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CASE NO.: Appeal (civil)  4168 of 2003

PETITIONER: M/S S.B.P. & CO.                                 

RESPONDENT: M/S PATEL ENGINEERING LTD. & ANR

DATE OF JUDGMENT: 26/10/2005

BENCH: CJI R.C. LAHOTI,B.N. AGRAWAL,ARUN KUMAR,G.P. MATHUR A.K. MATHUR P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T WITH

CIVIL APPEAL NOs.4169/2003, 4170-4173/2003, 4076/2004,  3777/2003 and  CIVIL APPEAL  NOs.6562,6563-6564,6565-6566 of 2005                                                   of 2005 arising out of S.L.P. (CIVIL) NOs.3205/2004, 14033- 14034/2004, 21272-21273/2002,

P.K. BALASUBRAMANYAN, J.

               Leave granted in SLP(C) Nos.3205/2004, 14033- 14034/2004, 21272-273/2002.

1.              What is the nature of the function of the Chief Justice or  his designate under Section 11 of the Arbitration and Conciliation Act,  1996 is the question that is posed before us.  The three judges bench  decision in Konkan Rly. Corpn. Ltd. Vs. Mehul Construction Co.  [(2000) 7 SCC 201] as approved by the Constitution Bench in Konkan  Railway Corpn. Ltd. & anr. Vs. Rani Construction Pvt. Ltd.  [(2002) 2 SCC 388] has taken the view that it is purely an  administrative function, that it is neither judicial nor quasi-judicial and  the Chief Justice or his nominee performing the function under Section  11(6) of the Act, cannot decide any contentious issue between the  parties.  The correctness of the said view is questioned in these appeals.   

2.              Arbitration in India was earlier governed by the Indian  Arbitration Act, 1859 with limited application and the Second Schedule  to the Code of Civil Procedure, 1908.  Then came the  Arbitration Act,  1940. Section 8 of that Act conferred power on the Court to appoint an  arbitrator on an application made in that behalf.  Section 20 conferred a  wider jurisdiction on the Court for directing the filing of the arbitration  agreement and the appointment of an arbitrator.  Section 21 conferred a  power on the Court in a pending suit, on the agreement of parties, to  refer the differences between them for arbitration in terms of the Act.   The Act provided for the filing of the award in court, for the making of  a motion by either of the parties to make the award a rule of court, a  right to have the award set aside on the grounds specified in the Act  and for an appeal against the decision on such a motion.  This Act was  replaced by the Arbitration and Conciliation Act, 1996 which, by virtue  of Section 85, repealed the earlier enactment.   

3.              The Arbitration and Conciliation Act, 1996 (hereinafter  referred to as ’the Act’) was intended to comprehensively cover  international and commercial arbitrations and conciliations as also  domestic arbitrations and conciliations.  It envisages the making of an  arbitral procedure which is fair, efficient and capable of meeting the  needs of the concerned arbitration and for other matters set out in the  objects and reasons for the Bill.  The Act was intended to be one to

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consolidate and amend the law relating to domestic arbitrations,  international commercial arbitrations and enforcement of foreign  arbitral awards, as also to define the law relating to conciliation and for  matters connected therewith or incidental thereto.  The preamble  indicates that since the United Nations Commission on International  Trade Law (UNCITRAL) has adopted a Model Law for International  Commercial Arbitration and the General Assembly of the United  Nations has recommended that all countries give due consideration to  the Model Law and whereas the Model Law and the Rules make  significant contribution to the establishment of a unified legal  framework for a fair and efficient settlement of disputes arising in  international commercial relations and since it was expedient to make a  law respecting arbitration and conciliation taking into account the  Model Law and the Rules, the enactment was being brought forward.    The Act replaces the procedure laid down in Sections 8 and 20 of the  Arbitration Act, 1940.  Part I of the Act deals with arbitration.  It  contains Sections 2 to 43.  Part II deals with enforcement of certain  foreign awards, and Part III deals with conciliation and Part IV contains  supplementary provisions.   In this case, we are not concerned with Part  III, and Parts II and IV have only incidental relevance.  We are  concerned with the provisions in Part I dealing with arbitration.

4.              Section 7 of the Act read with Section 2 (b) defines an  arbitration agreement.   Section 2(h) defines ’party’ to mean a party to  an arbitration agreement.  Section 4 deals with waiver of objections on  the part of the party who has proceeded with an arbitration, without  stating his objections referred to in the section, without undue delay.   Section 5 indicates the extent of judicial intervention.  It says that  notwithstanding anything contained in any other law for the time being  in force, in matters governed by Part I, no judicial authority shall  intervene except where so provided in Part I.  The expression ’judicial  authority’ is not defined. So, it has to be understood as taking in the  courts or any other judicial fora.  Section 7 defines an arbitration  agreement and insists that it must be in writing and also explains when  an arbitration agreement could be said to be in writing.  Section 8  confers power on a judicial authority before whom an action is brought  in a matter which is the subject of an arbitration agreement, to refer the  dispute to arbitration, if a party applies for the same.  Section 9 deals  with the power of the Court to pass interim orders and the power to  give interim protection in appropriate cases.  It gives a right to a party,  before or during arbitral proceedings or at any time after the making of  the arbitral arbitral award but before its enforcement in terms of Section  36 of the Act, to apply to a court for any one of the orders specified  therein.  Chapter III of Part I deals with composition of arbitral  tribunals.  Section 10 gives freedom to the parties to determine the  number of arbitrators but imposes a restriction that it shall not be an  even number.  Then comes Section 11 with which we are really  concerned in these appeals.   

5.              The marginal heading of Section 11 is ’Appointment of  arbitrators’.   Sub-Section (1) indicates that a person of any nationality  may be an arbitrator, unless otherwise agreed to by the parties.  Under  sub-Section (2), subject to sub-Section (6),the parties are free to agree  on a procedure for appointing the arbitrator or arbitrators.  Under sub- Section (3), failing any agreement in terms of sub-Section (2), in an  arbitration with three arbitrators, each party could appoint one  arbitrator, and the two arbitrators so appointed, could appoint the third  arbitrator, who would act as the presiding arbitrator.   Under sub- Section (4), the Chief Justice or any person or institution designated by  him could make the appointment, in a case where sub-Section (3) has  application and where either the party or parties had failed to nominate  their arbitrator or arbitrators or the two nominated arbitrators had failed  to agree on the presiding arbitrator.  In the case of a sole arbitrator, sub- Section (5) provides for the Chief Justice or any person or institution  designated by him, appointing an arbitrator on a request being made by

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one of the parties, on fulfilment of the conditions laid down therein.   Then comes sub-Section (6), which may be quoted hereunder with  advantage:

"(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."

Sub-Section (7) gives a finality to the decision rendered by the Chief  Justice or the person or institution designated by him when moved  under sub-Section (4), or sub-Section (5), or sub-Section (6) of Section  11.  Sub-Section (8) enjoins the Chief Justice or the person or  institution designated by him to keep in mind the qualifications  required for an arbitrator by the agreement of the parties, and other  considerations as are likely to secure the appointment of an  independent and impartial arbitrator.  Sub-Section (9) deals with the  power of the Chief Justice of India or a person or institution designated  by him to appoint the sole or the third arbitrator in an international  commercial arbitration.  Sub-Section (10) deals with Chief Justice’s  power to make a scheme for dealing with matters entrusted to him by  sub-Section (4) or sub-Section (5) or sub-Section (6) of Section 11.   Sub-Section (11) deals with the respective jurisdiction of Chief Justices  of different  High Courts who are approached with requests regarding  the same dispute and specifies as to who should entertain such a  request.  Sub-Section 12 clause (a) clarifies that in relation to  international arbitration, the reference in the relevant sub-sections to  the ’Chief Justice’ would mean the ’Chief Justice of India’.  Clause (b)  indicates that otherwise the expression ’Chief Justice’ shall be  construed as a reference to the Chief Justice of the High Court within  whose local limits the principal Court is situated.  ’Court’ is defined  under Section 2(e) as the principal Civil Court of original jurisdiction in  a district.   

