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2005 (10) TMI 495 - SC - Companies LawArbitral tribunal so constituted, in terms of Section 16 of the Act, has the right to decide whether it has jurisdiction to proceed with the arbitration, whether there was any agreement between the parties and the other matters referred to therein. Whether the Chief Justice could entertain the application under Section 11(6) of the Act? Held that - The function performed by the Chief Justice of the High Court or the Chief Justice of India under Sub-section (6) of Section 11 of the Act (i.e. Arbitration and Conciliation Act, 1996) is administrative - pure and simple - and neither judicial nor quasi-judicial. The function to be performed by the Chief Justice under Sub-section (6) of Section 11 of the Act may be performed by him or by any person or institution designated by him . While performing the function under Sub-section (6) of Section 11 of the Act, the Chief Justice should be prima facie satisfied that the conditions laid down in Section 11 are satisfied. The Arbitral Tribunal has power and jurisdiction to rule on its own jurisdiction under Sub-section (1) of Section 16 of the Act. Where the Arbitral Tribunal holds that it has jurisdiction, it shall continue with the arbitral proceedings and make an arbitral award. A remedy available to the party aggrieved is to challenge the award in accordance with Section 34 or Section 37 of the Act. Since the order passed by the Chief Justice under Sub-section (6) of Section 11 of the Act is administrative, a Writ Petition under Article 226 of the Constitution is maintainable. A Letters Patent Appeal/Intra-court Appeal is competent. A Special Leave Petition under Article 136 of the Constitution also lies to this Court. (viii) While exercising extraordinary jurisdiction under Article 226 of the Constitution, however, the High Court will be conscious and mindful of the relevant provisions of the Act, including Sections 5, 16, 34 to 37 as also the object of the legislation and exercise its power with utmost care, caution and circumspection. Since the Chief Justice is performing administrative function in appointing an Arbitral Tribunal, there is no duty to act judicially on his part. The doctrine of duty to act fairly , however, applies and the Chief Justice must issue notice to the person or persons likely to be affected by the decision under Sub-section (6) of Section 11 of the Act. (xii) All appointments of Arbitral Tribunals so far made without issuing notice to the parties affected are held legal and valid. Henceforth, however, every appointment will be made after issuing notice to such person or persons. In other words, this judgment will have prospective operation and it will not affect past appointments or concluded proceedings.
Issues Involved:
1. Nature of the function of the Chief Justice under Section 11 of the Arbitration and Conciliation Act, 1996. 2. Interpretation of various provisions of the Arbitration and Conciliation Act, 1996. 3. Jurisdiction of the Arbitral Tribunal under Section 16 of the Act. 4. Finality of the decision under Section 11(7) of the Act. 5. Whether the Chief Justice acts as a persona designata. 6. The necessity of issuing notice to affected parties before appointing an arbitrator. 7. Judicial review of the Chief Justice's decision under Article 226 of the Constitution. Detailed Analysis: 1. Nature of the Function of the Chief Justice under Section 11 of the Arbitration and Conciliation Act, 1996: The primary issue was whether the function of the Chief Justice or his designate under Section 11 of the Arbitration and Conciliation Act, 1996, is administrative or judicial. The judgment concluded that the power exercised by the Chief Justice under Section 11(6) is not an administrative power but a judicial power. The Chief Justice must decide on jurisdictional facts, such as the existence of an arbitration agreement and the qualifications of the arbitrator, which involve an adjudicatory process. This decision overruled the earlier view that the Chief Justice's role was purely administrative. 2. Interpretation of Various Provisions of the Arbitration and Conciliation Act, 1996: The judgment provided an extensive interpretation of the Arbitration and Conciliation Act, 1996. It clarified that the Act was intended to comprehensively cover international and commercial arbitrations and conciliations, as well as domestic arbitrations and conciliations. The Act aims to create a fair, efficient, and unified legal framework for arbitration. 3. Jurisdiction of the Arbitral Tribunal under Section 16 of the Act: Section 16 of the Act allows the arbitral tribunal to rule on its own jurisdiction, including objections regarding the existence or validity of the arbitration agreement. The judgment emphasized that while the arbitral tribunal has the competence to decide its jurisdiction, this does not override the finality of the Chief Justice's decision under Section 11(7). The arbitral tribunal cannot revisit the decision made by the Chief Justice regarding the existence of an arbitration agreement or the appointment of an arbitrator. 4. Finality of the Decision under Section 11(7) of the Act: Section 11(7) gives finality to the decision rendered by the Chief Justice or the person designated by him. The judgment clarified that this finality applies to the Chief Justice's decision on jurisdictional facts and the existence of an arbitration agreement. This finality means that the decision cannot be challenged before the arbitral tribunal but can be reviewed by the Supreme Court under Article 136 of the Constitution. 5. Whether the Chief Justice Acts as a Persona Designata: The judgment concluded that the power conferred on the Chief Justice under Section 11(6) is not as a persona designata. The Chief Justice exercises this power in his capacity as the head of the judiciary, and the power can be delegated to another judge of the High Court or the Supreme Court. This delegation is consistent with the judicial nature of the power. 6. The Necessity of Issuing Notice to Affected Parties Before Appointing an Arbitrator: The judgment emphasized the need for issuing notice to the parties likely to be affected by the appointment of an arbitrator. This requirement ensures that the process is fair and that the parties have an opportunity to present their case. The judgment held that even though the Chief Justice's function is judicial, principles of natural justice require that notice be given to the affected parties. 7. Judicial Review of the Chief Justice's Decision under Article 226 of the Constitution: The judgment clarified that the decision of the Chief Justice under Section 11(6) is a judicial order. As such, it can be reviewed by the Supreme Court under Article 136 of the Constitution. The High Courts should not interfere with orders passed by the arbitral tribunal during arbitration proceedings, and parties should wait until the award is made to challenge it under Section 34 of the Act. This approach minimizes judicial intervention and ensures the expeditious resolution of disputes. Conclusion: The judgment comprehensively addressed the nature of the Chief Justice's function under Section 11 of the Arbitration and Conciliation Act, 1996, concluding that it is a judicial function. It emphasized the finality of the Chief Justice's decision, the necessity of issuing notice to affected parties, and the limited scope of judicial review to ensure a fair and efficient arbitration process. The decision overruled the earlier view that the Chief Justice's role was administrative and provided clarity on the interplay between Sections 11 and 16 of the Act.
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