2014 (1) TMI 789 - SC - Companies Law

Appointment of arbitrator - Appointment of expert by High Court - Billing Dispute - Dispute arose between the parties relating to amounts that is due and payable - High Court rejected to decided dispute - Held that - Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it - as observed in Union of India v. Amrit Lal Manchanda and another 2004 (2) TMI 361 - SUPREME COURT OF INDIA . The learned Judges have referred to paragraph 19 of SBP & Co. (2005 (10) TMI 495 - SUPREME COURT) and thereafter referred to Section 8 of the Act and opined what the judicial authority should decide. Thereafter the Court proceeded to deal with nature and scope of the issues arising for consideration in an application under Section 11 of the Act for appointment of the arbitrator While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of arbitrability or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under Section 34 of the Act, relying upon sub-section (2)(b)(i) of that section. The decisions rendered in Boghara Polyfab Private Limited (2008 (9) TMI 864 - SUPREME COURT) and Chloro Controls India Private Limited are in accord with the principles of law stated in SBP & Co. The designated Judge, as perceived from the impugned order, while dealing with an application under Section 11(6) of the Act, on an issue raised with regard to the excepted matters, was not justified in addressing the same on merits whether it is a dispute relating to excepted matters under the agreement in question or not. The designated Judge has fallen into error by opining that the disputes raised are not billing disputes , for the same should have been left to be adjudicated by the learned Arbitrator. The part of the order impugned that reflects the expression of opinion by the designate of the Chief Justice on the merits of the disputes, being pregnable, deserves to be set aside and is hereby set aside.

Issues Involved:
1. Consistency and Finality in Judicial Pronouncements
2. Interpretation of Arbitration Clauses
3. Jurisdiction of Chief Justice or Designate under Section 11(6) of the Arbitration and Conciliation Act, 1996
4. Determination of "Excepted Matters" and "Billing Disputes"
5. Role of Arbitral Tribunal in Deciding Jurisdiction and Arbitrability

Detailed Analysis:

1. Consistency and Finality in Judicial Pronouncements:
The court emphasized the importance of consistency in judicial pronouncements to create confidence in the legal system. This consistency is achieved through the rule of precedents and the principle of stare decisis, which are based on public policy. The court referenced the case of Government of Andhra Pradesh v. A. P. Jaiswal to highlight that consistency is the cornerstone of the administration of justice.

2. Interpretation of Arbitration Clauses:
The appeal was directed against the judgment of the High Court of Chhattisgarh, which appointed an arbitrator despite the appellant's contention that the dispute was a "billing dispute" and should be resolved by an expert as per the agreement. The court examined the clauses of the agreement, particularly clause 9.3 and 16.2, to determine whether the dispute fell within the ambit of "billing disputes" and hence should be referred to an expert rather than an arbitrator.

3. Jurisdiction of Chief Justice or Designate under Section 11(6) of the Arbitration and Conciliation Act, 1996:
The court discussed the role of the Chief Justice or his designate under Section 11(6) of the Act. It was noted that the Chief Justice or designate must decide on preliminary issues such as jurisdiction, existence of an arbitration agreement, and whether the claim is a live one or barred by limitation. The court referenced several cases, including SBP & Co. v. Patel Engineering Ltd., to outline the duties and limitations of the Chief Justice or designate in appointing an arbitrator.

4. Determination of "Excepted Matters" and "Billing Disputes":
The court addressed whether the dispute raised by the respondent was a "billing dispute" and hence an "excepted matter" that should be resolved by an expert rather than an arbitrator. The High Court had concluded that the disputes did not fall under the "billing disputes" category. However, the Supreme Court held that the determination of whether a dispute is an excepted matter should be left to the arbitrator and not decided by the Chief Justice or designate.

5. Role of Arbitral Tribunal in Deciding Jurisdiction and Arbitrability:
The court reiterated that issues of arbitrability and whether a dispute falls within the arbitration clause should be decided by the arbitral tribunal. The Chief Justice or designate should only record satisfaction that a live issue exists and not delve into the merits of whether the dispute is arbitrable. The court referenced the cases of Boghara Polyfab Private Limited and Chloro Controls India Private Limited to support this view.

Conclusion:
(i) The decisions in Boghara Polyfab Private Limited and Chloro Controls India Private Limited are consistent with the principles laid down in SBP & Co.
(ii) The designated Judge erred in addressing the merits of whether the dispute was an excepted matter under the agreement.
(iii) The determination of whether the disputes are "billing disputes" should be left to the arbitrator.
(iv) The part of the High Court's order that expressed an opinion on the merits of the dispute is set aside.

The appeal was allowed in part, and the matter was remanded to the arbitrator for adjudication. The court also extended the time for the appellants to file their counter affidavit/claim.

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