http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

CASE NO.: Appeal (civil)  5366 of 2007

PETITIONER: Rameshwar Das Agrawal & Anr.

RESPONDENT: Kiran Agrawal & Ors.

DATE OF JUDGMENT: 23/11/2007

BENCH: G.P. Mathur & P. Sathasivam

JUDGMENT: JUDGMENT (Arising out of SLP (C) No. 1822 OF 2006)

P. Sathasivam, J.

1)      Leave granted.  

2)      This appeal is directed against the order dated  09.12.2005 passed by the Hon\022ble Chief Justice of the High  Court of Judicature at Allahabad in Arbitration Application  No. 54 of 2003 appointing Hon\022ble Mr. Justice Giridhar  Malviya, a retired Judge of the Allahabad High Court as  Arbitrator in respect of the dispute between the parties.   3) Respondent Nos. 4 and 5 before the High Court are the  appellants in this appeal.  According to them, late Hari  Prakash Agrawal (father of respondent No.7) and Rameshwar  Das Agrawal (appellant No.1 herein) were very close relatives  and they decided to carry on business of electronics and  electrical goods and other items.  They executed a partnership  deed on 15.05.1992 which contains an arbitration clause.   Subsequently, a dispute arose between the members of their  two families and by agreement dated 13.09.2002 signed by the  partners, Shri Gopal Goel  of Ravindrapuri, Varanasi was  appointed as sole Arbitrator to decide all the disputes  concerning the business.  Since the entire disputes between  the families were reconciled, fresh Deed of Partnership  reconstituting the three partnership firms were executed on  13.09.2002 and signed by all the partners and witnessed by  the sole Arbitrator - Shri Gopal Goel and one Shri Vinod  Kumar Jindal, one of the advisors to the Arbitrator.  This was  intimated to the bank and sales-tax authorities.  After  retirement of Smt. Kiran Agrawal and her husband Shiv  Kumar Agrawal on 13.09.2002, a fresh Retirement Deed was  executed on 05.07.2003 which was also duly signed by the  parties concerned. Thereafter, first respondent herein filed an  application dated 07.07.2003 under Section 11 of the  Arbitration and Conciliation Act, 1996 (in short the \021Act\022) for  appointment of an Arbitrator based on clause 21 of the  agreement dated 15.05.1992.  On 17.10.2003, the High Court  issued notice to all the 8 respondents-therein.  Thereafter, the  matter was listed on 09.12.2005 and as per the office report,  most of the respondents had not been served.  Shri  Rameshwar Das Agrawal, appellant No.1-herein was  represented in the High Court through his counsel and prayed  time to file counter affidavit.   It was also stated that no  dispute remained for adjudication.  The High Court, after  rejecting the request of the first appellant-herein, by order  dated 09.12.2005, appointed Hon\022ble Mr. Justice Giridhar  Malviya as an Arbitrator.  Aggrieved by the said order, the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

appellants preferred this appeal.       4)     We heard Mr. Manoj Swarup, learned counsel for the  appellants and Mr. Jay Savla and Mr. Gaurav Agrawal,  learned counsel for respondent Nos. 1 and 7 respectively.    Respondent Nos. 2 to 6 though duly served notice not chosen  to contest the appeal. 5)      Mr. Manoj Swarup, learned counsel for the appellants  placing reliance on a Seven-Judge Bench decision of this  Court in SBP & Co. vs. Patel Engineering Ltd. and  Another, (2005) 8 SCC 618, which was pronounced on  26.10.2005, submitted that the decision on the application  under Section 11 of the Act is a judicial pronouncement, the  impugned order of the Hon\022ble Chief Justice which does not  contain any reason cannot be sustained and the same  deserves to be set aside.  He also contended that the Hon\022ble  Chief Justice, who passed the impugned order, has not taken  care to verify whether notice had been duly served on all the  respondents.  He further contended that in any event, the  High Court ought to have granted reasonable time to file their  objections.      On the other hand, Mr. Jay Savla and Mr.  Gaurav Agrawal, learned counsel for the contesting  respondents submitted that inasmuch as the appellants  herein (respondents before the High Court) did not utilize the  ample time provided by the High Court for filing their  objection, the ultimate order of the Hon\022ble Chief Justice  cannot be faulted with.  He also submitted that there is no  violation of the law as declared by this Court.  7)      We have carefully perused the relevant materials and  considered the rival submissions. 8)      Before analyzing the claim of both the parties, it is  relevant to note that the Hon\022ble Chief Justice of the Allahabad  High Court passed the impugned order appointing a retired  Judge of the High Court as an Arbitrator on 09.12.2005.  On  26.10.2005, a Seven-Judge Bench of this Court in SBP & Co.  vs. Patel Engineering Ltd. and Another (supra) reviewed the  entire legal position and issued various directions in the  matter of appointment of Arbitrator.  The larger Bench has  also overruled the earlier decision in Konkan Railway  Corporation Ltd. vs. Rani Construction Private Limited,  (2002) 2 SCC 388.  It is useful to refer to the conclusions  arrived at by the larger Bench which read thus:       \02347. 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 designated Judge would  be entitled to seek the opinion of an institution in the matter  of nominating an arbitrator qualified in terms of Section

