Report No. 176
2.4.1 Amendments to Section 8
'Judicial authority' in section 8 & proposed sec. 2(1)(fa) and new sub-section (3) to section 42: Several suggestions have been made with regard to section 8. We will deal with these suggestions one after another. Whether the term 'Judicial authority' in sec. 8 includes quasi judicial statutory authorities. Section 8 deals with a situation where an action is filed before a "judicial authority" and the opposite party relies on an arbitration clause, and in such a situation the Court 'shall' refer the matter to arbitration.
The Supreme Court has held that by using the word 'shall' (in contrast to the word 'may' used in sec. 34 of the old Act of 1940), there is no discretion vested in the Judicial authority and the reference to arbitration is mandatory (See P. Anandagajapathi Raju vs. P.V.G. Raju (2000)(4) SCC 539: AIR 2000 SC 1886). It is not proposed to deviate from this principle.
It is true that the English Act still retains the discretionary part in sec. 86 of that Act so far as domestic arbitration is concerned but even in England, the said provision in section 86 has not been brought into force and it is, in fact, said that it is not likely to be brought in force. A two judge Bench of the Supreme Court has held in M/s. Fair Air Engineers Private Ltd. vs. M.K. Modi (AIR 1997 SC 533) while dealing with the identical words 'judicial authority' used in the corresponding provision, sec.34 of the old Act of 1940, that the said words will cover Consumer Courts.
It was held that the consumer fora are quasi judicial bodies falling within the meaning of the words 'judicial authority' and could refer disputes to arbitration, if the parties before the fora are parties to arbitration agreements. Though the case arose under the 1940 Act, specific reference was made in the judgment to the Ordinance of 1996 which preceded the present Act and to section 8 of the Ordinance, interpreting it as applicable to quasi-judicial authorities also.
2.4.2 In this context, we have also to refer to a latter three judge judgment of the Supreme Court in Skypack Couriers Ltd. vs. N.K. Modi (200(5) SCC 294), wherein the Court set aside an award made by a third party to whom the National Consumer Commission referred the dispute for final adjudication without any further scope for filing objections. In the order of the National Commission making the reference, it was stated that they were not invoking the provisions of the Arbitration Act but were referring the matter to a third party for consensual adjudication.
The Supreme Court set aside the award and held that the Commission could not have adopted the above procedure of reference to a third party, for final decision without a right to file objections thereto. At the same time, the Supreme Court stated that it was not deciding whether the consumer courts could refer matters to arbitration under the Arbitration laws. We are referring to this case only to highlight that the earlier decision in M/s. Fair Air Engineers Ltd. vs. M.K. Modi was neither referred to nor overruled in the Skypack Courier case.
2.4.3 In the Consultation Paper (Annexure II), it was proposed that the words 'judicial authority' be dropped and the words 'Courts' substituted instead. This proposal was made keeping in view that the remedies that may be resorted to for questioning orders passed by different 'judicial authorities' may not be uniform. But in view of the subsequent discussion in various seminars, it was pointed out that it would be better if quasi judicial authorities before whom some actions are pending, are in a position to refer matters to arbitrators, wherever reliance is placed upon an arbitration clause.
The Commission is of the view that the words 'judicial authority' can be retained to enable easy reference to arbitration under section 8 itself by the judicial authority concerned, (as held in Fair Air Engineers case) before whom the matter may be pending rather than drive the party who is relying on the arbitration clause to a separate application under sec.11.
2.4.4 It is true that remedies against an order passed by different judicial bodies under sec.8 may normally be different. But because of sec. 5, remedy under sec.115 Code of Civil Procedure is barred and the remedy may be only under Art.227 of the Constitution of India. If it is an order passed by any quasi-judicial statutory authority, then because of sec. 5, the remedy under the special Act applicable to the tribunal is barred and remedy may be only under Art.227.
Therefore, there is no scope for different remedies becoming available under different special statutes applicable to different quasi-judicial authorities. Thus the remedies are perhaps restricted to Art. 227. Therefore the word 'judicial authority' will remain and will, therefore, cover quasi-judicial tribunals also as per the law declared by the Supreme Court in Fair Air Engineers case. We have already referred to the proposal to add a definition of 'judicial authority' in section 2(1) as follows: Section 2(1)(fa): 'judicial authority' includes any quasi-judicial statutory authority.