DAMODARM SANJIVAYA NATIONAL LAW UNIVERSITY, SABBAVARAM

ANDHRA PRADESH, INDIA

ASSIGNMENT TITLE

ROLE OF CHIEF JUSTICE IN APPOINTMENT OF ARBITRATORS

SUBJECT

ADR

NAME OF THE FACULTY

Mr.R.VISHNUKUMAR

SUBMITTED BY

ADARSH KUMAR

6th Semester

17LLB004

SECTION-A

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 ACKNOWLEDGEMENT

This project is the result of the hardwork and dedication as put in by me and last but never the
least my subject faculty Vishnu sir who constantly motivated us to do the same. This project
did increase to a great extent my understanding of the subject and topic and has turned out to
be an objective assesment

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 TABLE OF CONTENTS

S.NO CONTENTS PAGES

1 INTRODUCTION 5-6

2 ROLE OF THE COURT 6-8

3 ANALYTICAL PERSPECTIVE 8-11

4 PREVAILING FACETS 11-13

5 FUNCTIONALITY 13-14

6 ICC PERSPECTIVE 14-15

7 UNITED KINGDOM 15-16

8 CONCLUSION 16-20

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 INTRODUCTION

The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act)
The Act is based on the 1985 UNCITRAL Model Law on International Commercial
Arbitration and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and
Reasons of the Act recognises that India’s economic reforms will become effective only if the
nation’s dispute resolution provisions are in tune with international regime. The Statement of
Objects and Reasons set forth the main objectives of the Act as follows:

“i) to comprehensively cover international and commercial arbitration and conciliation as

also domestic arbitration and conciliation;

ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting
the needs of the specific arbitration;

iii) to provide that the arbitral tribunal gives reasons for its arbitral award;

iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;

v) to minimise the supervisory role of courts in the arbitral process;

vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during

the arbitral proceedings to encourage settlement of disputes;

vii) to provide that every final arbitral award is enforced in the same manner as if it were a
decree of the court;

Section 11 of the Arbitration and Conciliation Act, 1996 provides for appointment of
arbitrators by the Chief Justice on failure of party-agreed procedure or the lack of consensus
between the parties regarding the arbitrator. Numerous applications are filed every year in the
Supreme Court and the high courts for appointment of arbitrators. This paper argues that (1)
the judiciary has virtually created a monopoly by institutionalising appointment of retired
judges as arbitrators; (2) courts have eliminated competition from other potentially capable
professionals for appointment as arbitrators; and (3) there is lack of transparency in the
process of appointment of arbitrators. Information to gauge the level of transparency in the

4
appointment process has been obtained from 10 high courts and the Supreme Court through
the Right to Information

Act is a composite piece of legislation. It provides for domestic arbitration; international

commercial arbitration; enforcement of foreign award and conciliation (the latter being based
on the UNCITRAL Conciliation Rules of 1980). The more significant provisions of the Act
are to be found in Part I and Part II thereof. Part I contains the provisions for domestic and
international commercial arbitration in India. All arbitration conducted in India would be
governed by Part I, irrespective of the nationalities of the parties.

Part II provides for enforcement of foreign awards. Part I is more comprehensive and
contains extensive provisions based on the Model Law. It provides inter alia for arbitrability
of disputes; non-intervention by courts; composition of the arbitral tribunal; jurisdiction of
arbitral tribunal; conduct of the arbitration proceedings; recourse against arbitral awards and
enforcement. Part II on the other hand, is largely restricted to enforcement of foreign awards
governed by the New York Convention or the Geneva Convention.

Part II is thus, (by its very nature) not a complete code. This led to judicial innovation by the
Supreme Court in the case of Bhatia International v. Bulk Trading 1. Here the Indian courts
jurisdiction was invoked by a party seeking interim measures of protection in relation to an
arbitration under the ICC Rules to be conducted in Paris. The provision for interim measure
(section 9) was to be found in Part I alone (which applies only to domestic arbitration). Hence
the Court was faced with a situation that there was no proprio vigore legal provision under
which it could grant interim measure of protection. Creatively interpreting the Act, the
Supreme Court held that the “general provisions” of Part I would apply also to offshore
arbitrations, unless the parties expressly or impliedly exclude applicability of the same.
Hence by judicial innovation, the Supreme Court extended applicability of the general
provisions of Part I to off-shore arbitrations as well.

