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PETITIONER: KONKAN RAILWAY CORPN.  LTD.  & ORS.

       Vs.

RESPONDENT: M/S.  MEHUL CONSTRUCTION CO.

DATE OF JUDGMENT:       21/08/2000

BENCH: Doraswami Raju, G.B.Palttanaik

JUDGMENT:

PATTANAIK,J. L.....I.........T.......T.......T.......T.......T.......T..J

     In  this  batch of cases an important question  arises for   consideration  of  this   Court,  namely,  under   the provisions  of Arbitration and Conciliation Act, 1996,  what should  be the correct approach of the Chief Justice or  his nominee  in  relation  to the matter of  appointment  of  an arbitrator  under Section 11(6) of the Act, and what is  the true  nature  of the said order and further if a  person  is aggrieved  by such order, can he file application in a Court and  whether such an application could be entertained and if so,  in  which forum?  In Sundaram Finance Ltd.   vs.   NEPC India  Ltd.     (1999)  2 Supreme Court  Cases  479,  while deciding  the question as to whether under Section 9 of  the Arbitration  and  Conciliation  Act,  1996,  the  Court  has jurisdiction   to   pass  an   interim  order  even   before commencement  of  arbitration  proceeding   and  before   an Arbitrator   is   appointed,   after   analysing   different provisions  of Arbitration Act, 1940 and the present Act  of 1996  an observation has been made to the effect under  the 1996  Act,  appointment  of Arbitrator is made  as  per  the provisions of Section 11 which does not require the Court to pass  a judicial order appointing Arbitrator. In Ador Samia Private  Ltd.   vs.   Peekay Holdings Limited and  others  - (1999)  8  Supreme Court Cases, 572, this Court came to  the conclusion  that the Chief Justice of the High Court or  his designate  under  Section  11(6)  of   1996  Act,  acts   in administrative  capacity,  and such, an order of  the  Chief Justice  is not passed by any court exercising any  judicial function  nor  is  it a tribunal having the trappings  of  a judicial  authority  and  it must, therefore, be  held  that against  such  order,  which  is  administrative  in  nature application  under Article 136 of the Constitution would not lie.   Notwithstanding the aforesaid decision of this  Court in  Ador  Samia  Pvt.  Ltd.  (supra) case when  the  present batch  of  cases came up for consideration before the  Bench presided over by Majmudar, J.  who was the author of Samias case  (supra)  it was contended that the aforesaid  decision requires  consideration and having acceded to the request of the  petitioner,  the Bench passed the order to  place  this batch  of  cases before a Three Judge Bench and that is  how these  cases have come before us.  Two basic questions which really  arise for consideration are, (1) what is the  nature

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of  the  order  that is passed by the Chief Justice  or  his nominee  in  exercise  of  power under  sub-section  (6)  of Section  11 of the Act?  and, (2) even if said order is held to  be  administrative in nature what is the remedy open  to the  person  concerned if his request for appointment of  an Arbitrator  is  turned down by the learned Chief Justice  or his  nominee,  for  some reason or other?  In  deciding  the latter  question it would be necessary to find out the  true intention of the legislature in substituting 1940 Act by the present  Act and bearing in mind the object of enactment  of the new Act what should be the approach of the learned Chief Justice  or his nominee when an application for  appointment of  an  Arbitrator is made invoking the  jurisdiction  under Section 11(6) of the 1996 Act.