6.              Section 12 sets out the grounds of challenge to the person  appointed as arbitrator and the duty of an arbitrator appointed, to  disclose any disqualification he may have.  Sub-Section (3) of Section  12 gives a right to the parties to challenge an arbitrator.  Section 13 lays  down the procedure for such a challenge.  Section 14 takes care of the  failure of or impossibility for an arbitrator to act and Section 15 deals  with the termination of the mandate of the arbitrator and the  substitution of another arbitrator.  Chapter IV deals with the jurisdiction  of arbitral tribunals.  Section 16 deals with the competence of an  arbitral tribunal, to rule on its jurisdiction.  The arbitral tribunal may  rule on its own jurisdiction, including ruling on any objection with  respect to the existence or validity of the arbitration agreement.  A  person aggrieved by the rejection of his objection by the tribunal on its  jurisdiction or the other matters referred to in that Section, has to wait  until the award is made to challenge that decision in an appeal against

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the arbitral award itself in accordance with Section 34 of the Act.  But  an acceptance of the objection to jurisdiction or authority, could be  challenged then and there, under Section 37 of the Act.  Section 17  confers powers on the arbitral tribunal to make interim orders.  Chapter  V comprising  of Sections 18 to 27 deals with the conduct of arbitral  proceedings.  Chapter VI containing Sections 28 to 33 deals with  making of the arbitral award and termination of the proceedings.   Chapter VII deals with recourse against an arbitral award.  Section 34  contemplates the filing of an application for setting aside an arbitral  award by making an application to the Court as defined in Section 2(e)  of the Act.  Chapter VIII deals with finality and enforcement of arbitral  awards.  Section 35 makes the award final and Section 36 provides for  its enforcement under the Code of Civil Procedure, 1908 in the same  manner as if it were a decree of court.  Chapter IX deals with appeals  and Section 37 enumerates the orders that are open to appeal.  We have  already referred to the right of appeal available under Section 37(2) of  the Act, on the Tribunal accepting a plea that it does not have  jurisdiction or when the arbitral tribunal accepts a plea that  it is  exceeding the scope of its authority.   No second appeal is  contemplated, but right to approach the Supreme Court is saved.   Chapter X deals with miscellaneous matters.  Section 43 makes the  Limitation Act, 1963 applicable to proceedings under the Act as it  applies to proceedings in Court.  

7.              We will first consider the question, as we see it.  On a  plain understanding of the relevant provisions of the Act, it is seen that  in a case where there is an arbitration agreement, a dispute has arisen  and one of the parties had invoked the agreed procedure for  appointment of an arbitrator and the other party has not cooperated, the  party seeking an arbitration, could approach the Chief Justice of the  High Court if it is an internal arbitration or of the Supreme Court if it is  an international arbitration to have an arbitrator or arbitral tribunal  appointed.  The Chief Justice, when so requested, could appoint an  arbitrator or arbitral tribunal depending on the nature of the agreement  between the parties and after satisfying himself that the conditions for  appointment of an arbitrator under sub-Section (6) of Section 11 do  exist.   The Chief Justice could designate another person or institution  to take the necessary measures.   The Chief Justice has also to have the  qualification of the arbitrators in mind before choosing the arbitrator.   An arbitral tribunal so constituted, in terms of Section 16 of the Act,  has the right to decide whether it has jurisdiction to proceed with the  arbitration, whether there was any agreement between the parties and  the other matters referred to therein.   

8.              Normally, any tribunal or authority conferred with a power  to act under a statute, has the jurisdiction to satisfy itself that the  conditions for the exercise of that power existed and that the case calls  for the exercise of that power.  Such an adjudication relating to its own  jurisdiction which could be called a decision on jurisdictional facts, is  not generally final, unless it is made so by the Act constituting the  tribunal.  Here,  sub-Section (7) of Section 11 has given a finality to the  decisions taken by the Chief Justice or any person or institution  designated by him  in respect of matters falling under sub-Sections (4),  (5) and (6) of Section 11.  Once a statute creates an authority, confers  on it power to adjudicate and makes its decision final on matters to be  decided by it, normally, that decision cannot be said to be a purely  administrative decision.  It is really a decision on its own jurisdiction  for the  exercise of the power conferred by the statute or to perform the  duties imposed by the statute.  Unless, the authority satisfies itself that  the conditions for exercise of its power exist, it could not accede to a  request made to it for the exercise of the conferred power.  While  exercising the power or performing the duty under Section 11(6) of the  Act, the Chief Justice has to consider whether the conditions laid down  by the section for the exercise of that power or the performance of that  duty, exist.  Therefore, unaided by authorities and going by general

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principals, it appears to us that while functioning under Section 11(6)  of the Act, a  Chief Justice or the person or institution designated by  him, is bound to decide whether he has jurisdiction, whether there is an  arbitration agreement, whether the applicant before him, is a party,  whether the conditions for exercise of the power have been fulfilled and  if an arbitrator is to be appointed, who is the fit person, in terms of the  provision.   Section 11(7) makes his decision on the matters entrusted  to him, final.

9.              The very scheme, if it involves an adjudicatory process,  restricts the power of the Chief Justice to designate, by excluding the  designation of a non-judicial institution or a non-judicial authority to  perform the functions.  For, under our dispensation, no judicial or  quasi-judicial decision can be rendered by an institution if it is not a  judicial authority, court or a quasi-judicial tribunal.  This aspect is dealt  with later while dealing with the right to designate under Section 11(6)  and the scope of that designation.  

10.             The appointment of an arbitrator against the opposition of  one of the parties on the ground that the Chief Justice had no  jurisdiction or on the ground that there was no arbitration agreement, or  on the ground that there was no dispute subsisting which was capable  of being arbitrated upon or that the conditions for exercise of power  under Section 11(6) of the Act do not exist or that the qualification  contemplated for the arbitrator by the parties cannot be ignored and has  to be borne in mind, are all adjudications which affect the rights of  parties.  It cannot be said that when the Chief Justice decides that he  has jurisdiction to proceed with the matter, that there is an arbitration  agreement and that one of the parties to it has failed to act according to  the procedure agreed upon, he is not adjudicating on the rights of the  party who is raising these objections.  The duty to decide the  preliminary facts enabling the exercise of jurisdiction or power, gets all  the more emphasized, when sub-Section (7) designates the order under  sub-sections (4), (5) or (6) a ’decision’ and  makes the decision of the  Chief Justice final on the matters referred to in that sub-Section.  Thus,  going by the general principles of law and the scheme of Section 11, it  is difficult to call the order of the Chief Justice merely an  administrative order and to say that the opposite side need not even be  heard before the Chief Justice exercises his power of appointing an  arbitrator.   Even otherwise, when a statute confers a power or imposes  a duty on the highest judicial authority in the State or in the country,  that authority, unless shown otherwise, has to act judicially and has  necessarily to consider whether his power has been rightly invoked or  the conditions for the performance of his duty are shown to exist. 11.             Section 16 of the Act only makes explicit what is even  otherwise implicit, namely, that the arbitral tribunal constituted under  the Act has the jurisdiction to rule on its own jurisdiction, including  ruling on objections with respect to the existence or validity of the  arbitration agreement.  Sub-section (1) also directs that an arbitration  clause which forms part of a contract shall be treated as an agreement  independent of the other terms of the contract.  It also clarifies that a  decision by the arbitral tribunal that the contract is null and void shall  not entail ipso jure the invalidity of the arbitration clause.  Sub-section  (2) of Section 16 enjoins that a party wanting to raise a plea that the  arbitral tribunal does not have jurisdiction, has to raise that objection  not later than the submission of the statement of defence, and that the  party shall not be precluded from raising the plea of jurisdiction merely  because he has appointed or participated in the appointment of an  arbitrator.  Sub-section (3) lays down that a plea that the arbitral  tribunal is exceeding the scope of its authority, shall be raised as soon  as the matter alleged to be beyond the scope of its authority is raised  during the arbitral proceedings.  When the Tribunal decides these two  questions, namely, the question of jurisdiction and the question of  exceeding the scope of authority or either of them, the same is open to  immediate challenge in an appeal, when the objection is upheld and

