Professional Documents
Culture Documents
Equivalent Citation: AIR2001All259, 2001 (44) ALR 323, 2001(3)ARBLR410(All), 2001 3 AWC1939All, 2001CriLJ274
Appellants: Rail India Technical and Economic Services Ltd. and another
Vs.
Respondent: Vidyawati Construction Co. and others
Hon'ble Judges/Coram:
G.P. Mathur and Satish Kumar Jain-II, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: Umesh Narain Sharma and Ravi Shanker Prasad,
Advs.
Case Note:
Arbitration and Conciliation Act, 1996 - Sections 11(5)/(6) and 16--
Appointment of Arbitrator by Chief Justice of High Court--Order of
appointment is administrative order--Contention that in view of arbitration
clause Chief Justice of Delhi High Court and not Chief Justice of Allahabad High
Court has authority to appoint arbitrator--Untenable--Such plea not raised in
objection to petition for appointment--Plea cannot be raised for first time in
writ petition--Arbitration clause speaking of Court--But Chief Justice
appointing arbitrator not Court--Claim of respondent mainly for amount due on
account of construction of building at Allahabad--Hence, civil court at
Allahabad has jurisdiction under Section 20, C.P.C.--Hence Chief Justice of
Allahabad High Court has jurisdiction to appoint arbitrator in view of Section
11(12)(b)--Not sound exercise of discretion to entertain writ petition
challenging order of appointment of arbitrator under Section 11--Writ
petitioner can raise all pleas on which order of Chief Justice assailed in writ
petition before Arbitral Tribunal under Section 16--High Court should not
entertain writ petition having effect of delaying arbitral proceedings.The writ
petitioner can raise all such please on which the order of the Chief Justice has
been assailed here before the Arbitral Tribunal under Section 16 of the
Arbitration and Conciliation Act, 1996 and can pursue the further remedies
provided under the Act and this Court should not entertain a writ petition
under Article 226 of the Constitution at the initial stage which may have the
effect of delaying the arbitral proceedings and thereby defeat the very purpose
for which the 1996 Act has been enacted.
JUDGMENT
G.P. Mathur, J.
1. This writ petition under Article 226 of the Constitution has been filed for quashing the
order dated November 17, 2000 of Hon'ble the Chief Justice appointing an arbitrator
under Section 11(5) of the Arbitration and Conciliation Act. 1996.
3. The first question which requires consideration is what is the nature of the order
passed by the Chief Justice under Section 11(5) of the Act and whether it is amenable
to writ jurisdiction of the court. In Sundaram Finance Ltd. v. N.E.P.C. India Ltd.,
MANU/SC/0012/1999 : (1999) 2 SCC 479. It was observed that appointment of
arbitrator under Section 11 of the Act does not require the Court to pass a judicial
order. The same view was taken in Ador Samin (P.) Ltd. v. Peekay Holdings Ltd.,
MANU/SC/0506/1999 : (1999) 8 SCC 572, and it was held that while exercising power
under Section 11(6) of the Act, the Chief Justice of the High Court or his designate acts
in an administrative capacity and such an order of the Chief Justice is not passed by any
Court exercising any judicial function nor it is a Tribunal having the trappings of a
judicial authority. The question as to what is the nature of the order passed by the Chief
Justice while making appointment of an arbitrator under Section 11 of the Act was
referred for consideration to a Larger Bench in Konkan Rly. Corporation Ltd. and others
v. Mehul Construction Co., MANU/SC/0523/2000 : (2000) 7 SCC 201. After a detailed
consideration of the matter, it was observed as follows in paragraph 6 of the reports :
"The nature of the function performed by the Chief Justice being essentially
to aid the constitution of the Arbitral Tribunal immediately and the
Legislature having consciously chosen to confer the power on the Chief
Justice and not on a Court, it is apparent that the order passed by the Chief
Justice or his nominee is an administrative order, as has been held by this
Court in Ador Samia, case and the observations of this Court in Sundaram
Finance Ltd., case also are quite appropriate and neither of those decisions
require any reconsideration......."
