INTRODUCTION Carrying on business activities entails many issues, one of which is parties entering into various contracts which lay down terms and conditions. Although, generally, efforts are made for unhindered implementation of the contracts, it may so happen that, in their performance, disputes arise which the existing stipulations can't take into account. In fact it is not humanly possible to provide for all eventualities which can give rise to disputes and lay down ways and means to avoid them. Therefore a mechanism has to be in place which will help in amicable settlement of altercation. While knocking at the doors of the courts for justice is pervasive, the delays and the costs involved in court process cannot be wished away. An alternative machinery, which is expeditious, offers swifter and less formal procedure as compared to courts, flexible and which is also cost effective with legal backing, was always in demand. And this machinery is Arbitration. It simply means out of court settlement of disputes through a third party who is non-partisan and picked by the parties themselves. In the evntuatlity of the parties not reaching a conclusion as to the arbitrators themselves there are provisions to allow any other neutral body such as the court to appoint the arbitrtaor. This process is well-accepted throughout the world. In the Indian context, the Arbitration Act 1940 was in the statute book for long but with globalisation of the Indian Economy, it has given way to The Arbitration and Conciliation Act, 1996 which has made the law of arbitration in line with the global law. This project is an attempt to study the provision which allows the Chief Justice or any person or institution delegated by him to appoint the arbitrator. Infact as far as this provision is concerned the Indian law is not a replication of the model law or any of the legal systems. This has been done keeping in mind the new globalised scenario and the objective of minimal court interference. However there have been various problems faced with the working of this provision. The debate regarding the nature and scope of the provision has been addressed by many. Various forums have expressed divergent views. The judiciary has been oscillating between this being a administrative or judicial power as the consequences regarding the
right to appeal would depend on that. Further even the power to look into preliminary questions by the appointing body inspite of a specific provision in the Act giving the arbitrator the power to do the same has been debated in the same context. Various forums to suit their own interests are complicating the process of arbitration. However what must not be forgotten under any circumstances is the general scheme of the Act. The objective of the Act is to provide speedy and cost effective dispute resolution and hence build confidence in the Indian dispute settlement mechanism.
LEGAL LANDSCAPE The scheme for appointment of the arbitrator in clearly explained in section 11 of the Arbitration and Conciliation Act, 1996. Section 11 gives the parties the freedom to agree on a procedure to appoint an arbitrator. It envisages a situation where failing an agreement in arbitration with three arbitrators, each party shall appoint one arbitrator and the two appointed arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall appoint the third who shall act as the presiding arbitrator 1. Further (a) if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment;
Section 11 (3), Arbitration and Conciliation Act, 1996.
the appointment shall be made upon request by the Chief Justice or any person or institution designated by him2. The same is the provision in the case of a sole arbitrator as well.3 The power of the chief justice to appoint an arbitrator has also been clearly stated in sec 11. Section 11(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) or 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 necessary measure, unless the agreement on the appointment procedure provides other means for securing appointment4. Hence these sections together clearly lay out the scheme for appointment of the arbitrators and the various situations in which the Chief Justice or any institution designated by him may be approached for the appointment of the arbitrator. Further the 1996 is a comprehensive code of arbitration. In order to understand the scheme of the Act it is important to study some other relevant provisions as well. According to section 5 of the Act 'no judicial authority shall intervene except where so provided in this part 5. The Act envisages a difference in referring the parties to arbitration under the New York Rules and for domestic arbitration. This is clear from a cursory study of the Section 8 6 and Section 457. The difference between the two sections is apparent while section 8 2
Section 11 (4), Arbitration and Conciliation Act, 1996. Section 11 (5), Arbitration and Conciliation Act, 1996. 4 Section 11 (6), Arbitration and Conciliation Act, 1996. 5 Section 5- notwithstanding anything contained in any other law for the time being in force, for matters governed by this part, no judicial authority shall intervene except where so provided in this part. 6 Section 8 Power to refer parties to arbitration where there is an arbitration agreement (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if the party so applies not later than when submitting his first statement on the substance of the dispute refer the parties to arbitration. 7 Power of judicial authorities to refer party to arbitration notwithstanding anything contained in Part I or in the Code of Civil Procedure, a judicial authority when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative and incapable of being 3