1
(2002) 4 SCC 105

5
This became clear in a subsequent decision of the Supreme Court in Shreejee Traco (I) Pvt.
Ltd. v. Paperline International Inc2. Here the Court’s assistance was sought for appointing an
arbitrator in an offshore arbitration. The power of appointment by court exists under Section
11 of Part I of the Act. The Court declined to exercise jurisdiction. It found that the
arbitration was to be conducted in New York and that the law governing the arbitration
proceedings would be the law of seat of the arbitration. Hence, the extension of Part I
provisions to foreign arbitrations sanctified by Bhatia could not be resorted to in every case.
The Indian Courts would have to first determine if it has jurisdiction, in the international
sense.

ROLE OF THE COURT:

One of the fundamental features of the Act is that the role of the court has been minimised.
Accordingly, it is provided that any matter before a judicial authority containing an
arbitration agreement shall be referred to arbitration (Section 8 provided the non - applicant
objects no later than submitting its statement of defense on merits). Further, no judicial
authority shall interfere,

except as provided for under the Act (Section 5). In relation to arbitration proceedings, parties
can approach the Court only for two purposes: (a) for any interim measure of protection or
injunction or for any appointment of receiver etc; or

(b) for the appointment of an arbitrator in the event a party fails to appoint an arbitrator or if
two appointed arbitrators fail to agree upon the third arbitrator. In such an event, in the case
of domestic arbitration, the Chief Justice of a High Court may appoint an arbitrator, and in
the case of international commercial arbitration, the Chief Justice of the Supreme Court of
India may carry out the appointment. A court of law can also be approached if there is any
controversy as to whether an arbitrator has been unable to perform his functions or has failed
to act without undue delay or there is a dispute on the same. In such an event, the court may
decide to terminate the mandate of the arbitrator and appoint a substitute arbitrator.

2
(2003) 9 SCC 79.

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 JURISDICTION OF THE ARBITRATOR:

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. The
arbitration agreement shall be deemed to be independent of the contract containing the
arbitration clause, and invalidity of the contract shall not render the arbitration agreement
void. Hence, the arbitrators shall have jurisdiction even if the contract in which the arbitration
agreement is contained is vitiated by fraud and/or any other legal infirmity. Further, any
objection as to jurisdiction of the arbitrators should be raised by as party at the first instance,
i.e., either prior to or along with the filing of the statement of defence. If the plea of
jurisdiction is rejected, the arbitrators can proceed with the arbitration and make the arbitral
award. Any party aggrieved by such an award may apply for having it set aside under Section
34 of the Act. Hence, the scheme is that, in the first instance, the objections are to be taken up
by the arbitral tribunal and in the event of an adverse order, it is open to the aggrieved party
to challenge the award.

ANALYTICAL CONSTRUCT

A momentous Seven Judge Constitution Bench decision in SBP& Co. v. Patel Engineering
Ltd., the Supreme Court has clarified and explained the operation of Section 11(6) of the
Arbitration and Conciliation Act, 1996 [hereinafter the "Act"] dealing with the appointment
of arbitrators by the Chief Justice. The Court explained that such an appointment is an
exercise of judicial power and not an administrative decision.

This has far-reaching consequences for the future conduct of arbitral proceedings in India and
more importantly for the signal that this sends out about the scope of judicial interference in
alternative methods of dispute resolution. Numerous commentators have criticized the
decision in SBP & Co. v. Patel Engineering Ltd. as going beyond the expected role of a
judicial forum in a party chosen dispute resolution mechanism. Be that as it may, it is
submitted that this case raises a more fundamental concern, a concern that has been
overlooked in the diatribe against judicial interference in arbitration. More significantly, it is
to be rued that the decision has virtually re-written the statutory language in Section 11(6). In
a legal system that prides itself on a rule of law premised upon a tripartite system of
governance, this decision goes way beyond the intention of the legislature that was clearly
discernible in the express words of the statute.

7
This has opened a Pandora's box. The Act, under Section 12(2), provides full freedom to the
parties to agree upon a procedure for the appointment of the arbitrator(s). Usually, the parties
provide for the appointment of a named arbitrator, or in the case of an institutional
arbitration, a designee institution. If such procedure for appointment of the arbitrators is left
for future agreement between the parties, it is not uncommon that for frustrating the
arbitration, one of the parties refuses to appoint an arbitrator.