It may be noticed that in a subsequent decision in Konkan Railway Corporation Ltd. and
another v. Rani Construction Ltd., (2000) 8 SCC 159. the question has again been
referred for reconsideration. However, the decision rendered in Konkan Railway
Corporation Ltd. v. Mehul Construction Company (supra) has not been overruled so far
and, therefore, it is binding on this Court. Accordingly, we have to proceed on the
footing that the impugned order dated November 17, 2000 of the Chief Justice is an
administrative order and, therefore, the present writ petition under Article 226 of the
Constitution is maintainable.
5. The answer to the question as to the Chief Justice of which particular High Court will
have the jurisdiction to entertain a petition under Section 11 of the Act is given in
clause (b) of sub-section (12) of Section 11 of the Act. It provides that reference to
"Chief Justice" in subsections (4), (5), (6), (7), (8) and (10) of Section 11 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. Therefore, in order to ascertain the jurisdiction of the
Chief Justice, it has to be seen which principal civil court of original jurisdiction or the
High Court exercising Its ordinary original civil jurisdiction has the jurisdiction to decide
the question forming the subject-matter of the arbitration if the same had been the
6. The second submission of the learned counsel for the petitioner is that the contractor
M/s. Vidyawati Construction Ltd. (respondent No. 1) had made a request by their letter
dated September 30. 1998 for appointment of an arbitrator and thereafter the
Managing Director of R.I.T.E.S. by his order dated November 5, 1998 had appointed Sri
Iqbal Singh, Group General Manager, as the sole arbitrator. The General Manager of
R.I.T.E.S. sent a letter dated November 9, 1998 to Sri Iqbal Singh informing him that
he had been appointed as an arbitrator and a copy of the said letter was also sent to
the contractor M/s. Vidyawati Construction Company (respondent No. 1) by registered
post. Learned counsel has submitted that as an arbitrator had already been appointed
on 'November 5, 1998 the conditions necessary for exercise of power by the Chief
Justice under sub-section (5) or sub-section (6) of Section 11 of the Act did not exist
and, therefore, the impugned order dated November 17, 2000 passed by the Chief
Justice appointing an arbitrator is not only illegal but is also without jurisdiction. In
support of his submission, learned counsel has placed reliance on certain observations
made in Data Switchgears Ltd. v. Tata Finance Ltd. and another, MANU/SC/0651/2000 :
(2000) 8 SCC 151.
7. The principal question to be considered is whether it would be proper for the High
Court, while exercising jurisdiction under Article 226 of the Constitution, to examine the
correctness or validity of the order passed by the Chief Justice under sub-sections (5) or
(6) of Section 11 of the Act or any challenge to such an order, having regard to scheme
of the Act, should be raised before the Arbitral Tribunal.
9. Section 2(1)(d) provides that in Part 1 "Arbitral Tribunal" means a sole arbitrator or a
penal of arbitrators. Chapter IV of the Act deals with jurisdiction of Arbitral Tribunals
and Section 16 thereof reads as follows :
(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.
(2) A plea that the Arbitral Tribunal does not have jurisdiction shall' be raised
not later than the submission of the statement of defence ; however, a party
shall not be precluded from raising such a plea merely because that he has
appointed, or participated in the appointment of an arbitrator.
(3) A plea that the Arbitral Tribunal is exceeding the scope of its authority
shall be raised as soon as the matter alleged to be beyond the scope of its
authority is raised during the arbitral proceedings.
(4) The Arbitral Tribunal may, in either of the case referred to sub-section
(2) or sub-section (3), admit a later plea if it consider the delay justified.
(5) The Arbitral Tribunal shall decide on a plea referred to in sub-section (2)
or sub-section (3) and, where the Arbitral Tribunal takes a decision rejecting
the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for
setting aside such an arbitral award in accordance with Section 34."
