Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
There are many complicated issues
with the Arbitration and Conciliation Act, 1996 and I feel that we require
certain reforms. When the arbitration clause is silent on the Arbitrator and
when a party approaches the Hon’ble Chief Justice of a High Court or his designate
under section 11 of the Arbitration and Conciliation Act, 1996 seeking for
appointment of arbitrator, the powers of the appointing authority under section
11 of the Act led to much discussion and the issue was extensively discussed by
the Hon’ble Apex Court. No more the power of the Chief Justice or his designate
under section 11 of the Arbitration and Conciliation Act, 1991 is merely
administrative. There are many complications basically with the Arbitration
mechanism and there are people supporting the ADR through Arbitration and there
are people to oppose the mechanism for various reasons. All issues were
comprehensively addressed by the Hon’ble Apex Court and effort is made to
prevent the unnecessary litigation at the stage of getting an Arbitrator
appointed under section 11 or at the stage of filing an application before an
authority under section 8 of the Act. It is not an issue and it’s a complicated
issue and if it is not addressed property, then, it will have drastic
implications on the litigants. Referring to the law under section 11 of the
Arbitration and Conciliation Act, 1996, Hon’ble Mr.Justice S.Thakur of Hon’ble
Apex Court in Arbitration Petition No.2 of 2010 between Alva Aluminium Ltd.
Bangkok Vs. Gabriel India Limited, has observed as follows:
“There is a long line of
decisions of this Court in which this Court has examined the nature and the
scope of the enquiry and the jurisdiction of the Chief Justice or his designate
while dealing with petitions under Section 11 of the Arbitration and
Conciliation Act, 1996. References to all those decisions is unnecessary for
the question that falls for determination here, stands concluded by two recent
decisions of this Court which alone should suffice for the present.
In National Insurance Co. Ltd. v.
Boghara Polyfab (P) Ltd. 2009 (1) SCC 267, this Court examined the provisions
of Section 11 of the Act and categorized the issues that may arise for
determination in a petition under Section 11 before the Chief Justice or his
designate and the approach to be adopted qua the same. The Court said:
"22.1. The issues (first
category) which the Chief Justice/his designate will have to decide are:
(a) Whether the party making the
application has approached the appropriate High Court.(b) Whether there is an
arbitration agreement and whether the party who has applied under Section 11 of
the Act, is a party to such an agreement.
22.2. The issues (second
category) which the Chief Justice/his designate may choose to decide (or leave
them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead
(long-barred) claim or a live claim.
(b) Whether the parties have
concluded the contract/transaction by recording satisfaction of their mutual
rights and obligation or by receiving the final payment without objection.
22.3. The issues (third category)
which the Chief Justice/his designate should leave exclusively to the Arbitral
Tribunal are:
(i) Whether a claim made falls
within the arbitration clause (as for example, a matter which is reserved for
final decision of a departmental authority and excepted or excluded from
arbitration).
(ii) Merits or any claim involved
in the arbitration."
The question whether there is an
arbitration agreement and whether the party who has applied under Section 11 of
the Act is a party to such an agreement in terms of the above decision falls in
category (1) and has, therefore, to be decided by the Chief Justice or his
designate.
The above decision was followed
in A.P. Tourism Development Corpn. Ltd. v. Pampa Hotels Ltd. 2010 (5) SCC 425
where also one of the questions that fell for determination was whether
existence or validity of the arbitration agreement is a matter to be decided by
the Chief Justice/designate while considering a petition under Section 11 of
the Act or the same has to be decided by the Arbitrator. Relying upon the
decision of this Court in SBP & Co. v. Patel Engg. Ltd. 2005 (8) SCC 618
and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd. 2009 (1) SCC 267,
this Court held that the question had to be decided by the Chief Justice or his
designate. The Court observed:
"It is held in SBP & Co.
v. Patel Engg. Ltd.and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd.
that the question whether there is an arbitration agreement and whether the
party who has applied under Section 11 of the Act, is a party to such an
agreement, is an issue which is to be decided by the Chief Justice or his designate
under Section 11 of the Act before appointing an arbitrator. Therefore there
can be no doubt that the issue ought to have been decided by the learned
designate of the Chief Justice and could not have been left to the arbitrator.”
On account of the prospective
overruling direction in SBP, any appointment of an arbitrator under Section 11
of the Act made prior to 26-10-2005 has to be treated as valid and all
objections including the existence or validity of the arbitration agreement,
have to be decided by the arbitrator under Section 16 of the Act. The legal
position enunciated in the judgment in SBP will govern only the applications to
be filed under Section 11 of the Act from 26-10-2005 as also the applications
under Section 11(6) of the Act pending as on 26-10-2005 (where the arbitrator
was not yet appointed)."
It is in the light of above
pronouncements, unnecessary to delve any further on this issue. It is clear
that once the existence of the arbitration agreement itself is questioned by
any party to the proceeding initiated under Section 11 of the Act, the same
will have to be decided by the Chief Justice/designate as the case may be. That
is because existence of an arbitration agreement is a jurisdictional fact which
will have to be addressed while making an order on a petition under Section 11
of the Act. The position may be different where arbitration proceedings are
initiated before a nominated arbitral Tribunal but the opposite party appears
to dispute the existence of the arbitration agreement. In any such situation
the Arbitral Tribunal can itself decide the issue in exercise of its powers
under Section 16(1) of the Act which reads as under:
"Jurisdiction of arbitral
tribunals:
16. Competence of arbitral
tribunal to rule on its jurisdiction.- (1) The arbitral tribunal may rule on
its own jurisdiction, including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for that purpose, -
(a) an arbitration clause which
forms part of a contract shall be treated as an agreement independent of the
other terms of the contract; and
(b) a decision by the arbitral
tribunal that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause."
So also the parties may without
approaching the Chief Justice refer the matters in dispute to the nominated
Tribunal including the question whether there exists an arbitration agreement.
In any such case also the Arbitral Tribunal can determine the existence of the
arbitration agreement. Suffice it to say that the power available to the
Arbitral Tribunal under Section 16 of the Act does not imply that the issue can
be or ought to be left to be determined by the Arbitral Tribunal even in cases
where one of the parties has filed a petition under Section 11 of the Act and
the other party opposes the making of a reference on the ground that there
exists no arbitration agreement between them. It is quite evident that the
question whether or not an arbitration agreement exists between the parties will
have to be answered for it is only if the answer to that question is in the
affirmative that the Chief Justice or his designate can pass an order of
reference of the disputes for adjudication."
Ozg Sarfaesi / DRT Lawyer
Ahmedabad | Pune |
Kolkata | Bangalore | Delhi | Mumbai
VoIP Text / Phone
# 09811415837-61-72-84-92-94
Website: http://sarfaesi.ozg.in
Email: debt@liaisoning.com