Similarly, it is not hard to imagine situations where both the party-appointed arbitrators are
unable to reach any agreement as to their choice of a common third arbitrator. In such
situations, where the parties are not able to agree on the procedure, or the arbitrators are
unable to agree upon the third arbitrator, or the designee institution is unable to perform its
functions related to the procedure of appointment of the arbitral tribunal, Section 11(6) of the
Act provides, in the absence of any other means for securing the appointment provided in the
agreement on the appointment procedure, such appointment shall be made, upon request of a
party, by the Chief Justice or any person or institution designated by him. The next sub-
section further provides this decision of the Chief Justice or any person or institution
designated by him shall be final

Thus to appoint or secure appointment of the sole arbitrator or the third arbitrator, the default
power under all these provisions vests in the Chief Justice or any person or institution
designated by him. The pertinent questions therefore are: What is the nature of this function?
Is it judicial? Is it administrative or neither? Or is it a statutory power? The Supreme Court
has been vexed with these questions since the enactment of the Act.

Delving further, Intervention by the Court at the instance of a party to arbitral proceedings is
provided in Section 9 of the Arbitration and Conciliation Act 1996 provides for intervention
by the Court at the instance of a party to arbitral proceedings. The Act of 1996, besides
empowering the arbitral tribunal to make orders under Section 17 of the Act 1996, includes
provision in Section 9 conferring similar powers on the Court. The range of the measures
covered by this section is considerably wider than that under section 17, due to the different
purposes of these two provisions. The provisions of Section 11 of The Arbitration and
Conciliation Act 1996 gives the parties maximum freedom to concur on a procedure,
followed by default provisions in case the parties fail to agree on the procedure or the parties
do not come

8
to agreement. This provision vests the default power to appoint arbitrators in the ‘Chief
Justice or any Person or Institution designated by him’. This provision is one of the instances
where court assistance is of vital importance to ensure smooth and efficient arbitral
proceedings. However, it is to be highlighted at this juncture that the most significant
deviation from the Model Law is that Section 11 uses the word “Chief Justice” instead of the
word ‘Court” used in Article 11 of the Model Law.

Before adverting to appraise this concept whether nature of the function exercised by the
Chief Justice under this provision Is Judicial, Administrative or neither or is a statutory
power, supported with ratios of law laid down by the Hon’ble Apex Court, it would be proper
to appreciate in precision the provision of this section under the following categories.

NATIONALITY OF THE ARBITRATOR

‘No person shall be precluded by reason of Nationality from acting as an arbitrator’ as

provided in Section 11(1) of the 1996 Act. This provision is designed to indicate that Indian
Legislature has no bias against persons of any Nationality for acting as an Arbitrator in
Arbitration under Part I of this Act. However, it grants full liberty to the parties to choose or
restrict the Arbitrators from different nationalities.

CHOICE OF PROCEDURE

Full freedom to the parties to agree on a procedure for appointing the Arbitrator/s is given
under Section 11(2) of the Act This freedom, however, is subject to the default procedure set
forth in section 11(6) for securing the appointment of an Arbitrator through the Chief Justice
or any Person or Institution designated by him.

DEFAULT IN CASE OF THREE ARBITRATOR PANEL

In case the parties fail to agree on a procedure, section 11(3) of the Act, in Arbitration with
three Arbitrators, provides the default procedure for appointment of the Arbitrator/s. If the
parties fail to make appointment in accordance with this procedure within the prescribed
time, section 11(4) of the Act provides that the appointment of the Arbitrator shall, upon
request of a party, be made by the Chief Justice or any Person or Institution designated by
him.

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 DEFAULT IN CASE OF ARBITRATION WITH SOLE ARBITRATOR

Section 11(5) of the Act contemplates that in the absence of an agreement on procedure under
sub section (2), in an Arbitration with sole Arbitrator, if the parties fail to agree on the
Arbitrator within the prescribed time, then, upon the request of a party, the appointment shall
be made by the Chief Justice or any Person or Institution designated by him.

SECURING APPOINTMENT
Section 11(6) of the Act provides that in case under the procedure agreed upon by the parties,
(i) a party fails to act as required under that procedure, or (ii) the parties, or the two appointed
arbitrators, fail to reach an agreement expected of them under that procedure or (iii) a Person,
including an Institution, fails to perform any function entrusted to him or to it under that
procedure, the Chief Justice or any Person or Institution designated by him, on request of a
party, shall take necessary measures for securing the appointment, unless the agreement on
appointments of procedure provides other means of securing the appointment.

FINALITY
Decision of the Chief Justice or his designate in the matter entrusted to him under sub section
(4), (5) and (6) of the 1996 Act shall be final as provided in Section 11(7) of the Act

REQUISITES OF APPOINTMENT
Chief Justice or his designate in appointing an Arbitrator shall have regard to (i) any
qualifications required of the Arbitrator by the Agreement of the parties and
(ii) other considerations which are likely to secure the appointment of an independent and
impartial Arbitrator as contemplated under Section 11 (8) of the 1996 Act.

