Petitioner Counsel :- P.K. Ganguly Respondent Counsel :- C.S.C.
Hon'ble Ferdino Inacio Rebello, Chief Justice This is an application for review of the order dated 8th May, 2009 whereby the Chief Justice, exercising his power under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') has dismissed the application for appointment of an Arbitrator.
By order dated 8th May, 2009, the learned Chief Justice passed the following order:-
"This application has been filed for appointment of Arbitrator.
Applicant has not made demand for appointment of the Arbitrator within the time stipulated in the agreement.
In that view of the matter, the application filed by the applicant for appointment of Arbitrator is absolutely misconceived.
Accordingly, it is rejected."
It is submitted on behalf of the applicant, that the final bill was paid to the applicant on 16.12.2006, the cheque was received by him on 28.12.2006 and the same was deposited in the bank on 02.01.2007. The further claim of the applicant is that by representation dated 19.01.2007, he had submitted that full payment had not been made to the applicant.
The question for my consideration is, whether it is open to the Chief Justice, in exercise of his jurisdiction under Section 11 (6) of the Act, to exercise the power of review?
Section 11 (6) and 11 (7) of the Act, which are relevant, read as under:-
"11. Appointment of Arbitrators. - (1) .... ...
(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."
Another relevant provision is Section 5, which reads as under:-
"5. 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 11 of the Act was the subject matter of consideration before the Supreme Court in the case of SBP & Co. Vs. Patel Engineering Ltd. & Anr., (2005) 8 SCC 618 wherein, by a majority judgment, it has been held that the Chief Justice, while exercising powers under Section 11 of the Act, exercises judicial power and not administrative power. For that purpose, we may gainfully refer to the following observations:-
"16. ... Section 11 only covers another situation. Where one of the parties has refused to act in terms of the arbitration agreement, the other party moves the Chief Justice under Section 11 of the Act to have an arbitrator appointed and the first party objects, it would be incongruous to hold that the Chief Justice cannot decide the question of his own jurisdiction to appoint an arbitrator when in a parallel situation, the judicial authority can do so. Obviously, the highest judicial authority has to decide that question and his competence to decide cannot be questioned. ...
18. ... Therefore, the power was conferred on the highest judicial authority in the country and in the State in their capacities as Chief Justices. They have been conferred the power or the right to pass an order contemplated by Section 11 of the Act. We have already seen that it is not possible to envisage that the power is conferred on the Chief Justice as persona designata. Therefore, the fact that the power is conferred on the Chief Justice, and not on the court presided over by him is not sufficient to hold that the power thus conferred is merely an administrative power and is not a judicial power.
25.... It is also not correct to say that by the mere constitution of an Arbitral Tribunal the rights of the parties are not affected. Dragging a party to an arbitration when there existed no arbitration agreement or when there existed no arbitrable dispute, can certainly affect the right of that party, and, even on monetary terms, impose on him a serious liability for meeting the expenses of the arbitration, even if it be the preliminary expenses and his objection is upheld by the Arbitral Tribunal. Therefore, it is not possible to accept the position that no adjudication is involved in the constitution of an Arbitral Tribunal.
39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also 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. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration.
47. (i) .... ....
(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 designated Judge 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 designated Judge."
Thus, it would be clear that, in the course of deciding an application, the Chief Justice or his delegate, exercising the judicial powers, has the right to decide certain preliminary aspects - some of them are whether claim was a dead one, or a long-barred claim that was sought to be resurrected, or whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection.
In the instant case, the learned Chief Justice has held that the application for appointment of the Arbitrator has not been made within the time stipulated in the agreement. In other words, he has held that the exercise of jurisdiction by the Chief Justice, on the facts of the case, is not warranted.
The question then is, considering the judgment in SBP & Co. (supra) and the statutory provisions, does review lie against a decision made under Section 11 (6)? We have already reproduced Section 5 of the Act. In a matter governed by Part I, no judicial authority shall intervene except as provided in this Part. The power under Section 11 (6) is not conferred on the Court but on the Chief Justice or his delegate. That power which is exercised is a judicial power. At the same time, it cannot be held that the Chief Justice or his delegate is a Court, for the purpose of exercising the review jurisdiction conferred on a Civil Court by Order 47 Rule 1 of the Code of Civil Procedure. The power of substantive judicial review is not an inherent in a Court or Tribunal but it has to be specifically conferred. In the absence of conferment of such power, no Court or Tribunal can exercise this jurisdiction. (See Narsi Thakershi Vs. Pradyumansinghju, AIR 1970 SC 1273).
The power of substantive review is distinct from the power of procedural review. The power of procedural review is inherent in every Court or Tribunal to do complete justice, whereas the power of substantive review is a power which has to be conferred. We may gainfully refer to the following observations of the Supreme Court in the case of Grindlays Bank Ltd. Vs. The Central Government Industrial Tribunal & Ors., AIR 1981 SC 606:-
"6. We are of the opinion that the Tribunal had the power to pass the impugned order if it thought fit in the interest of justice. It is true that there is no express provision in the Act or the rules framed thereunder giving the Tribunal jurisdiction to do so. But it is a well-known rule of statutory construction that a Tribunal or body should be considered to be endowed with such ancillary or incidental powers as are necessary to discharge its functions effectively for the purpose of doing justice between the parties. In a case of this nature, we are of the view that the Tribunal should be considered as invested with such incidental or ancillary powers unless there is any indication in the statute to the contrary. We do not find any such statutory prohibition. On the other hand, there are indications to the contrary.
13.... The decision in Narshi Thakershi v. Pradyumansinghji, AIR 1970 SC 1273 is distinguishable. It is an authority for the proposition that the power of review is not an inherent power, it must be conferred either specifically or by necessary implication. Sub-sections (1) and (3) of S. 11 of the Act themselves make a distinction between procedure and powers of the Tribunal under the Act, while the procedure is left to be devised by the Tribunal to suit carrying out its functions under the Act, the powers of civil court conferred upon it are clearly defined. The question whether a party must be heard before it is proceeded against is one of procedure and not of power in the sense in which the words are used in S. 11. The answer to the question is, therefore, to be found in sub-s. (1) of S. 11 and not in sub-s. (3) of S. 11. Furthermore, different considerations arise on review. The expression 'review' is used in two distinct senses, namely (1) a procedural review which is either inherent or implied in a court or Tribunal to set aside a palpably erroneous order passed under a misapprehension by it, and (2) a review on merits when the error sought to be corrected is one of law and is apparent on the face of the record. It is in the latter sense that the Court in Narshi Thakershi's case held that no review lies on merits unless a statute specifically provides for it, obviously when a review is sought due to a procedural defect, the inadvertent error committed by the Tribunal must be corrected ex debito justitiae to prevent the abuse of its process, and such power inheres in every Court or Tribunal."
Thus, on a conjoint reading of the scheme of the Act and the power traceable in the Chief Justice, it is a judicial power, the Chief Justice is not a Court who can exercise the power of substantive review as it has not been specifically conferred. At the highest, what would be the inherent would be only the power of procedural review. In the instant case, the review is not sought on the ground that the application was dismissed ex parte or in the absence of the petitioner or his counsel. Section 5 of the Act shall also be read in that context, namely, that the judicial authority will only exercise powers conferred upon it.
The review, therefore, in the instant case, would be substantive review on the merits of an issue and in that light of the matter, the application, as filed, is not maintainable and, consequently, rejected.
26.11.2010 AHA (F.I. Rebello, C.J.) Hon'ble F.I. Rebello, C.J.
Rejected.
For orders, see order of date passed on separate sheets.
26.11.2010 AHA (F.I. Rebello, C.J.)