states that the judicial authority shall refer the parties to arbitration section 45 gives the judicial authority the discretion to refer the parties to arbitration unless it finds that the said agreement is null and void and inoperative. So the difference in procedure as in the case of enforcement of foreign awards and domestic arbitration are apparent. Hence in the opinion of the researcher since the two are clearly worded differently the difference in the two situations is apparent. So if a general overview of the 1996 Act is conducted it will be seen that the Act is a Code envisaging minimum intervention by the court as it clear by a reading of Section 5 of the Act and all situations where an appeal can be made against an order of the arbitral tribunal have been clearly stated in section 37 of the Act.8. Since the Act covers the situations where an appeal would be possible it clearly excludes all other possibilities. After examining these sections it would be easy to come to the conclusion that the 1996 Act provides greater autonomy to the parties and has reduced judicial interference. The Act is based on the Model law by the United Nations Commission for International Trade Law (UNCITRAL) of which India is a member and meets the specific need for international commercial arbitration. The important feature of the UNCITRAL model rules and law is that they have harmonized concepts on arbitration and conciliation of different legal systems of the world and thus contain provisions designed for universal application. The new Act has been instrumental in attracting foreign investors and making them feel secure in the environment of efficient and speedy justice9. However the provisions of section must be examined in the light of these objectives of the Arbitration and Conciliation Act, 1996. This provision differs from the model law and also from the law of most of the other countries. The model law in Art 11(4) performed. 8 Section 37 Appealable Orders (1) an appeal shall lie from the following order ( and no others) to the court authorized by law to hear appeals from original decrees of the court passing the order namely(a) Granting or refusing to grant any measure under section 9. (b) Setting aside or refusing to set aside an arbitral award under section 34. (2) appeal shall also lie to a court from an order of the arbitral tribunal(a) accepting the plea referred to in sub section 2 or sub section 3 of section 16; or (b) granting or refusing to grant an interim measure under section 17 (3) no second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away an right to appeal to the Supreme Court. 9 K.G Singhania, 'Comparative Study of the Indian Arbitration Act 1940 and the Arbitration and Conciliation Act 1996', Arbitration and ADR, Vol. 3, No 2, October 1998.
contemplates the appointment of arbitrators by 'Court or other Authority specified in Art 6' and Art 6 mandates that 'the functions referred to in Art 11(4)..shall be performed byâ€Ś (each state enacting this model law specifies the court, courts or where referred to therein, other authority competent to perform these functions 10.thus it must be observed that the Section 11 of the Indian Act is not a replication of the model UNCITRAL model. Infact keeping the objective of minimal court interference in mind Section 11 of the Indian Act is probably more progressive than the model law as has been stated by Dr. Gerold Hermann a principal drafter of the model law.11 Hence the objectives of the 1996 act are clear and are reflected in almost all the provisions of the Act. The main objective being speedy justice and minimal intervention of the courts section 11 facilitates such an objective as the chief justice as an officer is given the power to appoint or arbitrator or designate any institution to do the same. So the parties do not have to go through the courts for the appointment of the arbitrator and it can be done in a speedy fashion. Before concluding the examination of legal landscape as regards the power of the Chief Justice to appoint an arbitrator and the general scheme of the Act it is important to observe the change that has been seen after 1940 Act.Section 8 of the 1940 Act corresponds to section 11 of the 1996 Act 12. So the old Act talks about the court appointing the arbitrator which is similar to the provision of the model law. However the 1996 Act clearly deviates from that principle and gives the Chief Justice or any institution designated by him to appoint the arbitrator. This could be understood in the context of the 10
Consultation Paper on review of Working of the Arbitration and Conciliation Act, 1996, Law Commission of India. 11 Dr Gerold Hermann, at the XV ICCA Congress held at New Delhi, March 2-4, 2000. 12 Section 8 of the Arbitration Act 1940 states that Power of the Court to Appoint arbitrator or umpire-(1) in any of the following cases:(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not after differences have arisen, concur in the appointment or appointments; or (b) if any appointed arbitrator neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that that it was intended that the vacancy should not be supplied, and the parties or the arbitrator, as the case may be, do not supply the vacancy; or (c) where the parties or the arbitrators are required to appoint an umpire and not appoint him, any party may serve the other parties or arbitrators as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy (2) If the appointment is not made within 15 clear days after the service of the said notice, the court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.
