M/S. Konkan
Railway Corporation Ltd. & Anr Vs. M/S. Rani Construction Pvt. Ltd. [2002] Insc
51 (30 January 2002)
Cji,
Syed Shah Mohammed Quadri, U. C. Banerjee, S.N. Variava & Shivaraj V. Patil
WITHC.A.
Nos. 713-714/1999, C.A. No. 715/1999, C.A. No. 716/1999, C.A. Nos.
2037-2040/1999, C.A. No. 2041/1999, C.A. Nos. 2042-2044/1999, C.A. No.
4311/1999, C.A. No. 4312/1999, C.A. No. 4324/1999, C.A. No. 4356/1999, C.A. No.
7304/1999 and
C.A. Nos. 7306-7309/1999.
Bharucha,
C.J.I.:
When
it first reached before a Constitution Bench, the following order was passed :
"This
reference has been made by a detailed referral order [2000(8) SCC 159].
It
appears that the Chief Justice or his nominee, acting under Section 11 of the
Arbitration and Reconciliation Act, 1996, have decided contentious issues
arising between the parties to an alleged arbitration agreement and the
question that we are called upon to decide is whether such an order deciding
issues is a judicial order or an administrative order.
In the
course of the short hearing before us, another question has surfaced, which is:
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? In other words, is the power of the Chief Justice or his
nominee under Section 11 restricted to the nomination of an arbitrator in cases
falling under Sub-sections (4), (5) and (6) thereof? From what we understood,
the learned Solicitor General appearing for the appellant, and learned counsel
appearing for the respondents are ad idem on this aspect. According to both of
them, the power of the Chief Justice or his nominee under Section 11 is
restricted to the nomination of an arbitrator and the order that he makes is an
administrative order.
It,
therefore, becomes necessary to request the Attorney General to assist the
Court. Mr. Andhyarujina, who is in Court but is not appearing in the matter,
has advanced some submissions before us. He shall also be entitled to do so
when the matter is taken up again before a Constitution Bench.
The
Registry shall furnish a copy of this order and a copy of the paper books both
to the Attorney General and to Mr. Andhyarujina.
Adjourned
accordingly." To determine whether the order of the Chief Justice or his
designate under Section 11 of the Act is a judicial order or an administrative
order, it is necessary to take note of certain provisions of the Act. Section
2(e) defines a Court thus :
"(e)
"Court" means the principal Civil Court of original jurisdiction in a
district, and includes the High Court in exercise of its ordinary original
civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter of a
suit, but does not include any civil court of a grade inferior to such
principal Civil Court, or any Court of Small Causes;" Section 5 reads thus
:
"Extent
of judicial intervention - Notwithstanding anything contained in any other law
for the time being in force, in matters governed by this Part, no judicial
authority shall intervene except where so provided in this Part." Section
8, so far as is relevant, reads thus :
"8(1)
A judicial authority before which an action is brought in a matter which is the
subject of an arbitration agreement shall, if a party so applies not later than
when submitting his first statement on the substance of the dispute, refer the
parties to arbitration." Section 10 states that the parties to an
arbitration agreement are free to determine the number of arbitrators, provided
that such number shall not be an even number; failing such determination, the
arbitral tribunal shall consist of a sole arbitrator.
Section
11 reads thus :
"Appointment
of arbitrators –
(1) A
person of any nationality may be an arbitrator, unless otherwise agreed by the
parties.
(2)
Subject to sub-section (6), the parties are free to agree on a procedure for
appointing the arbitrator or arbitrators.
(3)
Failing any agreement referred to in sub-section (2), in an arbitration with
three arbitrators, each party shall appoint one arbitrator, and the two
appointed arbitrators shall appoint the third arbitrator who shall act as the
presiding arbitrator.
(4) If
the appointment procedure in sub-section (3) applies and-
(a) a
party fails to appoint an arbitrator within thirty days from the receipt of a
request to do so from the other party; or
(b) the
two appointed arbitrators fail to agree on the third arbitrator within thirty
days from the date of their appointment, the appointment shall be made, upon
request of a party, by the Chief Justice or any person or institution
designated by him.
(5)
Failing any agreement referred to in sub-section (2), in an arbitration with a
sole arbitrator, if the parties fail to agree on the arbitrator within thirty
days from receipt of a request by one party from the other party to so agree
the appointment shall be made, upon request of a party, by the Chief Justice or
any person or institution designated by him.