     At  the outset, it must be borne in mind that prior to the  1996  Act,  the Arbitration Act of 1940, which  was  in force  in  India  provided for domestic arbitration  and  no provision was there to deal with the foreign awards.  So far as  the  Foreign Awards are concerned, the same  were  being dealt with by the Arbitration (Protocol and Convention) Act, 1937,  and the Foreign Awards (Recognition and  Enforcement) Act,  1961.   The increasing growth of global trade and  the delay in disposal of cases in Courts under the normal system in  several  countries  made  it   imperative  to  have  the perception of an alternative Dispute Resolution System, more particularly,  in  the matter of commercial disputes.   When the entire world was moving in favour of a speedy resolution of  commercial  disputes, the United Nations  Commission  on International  Trade  Law  way  back  in  1985  adopted  the Uncitral  Model Law of International Commercial  Arbitration and  since then, number of countries have given  recognition to  that Model in their respective legislative system.  With the  said Uncitral Model Law in view the present Arbitration and  Conciliation  Act  of 1996 has been  enacted  in  India replacing  the Indian Arbitration Act, 1940 , which was  the principal legislation on Arbitration in the country that had been  enacted during the British Rule.  The Arbitration  Act of  1996  provides  not only for  domestic  arbitration  but spreads  its  sweep to International Commercial  Arbitration too.   The Indian law relating to the enforcement of Foreign Arbitration  Awards  provides  for greater autonomy  in  the arbitral  process  and  limits judicial  intervention  to  a narrower  circumference  than  under the previous  law.   To attract the confidence of International Mercantile community and  the  growing  volume of Indias  trade  and  commercial relationship  with  the  rest  of the world  after  the  new liberalisation  policy of the Government, Indian  Parliament was  persuaded to enact the Arbitration and Conciliation Act of  1996  in Uncitral model and, therefore, in  interpreting any  provisions  of the 1996 Act Courts must not ignore  the objects  and  purpose  of  the enactment of  1996.   A  bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of the Arbitration and Conciliation Act  1996 would unequivocally indicate that 1996 Act  limits intervention  of  Court  with  an arbitral  process  to  the minimum  and it is certainly not the legislative intent that each  and  every order passed by an authority under the  Act would be a subject matter of judicial scrutiny of a Court of Law.   Under the new law the grounds on which an award of an arbitrator  could  be challenged before the Court have  been severely cut down and such challenge is now permitted on the basis  of invalidity of the agreement, want of  jurisdiction on  the part of the arbitrator or want of proper notice to a party  of  the appointment of the arbitrator or of  atbitral

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proceedings.   The  powers  of   the  arbitrator  have  been amplified  by  insertion of specific provisions  of  several matters.   Obstructive  tactics  adopted by the  parties  in arbitration  proceedings  are  sought to be thwarted  by  an express  provision  inasmuch as if a party  knowingly  keeps silent  and then suddenly raises a procedural objection will not  be  allowed  to  do so.  The role  of  institutions  in promoting  and  organising arbitration has been  recognised. The  power  to  nominate arbitrators has been given  to  the Chief  Justice or to an institution or person designated  by him.   The  time limit for making awards has  been  deleted. The  existing provisions in 1940 Act relating to arbitration through intervention of Court, when there is no suit pending or  by order of the court when there is a suit pending, have been  removed.   The importance of transnational  commercial arbitration has been recognised and it has been specifically provided  that even where the arbitration is held in  India, the  parties to the contract would be free to designate  the law  applicable to the substance of the dispute.  Under  the new  law  unless  the   agreement  provides  otherwise,  the arbitrators are required to give reasons for the award.  The award  itself  has now been vested with status of a  decree, inasmuch  as the award itself is made executable as a decree and it will no longer be necessary to apply to the court for a  decree in terms of the award.  All these aim at achieving the  sole object to resolve the dispute as expeditiously  as possible  with the minimum intervention of a Court of Law so that  the  trade and commerce is not affected on account  of litigations before a court.  When United Nations established the  Commission on International Trade Law it is on  account of  the  fact  that  the General  Assembly  recognised  that disparities  in national laws governing international  trade created  obstacles  to  the  flow  of  trade.   The  General Assembly  regarded the Commission on International Trade Law as  a medium which could play a more active role in reducing or  removing the obstacles.  Such Commission, therefore, was given   a   mandate  for   progressive   harmonization   and unification  of  the law of International Trade.  With  that objective  when  Uncitral  Model has been prepared  and  the Parliament  in  our  country  enacted  the  Arbitration  and Conciliation  Act of 1996 adopting Uncitral Model, it  would be  appropriate  to  bear the said objective in  mind  while interpreting  any  provision of the Act.  The  Statement  of Objects  and Reasons of the Act clearly enunciates that  the main  objective  of  the  legislation was  to  minimise  the supervisory  role  of Courts in the arbitral process.  If  a comparison is made between the language of Section 11 of the Act  and  Article 11 of the Model Law it would  be  apparent that  the  Act  has designated the Chief Justice of  a  High Court in cases of domestic arbitration and the Chief Justice of  India in cases of international commercial  arbitration, to  be the authority to perform the function of  appointment of arbitrator whereas under the Model Law the said power has been  vested  with  the Court.  When the  matter  is  placed before  the Chief Justice or his nominee under Section 11 of the  Act it is imperative for the said Chief Justice or  his nominee  to  bear  in mind the legislative intent  that  the arbitral  process should be set in motion without any  delay whatsoever  and all contentious issues are left to be raised before the arbitral tribunal itself.  At that stage it would not  be appropriate for the Chief Justice or his nominee  to entertain  any  contentious  issue between the  parties  and decide  the  same.  A bare reading of Sections 13 and 16  of the Act makes it crystal clear that questions with regard to the  qualifications,  independence and impartiality  of  the