liberalization policy of the government of India to integrate the Indian economy with the world economy and the subsequent increase in the international sale of goods and services, investment, communication and transportation. In order to keep pace with the disputes that would arise from these activities, India had to streamline its arbitral mechanism. Hence the ultimate goal is to provide a quick and cost effective remedy as any other law in the world13. In the case of section 11 the drafters went a step ahead of the model law and envisaged a situation where court intervention would be minimal and the Chief Justice or any institution designated by him will have the power to appoint an arbitrator.
Supra note 9, at 17.
DISCRETION OF THE COURT Having examined the legal provisions regarding the power of the Chief Justice to appoint the arbitrator it is important to observe the factual situation as well. Am important question that needs to be considered is whether the Chief Justice or any institution designated by him also have the power to go into preliminary questions before the appointment of the arbitrator. As far as the legal provisions are concerned it was been clearly seen that there is a difference between the domestic and foreign arbitration procedures. In the case of sec 35 the court has the power to see whether the agreement is null inoperative or void before appointing an arbitrator. However in the case of section 8 no such provision is given. Even under the 1940 Act the Court had the power to refuse the appointment of an arbitrator if there was no arbitration clause in existence. In the case of Dayanand Reddy v. A.P Industrial Infrastructure Corporation14 it was held by the courts that the original agreement signed by the parties did not contain any clause for arbitration. It was further held that in the absence of clear intention of the parties agreement for arbitration cannot and should not be inferred more so when the specific case of the respondent is that by mistake the clause relating to arbitration crept in the copy of the agreement. Further also in the case of Bharat Bhushan v. UP Small Industries Corporation Ltd.15 a contractor made an application under section 8 of the 1940 Act for the appointment of an independent arbitrator. Application was allowed by the civil judge an in appeal the High Court held that the court had no jurisdiction under section 8 of the 1940 Act to appoint an arbitrator because in the circumstances of the case none of the clauses of section 8 were attracted. However the Supreme Court in turn upheld the decision of the High Court but the for different reasons. They held that the disputed agreement did not contemplate any arbitration the application under section 8 was misconceived. However the situation under the 1996 Act should be different as the Act only says that in certain cases the chief Justice or any institution designated by him shall appoint an arbitrator under some given circumstances. However there has been varied opinion and 14 15
Dayanand Reddy v. A.P Industrial Infrastructure Corporation, (1993) 3 SCC 137. Bharat Bhushan v. UP Small Industries Corporation Ltd., (1999) 2 SCC 166.