(6)
Where, under an appointment procedure agreed upon by the parties, -
(a) a
party fails to act as required under that procedure; or
(b) the
parties, or the two appointed arbitrators, fail to reach an agreement expected
of them under that procedure; or
(c) a
person, including an institution, fails to perform any function entrusted to
him or it under that procedure, a party may request the Chief Justice or any
person or institution designated by him to take the necessary measure, unless
the agreement on the appointment procedure provides other means for securing
the appointment.
(7) A
decision on a matter entrusted by sub-section (4) or sub-section (5) or
sub-section (6) to the Chief Justice or the person or institution designated by
him is final.
(8)
The Chief Justice or the person or institution designated by him, in appointing
an arbitrator, shall have due regard to –
(a) any
qualifications required of the arbitrator by the agreement of the parties; and
(b) other
considerations as are likely to secure the appointment of an independent and
impartial arbitrator.
(9) In
the case of appointment of sole or third arbitrator in an international
commercial arbitration, the Chief Justice of India or the person or institution
designated by him may appoint an arbitrator of a nationality other than the
nationalities of the parties where the parties belong to different
nationalities.
(10)
The Chief Justice may make such scheme as he may deem appropriate for dealing
with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6)
to him.
(11)
Where more than one request has been made under sub-section (4) or sub-section
(5) or sub-section (6) to the Chief Justices of different High Courts or their
designates, the Chief Justice or his designate to whom the request has been
first made under the relevant sub-section shall alone be competent to decide on
the request.
(12)(a)
Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10)
arise in an international commercial arbitration, the reference to "Chief
Justice" in those sub-sections shall be construed as a reference to the
"Chief Justice of India".
(b)
Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10)
arise in any other arbitration, the reference to "Chief Justice" in
those sub-sections shall be construed as a reference to the Chief Justice of
the High Court within whose local limits the principal Civil Court referred to
in clause (e) of sub-section (1) of Section 2 is situate and, where the High
Court itself is the Court referred to in that clause, to the Chief Justice of
that High Court." Section 12 imposes upon a person approached to be an
arbitrator the obligation to disclose to the parties in writing any
circumstance that may give rise to justifiable doubts as to his independence
and impartiality. An arbitrator can be challenged if there are circumstances
that give rise to justifiable doubts about his independence and impartiality or
if he does not possess the qualifications agreed to by the parties, but such
challenge can be made only for reasons which the party challenging becomes
aware of after the appointment has been made. Section 13 speaks of the
challenge procedure. It states that the parties are free to agree on such a
procedure. Failing that, the party who makes the challenge must within fifteen
days after becoming aware of the constitution of the arbitral tribunal or of
any of the circumstances mentioned in Section 12, send a written statement of
the reasons for the challenge to the arbitral tribunal. Unless the challenged
arbitrator withdraws or the other party to the arbitration agrees to the
challenge, the arbitral tribunal shall decide upon the challenge and if the
challenge is not successful it shall continue the arbitration proceedings and
make an award. That award can be sought to be set aside under Section 34.
Section
16 empowers the arbitral tribunal to rule on its own jurisdiction. Clause (1)
of Section 16 is relevant, and reads thus :
"(1)
The arbitral tribunal may rule on its own jurisdiction, including ruling on any
objections with respect to the existence or validity of the arbitration
agreement, and for that purpose,-
(a) an
arbitration clause which forms part of a contract shall be treated as an
agreement independent of the other terms of the contract; and
(b) a
decision by the arbitral tribunal that the contract is null and void shall not
entail ipso jure the invalidity of the arbitration clause.
If a
party is aggrieved by an arbitral award made after rejection of his plea of
jurisdiction, he can challenge it in accordance with Section 34.
Section
34, so far as is relevant reads thus :
"(1)
Recourse to a court against an arbitral award may be made only by an
application for setting aside such award in accordance with sub-section (2) and
sub-section (3).
(2) An
arbitral award may be set aside by the court only if- (a) the party making the
application furnishes proof that –
(i) a
party was under some incapacity; or
(ii) the
arbitration agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law for the time
being in force; or
(iii)
the party making the application was not given proper notice of the appointment
of an arbitrator or of the arbitral proceedings or was otherwise unable to
present his case; or
(iv) the
arbitral award deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or it contains decisions on matters
beyond the scope of the submission to arbitration :
Provided
that, if the decisions on matters submitted to arbitration can be separated
from those not so submitted, only that part of the arbitral award which
contains decisions on matters not submitted to arbitration may be set aside; or
(v)
the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in
conflict with a provision of this Part from which the parties cannot derogate,
or, failing such agreement, was not in accordance with this Part; or.