THE CHIEF JUSTICE OF INDIA

In case of the appointment of sole or third Arbitrator, the Chief Justice of India or his
designate may appoint an Arbitrator of a Nationality other than the Nationalities of the parties
where the parties belong to different Nationalities as provided in Section 11(9) of the 1996
Act. Furthermore even for the matters referred to in Section 11(4), (5), (6), (7), (8) and (10)
of the Act, in an International Commercial Arbitration, the reference to ‘Chief Justice’ in
those provisions, shall be construed as a reference to the Chief Justice of India.

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 THE SCHEME
Chief Justice of India and every Chief Justice of a High Court in India shall make such
scheme as he may deem appropriate for dealing with matters entrusted by sub section (4) or
(5) or (6) of the Act to him as empowered under Section 11(10) of the 1996 Act.

CHIEF JUSTICE OF HIGH COURT

Section 11(11) and (12) of the 1996 Act provides that In a case where more than one request
has been made under Section 11(4), (5) or (6) of the Act to the Chief Justices of different
High Courts or their Designates, the Chief Justice or his Designate to whom the request has
been made first, under the relevant sub section, shall alone be competent to decide on the
request. Furthermore, where the matters referred to in the sub sections (4), (5), (6), (7), (8)
and (10) of Section 11 of the Act arise in any Arbitration other than an International
Arbitration, the reference to the Chief Justice ‘in those provisions 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 Civil
Jurisdiction has the jurisdiction to decide the question forming the subject – matter of the
Arbitration if the same had been the subject matter of a Suit

A reading of Section 11 of the Act reflects that the Chief Justice or his Designate, while
exercising his powers under Section 11 of the Act cannot entertain or decide the issues like
existence of an Arbitration Agreement, its validity or scope or jurisdiction of the Arbitrator to
decide the disputes which are sought to be referred to his Arbitration. The duty of the
appointing authority, in case of the failure of parties to do so is only to appoint the Arbitrator
in terms of the agreement between the parties. Section 16 empowers the Arbitral Tribunal to
rule on its own jurisdiction as well as regarding the objection with respect to the existence or
the validity of the Arbitration Agreement. Conferment of such powers on the Arbitrator
indicates the intention of the Legislature and its anxiety to see that the arbitral process is not
delayed or hampered.

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 ADMINISTRATIVE OR JUDICIAL
Nature of the order passed by the chief justice is whether administrative or judicial in nature?
The Supreme Court has held earlier that as the Chief Justice or his Designate under Section
11 of the Act acts in the administrative capacity, the order passed by him cannot be termed to
be an order passed by any Court exercising any judicial function. After referring to its earlier
judgements in Sundaram Finance Ltd., V. NEPC India Ltd3, Ador Samia (A) Ltd., V. Peeday
Holdings Ltd.4 Supreme Court held that it is a settled legal position that the order passed by
the Hon’ble Chief Justice under Section 11(6) of the Act cannot be subject matter of
challenge directly under Article 136 of the Constitution of India since powers discharged by
the Hon’ble Chief Justice under Section 11(6) of the Act is administrative nature

This position of law was again reiterated by the Court in Konkan Railway Corporation Ltd.,
V. Mehul Construction Co.5 where the Court observed that if the order under Section 11(6) of
the Act is to be treated as judicial or quasi judicial order then the consequential flow would
be nothing but the order will be made amenable to judicial intervention. If which effect their
would be all possibility to defeat the purpose of the Act by adopting dilatory tactics by the
reluctant party by approaching the court of law by challenging the order of appointment of an
arbitrator. Therefore such an interpretation to treat the order under Section 11(6) of the Act as
judicial or quasi judicial has been negatived only for the purpose to achieve the basic
objective of the 1996 by adopting UNCITRAL Model. On the other hand, it was observed
that that if the order passed by the Chief Justice under Section 11(6) of the Act is treated as
administrative in nature, then in such an event, in a case where the learned Chief Justice or
his nominee refuses erroneously to make an appointment then an intervention could be
possible by a Court in the same way as an intervention is possible against an administrative
order of the executive

Subsequently, a six of one majority of seven Judge Constitution Bench of the Supreme Court
in SBP & Co., V. Patel Engineering Ltd. has specifically stated that the default power of the
Chief Justice or his Designate to appoint an Arbitrator/s under section 11 of the Act is ‘is not