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only in an appeal against the final award, when the objection is  overruled.  Sub-section (5) enjoins that if the arbitral tribunal overrules  the objections under sub-section (2) or sub-section (3), it should  continue with the arbitral proceedings and make an arbitral award.   Sub-section (6) provides that a party aggrieved by such an arbitral  award overruling the plea on lack of jurisdiction and the exceeding of  the scope of authority, may make an application on these grounds for  setting aside the award in accordance with Section 34 of the Act.  The  question, in the context of Sub-Section (7) of Section 11 is, what is the  scope of the right conferred on the arbitral tribunal to rule upon its own  jurisdiction and the existence of the arbitration clause, envisaged by  Section 16(1), once the Chief Justice or the person designated by him  had appointed an arbitrator after satisfying himself that the conditions  for the exercise of power to appoint an arbitrator are present in the case.   Prima facie, it would be difficult to say that in spite of the finality  conferred by sub-Section (7) of Section 11 of the Act, to such a  decision of the Chief Justice, the arbitral tribunal can still go behind  that decision and rule on its own jurisdiction or on the existence of an  arbitration clause.  It also appears to us to be incongruous to say that  after the Chief Justice had appointed an arbitral tribunal, the arbitral  tribunal can turn round and say that the Chief Justice had no  jurisdiction or authority to appoint the tribunal, the very creature  brought into existence by the exercise of power by its creator, the Chief  Justice.  The argument of learned Senior Counsel, Mr. K.K. Venugopal  that Section 16 has full play only when an arbitral tribunal is  constituted without intervention under Section 11(6) of the Act, is one  way of reconciling that provision with Section 11 of the Act, especially  in the context of sub-section (7) thereof.  We are inclined to the view  that the decision of the Chief Justice on the issue of jurisdiction and the  existence of a valid arbitration agreement would be binding on the  parties when the matter goes to the arbitral tribunal and at subsequent  stages of the proceeding except in an appeal in the Supreme Court in  the case of the decision being by the Chief Justice of the High Court or  by a Judge of the High Court designated by him.  

12.             It is common ground that the Act has adopted the  UNCITRAL Model Law on International Commercial Arbitration.    But at the same time, it has made some departures from the model law.    Section 11 is in the place of Article 11 of the Model Law.  The Model  Law provides for the making of a request under Article 11 to "the court  or other authority specified in Article 6 to take the necessary measure".    The words in Section 11 of the Act, are "the Chief Justice or the person  or institution designated by him".   The fact that instead of the court,  the powers are conferred on the Chief Justice, has to be appreciated in  the context of the statute.  ’Court’ is defined in the Act to be the  principal civil court of original jurisdiction of the district and includes  the High Court in exercise of its ordinary original civil jurisdiction.    The principal civil court of original jurisdiction is normally the District  Court.   The High Courts in India exercising ordinary original civil  jurisdiction are not too many.  So in most of the States the concerned  court would be the District Court.   Obviously, the Parliament did not  want to confer the power on the District Court, to entertain a request for  appointing an arbitrator or for constituting an arbitral tribunal under  Section 11 of the Act.   It has to be noted that under Section 9 of the  Act, the District Court or the High Court exercising original  jurisdiction, has the power to make interim orders prior to, during or  even post arbitration.  It has also the power to entertain a challenge to  the award that may ultimately be made.   The framers of the statute  must certainly be taken to have been conscious of the definition of  ’court’ in the Act.  It is easily possible to contemplate that they did not  want the power under Section 11 to be conferred on the District Court  or the High Court exercising original jurisdiction.   The intention  apparently was to confer the power on the highest judicial authority in  the State and in the country, on Chief Justices of High Courts and on  the Chief Justice of India.   Such a provision is necessarily intended to

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add the greatest credibility to the arbitral process.  The argument that  the power thus conferred on the Chief Justice could not even be  delegated to any other Judge of the High Court or of the Supreme  Court, stands negatived only because of the power given to designate  another.  The intention of the legislature appears to be clear that it  wanted to ensure that the power under Section 11(6) of the Act was  exercised by the highest judicial authority in the concerned State or in  the country.    This is to ensure the utmost authority to the process of  constituting the arbitral tribunal.

13.             Normally, when a power is conferred on the highest  judicial authority who normally performs judicial functions and is the  head of the judiciary of the State or of the country, it is difficult to  assume that the power is conferred on the Chief Justice as persona  designata.  Under Section 11(6), the Chief Justice is given a power to  designate another to perform the functions under that provision.   That  power has generally been designated to a Judge of the High Court or of  the Supreme Court respectively.   Persona designata, according to  Black’s Law Dictionary, means "A person considered as an individual  rather than as a member of a class".   When the power is conferred on  the Chief Justices of the High Courts, the power is conferred on a class  and not considering that person as an individual.   In the Central  Talkies Ltd., Kanpur vs. Dwarka Prasad (1961 (3) SCR 495) while  considering the status in which the power was to be exercised by the  District Magistrate under the United Provinces (Temporary) Control          of Rent and Eviction Act, 1947, this Court held: "a persona designata is "a person who is pointed out or  described as an individual, as opposed to a person  ascertained as a member of a class, or as filling a particular  character."  (See Osborn’s Concise Law Dictionary, 4th  Edition., p.253).  In the words of Schwabe, C.J., in  Parthasardhi Naidu vs. Koteswara Rao,[I.L.R. 47 Mad 369  F.B.] personae designatae  are, "persons selected to act in  their private capacity and not in their capacity as Judges."    The same consideration applies also to a well-known  officer like the District Magistrate named by virtue of his  office, and whose powers the Additional District  Magistrate can also exercise and who can create other  officers equal to himself for the purpose of the Eviction  Act."

In Mukri Gopalan vs. Cheppilat Puthanpurayil Aboobacker  [(1995) 5 SCC 5] this Court after quoting the above passage from the  Central Talkies Ltd., Kanpur vs. Dwarka Prasad, applied the test to  come to the conclusion that when Section 18 of the Kerala Buildings  (Lease and Rent Control)  Act, 1965 constituted the District Judge as an  appellate authority under that Act, it was a case where the authority was  being conferred on District Judges who  constituted a class and,  therefore, the appellate authority could not be considered to be persona  designata.   What can be gathered from P. Ramanatha Aiyar’s  Advanced Law Lexicon, 3rd Edition, 2005, is that "persona designata"  is a person selected to act in his private capacity and not in his capacity  as a judge.   He is a person pointed out or described as an individual as  opposed to a person ascertained as a member of a class or as filling a  particular character.   It is also seen that one of the tests to be applied is  to see whether the person concerned could exercise the power only so  long as he holds office or could exercise the power even subsequently.    Obviously, on ceasing to be a Chief Justice, the person referred to in  Section 11(6) of the Act could not exercise the power.   Thus, it is clear  that the power is conferred on the Chief Justice under Section 11(6) of  the Act not as persona designata.    

14.             Normally a persona designata cannot delegate his power to  another.   Here, the Chef Justice of the High Court or the Chief Justice  of India is given the power to designate another to exercise the power

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conferred on him under Section 11(6) of the Act.   If the power is a  judicial power, it is obvious that the power could be conferred only on  a judicial authority and in this case, logically on another Judge of the  High Court or on a Judge of the Supreme Court.   It is logical to  consider the conferment of the power on the Chief Justice of the High  Court and on the Chief Justice of India as presiding Judges of the High  Court and the Supreme Court and the exercise of the power so  conferred, is exercise of judicial power/authority as presiding Judges of  the respective courts.   Replacing of the word ’court’ in the Model Law  with the expression "Chief Justice" in the Act, appears to be more for  excluding the exercise of power by the District Court and by the court  as an entity leading to obvious consequences in the matter of the  procedure to be followed and the rights of appeal governing the matter.    The departure from Article 11 of the Model Law and the use of the  expression "Chief Justice" cannot be taken to exclude the theory of its  being an adjudication under Section 11 of the Act by a judicial  authority.

