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Report No. 176

2.8.5 Difficulties arising if preliminary issues are not to be decided under sec. 11 - Examples:

Before parting with the subject, in order to support the above procedure, we may refer to two or three decisions of the Supreme Court under the 1996 Act. In Wellington Associates Ltd. vs. Kirit Mehta (AIR 2000 SC 1379), at the stage of sec. 11 applications it was argued for the respondent that the relevant clause which was relied upon by the petitioner as being an arbitration clause was, on the face of it, not an arbitration clause, and that it only permitted parties to agree, in future, to go to arbitration.

The Court straightaway held that the clause was not an arbitration clause and dismissed the sec. 11 application. The matter ended there. If such a simple issue were to be referred to the arbitrators and they should decide it after more than six adjournments , there would be unnecessary delay and expense. Again in Datar Switchgear Case (AIR 2000 SCW 3925) = 2000 Suppl. (2) J.T. 226), the applicants' request under sec. 11 (6) to the opposite side for appointment of an arbitrator was not honoured and an arbitrator was appointed by the opposite party after considerable delay.

Then the applicant filed a petition under sec. 11 seeking appointment by Court contending that the opposite party not having appointed an arbitrator within reasonable time, the said appointment was bad and therefore the Court could appoint an arbitrator under sec. 11. The opposite party contended that there was no time limit in sec. 11 (6) to take action upon a request for appointment of arbitrator and the periods fixed in sec. 11(4) and 11(5) were not applicable to sec. 11(6) and even otherwise, not mandatory.

In such a case, if the Court were to automatically appoint an arbitrator ignoring the arbitrator appointed initially by the opposite party, though belatedly, the question would arise as to which arbitrator would decide the case on merits. Such a case has arisen before the Delhi High Court as stated before us by a retired Judge of the Delhi High Court who is one of such arbitrators. We are referring to this case only to show that even if the Judge is dealing with the sec. 11 applications on the administrative side, some peculiar situations can arise requiring the Court to decide some issues before appointing an arbitrator.

In yet another case, Malayasian Airlines 2000(7) Scale 724, the filing of the application under sec. 11 by a power of attorney holder under a power of attorney which was not properly stamped as per Indian Stamp Act, was objected to. The applicant agreed to pay the penalty and stamp duty. An order had to be passed permitting parties to pay the duty and penalty before the concerned authority. It was not possible to straightaway appoint an arbitrator unless the issue of stamp duty was decided.

Like this, a variety of situations may arise where some decision on various issues which are raised at the stage of sec. 11 or sec. 8 becomes necessary. But once we improvise a procedure which will steer clear of delays, as stated above, the Judge at the stage of sec. 11 can have power to decide the various issues and the objections on the ground of delay in arbitration will not hold good. So far as delays in filing appeals etc., against orders in sec. 11 applications are concerned, we shall take up these questions separately.

We shall demonstrate that the number of stages of court intervention are more if the order of the Judge is an administrative order rather than if it is a judicial order. Unfortunately, an indepth study of the various ramifications of this problem has not been made by those who pleaded before us for retention of the existing provisions. We shall shortly advert to those issues. The result of the above discussion is that at the stage of sec. 11 applications, as under the ICC Rules, the Judge can be enabled to decide preliminary issues that may be raised.

This would save lot of expense and time. However the procedure for decision on the issues should not be allowed to be abused. A flexible provision is to be made, as suggested at the Bombay seminar, that the Judge will embark on a decision on preliminary issues only if they can be decided on basis of the undisputed documents and where no oral evidence is necessary, and if the Judge feels that the enquiry is simple enough and will not lead to delays and feels that this will save costs. Otherwise the Judge shall be bound to send these preliminary issues also to the arbitrators.

The Arbitration and Conciliation (Amendment) Bill, 2001 Back

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