2024 (12) TMI 663 - SC - Indian Laws

Appointment of an arbitrator by the High Court of Madras under Section 11(6) of the Arbitration and Conciliation Act, 1996 - violation of non-disclosure obligations under clause 19 of the appointment order leading to the order of termination - Nonpayment of wages and the legality and validity of the order of termination dated 21.01.2021. Appointment of an arbitrator by the High Court of Madras under Section 11(6) of the Arbitration and Conciliation Act, 1996 - violation of non-disclosure obligations under clause 19 of the appointment order leading to the order of termination - HELD THAT - In the order impugned, the High Court has proceeded to note an arbitration agreement and therefore, appointed an advocate as the arbitrator - The issue relating to violation of the non-disclosure obligation under clause 19 is only an afterthought. This was evidently not the ground when the respondent issued the show cause notice on 04.09.2020, nor was it a part of the inquiry report. This is also not a part of the charge memo dated 25.11.2020. Crucially, the termination was not based on any such allegation as is evident from the termination order dated 21.01.2021 - It can be concluded that there is no dispute about violation of nondisclosure obligations and Section 11(6) petition, to this extent is non-existent. Nonpayment of wages and the legality and validity of the order of termination dated 21.01.2021 - HELD THAT - The appellant approached the Authority under the PW Act much before the order of termination and the said authority would exercise jurisdiction under Section 15(2) of the PW Act to the exclusion of civil courts and these disputes are non-arbitrable - It was clearly intended to threaten the appellant for having approached the statutory authorities under the PW Act and the ID Act. There is no basis for invoking clause 19 of the agreement and demanding compensation of Rs. 14,02,822/- when that fact situation did not arise. The Section 11(6) petition has two facets. The first relates to disputes that were anyway pending before the statutory authorities, and they related to non-payment of wages and legality and propriety of termination which are non-arbitrable. The second facet relates to the alleged violation of clause 19 relating to nondisclosure obligation, which was not raised in the show cause notice, inquiry report, chargesheet and termination order and as such is non-existent. The judgment and the order passed by the High Court set aside - the petition under Section 11(6) filed by the respondent under the Arbitration and Conciliation Act dismissed.

Summary

Issues:
Questioning the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996; Allegation of violation of non-disclosure obligations under clause 19; Non-payment of wages and legality of termination order; Jurisdiction of the Authority under the Payment of Wages Act; Jurisdiction of the Industrial Tribunal under the Industrial Disputes Act.

Analysis:
The Supreme Court addressed the issue of challenging the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The appellant contended that the dispute with the respondent-employer was governed by the Payment of Wages Act, 1936, and the Industrial Disputes Act, 1947, making the application under Section 11 of the Act an abuse of remedial process. The Court noted that the termination order did not mention any violation of the non-disclosure obligations, rendering the Section 11(6) petition non-existent (Para 2, 13).

Regarding the non-payment of wages and the termination order, the Court emphasized that these disputes were already pending before the statutory authorities, making them non-arbitrable. The Authority under the Payment of Wages Act had jurisdiction over the wage claim, and the Industrial Tribunal had jurisdiction over the termination order, to the exclusion of civil courts and arbitration (Para 14, 15).

The Court highlighted the principle of subject-matter arbitrability, citing the Vidya Drolia case, and concluded that the Section 11(6) petition was an abuse of process intended to threaten the appellant for approaching statutory authorities. The demand for compensation under clause 19 was deemed baseless, leading to the dismissal of the petition and granting costs to the appellant (Para 16, 17, 18, 19).

In summary, the Supreme Court allowed the Civil Appeal, set aside the High Court's judgment, and dismissed the petition under Section 11(6) of the Arbitration and Conciliation Act. The Court affirmed the non-arbitrability of disputes already under the jurisdiction of statutory authorities and the Industrial Tribunal, emphasizing the abuse of process in invoking arbitration for such matters (Para 18).