10. Sub-section (1) of Section 16 provides that Arbitral Tribunal may rule on its own
jurisdiction. Subsection (2) of Section 16 shows that a plea that the Arbitral Tribunal
does not have the jurisdiction can be raised and the only restriction is that such a plea
should be raised not later than the submission of the statement of the defence. Sub-
section (4) permits the Arbitral Tribunal to admit a plea that it has no jurisdiction even
later if it considers the delay justified. Sub-section (5) enjoins upon the Arbitral Tribunal
to take a decision on a plea referred to in sub-section (2). namely, that it does not have
the jurisdiction. Where the Arbitral Tribunal takes a decision rejecting the plea, it will
continue with the arbitral proceedings and make an arbitral award. Sub-section (6)
provides that a party aggrieved by such an arbitral award may make an application for
setting aside such an arbitral award in accordance with Section 34. In view of the
11. What should be the approach of the Chief Justice while hearing a petition under
Section 11 of the Act and whether he should entertain and decide every objection has
been indicated in Konkan Railway Corporation Ltd. v. Mehul Construction Co. (supra) at
page 206. In the following words :
"......When the matter is placed before the Chief Justice or his nominee under
Section 11 of the Act, it is imperative for the said Chief Justice or his
nominee to bear in mind the legislative intent that the arbitral process should
be set in motion without any delay whatsoever and all contentious issues are
left to be raised before the Arbitral Tribunal itself. At that stage, it would not
be appropriate for the Chief Justice or his nominee to entertain any
contentious issue between the parties and decide the same......"
In the same decision, after taking notice of the provisions of Sections 13 and 16 of the
Act, the Court ruled as follows at page 207 :
".....Conferment of such power on the arbitrator under the 1996 Act indicates
the intention of the Legislature and its anxiety to see that the arbitral
process is set in motion. This being the legislation intent, it would be proper
for the Chief Justice or his nominee just to appoint an arbitrator without
wasting any time or without entertaining any contentious issues at that
stage, by a party objecting to the appointment of an arbitrator. If this
approach is adhered to, then there would be no grievance of any party and in
the arbitral proceeding, it would be open to raise any objection, as provided
under the Act......"
12. In Nimet Resources Inc. and another v. Essar Steels Ltd., (2000) 7 SCC 407, it has
been held that in a matter where there has been some transaction between the parties
and the existence of arbitration agreement is in challenge, the proper course for the
parties is to thrash out such question under Section 16 and not under Section 11 of the
Act. The reason given for taking such a view was that the power which is exercised
under Section 11 of the Act is in the nature of an administrative order and in such a
case unless the Chief Justice or his nominee can be absolutely sure that there exists no
arbitration agreement between the parties, it would be difficult to state that there
should be no reference to arbitration. It was further observed that such a view may not
be conclusive of the nature of the powers that are exercised under Section 11(6) of the
Act. Learned counsel for the petitioner has however placed strong reliance on
Wellington Associates Ltd. v. Writ Mehta, MANU/SC/0232/2000 : (2000) 4 SCC 272.
and has contended that in view of the ratio of this decision the objection of the writ
petitioner that no reference can be made to the Arbitral Tribunal ought to have been
decided by the Chief Justice, and as this question has neither been considered nor
decided, the impugned order dated November 17, 2000 deserves to be set aside and
the matter should be remitted to the Chief Justice for a fresh decision. We are afraid
that such a view does not follow from the principle enunciated in the decision cited by
13. In Sundaram Finance Ltd. v. N.E.P.C. Ltd., (supra), it has been observed that the
provisions of the 1996 Act should be interpreted keeping in mind the Model Law as the
concept under the present Act has undergone a complete change. It will, therefore, be
useful to take note of the corresponding provisions of the U.N.C.I.T.R.A.L. Model Law.