15.             We may at this stage notice the complementary nature of  Sections 8 and 11.  Where there is an arbitration agreement between the  parties and one of the parties, ignoring it, files an action before a  judicial authority and the other party raises the objection that there is an  arbitration clause, the judicial authority has to consider that objection  and if the objection is found sustainable to refer the parties to  arbitration.  The expression used in this Section is ’shall’ and this Court  in P. Anand Gajapathi Raju Vs. P.V. G. Raju [(2000) 4 SCC 539  and in Hindustan Petroleum Corporation Ltd. Vs. Pink City  Midway Petroleum [(2003) 6 SCC 503] has held that the judicial  authority is bound to refer the matter to arbitration once the existence  of a valid arbitration clause is established.  Thus, the judicial authority  is entitled to, has to and bound to decide the jurisdictional issue raised  before it, before making or declining to make a reference.   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.  If it is held that the Chief Justice has no right or duty to  decide the question or cannot decide the question, it will lead to an  anomalous situation in that a judicial authority under Section 8 can  decide, but not a Chief Justice under Section 11, though the nature of  the objection is the same and the consequence of accepting the  objection in one case and rejecting it in the other, is also the same,  namely, sending the parties to arbitration.  The interpretation of Section  11 that we have adopted would not give room for such an anomaly.   

16.             Section 11(6) does enable the Chief Justice to designate  any person or institution to take the necessary measures on an  application made under Section 11(6) of the Act.  This power to  designate recognized in the Chief Justice, has led to an argument that a  judicial decision making is negatived, in taking the necessary measures  on an application, under Section 11(6) of the Act.   It is pointed out that  the Chief Justice may designate even an institution like the Chamber of  Commerce or the Institute of Engineers and they are not judicial  authorities.   Here, we find substance in the argument of Mr.  F.S.Nariman, learned senior counsel that in the context of Section 5 of  the Act excluding judicial intervention except as provided in the Act,  the  designation contemplated is not for the purpose of deciding the  preliminary facts justifying the exercise of power to appoint an  arbitrator, but only for the purpose of nominating to the Chief Justice a  suitable person to be appointed as arbitrator, especially, in the context  of Section 11(8) of the Act.   One of the objects of conferring power on

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the highest judicial authority in the State or in the country for  constituting the arbitral tribunal, is to ensure credibility in the entire  arbitration process and looked at from that point of view, it is difficult  to accept the contention that the Chief Justice could designate a non- judicial body like the Chamber of Commerce to decide on the existence  of an arbitration agreement and so on, which are decisions, normally,  judicial or quasi judicial in nature.     Where a Chief Justice designates  not a Judge, but another person or an institution to nominate an arbitral  tribunal, that can be done only after questions as to jurisdiction,  existence of the agreement and the like, are decided first by him or his  nominee Judge and what is to be left to be done is only to nominate the  members for constituting the arbitral tribunal.  Looking at the scheme  of the Act as a whole and the object with which it was enacted,  replacing the Arbitration Act of 1940, it seems to be proper to view the  conferment of power on the Chief Justice as the conferment of a  judicial power to decide on the existence of the conditions justifying  the constitution of an arbitral tribunal.   The departure from the  UNCITRAL model regarding the conferment of the power cannot be  said to be conclusive or significant in the circumstances.  Observations  of this Court in paragraphs 389 and 391 in Supreme Court Advocates  on Record Association Vs. Union of India [(1993) 4 SCC 441 at 668]  support the argument  that the expression chief justice is used in the  sense of collectivity of judges of the Supreme Court and the High  Courts respectively.

17.             It is true that the power under Section 11(6) of the Act is  not conferred on the Supreme Court or on the High Court, but it is  conferred on the Chief Justice of India or the Chief Justice of the High  Court.  One possible reason for specifying the authority as the Chief  Justice, could be that if it were merely the conferment of the power on  the High Court, or the Supreme Court, the matter would be governed  by the normal procedure of that Court, including the right of appeal and  the Parliament obviously wanted to avoid that situation, since one of  the objects was to restrict the interference by Courts in the arbitral  process.  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.                  18.             It is also not possible to accept the argument that there is  an exclusive conferment of jurisdiction on the arbitral tribunal, to  decide on the existence or validity of the arbitration agreement.   Section 8 of the Act contemplates a judicial authority before which an  action is brought in a matter which is the subject of an arbitration  agreement, on the terms specified therein, to refer the dispute to  arbitration.  A judicial authority as such is not defined in the Act.  It  would certainly include the court as defined in Section 2(e) of the Act  and would also, in our opinion, include other courts and may even  include a special tribunal like the Consumer Forum  (See Fair Air  Engineers (P) Ltd. and another vs. N.K. Modi (1996 (6) SCC 385).    When the defendant to an action before a judicial authority raises the  plea that there is an arbitration agreement and the subject matter of the  claim is covered by the agreement and the plaintiff or the person who  has approached the judicial authority for relief, disputes the same, the  judicial authority, in the absence of any restriction in the Act, has  necessarily to decide whether, in fact, there is in existence a valid  arbitration agreement and whether the dispute that is sought to be raised  before it, is covered by the arbitration clause.  It is difficult to  contemplate that the judicial authority has also to act mechanically or  has merely to see the original arbitration agreement produced before it,

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and mechanically refer the parties to an arbitration.  Similarly, Section  9 enables a Court, obviously, as defined in the Act, when approached  by a party before the commencement of an arbitral proceeding, to grant  interim relief as contemplated by the Section.  When a party seeks an  interim relief asserting that there was a dispute liable to be arbitrated  upon in terms of the Act, and the opposite party disputes the existence  of an arbitration agreement as defined in the Act or raises a plea that  the dispute involved was not covered by the arbitration clause, or that  the Court which was approached had no jurisdiction to pass any order  in terms of Section 9 of the Act, that Court has necessarily to decide  whether it has jurisdiction, whether there is an arbitration agreement  which is valid in law and whether the dispute sought to be raised is  covered by that agreement.  There is no indication in the Act that the  powers of the Court are curtailed on these aspects.  On the other hand,  Section 9 insists that once approached in that behalf, "the Court shall  have the same power for making orders as it has for the purpose of and  in relation to any proceeding before it".  Surely, when a matter is  entrusted to a Civil Court in the ordinary hierarchy of Courts without  anything more, the procedure of that Court would govern the  adjudication [See R.M.A.R.A. Adaikappa Chettiar and anr. vs. R.  Chandrasekhara Thevar (AIR 1948 P.C. 12)]

19.             Section 16 is said to be the recognition of the principle of  Kompetenz \026 Kompetenz.  The fact that the arbitral tribunal has the  competence to rule on its own jurisdiction and to define the contours of  its jurisdiction, only means that when such issues arise before it, the  Tribunal can and possibly, ought to decide them.  This can happen  when the parties have gone to the arbitral tribunal without recourse to  Section 8 or 11 of the Act.   But where the jurisdictional issues are  decided under these Sections, before a reference is made, Section 16  cannot be held to empower the arbitral tribunal to ignore the decision  given by the judicial authority or the Chief Justice before the reference  to it was made.  The competence to decide does not enable the arbitral  tribunal to get over the finality conferred on an order passed prior to its  entering upon the reference by the very statute that creates it.  That is  the position arising out of Section 11(7) of the Act read with Section 16  thereof.  The finality given to the order of the Chief Justice on the  matters within his competence under Section 11 of the Act, are  incapable of being reopened before the arbitral tribunal.  In Konkan  Railway (Supra) what is considered is only the fact that under Section  16, the arbitral tribunal has the right to rule on its own jurisdiction and  any objection, with respect to the existence or validity of the arbitration  agreement.  What is the impact of Section 11(7) of the Act on the  arbitral tribunal constituted by an order under Section 11(6) of the Act,  was not considered.  Obviously, this was because of the view taken in  that decision that the Chief Justice is not expected to decide anything  while entertaining a request under Section 11(6) of the Act and is only  performing an administrative function in appointing an arbitral tribunal.   Once it is held that there is an adjudicatory function entrusted to the  Chief Justice by the Act, obviously, the right of the arbitral tribunal to  go behind the order passed by the Chief Justice would take another hue  and would be controlled by Section 11(7) of the Act.