3
(1999) 2 SCC 479,485
4
(1999)8 SCC 572, 573
5
(2000) 7 SCC 201

12
an administrative power. It is a judicial power’and this power 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. On the other hand, the
dissenting Judge has held that this power ‘is administrative, pure and simple, and neither
judicial nor quasi judicial’. This function may be performed by the Chief Justice or by any
Person or Institution designated by him. However, the learned Judge has not spelt out as to
what is the scope of the expression ‘administrative power’ and how this default power of the
Chief Justice is administrative. In any case, this being a minority view does not prevail. The
Parliament deliberately deviated from using the word ‘court’ as used in the Model Law, and
vested the default power to appoint an arbitrator in the ‘Chief Justice or any person or
institution designated by him’. The object of empowering the Chief Justice to designate ‘any
person or institution’ is that in ‘international commercial arbitrations of complex nature, he
may be able to draw upon a vast variety of persons or institutions experienced and well-
versed in modern international commercial arbitrations. A judge may be well versed in law,
but he may be quite unaware of various aspects and nuances of complex modern international
commercial arbitrations.
RIGHT TO APPEAL
The right to appeal from the decision of a court is not a matter of right but is a privilege
granted by statute6. Statutes generally provide for the right to appeal to a higher forum.
However, statutes may at times regulate or even curtail the right to the litigant to go on
appeal7. Such regulation or restriction does not affect the provisions of appeal to the Supreme
Court8 or the right to move the High Court under Article 226 for extraordinary relief under
the Constitution. As regards invocation of the extraordinary jurisdiction of the High Court,
the Constitution empowers a High Court under Article 226 to issue “directions, orders or
writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto
and certiorari, or any of them, for the purpose of enforcement of any of the rights conferred
by Part III and for any other purpose.”
There are two stages in appeals under Article 136 from the order of the Designate. In the first
stage, the Supreme Court examines if special leave is to be granted for appeal from the
decision of the lower court or tribunal. The court has the discretion to even refuse to grant
leave. If the Supreme Court decides to grant special leave, the petition enters the second stage

6
Purshotam Das Goyal v. Hon’ble Mr. Justice BM Dhillon, A.I.R. 1978 S.C. 1014.
7
L. Chandra Kumar v. Union of India, A.I.R. 1997 S.C. 1125.
8

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where it is treated as an appeal from the decision of the lower court.21 This paper does not
account those cases where the Supreme Court refused to grant special leave to appeal from
the order of the Designate as such decisions are usually not reported in the law journals.22
Although information on refusal to grant leave is available in the website of the Supreme
Court, it is virtually impossible to sift through the website for the status of each of the
petitions for special leave considering the number of civil Special Leave Petitions filed each
year. Cases where special leave was granted have been obtained through a free text search in
two electronic databases- Manupatra and Indiankanoon. In Manupatra, relevant decisions
were listed using subject-matter search. “Arbitration” was taken the subject matter and
“Section 11” was the primary search string employed. To check for omissions, the search
string “special leave” was also employed under the same subject-matter.

Further, even the available decisions do not provide complete information relevant for the
present undertaking. For instance, most of the decisions do not provide information
pertaining to the date of filing of the petition for special leave to appeal or the date of filing
the application under section 11. Therefore, certain assumptions have been made as regards
the unavailable data. Although these assumptions are, to some degree, arbitrary and militate
against the purpose of relying on data-objectivity, it is felt that these are necessary to
construct a picture that is most closely relatable to reality and would not drastically affect the
ultimate inference drawn from the data collected. Hence, gaps in data have been supplied
with re-constructed data based on the below assumptions. These assumptions have been made
in such a way that the re-constructed data most closely resembles the real data.

1. Most judgements of the Supreme Court do not record the date of notice of arbitration. In
the absence of the date of notice of arbitration, the date of filing of the application under
section 11 is taken, wherever available. This assumption may hereinafter be called as the
“Same Day Assumption”. Except for certain High Courts such as the High Courts of
Bombay, Karnataka, Andhra Pradesh and Punjab & Haryana, websites of most High Courts
do not provide information on the date of filing of the application under section 11. In the
absence of reliable data on the date of filing of the said application, the judgment of the
Designate, wherever available, has been perused.

14
In some cases, the judgment of the Designate reveals relevant information that is not found
in the judgment of the Supreme Court. In the absence of data on the date of filing, the last
date of the year in which the application was filed has been assumed to be the date of filing of
the application. This assumption may hereinafter be called as the “Last Day Assumption”.

