(1.)In Ador Samia Private Limited v. Peckay Holdings Limited and others, 1999 (8) SCC 572, a Bench of two learned Judges of this Court came to the conclusion that the Chief Justice or any person or institution designated by him, acting under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter called "The Act"), acted in an administrative capacity and such order did not attract the provisions of Article 136 of the Constitution of India. A Bench of two learned Judges referred for reconsideration the decision in Ador Samia to a Bench of three learned Judges. The decision of the Bench of the three learned Judges Konkan Railway Corporation Ltd. and others v. Mehul Construction Co., 2000 (7) SCC 201 affirmed the view taken in Ador Samia, namely, that the order of the Chief Justice or his designate in exercise of the power under Section 11 of the Act was an administrative order and that such order was not amenable to the jurisdiction of this Court under Article 136. Thereafter, in Konkan Railway Corpn. Ltd. and another v. Rani Construction Pvt. Ltd., 2000 (8) SCC 159 a Bench of two learned Judges referred to a larger Bench the decision of the three learned Judges, for reconsideration (a practice which a Constitution Bench has frowned upon). This is how the matter comes to be placed before a Constitution Bench.
(2.)When it first reached before a Constitution Bench, the following order was passed :
"This reference has been made by a detailed referral order 2000 (8) SCC 159.
It appears that the Chief Justice or his nominee, acting under Section 11 of the Arbitration and Conciliation Act, 1996, have decided contentious issues arising between the parties to an alleged arbitration agreement and the question that we are called upon to decide is whether such an order deciding issues a judicial order or an administrative order.
In the course, of the short hearing before us, another question has surfaced, which is: does the Chief Justice or his nominee, acting under Section 11, have the authority to decide any contentions issues between the parties to the alleged arbitration agreement In other words, is the power of the Chief Justice or his nominee under Section 11 restricted to the nomination of an arbitrator in cases falling under sub-sections (4), (5) and (6) thereof
From what we understood, the learned Solicitor General appearing for the appellant, and learned counsel appearing for the respondents are ad idem on this aspect. According to both of them, the power of the Chief Justice or his nominee under Section 11 is restricted to the nomination of an arbitrator and the order that he makes is an administrative order.
It, therefore, becomes necessary to request the Attorney General to assist the Court. Mr. Andhyarujina, who is in Court but is not appearing in the matter, has advanced some submissions before us. He shall also be entitled to do so when the matter is taken up again before a Constitution Bench.
The Registry shall furnish a copy of this order and a copy of the paper books both to the Attorney General and to Mr. Andhyarujina.
(3.)To determine whether the order of the Chief Justice or his designate under Section 11 of the Act is a judicial order or an administative order, it is necessary to take note of certain provisions of the Act. Section 2(e) defines a Court thus :
"(e) "Court" means the principal Civil Court of orginal jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions froming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;"
Section 5 reads thus :
"Extent of judicial intervention- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."
Section 8, so far as is relevant, reads thus :
"8(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration."
Section 10 states that the parties to an arbitration agreement are free to determine the number of arbitrators, provided that such number shall not be an even number; failing such determination, the arbitral tribunal shall consist of a sole arbitrator.
Section 11 reads thus :
"Appointment of arbitrators- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and-
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitrator with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,-
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-section shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-sections (4), (5, (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections 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."
Section 12 imposes upon a person approached to be an arbitrator the obligation to disclose to the parties in writing any circumstance that may give rise to justifiable doubts as to his independence and impartiality. An arbitrator can be challenged if there are circumstances that give rise to justifiable doubts about his independence and impartiality or if he does not possess the qualifications agreed to by the parties, but such challenge can be made only for reasons which the party challenging becomes aware of after the appointment has been made. Section 13 speaks of the challenge procedure. It states that the parties are free to agree on such a procedure. Failing that, the party who makes the challenge must within fifteen days after becoming aware of the constitution of the arbitral tribunal or of any of the circumstances mentioned in Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws or the other party to the arbitration agrees to the challenge, the arbitral tribunal shall decide upon the challenge and if the challenge is not successful it shall continue the arbitration proceedings and make an award. That award can be sought to be set aside under Section 34.
Section 16 empowers the arbitral tribunal to rule on its own jurisdiction. Clause (1) of Section 16 is relevant, and reads thus :
"(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,"
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(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.