Decided on April 27,2007



VIKRAMAJIT SEN, J. - (1.) This Petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as A and C Act) praying for the appointment of an Arbitrator to adjudicate upon disputes that have arisen between the parties arising out of an Agreement dated 21.6.2000 which contains an Arbitration Clause. It inter alia contemplates that disputes pertaining to 'any notified claim of the contract included in its Final Bill' shall be referred to arbitration by a Sole Arbitrator selected by the Contractor from a panel of three persons nominated by the General Manager of Indian Oil Corporation Limited (IOCL for brevity). Although the Petition has been strenuously contested, in its Reply to the Petition the Respondent/IOCL has already mentioned the names of three persons for selection as the Sole Arbitrator.
(2.) Mr. Kaura, learned counsel for the IOCL has resisted the reference to arbitration on the ground that it was imperative for the Petitioner to have notified its claims in consonance with Section 9 of the Agreement which is the Arbitration Clause and since this has not been done, no arbitrable disputes are in existence. Secondly, it is his argument that the claims which have now been raised stood settled by application of the principles of accord and satisfaction, and hence no disputes remain which require resolution through arbitration. At the very commencement of the hearing it had been conveyed to Mr. Kaura that a complete answer to these Objections can be found in Chunni Lal -vs- RPG Home Finance Pvt. Ltd., 134(2006) DLT 212 in that a definitive decision ought to be directed by the Court to be taken by the Arbitrator after detailed discussion.
(3.) In Chunni Lal I had arrived at a prima facie satisfaction of the existence of arbitrable disputes. Consequently the parties had been referred to arbitration leaving it open to the Arbitrator to finally rule on this aspect of the dispute also. The Respondents have stoutly resisted this understanding of the law, which in my view has been enunciated by the Seven Judges Bench of the Hon'ble Supreme Court in S.B.P. and Co. -vs- Patel Engineering Ltd., AIR 2006 SC 450 : (2005) 8 SCC 618 : JT 2005 (9) SC 219 : [2005] 128 Comp Cas 465(SC) : 2005 (3) Arb. LR 285. Their Lordships had recorded these twelve conclusions, of which the fourth is relevant for the present purposes: (i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under section 11(6) of the Act is not an administrative power. It is a judicial power. (ii) The power under section 11(6) of the Act, 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. (iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated judge would be that of the Chief Justice as conferred by the statute. (iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate. (underlining added) (v) Designation of a district judge as the authority under section 11(6) of the Act by the Chief Justice of the High Court is not warranted in the scheme of the Act. (vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of section 37 of the Act or in terms of section 34 of the Act. (vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court. (viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under section 11(6) of the Act. (ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by section 16 of the Act. (x) Since all were guided by the decision of this court in Konkan Railway corporation Ltd. v. Rani Construction P. Ltd. [2000] 8 SCC 159 and orders under section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under section 11(6) of the Act. (xi) Where District Judges had been designated by the Chief Justice of the High Court under section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications, if any, pending before them as on this date will stand transferred, to be dealt with by the Chief of the concerned High Court or a judge of that court designated by the Chief Justice. (xii) The decision in Konkan Railway Corporation Ltd. v. Rani Construction P. Ltd. [2000] 8 SCC 159 is overruled.;

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