debate on that issue. Some High Courts have taken the view that before taking necessary measures for securing appointment of the arbitrator or arbitrators under section 11 the Chief Justice or his designate can go into the question of existence or validity of the arbitration agreement and the arbitrality of the subject matter of the dispute in arbitration. In the case of Lachamanna B Horamani v. State of Karnataka16 the judge went into the issue of whether there was a valid clause referring the parties to arbitration and then the judge decided to appoint Chief Engineer as the sole arbitrator. Also in the case of Lloyds Steel Industries Limited v. Oil and Natural gas Corp. Ltd17. there was a contract with an arbitration clause. The applicant's bill involving huge amounts was with held for about 4 1/2 years and the applicant suffered great loss. The applicant agreed to enter into a memorandum of understanding and so the original claim between them was settled. However there was a dispute regarding interest for delayed payment. The contention was that the memorandum of association had put an end to the original agreement so the arbitration clause in that could not be invoked. However the counsel for the applicant contended that the appointment of the arbitrator was mandatory and it was for the arbitral tribunal to rule on it's own jurisdiction, including any objection as to the validity or existence of the arbitration agreement. The court disregarded this contention and said that even if the arbitral tribunal is required to decide the said question under section 16 of the Act, still however before referring the matter for arbitration, arbitration agreement must be in existence without the arbitration agreement there would be no question of referring the matter for arbitration. However there have been various courts that have also given decisions to the contrary. In the case of Nucon India (P) Ltd. v. Delhi Vidyut Board (Desu)18 It was an application for the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 for adjudicating the dispute having arisen between the petitioners and the respondents relating to the execution of the contract awarded by the respondents for the work of construction of control room building for 400 KV Sub-Station of the respondent (DESU) at Bawana, Delhi. The letter of intent was issued by the respondents on 6th August, 1991. The contract was for Rs. 1,10,02,860. Time was the essence of the 16 17
Lachamanna B Horamani v. State of Karnataka, 1999 (1) Arb. LR 153. Lloyds Steel Industries Limited v. Oil and Natural gas Corp. Ltd., AIR 1997 Bom 337. Nucon India (P) Ltd. v. Delhi Vidyut Board (Desu), 2001 (2) Arb LR 135.
contract and it was to be completed within a time period of six months, that is, by 8th June, 1992. According to the petitioners, the contract could not be completed for various reasons attributable to the respondents. The fact that there was an arbitration clause was not disputed. When the respondents failed either to make the payment of the claim amount or to appoint an Arbitrator in terms of the arbitration clause as demanded by the petitioners, the petitioners were left with no other alternative but to file the present petition under Section 11(6) of the Act. Learned counsel for the respondents claim that they did appoint a sole arbitrator as per the arbitration clause and sent a notice to the petitioner and so the petitioners claim under section 11 will become infructuaous. However the petitioners claim that the appointment was made after the application was made under the section and even after repeated requests the petitioner did not do the same before the application was filed under sec 11(6). The court held that f the other party fails to appoint an arbitrator within 30 days after the receipt of notice to do the court is chief Justice is obligated to do so without going into the any other questions of jurisdiction. Also in the case of Meda Narisimhulu v. Council of Scientific and Industrial Research and another19 the judge held that 'the question of limitation however debatable it is, should first be decided by the Chief Justice or a person designated by him before a decision is taken on the appointment of the arbitrator. Therefore i see no bar to appoint an arbitrator under section 11(6) read with other allied provisions inasmuch as the respondent failed to respond to the applicants request for the appointment of the arbitrator in terms of the agreement and the agreement does contain arbitration clause for the appointment of the sole arbitrator. Further there are certain larger questions that may arise in the context of section 11- the nature and amplitude of the power conferred on the Chief Justice or the person designated by him; whether the chief justice is required to pass a judicial order if there is a controversy with regard to arbitrality of the claims. It can be safely said that the jurisdiction conferred on the CJ or the person designated by him under section 11(4) and 11(6) does not comprehend the power to decide arbitrable and arguable questions which could otherwise be decided by the arbitrator. Therefore there is no bar to appoint an arbitrator under 11 (6) inasmuch as the respondent failed to respond to the applicant's request for appointment of an arbitrator as per the terms of the agreement. 19
Meda Narisimhulu v. Council of Scientific and Industrial Research and another,1999 (Suppl) Arb LR 648.