(b) the
court finds that –
(i) the
subject-matter of the dispute is not capable of settlement by arbitration under
the law for the time being in force, or
(ii) the
arbitral award is in conflict with the public policy of India.
Explanation.- Without prejudice to the generality
of sub-clause (2), it is hereby declared, for the avoidance of any doubt, that
an award is in conflict with the public policy of India if the making of the
award was induced or affected by fraud or corruption or was in violation of Section
75 or Section 81." An order setting aside or refusing to set aside an
arbitral award under Section 34 is appealable by reason of Section 37. Also appealable
are the orders relating to the jurisdiction of the arbitral tribunal under
Section 16.
It is
convenient at this stage to set out the scheme framed by the Chief Justice of
India under Section 11(10) of the Act. It is representative of the schemes
framed by the High Courts under the same provision.
"THE
APPOINTMENT OF ARBITRATORS BY THE CHIEF JUSTICE OF INDIA SCHEME, 1996
No.F.22/1/95/SCA/Genl.- In exercise of the powers conferred on the Chief
Justice of India under sub-section (10) of section 11 of the Arbitration and
Conciliation Ordinance, 1996, I hereby make the following Scheme.
1.
Short title.- This Scheme may be called the Appointment of Arbitrators by the
Chief Justice of India Scheme, 1996.
2.
Submission of request.- The request to the Chief Justice under sub-section (4)
or sub-section (5) or sub-section (6) of section 11 shall be made in writing
and shall be accompanied by-
(a) the
original arbitration agreement or a duly certified copy thereof;
(b) the
names and addresses of the parties to the arbitration agreement;
(c) the
names and addresses of the arbitrators, if any, already appointed;
(d) the
name and address of the person or institution, if any, to whom or which any
function has been entrusted by the parties to the arbitration agreement under
the appointment procedure agreed upon by them;
(e) the
qualifications required, if any, of the arbitrators by the agreement of the
parties;
(f) a
brief written statement describing the general nature of the dispute and the
points at issue;
(g) the
relief or remedy sought; and
(h) an
affidavit, supported by the relevant document, to the effect that the condition
to be satisfied under sub-section (4) or sub-section; (5) or sub-section (6) of
section 11, as the case may be, before making the request to the Chief Justice,
has been satisfied.
3.
Authority to deal with the request.- Upon receipt of a request under paragraph
2, the Chief Justice may either deal with the matter entrusted to him or
designate any other person or institution for that purpose.
4.
Forwarding of request to designated person or institution.- Where the Chief
Justice designates any person or institution under paragraph 3, he shall have
the request along with the documents mentioned in paragraph 2 forwarded
forthwith to such person or institution and also have a notice sent to the
parties to the arbitration agreement.
5.
Seeking further information.- The Chief Justice or the person or the
institution designated by him under paragraph 3 may seek further information or
clarification from the party making the request under this Scheme.
6.
Rejection of request.- Where the request made by any party under paragraph 2 is
not in accordance with the provisions of this Scheme, the Chief Justice or the
person or the institution designated by him may reject it.
7.
Notice to affected persons.- Subject to the provisions of paragraph 6, the
Chief Justice or the person or the institution designated by him shall direct
that a notice of the request be given to all the parties to the arbitration
agreement and such other person or persons as may seem to him or is likely to
be affected by such request to show cause, within the time specified in the
notice, why the appointment of the arbitrator or the measure proposed to be
taken should not be made or taken and such notice shall be accompanied by
copies of all documents referred to in paragraph 2 or, as the case may be, by
information or clarification, if any, sought under paragraph 5.
8.
Withdrawal of authority.- If the Chief Justice, on receipt of a complaint from
either party to the arbitration agreement or otherwise is of opinion that the
person or institution designated by him under paragraph 3 has neglected or
refused to act or is incapable of acting he may withdraw the authority given by
him to such person or institution and either deal with the request himself or
designate another person or institution for that purpose.
9.
Intimation of action taken on request.- The appointment made or measure taken
by the Chief Justice or any person or institution designated by him in
pursuance of the request under paragraph 1 shall be communicated in writing to-
(a) the
parties to the arbitration agreement;
(b) the
arbitrators, if any, already appointed by the parties to the arbitration
agreement;
(c) the
person or the institution referred to in paragraph 2(d);
(d) the
arbitrator appointed in pursuance of the request.
10.