20.             We will now consider the prior decisions of this Court.   In  Sundaram Finance Ltd. vs. NEPC India Ltd. (1999(2) SCC  479) this Court held that the provisions of the Act must be  interpreted and construed independently of the interpretation  placed on the Arbitration Act, 1940 and it will be more relevant to  refer to the UNCITRAL model law while called upon to interpret the  provisions of the Act.   This Court further held that under the 1996 Act,  appointment of arbitrator(s) is made as per the provision of Section 11  which does not require the Court to pass a judicial order appointing an  arbitrator or arbitrators.   It is seen that the question was not discussed  as such, since the court in that case was not concerned with the  interpretation of Section 11 of the Act.   The view as above was quoted

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with approval in Ador Samia Private Limited Vs. Peekay Holdings  Limited & Others (1999 (8) SCC 572) and nothing further was said  about the question.    In other words, the question as to the nature of the  order to be passed by the Chief Justice when moved under Section  11(6) of the Act,  was not discussed or decided upon.

21.             In Wellington Associates Ltd. vs. Kirit Mehta (2000 (4)  SCC 272) it was contended before the designated Judge that what was  relied on by the applicant was not an arbitration clause.   The applicant  contended that the Chief Justice of India or the designate Judge cannot  decide that question and only the arbitrator can decide the question in  view of Section 16 of the Act.   The designated Judge held that Section  16 did not exclude the jurisdiction of the Chief Justice of India or the  designated Judge to decide the question of the existence of an  arbitration clause.   After considering the relevant aspects, the learned  Judge held:  "I am of the view that in cases where --- to start with \026  there is a dispute raised at the stage of the application  under Section 11 that there is no arbitration clause at all,  then it will be absurd to refer the very issue to an arbitrator  without deciding whether there is an arbitration clause at  all between the parties to start with.   In my view, in the  present situation, the jurisdiction of the Chief Justice of  India or his designate to decide the question as to the  "existence" of the arbitration clause cannot be doubted and  cannot be said to be excluded by Section 16."

22.             Then came Konkan Railway Corporation Ltd. vs.  Mehul Construction Co. (2000(7) SCC 201) in which the first  question framed was, what was the nature of the order passed by the  Chief Justice or his nominee in exercise of his power under Section  11(6) of the Arbitration and Conciliation Act, 1996?   After noticing the  Statement of Objects and Reasons for the Act and after comparing the  language of Section 11 of the Act and the corresponding article of the  model law, it was stated that the Act has designated the Chief Justice of  the 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 an arbitrator,   whereas under the model law,  the said power was vested with the  court.   When the matter is placed before the Chief Justice or his  nominee under Section 11 of the Act it was imperative for the 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 left to be raised before the arbitral tribunal  itself.   It was further held that at that stage, it would not be appropriate  for the Chief Justice or his nominee, to entertain any contention or  decide the same between the parties.  It was also held that in view of  the conferment of power on the arbitral tribunal under Section 16 of the  Act, the intention of the legislature and its anxiety to see that the  arbitral process is set in motion at the earliest, it will be appropriate for  the Chief Justice to appoint an arbitrator without wasting any time or  without entertaining any contentious issue by a party objecting to the  appointment of an arbitrator.   The Court stated:  "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 power 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 an  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

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order then the said order would be amenable to 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  the UNCITRAL Model."

23.             The Court proceeded to say that if it were to be held that  the order passed was purely administrative in nature, that would  facilitate the achieving of the object of the Act, namely, quickly setting  in motion the process of arbitration.  Great emphasis was placed on the  conferment of power on the Chief Justice in preference to a court as  was obtaining in the model law.   It was concluded " The nature of the  function performed by the Chief Justice being essentially to aid the  constitution of the arbitral 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 Samia case (supra) and the observations of this Court in  Sundaram Finance Ltd. case (supra) also are quite appropriate  and neither of those decisions require any reconsideration."    

24.              It was thus held that an order passed under Section 11(6)  of the Act, by the Chief Justice of the High Court or his nominee, was  an administrative order, its purpose being the speedy disposal of  commercial disputes and that such an order could not be subjected to  judicial review under Article 136 of the Constitution of India.   Even an  order refusing to appoint an arbitrator would not be amenable to the  jurisdiction of the Supreme Court under Article 136 of the Constitution.    A petition under Article 32 of the Constitution was also not  maintainable.  But, an order refusing to appoint an arbitrator made by  the Chief Justice could be challenged before the High Court under  Article 226 of the Constitution.   What seems to have persuaded this  Court was the fact that the statement of objects and reasons of the Act  clearly enunciated that the main object of the legislature was to  minimize the supervisory role of courts in arbitral process.   Since  Section 16 empowers the arbitral tribunal to rule on its own jurisdiction  including ruling on objections with respect to the existence or validity  of an arbitration agreement,  a party would have the opportunity to raise  his grievance against that decision either immediately or while  challenging the award after it was pronounced.  Since it was not proper  to encourage a party to an arbitration, to frustrate the entire purpose of  the Act by adopting dilatory tactics by approaching the court even  against the order of appointment of an arbitrator, it was necessary to  take the view that the order was administrative in nature.  This was all  the more so, since the nature of the function performed by the Chief  Justice was essentially to aid the constitution of the arbitral tribunal  immediately and the legislature having consciously chosen to confer  the power on the Chief Justice and not on the court, it was apparent that  the order was an administrative order.   With respect, it has to be  pointed out that this Court did not discus or consider the nature of the  power that the Chief Justice is called upon to exercise.  Merely because  the main purpose was the constitution of an arbitral tribunal, it could  not be taken that the exercise of power is an administrative power.        While constituting an arbitral tribunal, on the scheme of the Act, the  Chief Justice has to consider whether he as the Chief Justice has  jurisdiction in relation to the contract, whether there was an arbitration  agreement in terms of Section 7 of the Act and whether the person  before him with the request, is a party to the arbitration agreement.   On  coming to a conclusion on these aspects, he has to enquire whether the  conditions for exercise of his power under Section 11(6) of the Act  exist in the case and only on being satisfied in that behalf, he could

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appoint an arbitrator or an arbitral tribunal on the basis of the request.   It is difficult to say that when one of the parties raises an objection that  there is no arbitration agreement, raises an objection that the person  who has come forward with a request is not a party to the arbitration  agreement, the Chief Justice can come to a conclusion on those  objections without following an adjudicatory process.  Can he  constitute an arbitrary tribunal, without considering these questions?  If  he can do so, why should such a function be entrusted to a high judicial  authority like the Chief Justice.   Similarly, when the party raises an  objection that the conditions for exercise of the power under Section  11(6) of the Act are not fulfilled and the Chief Justice comes to the  conclusion that they have been fulfilled, it is difficult to say that he was  not adjudicating on a dispute between the parties and was merely  passing an administrative order.   It is also not correct to say that by the  mere constitution of an arbitral tribunal the rights of 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 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.

25.             It is also somewhat incongruous to permit the order of the  Chief Justice under Section 11(6) of the Act being subjected to scrutiny  under Article  226 of the Constitution at the hands of another Judge of  the High Court.   In the absence of any conferment of an appellate  power, it may not be possible to say that a certiorari would lie against  the decision of the High Court in the very same High Court.   Even in  the case of an international arbitration, the decision of the Chief Justice  of India would be amenable to challenge under Article 226 of the  Constitution before a High Court.   While construing the scope of the  power under Section 11(6), it will not be out of place for the court to  bear this aspect in mind, since after all, courts follow or attempt to  follow certain judicial norms and that precludes such challenges (see  Naresh Shridhar Mirajkar and others.  Vs. State of Maharashtra  and another (1966 (3) SCR 744) and Rupa Ashok Hurra vs. Ashok  Hurra and another (2002 (4) SCC 388).

26.             In Nimet Resourcs Inc. & Anr. Vs.Essar Steels Ltd.  (2000 (7) SCC 497) the question of existence or otherwise of an  arbitration agreement between the parties was itself held to be referable  to the arbitrator since the order proceeded on the basis that the power  under Section 11(6) was merely administrative.