Hence all the cases clearly show that there is a divergence of judicial opinion on the question of whether the chief justice or designated authority can go into preliminary issues regarding jurisdiction inspite of the fact that section 16 clearly says that the arbitrators have the power to adjudicate matter regarding their own jurisdiction. This question that has been widely debated recently. The Law Commission of India has also gone into the question and conducted the study. According to the report of the law commission it is true that section 16 of the arbitration Act, 1996 confers power on the arbitrators to decide various jurisdictional issues. One view is that even jurisdictional issues raised in section 11 stage should be decided only by arbitrators and not by courts. They further clarify that it is the first time that such a specific power is given to the arbitrator under the new Act. According to the law commission's understanding of section 16 It appears that the intention behind Section 16(1) is that such a power to decide jurisdictional issues should be exercised by the arbitrators whenever disputes go before them on being referred by the parties. if the matter straightway goes before the arbitrators i.e not by reference under section 11, the arbitrators can certainly decide the jurisdictional issues and the decision on the said issues would always be amenable to review under section 34 of the Act if the present position continues under section 11 the arbitrators would decide questions of jurisdiction and if they accept the plea of lack of jurisdiction , their order would be amenable to appeal under section 37 (2) (a). if however they reject the said plea, there is no provision for appeal and the party has to wait till the award is passed.20. Hence in the opinion of the Law Commission the courts should have the power to go into issues of jurisdiction and when a party contends that there is no arbitration agreement questions of fact are raised. In such an event a provision can be made under section 11 that the court may have the evidence recorded by an advocate commissioner appointed by it21. In the opinion if the researcher the law commissions understanding should be subject to criticism as it is apparent that the main objective of the 1996 Act is speedy justice. When the Act specifically confers power under section 16 on the arbitrator to go into questions regarding jurisdiction the appointing authority should not have the right to consider questions of jurisdiction. The Chief Justice or any designate is only required to 20 21
Supra note 10, at 29. Id.
appoint an arbitrator in the eventuality that there is disagreement between the parties or deadlock. This is so that an impartial authority may be able to appoint an arbitrator in the event of a dispute between the parties. Hence the function of the court or the designate should be restricted to the appointment alone and not to go into the questions of jurisdiction.
NATURE OF THE POWER An extremely important provision that has arisen in the context of the power of the chief justice to appoint the arbitrator is what is the nature of the power. There has been a wide controversy regarding this issue and various judicial opinions have been given. The provisions of section 11 repose the statutory power in the Chief Justice or his designate in cases where parties fail to agree with respect to the procedure or appointment of the arbitrators. Despite the clear and unambiguous language of the statute, both confusion and conflict have arisen on the question of whether the statutory functions of the Chief Justice or his designate are acting under section 11 are of administrative or judicial character?22 It would be important to understand the scope of the terms administrative and judicial. The term administrative though bearing a wide range of meanings may be taken as referring to 'broad areas of government activity in which repositories of power may exercise every class of statutory function'.23 A judicial decision on the other hand presupposes an existing dispute between two or more parties and involves the presentation of their case by the parties to the dispute; ascertainment of facts by means of evidence adduced by the parties; submission of legal arguments; decision which disposes of the whole matter by a finding on disputed facts and an application of law when necessary, and a ruling on any disputed questions of law24. Hence now the nature of the power given to the Chief Justice or his delegate may be examined. The question of whether the court has the power to go into the preliminary question of the arbitrality of the dispute would also be answered if the power was held to be judicial or administrative. In the case of K.R Raveendranath v. State of Kerela25 referred the question as to whether the Supreme Court or his designate acting under section 11 to appoint an arbitrator could decide the questions of existence and validity of the agreement to a larger bench. Following this decision a two-judge bench in the case of ICICI Ltd. v. East Coast Boat Builders & Engineers Ltd. 26. also referred the matter to a 22
O.P Malhotra, The Arbitration and Conciliation Act, 1996 (under publication by Butterworths, New Delhi). 23 Id. 24 JAG Griffith et al, Principles of Administrative Law (4th ed., London: Pitman Publishing, 1967) at 143. 25 K.R Raveendranath v. State of Kerela, (1996) 10 SCC 35. 26 ICICI Ltd. v. East Coast Boat Builders & Engineers Ltd, (1998) 9 SCC 728.