Article 16 of the Model Law, which corresponds to Section 16 of the Act is being
reproduced below :
(3) The Arbitral Tribunal may rule on a plea referred to in paragraph (2) of
this article either as a preliminary question or in an award on the merits. In
either case, a ruling by the Arbitral Tribunal that it has jurisdiction may be
contested by any party only in an action for setting aside the arbitral award."
14. The commentary on the three paragraphs of the Model Law has been given under
the headings A. B. C and D. Note 1 under heading A and notes 11 to 15 under Note D,
which are relevant for the controversy in hand, are being reproduced below :
12. As noted earlier (above, para 1), the power of the Arbitral
Tribunal to rule on its own competence is subject to judicial
control. Where a ruling by the Arbitral Tribunal that it has
jurisdiction is, exceptionally, included in an award on the merits, it
is obvious that the judicial control of that ruling would be
exercised upon an application by the objecting party for the
setting aside of that award. The less clear, and in fact
controversial, case is where such affirmative ruling is made on a
plea as a preliminary question. The solution adopted in Article 16
(3) is that also in this case judicial control may be sought only
after the award on the merits is rendered, namely in setting aside
proceedings (and, although this is not immediately clear from the
present text, in any recognition or enforcement proceedings).
13. It was for the purpose of preventing dilatory tactics and abuse
of any immediate right to appeal that this solution was adopted,
reinforced by the deletion of previous draft Article 17, which
provided for concurrent court control. The disadvantage of this
solution, as was pointed out by the proponents of immediate court
control, is that it may lead to considerable waste of time and
money where, after lengthy proceedings with expensive hearings
and taking of evidence, the Court sets aside the award for tack of
jurisdiction.
15. Article 16(3) does not regulate the case where the Arbitral Tribunal rules
that it has no jurisdiction. A previous draft provision which allowed recourse
to the court, not necessarily with the aim of forcing the arbitrators to
continue the proceedings but in order to obtain a decision on the existence of
a valid arbitration agreement was not retained by the Working Group. It was
stated that such ruling of the Arbitral Tribunal was final and binding as
regards these arbitral proceedings but did not settle the question whether
the substantive claim was to be decided by a court or by an Arbitral Tribunal.
It is submitted that it thus depends on the general law on arbitration or civil
procedure whether court control on such ruling may be sought, other than by
way of request in any substantive proceedings as referred to in Article 8(1)."
15. Note I shows that it is initially and primarily for the Arbitral Tribunal Itself to
determine whether it has jurisdiction and this principle is an accepted feature of modern
international arbitration. Note D shows that in order to avoid waste of time and
expenses a plea regarding the jurisdiction of the Arbitral Tribunal is normally to be
decided as a preliminary issue as a separate decision, unless the question of jurisdiction
as closely interlinked with the substantive issue. The provisions of the Model Law and
the commentary thereon clearly show that it is widely accepted practice in international
arbitration to raise a plea regarding the jurisdiction of the Arbitral Tribunal before the
Arbitral Tribunal itself, and a challenge to the order of reference is not to be raised
before a court at this stage. If we take it as a guiding principle for interpreting the
provisions of the Act, it will be in conformity with the practice and procedure in
international arbitration. Since our country is a signatory to some international
conventions., the domestic law of the country should be interpreted in a manner which
do not come in conflict with it. In Peoples Union for Civil Liberty v. Union of India,
(1997) SCC 301, the Apex Court has held that it is almost an accepted proposition of
law that rules of customary International Law, shall be deemed to be incorporated in
the domestic law. For holding this, the court relied upon the observation made by Sikri,
C.J. In Keshva Nand Bharati, MANU/SC/0445/1973 that in view of Article 51 of the
directive principles, the Court must interpret the language of the Constitution, if not
intractable, in the light of the United Nations Charter and the solemn declaration
subscribed to by India, The Court also took notice of similar observation made by
Khanna, J., in A. D. M., Jabalpur, MANU/SC/0062/1976 : (1976) 2 SCC 521 (at page
754) that if two constructions of the Municipal Law are possible, the Court should lean
in favour of adopting such construction as would make the provisions of the Municipal
Law to be in harmony with International law or treaty obligations. Applying this principle
the provisions of the Act should be interpreted in conformity With the international
practice and, consequently, no challenge should be permitted to be raised in a Court
against an order of reference to an arbitrator and the party feeling aggrieved should
raise such plea before the Arbitratral Tribunal itself.