27.             The correctness of the decision in Konkan Railway  Corpn. Ltd. vs. Mehul Construction Co.(supra) was doubted in  Konkan Railway Cooperation Ltd. vs. Rani Construction Pvt. Ltd.  and the order of reference, is reported in 2000 (8) SCC 159.   The  reconsideration was recommended on the ground that the Act did not  take away the power of the Court to decide preliminary issues  notwithstanding the arbitrator’s competence to decide such issues  including whether particular matters were "excepted matters", or  whether an arbitration agreement existed or whether there was a dispute  in terms of the agreement.   It was noticed that in other countries where  UNCITRAL model was being followed, the court could decide such  issues judicially and need not mechanically appoint an arbitrator.    There were situations where preliminary issues would have to be  decided by the court rather than by the arbitrator.   If the order of the  Chief Justice or his nominees were to be treated as an administrative  one, it could be challenged before the single Judge of the High Court,  then before a Division Bench and then the Supreme Court under Article  136 of the Constitution, a result that would cause further delay in  arbitral proceedings, something sought to be prevented by the Act.  An

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order under Section 11 of the Act did not relate to the administrative  functions of the Chief Justice or of the Chief Justice of India.    

28.             The reference came up before a Constitution Bench.   In  Konkan Railway Construction Ltd. vs. Rani Construction Pvt. Ltd.  (2002 (2) SCC 388),  the Constitution Bench reiterated the view taken  in Mehul Construction Co.’s case (supra), if we may say so with  respect, without really answering the questions posed by the order of  reference.  It was stated that there is nothing in Section 11 of the Act  that requires the party other than the party making the request, to be  given notice of the proceedings before the Chief Justice.   The Court  went on to say that Section 11 did not contemplate a response from the  other party.   The approach was to say that none of the requirements  referred to in Section 11(6) of the Act contemplated or amounted to an  adjudication by the Chief Justice while appointing an arbitrator.   The  scheme framed under the Arbitration Act by the Chief Justice of India  was held to be not mandatory.   It was stated that the UNCITRAL  model law was only taken into account and hence the model law, or  judgments and literature thereon, was not a guide to the interpretation  of the Act and especially of Section 11.

29.             With respect, what was the effect of the Chief Justice  having to decide his own jurisdiction in a given case was not  considered by the Bench.   Surely, the  question whether the Chief  Justice could entertain the application under Section 11(6) of the Act  could not be left to the decision of the arbitral tribunal constituted by  him on entertaining such an application.   We also feel that adequate  attention was not paid to the requirement of the Chief Justice having to  decide that there is an arbitration agreement in terms of Section 7 of the  Act before he could exercise his power under Section 11(6) of the Act  and its implication.  The aspect, whether there was an arbitration  agreement, was not merely a jurisdictional fact for commencing the  arbitration itself, but it was also a jurisdictional fact for appointing an  arbitrator on a motion under Section 11(6) of the Act, was not kept in  view.   A Chief Justice could appoint an arbitrator in exercise of his  power only if there existed an arbitration agreement and without  holding that there was an agreement, it would not be open to him to  appoint an arbitrator saying that he was appointing an arbitrator since  he has been moved in that behalf and the applicant before him asserts  that there is an arbitration agreement.   Acceptance of such an  argument, with great respect, would reduce the high judicial authority  entrusted with the power to appoint an arbitrator, an automaton and  sub-servient to the arbitral tribunal which he himself brings into  existence.  Our system of law does not contemplate such a situation.

30.             With great respect, it is seen that the court did not really  consider the nature of the rights of the parties involved when the Chief  Justice exercised the power of constituting the arbitral tribunal.   The  court also did not consider whether it was not necessary for the Chief  Justice to satisfy himself of the existence of the facts which alone  would entitle him or enable him to accede to the request for  appointment of an arbitrator and what was the nature of that process by  which he came to the conclusion that an arbitral tribunal was liable to  be constituted.   When, for example, a dispute which no more survives  as a dispute, was referred to an arbitral tribunal or when an arbitral  tribunal was constituted even in the absence of an arbitration agreement  as understood by the Act, how  could the rights of the objecting party  be said to be not affected, was not considered in that perspective.   In  other words, the Constitution Bench proceeded on the basis that while  exercising power under Section 11(6) of the Act there was nothing for  the Chief Justice to decide.   With respect, the very question that fell for  decision was whether there had to be an adjudication on the preliminary  matters involved and when the result had to depend on that  adjudication, what was the nature of that adjudication.   It is in that  context that a reconsideration of the said decision is sought for in this

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case.   The ground of ensuring minimum judicial intervention by itself  is not a ground to hold that the power exercised by the Chief Justice is  only an administrative function.   As pointed out in the order of  reference to that Bench, the conclusion that it is only an administrative  act is the opening of the gates for an approach to the High Court under  Article 226 of the Constitution, for an appeal under the Letters Patent  or the concerned High Court Act to a Division Bench and a further  appeal to this Court under Article 136 of the Constitution of India.   

31.             Moreover, in a case where the objection to jurisdiction or  the existence of an arbitration agreement is overruled by the arbitral  tribunal, the party has to participate in the arbitration proceedings  extending over a period of time by incurring substantial expenditure  and then to come to court with an application under Section 34 of the  Arbitration Act seeking the setting aside of the award on the ground  that there was no arbitration agreement or that there was nothing to be  arbitrated upon when the tribunal was constituted.   Though this may  avoid intervention by court until the award is pronounced, it does mean  considerable expenditure and time spent by the party before the arbitral  tribunal.  On the other hand, if even at the initial stage, the Chief Justice  judicially pronounces that he has jurisdiction to appoint an arbitrator,  that there is an arbitration agreement between the parties, that there was  a live and subsisting dispute for being referred to arbitration and  constitutes the tribunal as envisaged, on being satisfied of the existence  of the conditions for the exercise of his power, ensuring that the  arbitrator is a qualified arbitrator, that will put an end to a host of  disputes between the parties, leaving the party aggrieved with a remedy  of approaching this Court under Article 136 of the Constitution.   That  would give this Court, an opportunity of scrutinizing the decision of the  Chief Justice on merits and deciding whether it calls for interference in  exercise of its plenary power.  Once this Court declines to interfere  with the adjudication of the Chief Justice to the extent it is made, it  becomes final.   This reasoning is also supported by sub-section (7) of  Section 11, making final, the decision of the Chief Justice on the  matters decided by him while constituting the arbitral tribunal. This  will leave the arbitral tribunal to decide the dispute on merits  unhampered by preliminary and technical objections.  In the long run,  especially in the context of the judicial system in our country, this  would be more conducive to minimising judicial intervention in matters  coming under the Act.   This will also avert the situation where even  the order of the Chief Justice of India could be challenged before a  single judge of the High Court invoking the Article 226 of the  Constitution of India or before an arbitral tribunal, consisting not  necessarily of legally trained persons and their coming to a conclusion  that their constitution by the Chief Justice was not warranted in the  absence of an arbitration agreement or in the absence of a dispute in  terms of the agreement.

32.             Section 8 of the Arbitration Act, 1940 enabled the court  when approached in that behalf to supply an omission.  Section 20 of  that Act enabled the court to compel the parties to produce the  arbitration agreement and then to appoint an arbitrator for adjudicating  on the disputes.  It may be possible to say that Section 11(6) of the Act  combines both the powers.  May be, it is more in consonance with  Section 8 of the Old Act.  But to call the power merely as an  administrative one, does not appear to be warranted in the context of  the relevant provisions of the Act.   First of all, the power is conferred  not on an administrative authority, but on a judicial authority, the  highest judicial authority in the State or in the country.   No doubt, such  authorities also perform administrative functions.  An appointment of  an arbitral tribunal in terms of Section 11 of the Act, is based on a  power derived from a statute and the statute itself prescribes the  conditions that should exist for the exercise of that power.  In the  process of exercise of that power, obviously the parties would have the  right of being heard and when the existence of the conditions for the

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exercise of the power are found on accepting or overruling the  contentions of one of the parties it necessarily amounts to an order,  judicial in nature, having finality subject to any available judicial  challenge as envisaged by the Act or any other statute or the  Constitution.   Looked at from that point of view also, it seems to be  appropriate to hold that the Chief Justice exercises a judicial power  while appointing an arbitrator.