larger bench for consideration. In the case of Sundaram Finance Ltd. v. NEPC India Ltd.27 the court stated that the appointment of an arbitrator under section 11 does not require a court to pass a judicial order. This opinion was reaffirmed in the case of Ador Samia Pvt. Ltd. v. Peekay Holdings Ltd.28 here the court held that orders under section 11 of the Act are not judicial orders. It went on to say that as the learned Chief Justice or his designate under section 11 (6) of the Act acts in administrative capacity. It is obvious that such order cannot be passed by any court exercising judicial function nor is a tribunal having the trappings of a judicial authority. Recently in the case of Wellington Associates Ltd v. Kirit Mehta29 acting as a designate of the Chief Justice of India in an International Commercial Arbitration Jagannadha Rao J had assumed full judicial powers. In this case he held that the jurisdiction of the CJI or his designate to decided question is not excluded by Section 16 of the Act. Further he held that arbitration clause was an enabling provision only having no mandatory sense and thus no reference could be made to an Arbitral tribunal. He stated that even if the Chief Justice of India or his designate is to be treated as an administrative authority, the position is that when the said authority is approached seeking appointment of an arbitrator or an arbitral tribunal and a question is raised that there is to start with, no arbitration clause the CJI or his designate would have to decide the question. What must be noted here is that Jagannadha Rao J was the same judge who had deemed it appropriate to refer the matter to a larger bench in the earlier case of ICICI Ltd.30 Another important case in this regard is that of Konkan Railway Corportaion Ltd. v. M/s Mehul Construction Co.31, in this case it was stated that if it was held that the order under section 11(6) is a judicial or quasi judicial order then the said order would be amenable for judicial intervention. And any reluctant party may frustrate the entire purpose by adopting dilatory tactics in approaching a court of law even against a 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 1996 Act. If on the other hand it 27
Sundaram Finance Ltd. v. NEPC India Ltd., (1999) 2 SCC 479. Ador Samia Pvt. Ltd. v. Peekay Holdings Ltd., (1998) 8 SCC 572. 29 Wellington Associates Ltd v. Kirit Mehta, (2000) 4 SCC 272. 30 Supra note 22, at 14. 31 Konkan Railway Corportaion Ltd. v. M/s Mehul Construction Co, (2000) 3 SCCJ 265. 28
is held that the order passed in administrative in nature then in such a case when the CJ or his designate refuses erroneously to make an appointment then an intervention could be possible by the court. It would be a case of non-performance of the duty of the chief justice or his designate and then a writ of mandamus would lie. The nature and function of the Chief Justice being essentially to aid the construction of the arbitral tribunal the legislature consciously chose to confer the power on the chief justice and not the court. Hence the power is an administrative power and not a judicial power. This court clearly went into the details of the function of the Chief Justice and his designate and came to the conclusion that it is an administrative power. However a contrary view has also been held in the case of KonKan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd.32 In this case it has been pointed out that there could be a variety of situations where preliminary issues arising at the stage of Section 11 would have to be decide by the chief justice or his nominee, by a judicial order and this would save time and expenditure and this view is not inconsistent with the UNCITRAL model. It was held that if the order is treated as an administrative order it could be challenged before a single bench of the High Court, the by a Division Bench and finally under Art 136 to the Supreme Court. On the other hand in the case of a judicial order there would be a direct appeal to the Supreme Court under Art 136. The bench referred to the case of Azov Shipping Co. v. Baltic Shipping Co.33 where the question of jurisdiction was first decided by the arbitrator and then came up before the court. The court observed that this was perhaps a case where the parties could have straightway come first before the court for determination of this issue, as that would have saved costs and time. Hence the court held that the power was a judicial power and holding so would be in the interests of justice and in keeping with the objectives of the Act. Hence clear divergence of opinion can be seen as regards the issue. There are two main views regarding the nature of the power. People who contest that the power is an administrative power state the reasons for it thus34
KonKan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd, 2000 (3) Arb LR 435. Azov Shipping Co. v. Baltic Shipping Co, 1999 (1) LL.LR 68. 34 Supra note 22, at 15. 33