2. The date of filing of the Special Leave Petition is rarely available. Unlike the websites of
certain High Courts, the Supreme Court’s website does not provide information on the date of
filing of the Special Leave Petition. In such cases, this paper relies on the limitation period
for filing of Special Leave Petitions. Article 133(c) of the Schedule to the Limitation Act,
1963 prescribes a period of ninety days from the date of the order of the High Court to appeal
to the Supreme Court by special leave. A further period of thirty days is assumed for the
receipt of certified copy of the Designate’s Order. Therefore, the Special Leave Petition is
assumed to have been filed one hundred and twenty days after the date of order of the
Designate. This assumption may hereinafter be called as the “Limitation Assumption”.

In a few cases decided prior to Patel Engineering, there were writ petitions under Article 226
filed against orders of Single Judges. After Patel Engineering, Special Leave Petitions were
filed from the orders of the High Court. In such cases, the date of filing of the Special Leave
Petition is calculated as per the above methodology not from the date of the order of the
Designate but from the date of the decision in the writ petition. There are also cases where the
court has condoned the delay in the filing the Special Leave Petition. In most cases, the
judgment records the number of days of delay. These have been added to the one hundred
and twenty day period. In cases where there is no data on the number of days of delay, the
Last Day Assumption has been adopted

The development of law depends upon the collective wisdom of the judges. It is, therefore,
suggested that the Chief Justices may reflect on the need of designating persons or
institutions having proper qualifications and awareness of the requirements of the modern
arbitrations. Likewise, the judges whenever designated by the Chief Justice should address
themselves to the requirements of arbitration rather than going into the contentious issues in
arbitration, which should be left to the legitimate jurisdiction of the arbitral tribunal. This will
serve the needs of the national and international trading community whose function it is for
commercial arbitration to serve. Quoting clause (x) in para 46 from the SBP & Co., V. Patel

15
Engineering Ltd.9, the Madras High Court has taken the view that as and from the date of the
judgement of the Supreme Court i.e. 26.10.2005, the position as adopted in S.B.P. & Co. will
govern even the pending applications under Section 11(6) of the Act. The Delhi High Court
in Kurup Engineering Company Ltd., V. Bharat Heavy Electricals Ltd.10 observed that the
ratio of the Supreme Court Judgement is that an order passed under Section 11(6) of the Act
whether before or after the judgment in S.B.P. Case would be judicial order. Applicability of
Judgement in SBP & Co. to an order passed under Section 11 before judgement was
delivered in SBP. & Co. Case – Whether it operates prospectively or retrospectively? –
Impugned order passed by Chief Justice on 16.8.2005, wherein Chief Justice following
Konkan Railway case, appointed Arbitrator and directed Arbitrator to decide validity of
Arbitration Agreement – Subsequently before SLP could be filed, Judgment in S.B.P. & Co
was pronounced – Applicability of SBP & Co Judgement to present case? Held in view of
specific observation made by Seven Judge Bench in SBP & Co at para 47 (x) said judgement
operates prospectively and that any appointment made prior to such judgement would be
valid. Though question involved is academic in nature, Arbitrator has to decide whether there
exists and Arbitration Agreement – But post SBP &Co Chief Justice has to decide existence
of Arbitration Agreement and also decide whether applicant is party to such agreement11

DENIAL BY THE PARTIES

Where the arbitration agreement is denied by the parties then what are the powers to be
exercised under section 11 of the act? Where the Arbitration Agreement between the parties
is denied by the Respondent, whether the Chief Justice or his designate, in exercise of power
under Section 11 of the Act, can appoint an Arbitrator without deciding the question whether
there was an Arbitration Agreement between the parties by leaving it open to be decided by
the Arbitrator was taken up for consideration and the dictum was held down by the Hon’ble
Apex Court in series of judgments which would be useful for reference and in depth study

Following the decision in S.B.P. & Co., Hon’ble Apex Court in National Insurance Co. Ltd.,
held that when the appointment of Arbitral Tribunal is sought for through the intervention of
the Court under Section 11, then the foremost duty of the Chief Justice has been already
defined in SBP & Co. Thereby Hon’ble Apex Court in the application under Section 11 of the
9

10

Maharishi Dayamand University V. Anand Coop. LIC Society Ltd., and another 2007 (5)
11

SCC 295
16
Act first recognized and segregated the preliminary issues that fell for consideration into
three categories. First category derived issues which the Chief Justice or his Designate is
bound to decide. Secondly the issues which the Chief Justice or his Designate can also choose
to decide and thirdly the issues which fell for consideration to be decided by the Tribunal.
The first category issues which the Chief Justice/his designate will have to decide are:
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an Arbitration Agreement and whether the party who has applied under
Section 11 of the Act, is a party to such an agreement.
The issues which fell under second category wherein the Chief Justice or his Designate can
also choose to decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of
their mutual rights and obligation or by receiving the final payment without objection.
Third category wherein the issues which fell for consideration to be decided exclusively by
the Tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is
reserved for final decision of a department authority and excepted or excluded from
arbitration).
(ii) Merits or any claim involved in the arbitration.”