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arbitrator,  and  in  respect  of the  jurisdiction  of  the arbitrator  could be raised before the arbitrator who  would decide the same.  Section 13(1) provides that party would be free  to agree on a procedure for challenging an arbitrator. Sub-section  (2)  of said Section provides that failing  any such   agreement,   a  party   intending  to  challenge   an arbitrator,   either   on  grounds    of   independence   or impartiality  or  on  the  grounds   of  lack  of  requisite qualifications,  shall  within 15 days of becoming aware  of the  constitution  of the Tribunal send a written  statement for  the  challenge to the Tribunal itself.   Section  13(3) provides  that unless the arbitrator withdraws or the  other party  agrees to the challenge, the Tribunal shall decide on the  challenge  itself.   Sub-section   (4)  of  Section  13 mandates  an arbitrator to continue the arbitral proceedings and  to  make  an award.  Section 16 empowers  the  arbitral tribunal  to  rule on its own as well as on objections  with respect  to  the  existence or validity of  the  arbitration agreement.  Conferment of such power on the arbitrator under 1996  Act indicates the intention of the legislature and its anxiety  to see that the arbitral process is set in  motion. This  being  the legislative intent, it would be proper  for the  Chief  Justice  or  his  nominee  just  to  appoint  an arbitrator  without wasting any time or without entertaining any  contentious issues at that stage, by a party  objecting to  the  appointment of an arbitrator.  If this approach  is adhered  to,  then there would be no grievance of any  party and  in  the arbitral proceeding, it would be open to  raise any  objection,  as  provided under the  Act.   But  certain contingencies  may  arise  where the Chief  Justice  or  his nominee  refuses to make an appointment of an arbitrator and in  such  a case a party seeking appointment  of  arbitrator cannot  be  said to be without any remedy.  Bearing in  mind the  purpose  of legislation, the language used  in  Section 11(6)  conferring power on the Chief Justice or his  nominee to  appoint an arbitrator, the curtailment of the powers  of the  Court  in  the matter of  interference,  the  expanding jurisdiction  of  the arbitrator in course of  the  arbitral proceeding,  and  above all the main objective, namely,  the confidence  of the international market for speedy  disposal of  their  disputes,  the character and status of  an  order appointing  arbitrator  by the Chief Justice or his  nominee under  Section 11(6) has to be decided upon.  If it is  held that  an  order  under  Section   11(6)  is  a  judicial  or quasi-judicial  order then the said order would be  amenable for  judicial  intervention  and  any  reluctant  party  may frustrate the entire purpose of the Act by adopting dilatory tactics  in approaching a court of law even against an order of appointment of an arbitrator.  Such an interpretation has to  be  avoided in order to achieve the basic objective  for which  the  country  has enacted the Act  of  1996  adopting Uncitral  Model.  If on the other hand, it is held that  the order  passed  by the Chief Justice under Section  11(6)  is 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.  In other words, it would be a case of  non- performance of the duty by the Chief Justice or his nominee, and   therefore,  a  mandamus  would   lie.   If   such   an interpretation  is given with regard to the character of the order  that has been passed under Section 11(6) then in  the event  an order of refusal is passed under Section 11(6)  it could  be  remedied  by  issuance of  a  mandamus.   We  are

