Case Reference
:
Civil Appeals No.5880-89 of 1997 with Nos.713-16,
2037-44, 4311-12, 4324, 4356, 7304 and 7306-09 of 1999, decided
on October 19, 2000.
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| The learned Solicitor General of
India appearing for the appellants submitted that the order
of the learned Chief Justice of Mumbai High Court, u/s.11
of Arbitration & Conciliation Act, 1996 (for short “the
Act”), on the preliminary issues is a judicial order,
on facts, is liable to be set aside under Article 136 of the
Constitution of India. It was contended that even if the order
is treated as administrative in nature, it is amenable to
Article 136.
The three-Judge Bench of the Supreme Court of India in Konkan
Railway Corpn.Ltd. vs.Mehul Construction Co. held that the
order of the Chief Justice or his nominee in appointment of
an Arbitrator under Section 11 of the Act is administrative
in nature and no appeal is maintainable under Article 136
of the Constitution against such an order, even if they contain
reasons and decisions on certain preliminary issues raised
by the parties at the stage of appointment of an Arbitrator.
The learned Solicitor General contended that it is now well
settled in several countries, where the UNCITRAL Model has
been adopted and where the Arbitrator also is permitted to
decide questions as to the existence of the arbitration clause
or validity of the agreement, that the court can decide certain
preliminary disputes which are raised before it or before
the appointment of Arbitrators - such as disputes relating
to existence of arbitration agreement or a question as to
the very existence of a “dispute” or as to whether
the items of disputes fall within “excepted” matters
or whether an arbitrator could be appointed where the invocation
of the clause by one party was beyond the prescribed period
in which one has to ask the other side to appoint an Arbitrator
etc. The Solicitor General contended that in a situation where
the matter has straight away gone before an Arbitrator by
act of parties without intervention of court, the Arbitrator
is empowered to decide these basic questions under Section
16 of the Act. However, when a case comes before judicial
authority and the defendant pleads that there is an arbitration
clause or where, on account of non-appointment of an Arbitrator,
the court is approached for appointment of an Arbitrator,
the court can decide these preliminary issues judicially and
need not mechanically appoint an Arbitrator under Section
11 in such cases.
A reference was drawn to the post-UNCITRAL case-law in France,
Austria, Sweden, Belgium, Netherlands, USA, etc., where if
the court is first seized of the preliminary issues before
appointment of an Arbitrator, even in cases where the Arbitrator,
under the statute, is empowered to decide these questions
- the court can and will decide these issues first rather
than permit the Arbitrator to decide them.
The Solicitor General contended that merely because the words
“Chief Justice (or his nominee)” are now used
in the 1996 Act, the order of the Chief Justice (or his nominee)
does not become an administrative order. The order does not
relate to administrative functions of the Chief Justice of
India or Chief Justice of the High Court –
such as those concerning the internal administration of the
Supreme Court, or the High Court or of the subordinate judiciary,
as the case may be. On the other hand, if preliminary issues
raised by two contracting litigating parties are decided by
the Chief Justice (or his nominee), such an order cannot be
administrative in nature.
It was pointed out that if an order of the Chief Justice (or
his nominee) was to be treated as an administrative order,
it could be challenged before a Single Judge of the High Court
and then before a Division Bench and then in the Supreme Court
under Article 136 and such a procedure would only delay the
arbitration proceedings more than if the order was accepted
as a judicial order and was permitted to be challenged directly
under Article 136. If the order of the Chief Justice (or his
nominee) were to be treated to be administrative in nature,
in practice, the defaulting party could drag on the matter
for years at the two stages of Article 226 proceedings even
on the preliminary issues.
The learned Judges were of the view in the light of the above
contentions and a number of cases arising out of the question
discussed above (i.e. whether administrative order or not)
it was desirable to re-examine the matter and directed the
papers to be placed before the Hon’ble Chief Justice
of India for passing appropriate orders.
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