.09.2002 signed by the partners, Shri Gopal Goel of Ravindrapuri, Varanasi was appointed as sole Arbitrator to
decide all the disputes concerning the business. Since the entire disputes
between the families were reconciled, fresh Deed of Partnership reconstituting
the three partnership firms were executed on 13.09.2002 and signed by all the
partners and witnessed by the sole Arbitrator - Shri Gopal Goel and one Shri Vinod
Kumar Jindal, one of the advisors to the Arbitrator. This was intimated to the
bank and sales-tax authorities. After retirement of Smt. Kiran Agrawal and her
husband Shiv Kumar Agrawal on 13.09.2002, a fresh Retirement Deed was executed
on 05.07.2003 which was also duly signed by the parties concerned. Thereafter,
first respondent herein filed an application dated 07.07.2003 under Section 11
of the Arbitration and Conciliation Act, 1996 (in short the Act) for
appointment of an Arbitrator based on clause 21 of the agreement dated
15.05.1992. On 17.10.2003, the High Court issued notice to all the 8
respondents-therein. Thereafter, the matter was listed on 09.12.2005 and as per
the office report, most of the respondents had not been served. Shri Rameshwar Das
Agrawal, appellant No.1-herein was represented in the High Court through his
counsel and prayed time to file counter affidavit. It was also stated that no
dispute remained for adjudication. The High Court, after rejecting the request
of the first appellant-herein, by order dated 09.12.2005, appointed Honble
Mr. Justice Giridhar Malviya as an Arbitrator. Aggrieved by the said order, the
appellants preferred this appeal.
heard Mr. Manoj Swarup, learned counsel for the appellants and Mr. Jay Savla
and Mr. Gaurav Agrawal, learned counsel for respondent Nos. 1 and 7
Nos. 2 to 6 though duly served notice not chosen to contest the appeal.
Manoj Swarup, learned counsel for the appellants placing reliance on a
Seven-Judge Bench decision of this Court in SBP & Co. vs. Patel Engineering
Ltd. and Another, (2005) 8 SCC 618, which was pronounced on 26.10.2005,
submitted that the decision on the application under Section 11 of the Act is a
judicial pronouncement, the impugned order of the Honble Chief Justice
which does not contain any reason cannot be sustained and the same deserves to
be set aside. He also contended that the Honble Chief Justice, who passed
the impugned order, has not taken care to verify whether notice had been duly
served on all the respondents. He further contended that in any event, the High
Court ought to have granted reasonable time to file their objections. On the
other hand, Mr. Jay Savla and Mr. Gaurav Agrawal, learned counsel for the
contesting respondents submitted that inasmuch as the appellants herein
(respondents before the High Court) did not utilize the ample time provided by
the High Court for filing their objection, the ultimate order of the Honble
Chief Justice cannot be faulted with. He also submitted that there is no
violation of the law as declared by this Court.
have carefully perused the relevant materials and considered the rival
Before analyzing the claim of both the parties, it is relevant to note that the
Honble Chief Justice of the Allahabad High Court passed the impugned order
appointing a retired Judge of the High Court as an Arbitrator on 09.12.2005. On
26.10.2005, a Seven-Judge Bench of this Court in SBP & Co. vs. Patel
Engineering Ltd. and Another (supra) reviewed the entire legal position and
issued various directions in the matter of appointment of Arbitrator. The
larger Bench has also overruled the earlier decision in Konkan Railway
Corporation Ltd. vs. Rani Construction Private Limited, (2002) 2 SCC 388. It is
useful to refer to the conclusions arrived at by the larger Bench which read
We, therefore, sum up our conclusions as follows:
The power exercised by the Chief Justice of the High Court or the Chief Justice
of India under Section 11(6) of the Act is not an administrative power. It is a
The power under Section 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.
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
designated Judge would be entitled to seek the opinion of an institution in the
matter of nominating an arbitrator qualified in terms of Section 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 designated Judge.
Designation of a District Judge as the authority under Section 11(6) of the Act
by the Chief Justice of the High Court is not warranted on the scheme of the
Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High
Court would not interfere with the 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 Section 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 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 Section 11(6) of the Act.