It is clear from the said two decisions that the question whether there is an arbitration
Agreement has to be decided only by the Chief Justice or his designate and should not be left
to the decision of the Arbitral Tribunal. This is because the question whether there is
Arbitration Agreement is a jurisdictional issue and unless there is a valid Arbitration
Agreement, the application under Section 11 of the Act will not be maintainable and the
Chief Justice or his designate will have no
jurisdiction to appoint an Arbitrator under Section 11 of the Act. Hon’ble Apex Court also
made it clear that only in regard to the issues shown in the second category, the Chief Justice
or his designate has the choice of either deciding them or leaving them to the decision of the
Arbitral Tribunal.
Even in regard to the issues falling under the second category, Hon’ble Apex Court made it
clear that where allegations of forgery or fabrication are made in regard to the documents, it
would be appropriate for the Chief Justice or his designate to decide the issue. In view of this
settled position of law, the issue whether there was an Arbitration Agreement ought to have

17
been decided by the designate of the Chief Justice and only if the finding was in the
affirmative he could have proceeded to appoint the Arbitrator.

While deciding the case of Reva Eletric Car Company Private Limited V. Green Mobil 12,
wherein the provisions of Section 16(1) in the backdrop of the Doctrine of Kompetez
Kompetenz were considered that it was inter alia held that under Section 16(1) the legislature
makes it clear that while considering any objection with regard to the existence or validity of
the arbitration agreement, the arbitration clause, which formed part of the contract, had to be
treated as an agreement independent of the other terms of the contract. Reference was made
in the said judgment to the provisions of Section 16(1) (b) of the 1996 Act, which provides
that even if the Arbitral Tribunal concludes that the contract is null and void, it should not
result, as a matter of law, in an automatic invalidation of the Arbitration Clause.

It was also held that Section 16(1) (a) of the 1996 Act presumes the existence of a valid
Arbitration Clause and mandates the same to be treated as an Agreement independent of the
other terms of the contract. By virtue of Section 16(1) (b) of the 1996 Act, which provides
that even if the Arbitral Tribunal concludes that the contract is null and void, it should not
result, as a matter of law, in an automatic invalidation of the Arbitration Clause.

It was also held that Section 16(1) (a) of the 1996 Act presumes the existence of a valid
Arbitration Clause and mandates the same to be treated as an Agreement independent of the
other terms of the contract. By virtue of Section 16(1) (b) of the 1996 Act, the Arbitration
Clause continues to be enforceable, notwithstanding a declaration that the contract was null
and void13.

LIMITATION
Relevant consideration for appointment of arbitrator when the issue of limitation under
section 20 of 1940 act is raised deserves a look. Petitioner filed an Application for
appointment of Arbitrator to resolve disputes arising out of agreement of year 1979 -
Contention of Respondent that application under section 11(6) is barred by limitation, since
period of limitation under Section 20 of 1940 Act is three years – Held, while exercising
power under Section 11(6) of Act, claim that was sought to be resurrected and whether

12
2012 (2) SCC 93
13
Today Homes & Infrastructure Pvt. Ltd., V. Ludhiana Improvement Trust and another 2013 (3) CTC 559

18
parties have concluded transaction by recording satisfaction of their mutual rights and
obligations or by receiving final payment without objection – claim raised by petitioner is
dead claim and cannot be resolved through arbitration proceedings – application for
appointment of arbitrator is hopelessly barred by limitation14

By the Constitution Bench Judgement of the Supreme Court in the case of SBP & Co V. Patel
Engineering Limited, 2005 (5) CTC 302 (SC), the earlier decisions of the Supreme Court in
the case of Konkan Railway Corporation Limited V. Mehul Construction Co. 2000 (3) CTC
686(SC) and also Konkan Railway Corporation Limited V. Rani Construction (P) Ltd., 2002
(1) CTC 679 (SC) have been overruled. In the aforesaid judgement their Lordships have
elaborately discussed the power of the Chief Justice under Section 11 (6) of the Act. While
exercising the power of performing the duty under Section 11(6) of the Act, the Chief Justice
has to consider whether the conditions laid down by the Section for the exercise of that power
or the performance of that duty exist.

