2011 (2) TMI 1301 - SC - Companies Law

Whether there was inherent lack of jurisdiction in the Arbitrator thereby nullifying the award? Held that - Appeal allowed. In this case it is not in dispute that the contract between the parties contained an arbitration clause (clause 29). The decision of the High Court that the provisions of the 1983 Adhiniyam would apply and sole arbitrator appointed by the designate of the Chief Justice lacked inherent jurisdiction cannot therefore be sustained. Though the said Arbitration clause provided for reference of disputes to a three member Arbitration Board the designate chose to appoint a sole arbitrator and that order dated 11.5.2007 attained finality.

Summary

Issues:
Jurisdiction of the arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996.

Analysis:
The appellant filed an application under section 11(6) of the Act before the High Court, seeking appointment of an arbitrator due to disputes arising from a work order. The Chief Justice designated a retired Judge as the arbitrator. The appellant claimed Rs.76,64,725 with interest, which the arbitrator awarded in their favor. The respondents challenged the award under section 34, arguing lack of jurisdiction of the arbitrator appointed under the Act.

The District Judge rejected the respondents' objection to the arbitrator's jurisdiction, which was upheld in a review petition. The appellant's review application regarding the appointment of the arbitrator was dismissed by the High Court. The respondents appealed the decision to the High Court, which set aside the orders, stating the arbitrator lacked jurisdiction as the dispute should have been decided by a statutory tribunal under a different law.

The Supreme Court referred to a previous case where it was held that once an arbitrator is appointed by the Chief Justice or designate, the tribunal cannot question its own jurisdiction. The Court ruled that the arbitrator's appointment under section 11(6) was valid, and the High Court's decision was incorrect. The High Court's order was set aside, and the District Judge was directed to proceed with the application under section 34 of the Act on its merits.

In conclusion, the Supreme Court clarified the jurisdiction of the arbitrator appointed under section 11(6) of the Act, emphasizing that once appointed by the Chief Justice or designate, the tribunal's jurisdiction cannot be challenged. The Court overturned the High Court's decision, affirming the validity of the arbitrator's appointment and directing further proceedings on the application under section 34 of the Act.