In a case where an Arbitral Tribunal has been constituted by the parties
without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will
have the jurisdiction to decide all matters as contemplated by Section 16 of
Since all were guided by the decision of this Court in Konkan Rly. Corpn. Ltd.
v. Rani Construction (P) Ltd. 2 and orders under Section 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 Section 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 Section 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 High Court concerned or a Judge of that Court designated by the Chief
The decision in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. is
overruled. From the above, it is clear that the power being exercised by
the Chief Justice or the designated Judge under Section 11 is not an
administrative power but it is a judicial power. It is also clear that an
appeal would lie against that order only under Article 136 of the Constitution
of India to this Court.
the decision in Konkan Railway Corpn. Ltd. (supra) has been overruled, the
Bench has clarified that appointment of arbitrators or Arbitral Tribunals
therefore, made are to be treated as valid, all objections being left to be
decided under Section 16 of the Act. Unfortunately, the above decision in SBP
& Co. vs. Patel Engineering Ltd. and Another (supra) though decided earlier
i.e. on 26.10.2005 has not been brought to the notice of the Chief Justice, who
passed an order, subsequent to the same i.e. on 09.12.2005. In view of the fact
that an order passed under Section 11(6) is a judicial order and in the light
of the stand of the contesting respondents before the High Court, the
appellants in this Court, the impugned order appointing an Arbitrator without
adverting to the claim and objection of both parties cannot be sustained. The
order of the High Court reads as under:
Vijay Kumar Singh has appeared for the respondent.
prayer for filing affidavit is turned down.
the purpose of acting as Arbitrator in this matter Honble Giridhar Malviya
of 26, Hamilton Road, a retired Judge of this High Court
is hereby nominated.
Nath Ray C.J. As rightly pointed out by learned counsel for the
appellants, the order does not show any reason for appointing an Arbitrator. As
said earlier, after the decision of this Court in SBP & Co. vs. Patel
Engineering Ltd. and Another (supra) it is incumbent on the part of the Chief
Justice or a designated Judge to consider the claim of both parties and pass a
from the above infirmity, learned counsel for the appellants has also brought
to our notice that in spite of a request made for filing an affidavit opposing
the application for appointment of an Arbitrator, the Chief Justice has not
afforded further time. It is also pointed out that except respondent
No.4-therein, notice had not been served on the other respondents and without
hearing them an order has been passed appointing an Arbitrator. We verified the
order sheet of the High Court (Annexure-P4) which is available at page 50 of
the paper-book. The relevant details are reproduced hereunder:- ORDER
SHEET Arbitration case No. 54 of 2002 Xxxx xxxx xxxx 14.07.05 Case Shri Y.P.Singh
Advocate and Ajay Kumar Singh have filed Vakalatnama on behalf of the
respondent No.4 Notices issued to respondents fixing 17.12.2002 have been
returned after service as under:
No.7 Returned undelivered cover with report Not Known.
No.6 Returned undelivered cover with report Not Known.
No.8 Returned undelivered cover with report Not Known.
No.1 Returned undelivered cover with report Not Known.
No.3 Returned undelivered cover with report Not Known.
No.2 Notice has not returned after service Put up for Orders Sd/- Section
Officer Copying (D) Department High Court, Allahabad. As rightly pointed out that whether notice duly served on all the
respondents was not verified before passing the order on 09.12.2005. In our
opinion, the following conclusion would emerge:
the respondents therein except respondent No.4, notice was not served in the
application for appointment of arbitrator.
Even the served respondent was not afforded adequate opportunity to file his
The order does not satisfy the requirement of law laid down by this Court in
SBP & Co. vs. Patel Engineering Ltd. and Another (supra) 9) In view of the
above, we have no other option except to set aside the impugned order and remit
the same for passing fresh order. Since respondents 1 and 7 herein are
represented by their counsel and notice had duly been served on the other
respondents in this Court and none appeared for them, they are permitted to
file their objections, if they so desire within a period of 4 weeks from the
date of receipt of copy of this judgment. Considering the fact referred to
above, we make it clear that no further notice need be issued by the High
constrain to arrive at such conclusion since all of them (except Shivkumar Agrawal)
are members of one family residing at No.20, Gurdas Colony, Varanasi and all of
them were duly served notice in this Court.
We, therefore, set aside the impugned order dated 09.12.2005 passed by the
Chief Justice of Allahabad High Court and remit the same to the High Court to
pass fresh order as early as possible as observed above and in the light of the
principles laid down in SBP & Co. vs. Patel Engineering Ltd. and Another
The Civil Appeal is allowed to the extent mentioned above. No costs.