33.             In Attorney Geenral of the Gambia vs. Pierre Sarr  N’jie  (1961 Appeal Cases 617) the question arose whether the power  to judge an alleged professional misconduct could be delegated to a  Deputy Judge by the Chief Justice who had the power to suspend any  barrister or solicitor from practicing within the jurisdiction of the court.    Under Section 7 of the Supreme Court Ordinance of the Gambia, the  Deputy Judge could exercise "all the judicial powers of the Judge of the  Supreme Court".   The question was, whether the taking of disciplinary  action for professional misconduct; was a judicial power or an  administrative power.   The Judicial Committee of the Privy Council  held that a judge exercises judicial powers not only when he is deciding  suits between the parties but also when he exercises disciplinary  powers which are properly appurtenant to the office of a judge.  By  way of illustration, Lord Dening stated "Suppose, for instance, that a  judge finding that a legal practitioner had been guilty of professional  misconduct in the course of a case, orders him to pay the costs, as he  has undoubtedly power to do (see Myers v. Elman, per Lord Wright).    That would be an exercise of the judicial powers of the judge just as  much as if he committed him for contempt of court.  Yet there is no  difference in quality between the power to order him to pay costs and  the power to suspend him or strike him off."   

34.             The above example gives an indication that it is the nature  of the power that is relevant and not the mode of exercise.  In  Shankarlal Aggarwal and ors. vs. Shankar Lal Poddar and ors.   (1964 (1) SCR 717)  this Court was dealing with the question whether  the order of the Company Judge confirming a sale was merely an  administrative order passed in the course of the administration of the  assets  of the company under liquidation and, therefore, not a judicial  order subject to appeal.  This Court held that the order of the Company  Judge confirming the sale was not an administrative but a judicial  order.  Their Lordships stated thus: "It is not correct to say that every order of the Court,  merely for the reason that it is passed in the course of the  realization of the assets of the Company, must always be  treated merely as an administrative one.   The question  ultimately depends upon the nature of the order that is  passed.   An order according sanction to a sale  undoubtedly involves a discretion and cannot be termed  merely an administrative order, for before  confirming  the sale the court has to be satisfied, particularly where  the confirmation is opposed, that the sale has been held in  accordance with the conditions subject to which alone the  liquidator has been permitted to effect it, and that even  otherwise the sale has been fair and has not resulted in  any loss to the parties who would ultimately have to  share the realization.

       It is not possible to formulate a definition which  would satisfactorily distinguish between an  administrative and a judicial order.   That the power is  entrusted to or wielded by a person who functions as a  court is not decisive of the question whether the act or  decision is administrative or judicial.   An administrative  order would be one which is directed to the regulation or  supervision of matters as distinguished from an order  which decides the rights of parties or confers or refuses

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to confer rights to property which are the subject of  adjudication before the court.  One of the tests would be  whether a matter which involves the exercise of  discretion is left for the decision of the authority,  particularly if that authority were a court, and if the  discretion has to be exercised on objective, as  distinguished from a purely subjective consideration, it  would be a judicial decision.  It has sometimes been said  that the essence of a judicial proceeding or of a judicial  order is that there would be two parties and a lis between  them which is the subject of adjudication, as a result of  that order or a decision on an issue between a proposal  and an opposition.  No doubt it would not be possible to  describe an order passed deciding a lis between the  authority that is not a judicial order but it does not follow  that the absence of a lis necessarily negatives the order  being judicial.   Even viewed from this narrow  standpoint, it is possible to hold that there was a lis  before the Company Judge which he decided by passing  the order.   On the one hand were the claims of the  highest bidder who put forward the contention that he  had satisfied the requirements laid down for the  acceptance of his bid and was consequently entitled to  have the sale in his favour confirmed, particularly so as  he was supported in this behalf by the Official  Liquidators.   On the other hand,  there was the first  respondent and the large body of unsecured creditors  whose interests, even if they were not represented by the  first respondent, the court was bound to protect.  If the  sale  of which confirmation was sought was characterized  by any deviation subject to which the sale was directed to  be held or even otherwise was for a gross undervalue in  the sense that very much more could reasonably be  expected to be obtained if the sale were properly held, in  view of the figure of Rs.3,37,000/- which had been bid  by Nandlal Agarwalla it would be duty of the court to  refuse the confirmation in the interests of the general  body of creditors, and this was the submission made by  the first respondent.   There were thus two points of view  presented to the court by two contending parties or  interests and the court was called upon to decide between  them, and the decision vitally affected the rights of the  parties to property.   Under the circumstances, the order  of the Company Judge was a judicial order and not  administrative one, and was therefore not inherently  incapable of being brought up in appeal."

35.             Going by the above test it is seen that at least in the matter  of deciding his own jurisdiction and in the matter of deciding on the  existence of an arbitration agreement, the Chief Justice when  confronted with two points of view presented by the rival parties, is  called upon to decide between them and the decision vitally affects the  rights of the parties in that, either the claim for appointing an arbitral  tribunal leading to an award is denied to a party or the claim to have an  arbitration proceeding set in motion for entertaining a claim is  facilitated by the Chief Justice.   In this context, it is not possible to say  that the Chief Justice is merely exercising an administrative function  when called upon to appoint an arbitrator and that he need not even  issue notice to opposite side before appointing an arbitrator.

36.             It is fundamental to our procedural jurisprudence, that the  right of no person shall be affected without he being heard.  This

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necessarily imposes an obligation on the Chief Justice to issue notice to  the opposite party when he is moved under Section 11 of the Act.  The  notice to the opposite party cannot be considered to be merely an  intimation to that party of the filing of the arbitration application and  the passing of an administrative order appointing an arbitrator or an  arbitral tribunal.  It is really the giving of an opportunity of being heard.   There have been cases where claims for appointment of an arbitrator  based on an arbitration agreement are made ten or twenty years after  the period of the contract has come to an end.  There have been cases  where the appointment of an arbitrator has been sought, after the parties  had settled the accounts and the concerned party had certified that he  had no further claims against the other contracting party.  In other  words, there have been occasions when dead claims are sought to be  resurrected.  There have been cases where assertions are made of the  existence of arbitration agreements when, in fact, such existence is  strongly disputed by the other side who appears on issuance of notice.   Controversies are also raised as to whether the claim that is sought to  be put forward comes within the purview of the concerned arbitration  clause at all.  The Chief Justice has necessarily to apply his mind to  these aspects before coming to a conclusion one way or the other and  before proceeding to appoint an arbitrator or declining to appoint an  arbitrator.  Obviously, this is an adjudicatory process.  An opportunity  of hearing to both parties is a must.  Even in administrative functions if  rights are affected, rules of natural justice step in.  The principles  settled by Ridge Vs. Baldwin [(1963) 2 ALL ER 66] are well known   Therefore, to the extent, Konkan Railway (supra) states that no notice  need be issued to the opposite party to give him an opportunity of being  heard before appointing an arbitrator, with respect, the same has to be  held to be not sustainable.   

37.             It is true that finality under Section 11 (7) of the Act is  attached only to a decision of the Chief Justice on a matter entrusted by  sub-Section (4) or sub-Section (5) or sub-Section (6) of that Section.   Sub-Section (4) deals with the existence of an appointment procedure  and the failure of a party to appoint the arbitrator within 30 days from  the receipt of a request to do so from the other party or when the two  appointed arbitrators fail to agree on the presiding arbitrator within 30  days of their appointment.  Sub-Section (5) deals with the parties  failing to agree in nominating a sole arbitrator within 30 days of the  request in that behalf made by one of the parties to the arbitration  agreement and sub-Section (6) deals with the Chief Justice appointing  an  arbitrator or an arbitral tribunal when the party or the two arbitrators  or a person including an institution entrusted with the function, fails to  perform the same.  The finality, at first blush, could be said to be only  on the decision on these matters.  But the basic requirement for  exercising his power under Section 11(6), is the existence of an  arbitration agreement in terms of Section 7 of the Act and the applicant  before the Chief Justice being shown to be a party to such an  agreement.  It would also include the question of the existence of  jurisdiction in him to entertain the request and an enquiry whether at  least a part of the cause of action has arisen within the concerned State.   Therefore, a decision on jurisdiction and on the existence of the  arbitration agreement and of the person making the request being a  party to that agreement and the subsistence of an arbitrable dispute  require to be decided and the decision on these aspects is a prelude to  the Chief Justice considering whether the requirements of sub-Section  (4), sub-Section (5) or sub-Section (6) of Section 11 are satisfied when  approached with the request for appointment of an arbitrator.  It is  difficult to understand the finality to referred to in Section 11(7) as  excluding the decision on his competence and the locus standi of the  party who seeks to invoke his jurisdiction to appoint an arbitrator.   Viewed from that angle, the decision on all these aspects rendered by  the Chief Justice would attain finality and it is obvious that the decision  on these aspects could be taken only after notice to the parties and after  hearing them.  