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persuaded  to  accept the second alternative inasmuch as  in such an event there would not be inordinate delay in setting the  arbitral process in motion.  But, as has been explained earlier  in  the earlier part of this judgment, the duty  of the  Chief Justice or his nominee being to set the  arbitral process  in motion it is expected that invariably the  Chief Justice  or  his  nominee  would   make  an  appointment  of arbitrator  so  that the arbitral proceeding would start  as expeditiously  as  possible and the dispute itself could  be resolved  and the objective of the Act can be achieved.   In fact  a Bench of this Court in Sundaram Finance case (supra) while  considering  the  scope of Section 9 of the  Act  has approached  the problem from this perspective and incidental observation  has been made that Section 11 does not  require the  Court  to pass a judicial order appointing  arbitrator. The  nature  and function performed by the Chief Justice  or his  nominee  under  sub- section (6) of  Section  11  being essentially to aid the constitution of the arbitral tribunal cannot  be  held to be a judicial function as otherwise  the legislature  could  have  used  the  expression  court  or judicial authority instead of choosing the expression the Chief Justice or his nominee.  If a comparison is made with the  English Arbitration Act 1996 it would appear that under the  English Act it is the Court which has been vested  with the function of appointment of an arbitrator upon failure of the  agreed  appointment procedure and an order made by  the Court  becomes appealable under Section 11(5) whereas  under the  Arbitration  and Conciliation Act of 1996 in India  the power of appointment is vested with the Chief Justice or his nominee.

     An  analysis  of different sub-sections of Section  11 would  indicate the character of the order, which the  Chief Justice  or  his  nominee passes under  Sub-section  (6)  of Section  11.  Sub-section (3) and sub-section (4) deals with cases,  in  which a party fails to appoint an arbitrator  or the  arbitrators  fail to agree on the third arbitrator  and thus seeks to avoid frustration or unreasonable delay in the matter  of  constitution  of   the  arbitral  tribunal.   It authorises  the Chief Justice of India or the Chief  Justice of  a  High  Court concerned, or any person  or  institution designated  by him to make the appointment upon request of a party,  if  the  other  party   has  failed  to  appoint  an arbitrator  within thirty days from the receipt of a request to  that  end.  Sub-sections 4, 5 and 6 designedly  use  the expression Chief Justice in preference to a Court or other authority  as in paragraphs (3) and (4) of Article 11 of the Model  Law, obviously for the reason that the Chief  Justice acting  in  his administrative capacity, is expected to  act quickly  without  encroaching on the requirements that  only competent persons are appointed as arbitrators.  Sub-section (4)  does not lay down any time limit within which the Chief Justice  or his nominee, designated by him, has to make  the appointment.   It  however expects that these  functionaries would  act  promptly.  While sub-sections (4) and  (5)  deal with  removal  of  obstacles  arising   in  the  absence  of agreement  between the parties on a procedure for appointing the  arbitrator  or arbitrators, sub- section (6)  seeks  to remove obstacles arising when there is an agreed appointment procedure.   These obstacles are identified in Clauses  (a), (b)  and (c) of sub-section(6).  Sub- section(6) provides  a cure  to these problems by permitting the aggrieved party to request  the  Chief  Justice or any  person  or  institution designated  by  him to take the necessary measure  i.e.   to make   the   appointment,  unless   the  agreement  on   the

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appointment  procedure provides other means for securing the appointment.   Sub-section(6),  therefore, aims at  removing any  dead-lock  or undue delay in the  appointment  process. This being the position, it is reasonable to hold that while discharging  the  functions under sub-section(6), the  Chief Justice  or his nominee will be acting in his administrative capacity  and  such a construction would subserve  the  very object of the new Arbitration Law.

     The  nature  of  the function performed by  the  Chief Justice  being  essentially to aid the Constitution  of  the Arbitration  Tribunal immediately and the legislature having consciously  chosen to confer the power on the Chief Justice and not a Court, it is apparent that the order passed by the Chief  Justice or his nominee is an administrative order, as has  been  held by this Court in Ador Samias case  and  the observations  of  this Court in Sundaram Finance Ltd.   case also  is  quite appropriate and neither of  those  decisions require  any re-consideration.  This being the position even an  order  refusing  to appoint an arbitrator  will  not  be amenable to the jurisdiction of this Court under Article 136 of  the  Constitution.   Needless to mention such  an  order refusing  to  appoint  an   arbitrator  after  deciding  the contentious  issues  would be an act of  non-performance  of duty  and  in  view  of what has  been  stated  earlier  the concerned authority could be directed by mandamus to perform its duty.