Requests and communications to be sent to Registrar.- All requests under this
Scheme and communications relating thereto which are addressed to the Chief
Justice shall be presented to the Registrar of this court, who shall maintain a
separate Register of such requests and communications.
11.
Delivery and receipt of written communications.- The provisions of sub-sections
(1) and (2) of section 3 of the Arbitration and Conciliation Ordinance, 1996
shall, so far as may be, apply to all written communications received or sent
under this Scheme.
12.
Costs for processing requests.- The party making a request under this Scheme
shall, on receipt of notice of demand from-
(a) the
Registry of the court where the Chief Justice makes the appointment of an
arbitrator or takes the necessary measure, or
(b) the
designated person or the institution as the case may be, where such person or
institution makes appointment or arbitrator or takes the necessary measure, pay
an amount of Rs. 15,000 in accordance with the terms of such notice towards to
costs involved in processing the request.
13.
Interpretation.- If any question arises with reference to the interpretation of
any of the provisions of this Scheme, the question shall be referred to the
Chief Justice, whose decision shall be final.
14.
Power to amend the Scheme.- The Chief Justice may, from time to time, amend by
way of addition or variation any provision of this Scheme." The three
Judge Bench whose judgment is to be reconsidered framed the following two
questions for consideration:
"(1)
What is the nature of the order that is passed by the Chief Justice or his
nominee in exercise of power under sub-section (6) of Section 11 of the Act?
(2)
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?"
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
was placed before the Chief Justice or his designate under Section 11 it was
imperative for the Chief Justice or his designate to bear in mind the
legislative intent that the arbitral process should be set in motion without
any delay and leave all contentious issues to be raised before the arbitral
tribunal. At that stage it was not appropriate for the Chief Justice or his
designate to entertain any contentious issues between the parties and decide
the same. 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, the party
seeking the appointment was not without remedy. An intervention was possible by
a court in the same way as an intervention was possible against an administrative
order of the executive. In other words, it would be a case of non-performance
of his duty by the Chief Justice or his designate and, therefore, a mandamus
would lie. In such an event there would not be any inordinate delay in setting
the arbitral process in motion. 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, as otherwise
the legislature would have used the expression "court" or
"judicial authority". 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.
In the
referring judgement the Bench of two learned Judges noted the material relied
upon by learned counsel for the appellant before them, which related to the
Model Law, and learned counsel's argument. It then stated, "In the light
of the above contentions and material, which in our opinion have a substantial
bearing on the matter, and further inasmuch as this question is one arising
almost constantly in a large number of cases in the various High Courts, it is
desirable that this Court re-examines the matter".
It is
convenient at this stage itself to deal with the argument based on the Model
Law. The Statement of Objects and Reasons of the Act states, "Though the
said UNCITRAL Model Law and Rules are intended to deal with international
commercial arbitration and conciliation, they could, with appropriate
modifications, serve as a model for legislation on domestic arbitration and
conciliation. The present Bill seeks to consolidate and amend the law relating
to domestic arbitration, international commercial arbitration, enforcement of
foreign arbitral awards and to define the law relating to conciliation, taking
into account the said UNCITRAL Model Law and Rules". That the Model Law
was only taken into account in the drafting of the said Act is, therefore,
patent. The Act and the Model Law are not identically drafted. Under Section 11
the appointment of an arbitrator, in the event of a party to the arbitration
agreement failing to carry out his obligation to appoint an arbitrator, is to
be made by "the Chief Justice or any person or institution designated by
him"; under clause 11 of the Model Law it is to be made by a court.
Section 34 of the Act is altogether different from clause 34 of the Model Law.
The Model Law and judgments and literature thereon are, therefore, not a guide
to the interpretation of the Act and, especially, of Section 11 thereof.
Article
136 empowers this Court to grant special leave to appeal from any judgment,
decree, sentence or order in any cause or matter passed or made by any court or
tribunal in the territory of India. For the nomination of an arbitrator by the
Chief Justice or his designate under Section 11 of the Act to be subject to
Article 136 such nomination must be
(a) a
judgment, decree, determination, sentence or order
(b) passed
or made by any court or tribunal in the territory of India.
The
question is whether such nomination is a determination or order and whether it
is made by a tribunal, as contended by learned counsel for the appellants.
There is in the line of authority of this Court on the subject a recurring
theme.