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38.             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.    The Chief  Justice has to decide whether the applicant has satisfied the conditions  for appointing an arbitrator under Section 11(6) of the Act.   For the  purpose of taking a decision on these aspects, the Chief Justice can  either proceed on the basis of affidavits and the documents produced or  take such evidence or get such evidence recorded, as may be necessary.   We   think that adoption of this procedure in the context of the Act  would best serve the purpose sought to be achieved by the Act of  expediting the process of arbitration, without too many approaches to  the court at various stages of the proceedings before the Arbitral  tribunal.

39.             An aspect that requires to be considered at this stage is the  question whether the Chief Justice of the High Court or the Chief  Justice of India can designate a non-judicial body or authority to  exercise the power under Section 11(6) of the Act.  We have already  held that, obviously, the legislature did not want to confer the power on  the Court as defined in the Act, namely, the District Court, and wanted  to confer the power on the Chief Justices of the High Courts and on the  Chief Justice of India.  Taking note of Section 5 of the Act and the  finality attached by Section 11 (7) of the Act to his order and the  conclusion we have arrived at that the adjudication is judicial in nature,  it is obvious that no person other than a Judge and no non-judicial body  can be designated for entertaining an application for appointing an  arbitrator under Section 11(6) of the Act or for appointing an arbitrator.   In our dispensation, judicial powers are to be exercised by the judicial  authorities and not by non-judicial authorities.  This scheme cannot be  taken to have been given the go-by by the provisions in the Act in the  light of what we have discussed earlier.  Therefore, what the Chief  Justice can do under Section 11(6) of the Act  is to seek the help of a  non-judicial body to point out a suitable person as an arbitrator in the  context of Section 11(8) of the Act and on getting the necessary  information, if it is acceptable, to name that person as the arbitrator or  the set of persons as the arbitral tribunal.

40.             Then the question is whether the Chief Justice of the High  Court can designate a district judge to perform the functions under  Section 11(6) of the Act.    We have seen the definition of ’Court’ in  the Act.  We have reasoned that the intention of the legislature was not  to entrust the duty of appointing an arbitrator to the District Court.  Since the intention of the statute was to entrust the power to the highest  judicial authorities in the State and in the country, we have no  hesitation in holding that the Chief Justice cannot designate a district  judge to perform the functions under Section 11(6) of the Act.  This  restriction on the power of the Chief Justice on designating a district  judge or a non-judicial authority flows from the scheme of the Act.  

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41.             In our dispensation of justice, especially in respect of  matters entrusted to the ordinary hierarchy of courts or judicial  authorities, the duty would normally be performed by a judicial  authority according to the normal procedure of that court or of that  authority.  When the Chief Justice of the High Court is entrusted with  the power, he would be entitled to designate another judge of the High  Court for exercising that power.    Similarly, the Chief Justice of India  would be in a position to designate another judge of the Supreme Court  to exercise the power under Section 11(6) of the Act.  When so  entrusted with the right to exercise such a power, the judge of the High  Court and the judge of the Supreme Court would be exercising the  power vested in the Chief Justice of the High Court or in the Chief  Justice of India.  Therefore, we clarify that the Chief Justice of a High  Court can delegate the function under Section 11(6) of the Act to a  judge of that court and he would actually exercise the power of the  Chief Justice conferred under Section 11(6) of the Act.  The position  would be the same when the Chief Justice of India delegates the power  to another judge of the Supreme Court and he exercises that power as  designated by the Chief Justice of India.  

42.             In this context, it has also to be noticed that there is an  ocean of difference between an institution which has no judicial  functions and an authority or person who is already exercising judicial  power in his capacity as a judicial authority.  Therefore, only a judge of  the Supreme Court or a judge of the High Court could respectively be  equated with the Chief Justice of India or the Chief Justice of the High  Court while exercising power under Section 11(6) of the Act as  designated by the Chief Justice.  A non-judicial body or institution  cannot be equated with a Judge of the High Court or a Judge of the  Supreme Court and it has to be held that the designation contemplated  by Section 11(6) of the Act is not a designation to an institution that is  incompetent to perform judicial functions.  Under our dispensation a  non-judicial authority cannot exercise judicial powers.

43.             Once we arrive at the conclusion that the proceeding  before the Chief Justice while entertaining an application under Section  11(6) of the Act is adjudicatory, then obviously, the outcome of that  adjudication is a judicial order.  Once it is a judicial order, the same, as  far as the High Court is concerned would be final and the only avenue  open to a party feeling aggrieved by the order of the Chief Justice  would be to approach to the Supreme Court under Article 136 of the  Constitution of India.  If it were an order by the Chief Justice of India,  the party will not have any further remedy in respect of the matters  covered by the order of the Chief Justice of India or the Judge of the  Supreme Court designated by him and he will have to participate in the  arbitration before the Tribunal only on the merits of the claim.   Obviously, the dispensation in our country, does not contemplate any  further appeal from the decision of the Supreme Court and there  appears to be nothing objectionable in taking the view that the order of  the Chief Justice of India would be final on the matters which are  within his purview, while called upon to exercise his jurisdiction under  Section 11 of the Act.  It is also necessary to notice in this context that  this conclusion of ours would really be in aid of quick disposal of  arbitration claims and would avoid considerable delay in the process,  an object that is sought to be achieved by the Act.   

44.             It is seen that some High Courts have proceeded on the  basis that any order passed by an arbitral tribunal during arbitration,  would be capable of being challenged under Article 226 or 227 of the  Constitution of India.  We see no warrant for such an approach.  

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Section 37 makes certain orders of the arbitral tribunal appealable.      Under Section 34, the aggrieved party has an avenue for ventilating his  grievances against the award including any in-between orders that  might have been passed by the arbitral tribunal acting under Section 16  of the Act.  The party aggrieved by any order of the arbitral tribunal,  unless has a right of appeal under Section 37 of the Act, has to wait  until the award is passed by the Tribunal.  This appears to be the  scheme of the Act.  The arbitral tribunal is after all, the creature of a  contract between the parties, the arbitration agreement, even though if  the occasion arises, the Chief Justice may constitute it based on the  contract between the parties.   But that would not alter the status of the  arbitral tribunal.   It will still be a forum chosen by the parties by  agreement.  We, therefore, disapprove of the stand adopted by some of  the High Courts that any order passed by the arbitral tribunal is capable  of being corrected by the High Court under Article 226 or 227 of the  Constitution of India.  Such an intervention by the High Courts is not  permissible. 45.             The object of minimizing judicial intervention while the  matter is in the process of being arbitrated upon, will certainly be  defeated if the High Court could be approached under Article 227 of  the Constitution of India or under Article 226 of the Constitution of  India against every order made by the arbitral tribunal.  Therefore, it is  necessary to indicate that once the arbitration has commenced in the  arbitral tribunal, parties have to wait until the award is pronounced  unless, of course, a right of appeal is available to them under Section 37  of the Act even at an earlier stage.   

46.             We, therefore, sum up our conclusions as follows:

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.

(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 on the scheme of the Act.   

(vi)    Once the matter reaches the arbitral tribunal or the sole

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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 Corpn. Ltd. & anr. Vs. Rani  Construction Pvt. 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 Justice of the concerned High Court or a  Judge of that court designated by the Chief Justice.

(xii)   The decision in Konkan Railway Corpn. Ltd. & anr. Vs.  Rani Construction Pvt. Ltd. [(2000) 8 SCC 159] is  overruled.  

44.             The individual appeals will be posted before the  appropriate bench for being disposed of in the light of the principles  settled by this decision.