2003 (9) TMI 537 - SC - Companies Law

Power of Court to remove arbitrators or umpire in certain conditions - Held that - Appeal dismissed. The Court having regard to the duty imposed upon the arbitrator held that the arbitrators enter on the reference as soon as they have accepted their appointment and have communicated to each other about the reference. If the Arbitrator fails in his duty to enter on the reference or make a public award during the period stipulated under rule 3 of the First Schedule indisputable a cause of action will arise for this removal or appointment of a new arbitrator in terms of sections 11 and 12 of the 1940 Act. The words commencement of the arbitration proceedings have not been defined in the 1940 Act. They have to be given their ordinary meaning having regard to the provisions contained in Chapter II thereof.

Summary

Issues:
1. Jurisdiction of the High Court to appoint a new arbitrator under the Arbitration Act, 1940 after the enactment of the Arbitration and Conciliation Act, 1996.
2. Commencement of arbitral proceedings under the new Act in relation to disputes that arose before its enactment.
3. Interpretation of the phrase "commencement of arbitration proceedings" under the Arbitration Act, 1940 and the new Act.

Analysis:
1. The case involved a dispute where the respondent sought reference for adjudication of disputes by an arbitrator after the Chief Engineer appointed an arbitrator under the Arbitration Act, 1940. The High Court, post the enactment of the Arbitration and Conciliation Act, 1996, appointed a new arbitrator. The appellant challenged this order on the grounds of jurisdiction. The Supreme Court dismissed the appeal, stating that the new Act applies to arbitral proceedings that commenced after its enforcement unless agreed otherwise by the parties.

2. The main issue revolved around when the arbitral proceedings commence under the new Act. The Court referred to precedents like Shetty's Construction Co. v. Konkan Railway Construction to establish that the proceedings commence upon the receipt of a request for arbitration by the respondent. The judgment highlighted that the phrase "in relation to arbitral proceedings" encompasses various stages, including invoking the arbitration clause and appointing an arbitrator, under the old Act for the award to become a decree.

3. The Court delved into the interpretation of the phrase "commencement of the arbitration proceedings" under the Arbitration Act, 1940, and the new Act. It discussed the duty imposed on arbitrators to make an award within a specified period and emphasized that failure to do so could lead to the removal or appointment of a new arbitrator. The judgment underscored the importance of giving ordinary meanings to legal terms in the absence of specific definitions in the Acts.

This comprehensive analysis of the judgment provides a detailed understanding of the issues involved and the Court's reasoning behind its decision, ensuring clarity on the legal aspects discussed in the case.