In the
judgment cited by learned counsel for the appellants himself, namely, the case
of Associated Cement Companies Ltd., a Constitution Bench said, "The
question which we have to decide in the present appeal is whether the State
Government is a tribunal when it exercises its authority under R.6(5) or R.6(6)
........... The main and basic test, however, is whether the adjudicating power
which a particular authority is empowered to exercise has been conferred on it
by a statute and can be described as a part of the State's inherent power
exercised in discharging its judicial function. Applying this test, there can
be no doubt that the power which the State Government exercises under R.6(5)
and R.6(6) is a part of the State's judicial power. It has been conferred on
the State Government by a statutory Rule and it can be exercised in respect of
disputes between the management and its welfare officers. There is, in that
sense, a lis; there is affirmation by one party and denial by another, and the
dispute necessarily involves the rights and obligations of the parties to
it." In Jaswant Sugar Mills Ltd., cited by the learned Attorney General,
this Court said, "The expression "determination" in the context
in which it occurs in Article 136 signifies an effective expression of opinion
which ends a controversy or a dispute by some authority to whom it is submitted
under a valid law for disposal. The expression "order" must have also
a similar meaning, except that it need not operate to end the dispute.
'Determination' or 'order' must be judicial or quasi-judicial; purely
administrative or executive direction is not contemplated to be made the
subject-matter of appeal to this Court. The essence of the authority of this
Court being judicial, this Court does not exercise administrative or executive
powers, i.e., character of the power conferred upon this Court, original or
appellate, by its constitution being judicial, the determination or order
sought to be appealed from must have the character of a judicial
adjudication". The Court went on to state that to make a decision or an
act judicial, the following criteria must be satisfied:
"(1)
it is in substance a determination upon investigation of a question by the
application of objective standards to facts found in the light of pre-existing
legal rule;
(2) it
declares rights or imposes upon parties obligations affecting their civil
rights; and
(3)
that the investigation is subject to certain procedural attributes
contemplating an opportunity of presenting its case to a party, ascertainment
of facts by means of evidence if a dispute be on questions of fact, and if the
dispute be on question of law on the presentation of legal argument, and a
decision resulting in the disposal of the matter on findings based upon those
questions of law and fact." The Court added, "But every decision or
order by an authority under a duty to act judicially is not subject to appeal
to this Court. Under Article 136, an appeal lies to this Court from
adjudications of courts and tribunals only. Adjudication of a court or a
tribunal must doubtless be judicial : but every authority which by its
constitution or authority specially conferred upon it is required to act
judicially, is not necessary a tribunal for the purpose of Article 136."
In the case of The Engineering Mazdoor Sabha, a Constitution Bench said:
"For
invoking Art. 136(1), two conditions must be satisfied. The proposed appeal
must be from any judgment, decree, determination, sentence or order, that is to
say, it must not be against a purely executive or administrative order. If the
determination or order giving rise to the appeal is a judicial or
quasi-judicial determination or order, the first condition is satisfied. The
second condition imposed by the Article is that the said determination or order
must have been made or passed by any Court or Tribunal in the territory of India. These conditions, therefore, require that the act
complained against must have the character of a judicial or quasi-judicial act
and the authority whose act is complained against must be a Court or a
Tribunal. Unless both the conditions are satisfied, Art. 136 (1) cannot be
invoked." The Court added:
"...The
Tribunals which are contemplated by Art. 136(1) are clothed with some of the
powers of the courts. They can compel witnesses to appear, they can administer
oath, they are required to follow certain rules of procedure; the proceedings
before them are required to comply with rules of natural justice, they may not
be bound by the strict and technical rules of evidence, but, nevertheless, they
must decide on evidence adduced before them; they may not be bound by other
technical rules of law, but their decisions must, nevertheless, be consistent
with the general principles of law. In other words, they have to act judicially
and reach their decisions in an objective manner and they cannot proceed purely
administratively or base their conclusions on subjective tests or
inclinations...".
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.
Section
11 of the Act deals with the appointment of arbitrators. It provides that the
parties are free to agree on a procedure for appointing an arbitrator or
arbitrators. In the event of there being no agreement in regard to such
procedure, in an arbitration by three arbitrators each party is required to
appoint one arbitrator and the two arbitrators so appointed must appoint the
third arbitrator. If a party fails to appoint an arbitrator within thirty days
from the request to do so by the other party or the two arbitrators appointed
by the parties fail to agree on a third arbitrator within thirty days of their
appointment, a party may request the Chief Justice to nominate an arbitrator
and the nomination shall be made by the Chief Justice or any person or
institution designated by him. If the parties have not agreed on a procedure
for appointing an arbitrator in an arbitration with a sole arbitrator and the
parties fail to agree on an arbitrator within thirty days from receipt of a
request to one party by the other party, the nomination shall be made on the
request of a party by the Chief Justice or his designate. Where an appointment
procedure has been agreed upon by the parties but a party fails to act as required
by that procedure or the parties, or the two arbitrators appointed by them,
fail to reach the agreement expected of them under that procedure or a person
or institution fails to perform the function entrusted to him or it under that
procedure, a party may request the Chief Justice or his designate to nominate
an arbitrator, unless the appointment procedure provides other means in this
behalf. The decision of the Chief Justice or his designate is final. In
nominating an arbitrator the Chief Justice or his designate must have regard to
the qualifications required of the arbitrator in the agreement between the
parties and to other considerations that will secure the nomination of an
independent and impartial arbitrator.