(1) the chief justice is a repository of the statutory power, to make the necessary measure for securing the appointment of the arbitrator or arbitrators. (2) The judicial function broadly speaking presupposes an existing dispute between two or more parties. The request to take the necessary measure for securing appointment of the arbitrator is not resolving any dispute relating to the existence or validity of the arbitral agreement. (3) The functions discharged by the CJ or a designate are administrative in character. Just because it is a judge who has been vested with the power does not make it a judicial function. (4) This function of the Chief Justice is analogous to the power given to the Chief Justice under Art 146 for appointment of officers and servants and the expenses of the Supreme Court. This is clearly a administrative power even though it is discharged by the Chief Justice. (5) The function of the Chief Justice under section 11 are exercisable by himself or 'any' other person or institution designated by him. The use of the word 'any would indicate that the power could be delegated to a non-judicial functionary also. (6) As a rule judicial functions cannot be delegated. If this were a judicial function then they could not have been designated to any person or institution that the court Chief Justice thinks fit. These are the reasons presented by the proponents of the administrative nature of the power. The researcher agrees with the view that the power is not a judicial power. Most of the views given above clearly indicate that the nature of the power is not one of adjudicating on a dispute. On the other hand the law commission of India clearly believes that power is meant to be a judicial power and that there should be an amendment to the section changing the words 'Chief Justice or any person or institution designated by him' to 'the court' taking it back to the provision as it stood in the 1940 model. According to them any question of jurisdiction decided by the Supreme Court would be binding under Art 141 and will be a final order without giving scope for further litigation. If the jurisdiction issue is decided by a bench of the High Court in domestic arbitration cases then only one appeal would lie to the supreme Court. this would save time and expense in their opinion. Further they
have suggested that applications may be placed before the concerned bench of the Supreme Court or the High Court, as original applications, without mixing them up with other arbitration cases so that they might get top priority35. Another point of view presented from a practical point of view is that there can be two situations. If the arbitrator is appointed then the parties are bound to proceed with the arbitration and no appeal lies in terms of the express provision of section 37. Once the courts appoint an arbitrator the arbitral tribunal is constituted pursuant to the courts orders. Any challenge to the jurisdiction had to be made before the arbitral tribunal pursuant to section 16. Section 16 (6) says that any party aggrieved by such an award may make an application for setting aside the award under section 3436. On the other hand if the court turns down the request then there is no arbitral tribunal to raise their disputes. So under section 37 a Special Leave Petition would be possible. Hence where the Chief Justice appoints the arbitrator the decision is clearly administrative and no appeal lies. However when the Chief Justice turns down the request for such appointment the decision examines the facts and circumstances of the case and decides the rights and liabilities of the parties and so is clearly judicial in nature37. Another view that could be examined in the opinion of the researcher is that this is not a power given to the Chief justice at all but a function that he must perform himself or through a designated body. It is basically the performance of a legal duty where no element of choice enters. Nothing in section 11 suggests that the Chief Justice or any person or institution designated by him has a choice in the matter of deciding whether to appoint an arbitrator or not. It is a function that he must perform as per the request of the parties. in which case the whole debate regarding administrative or judicial power would be of no consequence as it is just a power to a public functionary which he must perform in the course of his duty. The fact that there is no choice in the matter of appointment can also be seen from the difference between section 8 and 11 as compared to section 45. In section 45 there is a clear element of choice available to the court. If the court feels that the agreement is null and void it has the power not to refer the parties for arbitration. 35
Supra note 10 at 32. Ranbir Krishnan, ' Appointment of Arbitrator by Court under the Indian Arbitration and Conciliation Act,1996', International Arbitration Law Reporter, Vol. 3. (London: Sweet and Maxwell, 2000) at 37. 37 Id. 36
However in the case of domestic arbitration there is no such element of choice as per the Act. Hence there are various divergent views available in this regard. The Supreme Court still has to give a large bench decision upon the matter. The Law Commission has made suggestions to amend the act and make it a clearly judicial power. Various practitioners have also followed the middle path. Hence in the opinion of the researcher in this whole debate the party's interest should not be forgotten and the object and scheme of the Act to attain speedy and inexpensive disposal to the suit should not be forgotten.