     Having  answered  the two basic questions  raised,  as above,  let  us  now  examine the  impugned  orders  in  the different  cases, which are before us.  In S.L.P.(Civil) No. 11522-11526  of 1999, the order of the learned Chief Justice of  Bombay  High  Court in appointing an arbitrator  is  the subject matter of challenge.  Since the order of appointment passed  by  the learned Chief Justice, is administrative  in nature  and the learned Chief Justice does not function as a Court  or a tribunal, the said order is not amenable to  the jurisdiction  of  this  Court  under   Article  136  of  the Constitution.   The special leave petitions, are accordingly dismissed.

     Special  Leave Petition(Civil) No.19549/99 is directed against  the  order of the learned Chief Justice of  Gauhati High  Court,  refusing  to   appoint  an  arbitrator,  after entertaining contentious issues and deciding the said issues by  elaborate  consideration, on a finding that there is  no valid  agreement for arbitration.  Even if, it was not  open for  the learned Chief Justice to entertain the  contentious issues  and deciding the same, but since the ultimate  order is  administrative  in  nature, as has been held by  us  and since the learned Chief Justice does not function as a Court or  Tribunal,  the  order,  cannot be  subject  to  judicial scrutiny   of   this  Court  under   Article  136   of   the Constitution.   The aggrieved party however, has a remedy to approach  the High Court for issuance of a writ of mandamus, if so advised, in accordance with law.  It is clarified that the  learned Chief Justice not having functioned as a  Court or  Tribunal  and the order being administrative in  nature, the  observations and findings are not binding and will  not be  taken into consideration by the Arbitral Tribunal, if an objection  to validity or existence of Arbitration Agreement is  taken  before  it.  Such objection, if taken,  shall  be decided  on  its  own merits.  The  special  leave  petition

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stands rejected.

     Writ  Petition(Civil) No.  81/2000 is a petition under Article  32  of the Constitution, against the very order  of the  learned Chief Justice of Gauhati High Court, which  was the subject matter of challenge in Special Leave Petition(c) No.   19549/99.  We fail to understand how a petition  under Article 32, at all is entertainable against the order of the learned  Chief  Justice, refusing to appoint  an  arbitrator under  Section  11 of the Arbitration and Conciliation  Act, 1996.   This  petition under Article 32, accordingly  stands dismissed.

     Special   Leave  Petition(Civil)   No.   11317/99   is directed  against the order of the nominee of learned  Chief Justice   of  Andhra  Pradesh   High  Court,  appointing  an arbitrator  under  Section 11(6) of the Act.  The  order  in question  being administrative in nature and the nominee  of the  learned Chief Justice, not being a Court or a Tribunal, as held by us, this special leave petition stands dismissed.

     Special Leave Petition(Civil) No.  12323 of 1999 is by the  Union of India, against the order of the nominee of the learned   Chief  Justice  of   Andhra  Pradesh  High  Court, appointing  an  arbitrator under Section 11(6) of  the  Act. For  the reasons, already indicated in SLP(C) No.  11317/99, this special leave petition stands dismissed.

     Special Leave Petition(Civil) No.  8563/99 is directed against  the  order  of  the nominee of  the  learned  Chief Justice of Madras High Court, appointing an arbitrator under Section  11(6)  of  the  Act.    For  the  reasons,  already indicated,   the   said    order    of   appointment   being administrative  in  nature  and the nominee of  the  learned Chief  Justice , not being a Court or a Tribunal, the  order in  question  is  not amenable to the jurisdiction  of  this Court   under   Article   136  of   the   Constitution   and consequently, the special leave petition stands dismissed.

     Special Leave Petition(Civil) No.  8581/99 is directed against  the  order  of  the nominee of  the  learned  Chief Justice of Madras High Court, appointing an arbitrator under Section  11(6)  of  the  Act.  For the  self  same  reasons, indicated  in  SLP  (C)  No.  8563/99,  this  special  leave petition stands dismissed.