16. It is settled principle that if proceedings are initiated under a Statute which creates
a liability and also provides for a remedy, the remedy provided by the Statute only
must be availed of and not a writ petition under Article 226 of the Constitution. This
question was considered in considerable detail by a Constitution Bench soon after
17. The detention laws like National Security Act or Conservation of Foreign Exchange
and Prevention of Smuggling Activities Act make serious Inroad in the liberty of a
person. Under these laws a person is detained without any prior notice and, that too, on
the subjective satisfaction of the detaining authority which satisfaction cannot be
challenged on merits. The person detained gets only a right to make representation
against his detention but, that too, after he has been detained and he has been
deprived of his liberty. The decision of the representation naturally takes time. The
principle that the machinery provided by the Act should not be permitted to be by-
passed by taking recourse to proceedings under Article 226 of the Constitution prior to
execution of the detention, order was reiterated even in such cases. In Additional
Secretary to Government of India v. Smt. Alka Subhash Gadia, JT 1991 (1) SC 549, the
High Court had quashed the detention order under Article 226 of the Constitution at a
pre-execution stage but the Supreme Court reversed the judgment with the following
observations (paragraph 30) ;
"......The powers under Articles 226 and 32 are wide, and are untrammelled
by any external restrictions and can reach any executive order resulting in
civil or criminal consequences. However, the Courts have over the years
evolved certain self-restraints for exercising these powers. They have done
so in the interest of the administration of justice and for better and more
efficient and informed exercise of the said powers. These self-imposed
restraints are not confined to the review of the orders passed under
detention law only. They extend to the orders passed and decisions made
under all laws. It is in pursuance of this self-evolved judicial policy and in
conformity with the self-imposed internal restrictions that the Courts Insist
that the aggrieved person first allow the due operation and implementation
of the concerned law and exhaust the remedies provided by it before
approaching the High Court and this Court to invoke their discretionary
extraordinary and equitable jurisdiction under Articles 226 and 32
respectively. That jurisdiction by its very nature is to be used sparingly and
in circumstances where no other efficacious remedy is available...."
This decision has been subsequently followed in N. K. Bapna v. Union of India, JT 1992
(4) SC 49 ; State of Tamil Nadu u. P. K. Shamsuddin, MANU/SC/0377/1992 : AIR 1992
SC 1937 and Subhash Mujimal Gandhi v. L. Miningliana, MANU/SC/0835/1994 : 1994
(6) SCC 14. In view of these authoritative pronouncements it will not be a sound
exercise of discretion to entertain a petition under Article 226 of the Constitution
wherein challenge is made to an order of appointment of arbitrator under Section 11 of
the Act.
".....It is clarified that the learned Chief Justice not having functioned as a
court or tribunal and the order being administrative in nature, the
observations and findings are not binding and will not be taken Into
consideration by the Arbitral Tribunal, if an objection to validity or existence
of arbitration agreement is taken before it. Such objection, if taken, shall be
decided on its own merits.........."
19. We are, therefore, clearly of the opinion that the writ petitioner can raise all such
pleas on which the order of the Chief Justice has been assailed here before the Arbitral
Tribunal under Section 16 of the Act and can pursue the further remedies provided
under the Act and this Court should not entertain a writ petition under Article 226 of the
Constitution at the initial stage which may have the effect of delaying the arbitral
proceedings and thereby defeat the very purpose for which the 1996 Act has been
enacted.