There
is nothing in Section 11 that requires the party other than the party making
the request to be noticed. It does not contemplate a response from that other
party. It does not contemplate a decision by the Chief Justice or his designate
on any controversy that the other party may raise, even in regard to its
failure to appoint an arbitrator within the period of thirty days. That the
Chief Justice or his designate has to make the nomination of an arbitrator only
if the period of thirty days is over does not lead to the conclusion that the
decision to nominate is adjudicatory. In its request to the Chief Justice to
make the appointment the party would aver that this period has passed and,
ordinarily, correspondence between the parties would be annexed to bear this
out. This is all that the Chief Justice or his designate has to see. That the
Chief Justice or his designate has to take into account the qualifications
required of the arbitrator by the agreement between the parties (which,
ordinarily, would also be annexed to the request) and other considerations
likely to secure the nomination of an independent and impartial arbitrator also
cannot lead to the conclusion that the Chief Justice or his designate is
required to perform an adjudicatory function. That the word 'decision' is used
in the matter of the request by a party to nominate an arbitrator does not of
itself mean that an adjudicatory decision is contemplated.
As we
see it, 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 the
arbitration proceedings to commence. The function has been left to the Chief
Justice or his designate advisedly, with a view to ensure that the nomination
of the arbitrator is made by a person occupying high judicial office or his
designate, who would take due care to see that a competent, independent and
impartial arbitrator is nominated.
It
might be that though the Chief Justice or his designate might have taken all
due care to nominate an independent and impartial arbitrator, a party in a
given case may have justifiable doubts about that arbitrator's independence or
impartiality. In that event it would be open to that party to challenge the
arbitrator under Section 12, adopting the procedure under Section 13. There is
no reason whatever to conclude that the grounds for challenge under Section 13
are not available only because the arbitrator has been nominated by the Chief
Justice or his designate under Section 11.
It
might also be that in a given case the Chief Justice or his designate may have
nominated an arbitrator although the period of thirty days had not expired. If so,
the arbitral tribunal would have been improperly constituted and be without
jurisdiction. It would then be open to the aggrieved party to require the
arbitral tribunal to rule on its jurisdiction. Section 16 provides for this. It
states that the arbitral tribunal may rule on its own jurisdiction. That the
arbitral tribunal may rule "on any objections with respect to the
existence or validity of the arbitration agreement" shows that the
arbitral tribunal's authority under Section 16 is not confined to the width of
its jurisdiction, as was submitted by learned counsel for the appellants, but
goes to the very root of its jurisdiction. There would, therefore, be no
impediment in contending before the arbitral tribunal that it had been wrongly
constituted by reason of the fact that the Chief Justice or his designate had
nominated an arbitrator although the period of thirty days had not expired and
that, therefore, it had no jurisdiction.
The
schemes made by the Chief Justices under Section 11 cannot govern the
interpretation of Section 11. If the schemes, as drawn, go beyond the terms of
Section 11 they are bad and have to be amended. To the extent that The
Appointment of Arbitrators by the Chief Justice of India Scheme, 1996, goes
beyond Section 11 by requiring, in clause 7, the service of a notice upon the
other party to the arbitration agreement to show cause why the nomination of an
arbitrator, as requested, should not be made, it is bad and must be amended.
The other party needs to be given notice of the request only so that it may
know of it and it may, if it so chooses, assist the Chief Justice or his
designate in the nomination of an arbitrator.
We
record our appreciation of the assistance rendered by the learned Attorney
General as Amicus Curiae.
In the
result, the appeals are dismissed. No order as to costs.
.......................................CJI.
..........................................J.
(Syed
Shah Mohammed Quadri) ..........................................J.
(U.C. Banerjee)
..........................................J.
(S.N. Variava)
..........................................J.
(Shivaraj
V. Patil) January 30,
2002.
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