The Chief Justice or the person or institution designated by him, is bound to decide whether
he has jurisdiction to entertain the request, in the sense, whether the party making the motion
has approached the right High Court, whether there is a valid Arbitration Agreement in terms
of Section 7 of the Act and whether the person before him with the request is a party to the
Arbitration Agreement or whether there was no dispute subsisting which was capable of
being arbitrated upon. While exercising the power under Section 11(6) of the Act, the Chief
Justice shall have to decide the question whether the claim was a dead one or a long barred
claim that was sought to be resurrected and whether the parties have concluded the
transaction by recording satisfaction of their mutual rights and obligations or by receiving the
final payment without objection.

14
Arul Sigamani and others V. Paul Durai & Perumal and others 2010 (5) CTC 833

19
Dispute under an International Commercial Agreement would fall under the domain of
Section 2(f) of the Arbitration and Conciliation Act 1996. The Chief Justice of India is the
appropriate authority to appoint the Arbitrator. Therefore the application which was
inadvertently filed before the Chief Justice of the High Court of Madras was withdrawn and
the same was filed before the Hon’ble Apex court. Wherein the Apex Court applying Section
14 of the Limitation Act excluded the period during the Petitioner’s application was pending
before the Chief Justice of the High Court of Madras and entertained the application for
appointment of the Arbitrator15

EXCEPTIONS

As far as exceptions where the court cannot interpose and interdict appointment of an
arbitrator chosen by parties279is concerned, Section 11 of the Act provides for the
appointment of Arbitrators and Sub Section (6) of Section 11 of the Act provides, that when
the parties fail to reach to an agreement as regards the appointment of the Arbitrator, can
request the Chief Justice or any person or institution designated by him to come to the rescue
of the parties.

In the case of Datar Switchgears Ltd., V. Tata Finance Ltd.,& Another 16, Hon’ble Apex Court
while considering the powers of the Court to appoint Arbitrator under Section 8 of
Arbitration Act 1940 cited the decision of this Court in the case of Bhupinder Singh Bindra
V. Union of India and Anr17.. It was held in that case that “It is settled Law that Court cannot
interpose and interdict the appointment of an Arbitrator, whom the parties have chosen under
the terms of the contract unless legal misconduct of the Arbitrator, fraud, disqualification, etc.
is pleaded and proved. It is not in the power of the party at his own will or pleasure to revoke
the authority of the Arbitrator appointed with his consent. There must be just and sufficient
cause for revocation”. The said principle was observed to stand by in the normal course

15
HBM Print Ltd., V. Scantrans India Pvt. Ltd., 2007 (2) CTC 655
16
2000 (8) SCC 151
17
AIR 1995 SC 2464

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However, before parting with that case Hon’ble Court also observed that Railways and Public
institutions are very slow in reacting to the request made by a contractor for appointment of
the Arbitrator. Therefore, in case appointment is not made in time on the request made by the
contracting party, then in that case the power of the High Court to appoint Arbitrator under
Section 11 of the Act will not be denuded. Hon’ble Court strongly observed with the words
that “We cannot allow administrative authorities to sleep over the matter and leave the
citizens without any remedy. Authorities shall be vigilant and their failure shall certainly give
rise to cause to the affected party. In case, the General Manager, Railway does not appoint
the Arbitral Tribunal after expiry of the notice of 30 days or before the party approaches the
High Court, in that case, the High Court will be fully justified in appointing arbitrator under
Section 11 of the Act. It is the discretion of the High Court that they can appoint any railway
officer or they can appoint any High Court Judge according to the given situation18”

CONCLUSION

The Law Commission Report struck a death blow to the law set down in SBP & Co. v. Patel
Engineering Ltd. and proposed to make appointment of an arbitrator an administrative
decision to be carried out by the High Court or the Supreme Court, as the case may be. In a
welcome step, it also provided that such an application be endeavoured to be disposed of
expeditiously, and also within a 60 day period, from service of notice. The Cabinet taking this
ahead, without dealing with the issue of appointment being a judicial or administrative
decision, approved the insertion of a new sub-section in Section 11 of the Act, incorporating
the above recommendation on timeframe to speed the appointment process along quite
nicely.

18
Union of India and another V.V.S. Engineering (P) Ltd., 2007 (3) CTC 412

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