PRACTICE Any law in practice is hardly ever what i is envisaged to be by the Act. However it is necessary to remember the goals of the Act and not let practical manifestations take over the legislatures intent completely. It has been said that the issue of whether the power of the Chief Justice is administrative or judicial and the issue of whether the Chief Justice has the power authority to decide disputed cases apart from appointing the arbitrator has now been complicated beyond comprehension. Several appointments are held up in the meanwhile38. Another aspect that needs to be looked into while examining the actual practice of section 11 is the exercise of the power given to the Chief Justice to either appoint the arbitrator himself or through an institution or person designated by him. An examination of the cases where the chief justice has used his power to appoint an arbitrator it has most often been a retired Judge or an advocate 39. The serious concern here is the lack of institutional arbitration in the country. However this could be explained on the terms that ad hoc arbitration is preferred because of speed and the grounds of expense 40. Another reason could be the tendency of the judiciary to keep the power concentrated in it's own hands. There could be various reasons for the same. However both international and domestic arbitration needs to grow as it provides an effective method off dispute settlement. However the attitudes of the practitioners and the courts will have to change and the growth of the arbitration will have to be allowed unhindered.
MJ Antony, 'Litigants weep, lawyers laugh', Business Standard, 25th July, 2001. Meenakshi Devi v. MSTC Ltd., 2000 (Suppl) Arb LR 390; Ajit Prasad Jain v. Union of India, 2000 (Suppl) Arb LR 461. 40 Henry J Brown, ADR Principles and Practice ( London: Sweet and Maxwell, 1998) at 115. 39
CONCLUSION This project was an attempt to study the powers of the Chief Justice to appoint an arbitrator. Under the Arbitration and Conciliation Act 1996, the parties are free to decide the procedure for appointment of the arbitrators. However if there is a deadlock or a conflict some neutral body is required to appoint the arbitrator to adjudicate upon the dispute. This power under the Indian Act is given to the Chief Justice or any person or institution designated by him. This provision has to be understood in the context of general scheme of the Act itself. The mail objectives of the Act are to minimize court intervention and to make arbitration a speedy and cost effective method of dispute resolution. Hence in the opinion of the researcher the Chief Justice being an independent body has been entrusted with the function to appoint arbitrators. It is significant to note that this provision of our Arbitration and Conciliation Act,1996 is different from the UNCITRAL model and also from similar provisions in most other legal systems. This would indicate that the drafting of our Act as regards is aspect is extremely progressive. However various problems have emerged as regards the nature and scope of the power conferred on the Chief Justice through section 11 of the 1996 Act. The moot question being whether the power given to him is administrative or judicial and whether the power took into jurisdictional issues is that of the arbitrator alone (under section 16 of the 1996 Act) or the Chief Justice or his appointee even at the stage of appointment has the power to examine questions of jurisdiction apart from just appointing the arbitrator. In the opinion of the researcher the Act is a self contained code and so with provisions fro minimum intervention of the court. Hence the Chief Justice or his designate should be restricted to the mere appointment of the arbitrator and not go into jurisdictional questions as the Act clearly gives the arbitral tribunal the power decide questions on it's own jurisdiction. Further appeal provisions have also been clearly stated in the Act itself so debate about the consequences flowing from the judicial or administrative character of the should not be affecting the right to appeal of a party subjecting itself to arbitration under the rules of the 1996 Act.
The entire controversy and debate has complicated the issue and makes the process of arbitration seem very complicated. This however would be contrary to the intention of the Act. The legal practitioner today have made the process complicated and court oriented to serve their own ends. This should be avoided at all lengths. The primary goal of the Act to make the process of arbitration simple and cost effective should not be forgotten as that is becoming increasingly important to promote international sales and encourage foreign investors. In the new globalised scenario increase of international sales should be of paramount importance and making the process of dispute settlement simple and cost effective if a major incentive as it gives the foreign party the confidence to trade with Indians. Hence this being the primary goal in view the intervention of courts should be kept to a minimum and the process should be made simple and cost effective.
Published on Oct 13, 2010
Published on Oct 13, 2010