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

11(8) of the Act if the need arises but the order appointing  the arbitrator could only be that of the Chief Justice or the  designated Judge. ( 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 arbitrator, the High Court would not interfere with the  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 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 Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. 2 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 High Court concerned or a Judge of that Court  designated by the Chief Justice.  ( xii ) The decision in Konkan Rly. Corpn. Ltd. v. Rani  Construction (P) Ltd.  is overruled.\024  

From the above, it is clear that the power being exercised by  the Chief Justice or the designated Judge under Section 11 is  not an administrative power but it is a judicial power.  It is  also clear that an appeal would lie against that order only  under Article 136 of the Constitution of India to this Court.   Though the decision in Konkan Railway Corpn. Ltd. (supra)  has been overruled, the Bench has clarified that appointment  of arbitrators or Arbitral Tribunals therefore, made are to be  treated as valid, all objections being left to be decided under  Section 16 of the Act.  Unfortunately, the above decision in  SBP & Co. vs. Patel Engineering Ltd. and Another (supra)  though decided earlier i.e. on 26.10.2005 has not been  brought to the notice of the Chief Justice, who passed an  order, subsequent to the same i.e. on 09.12.2005.  In view of  the fact that an order passed under Section 11(6) is a judicial  order and in the light of the stand of the contesting  respondents before the High Court, the appellants in this

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

Court, the impugned order appointing an Arbitrator without  adverting to the claim and objection of both parties cannot be  sustained.  The order of the High Court reads as under: \023Shri Vijay Kumar Singh has appeared for the respondent.   The prayer for filing affidavit is turned down.        For the purpose of acting as Arbitrator in this matter  Hon\022ble Giridhar Malviya of 26, Hamilton Road, a retired  Judge of this High Court is hereby nominated.                                                                                                  Sd/-                                                 Ajoy Nath Ray                                                         C.J.\024

As rightly pointed out by learned counsel for the appellants,  the order does not show any reason for appointing an  Arbitrator.  As said earlier, after the decision of this Court in  SBP & Co. vs. Patel Engineering Ltd. and Another (supra)  it is incumbent on the part of the Chief Justice or a designated  Judge to consider the claim of both parties and pass a  reasoned order.        Apart from the above infirmity, learned counsel for the  appellants has also brought to our notice that in spite of a  request made for filing an affidavit opposing the application for  appointment of an Arbitrator, the Chief Justice has not  afforded further time.   It is also pointed out that except  respondent No.4-therein, notice had not been served on the  other respondents and without hearing them an order has  been passed appointing an Arbitrator.  We verified the order  sheet of the High Court (Annexure-P4) which is available at  page 50 of the paper-book.  The relevant details are  reproduced hereunder:-           \023ORDER SHEET        Arbitration case No. 54 of 2002               Xxxx xxxx xxxx              14.07.05  Case                         Shri Y.P.Singh Advocate and Ajay Kumar Singh have filed Vakalatnama on behalf of the  respondent No.4        Notices issued to respondents fixing 17.12.2002  have been returned after service as under:

Respondent No.7 Returned undelivered cover with  report \023Not Known\024. Respondent No.6 Returned undelivered cover with  report \023Not Known\024. Respondent No.8 Returned undelivered cover with  report \023Not Known\024. Respondent No.1 Returned undelivered cover with  report \023Not Known\024. Respondent No.3 Returned undelivered cover with  report \023Not Known\024.       Respondent No.2   Notice has not returned after service  Put up for Orders               Sd/-       Section Officer        Copying (D) Department       High Court, Allahabad.\024

As rightly pointed out that whether notice duly served on all  the respondents was not verified before passing the order on  09.12.2005.  In our opinion, the following conclusion would

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

emerge:  i)      All the respondents therein except respondent No.4,  notice was not served in the application for  appointment of arbitrator. ii)     Even the served respondent was not afforded  adequate opportunity to file his objection. iii)    The order does not satisfy the requirement of law  laid down by this Court in SBP & Co. vs. Patel  Engineering Ltd. and Another (supra) 9)      In view of the above, we have no other option except to  set aside the impugned order and remit the same for passing  fresh order.  Since respondents 1 and 7 herein are represented  by their counsel and notice had duly been served on the other  respondents in this Court and  none appeared for them, they  are permitted to file their objections, if they so desire   within a  period of 4 weeks from the date of receipt of copy of this  judgment.  Considering the fact referred to above, we make it  clear that no further notice need be issued by the High Court.   We constrain to arrive at such conclusion since all of them  (except Shivkumar Agrawal) are members of one family  residing at No.20, Gurdas Colony, Varanasi and all of them  were duly served notice in this Court.   

10)     We, therefore, set aside the impugned order dated  09.12.2005 passed by the Chief Justice of Allahabad High  Court and remit the same to the High Court to pass fresh  order as early as possible as observed above and in the light of  the principles  laid down in SBP & Co. vs. Patel Engineering  Ltd. and Another (supra). 11)     The Civil Appeal is allowed to the extent mentioned  above.  No costs.