Wednesday, October 06, 2010

Jurisdiction of the SC and Section 11(6) of the Arbitration and Conciliating Act, 1996

I am pleased to present a guest post by Mr. Anirban Bhattacharya, a Senior Associate with Luthra & Luthra Law Offices, New Delhi. The present article contains views of the author and not necessarily the views of the firm that engages him.
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The jurisdiction of the Supreme Court can broadly be categorized as under:

1) Appellate Jurisdiction
2) Original Jurisdiction
3) Advisory Jurisdiction

The original jurisdiction as conferred by the Constitution of India are under articles 32, 71, 131, 139 A(1) ,139(A)(2); read with section 25 of the Code of Civil Procedure, 1908 and Section 406 of the Code of Criminal Procedure, 1973. Lastly, Article 71 of the Constitution of India, 1950, which provides that all doubts and disputes relating to election of a President or Vice- President are required to be enquired into and decided by the Supreme Court.

The third amended volume of the handbook of practice and procedure of the Supreme Court release on March 25, 2010 by Hon’ble Mr. Justice K G Balakrishnan (as he then was) also reflects the same understanding.

However, requests (Arbitration Petitions) are regularly filed and disposed of by the Supreme Court in its “Civil Original Jurisdiction”. A case in point may be a recent such decision by the CJI designate in Denel (Proprietary Limited Vs. Bharat Electronics Ltd. and Anr. (JT 2010(5)SC 344). The relevant extract is herein as under:

“The Petitioner has filed the present Arbitration Petition under Sub-section (6) of Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"). It is prayed in the petition to appoint a sole arbitrator to adjudicate the dispute between the parties.

In the light of the aforesaid factual background, the petitioner has invoked the jurisdiction of this Court by filing the petition under Section 11(6) of the Arbitration and Conciliation Act 1996, to appoint an arbitrator to resolve the dispute between the parties.

Sub-section (6) of Section 11 of the Act provides, that, when the parties fail to reach to an agreement as regards the appointment of the arbitrator, can request the Chief Justice or any person or institution designated by him to come to the rescue of the parties. Therefore, petitioner in the present case has sought the appointment of the arbitrator by this Court so that the dispute between the parties can be resolved.”


It appears that the Hon’ble Judge did not notice the mandate of the Constitutional Bench decision of the Supreme Court in S.B.P. and Co. Vs. Patel Engineering, (2005) 8 SCC 618 which in most categorical and unequivocal terms clarified the legal position of section 11 overruling on of the court’s previous decisions as under:

“It is true that the power under Section 11(6) of the Act is not conferred on the Supreme Court or on the High Court, but it is conferred on the Chief Justice of India or the Chief Justice of the High Court. One possible reason for specifying the authority as the Chief Justice, could be that if it were merely the conferment of the power on the High Court, or the Supreme Court, the matter would be governed by the normal procedure of that Court, including the right of appeal and the Parliament obviously wanted to avoid that situation, since one of the objects was to restrict the interference by Courts in the arbitral process. Therefore, the power was conferred on the highest judicial authority in the country and in the State in their capacities as Chief Justices. They have been conferred the power or the right to pass an order contemplated by Section 11 of the Act.”

Thus, from a conjoint reading of the aforesaid decisions, it is clear that the petitioners could not have invoked the jurisdiction of the court nor could they have sought for appointment of an arbitrator by the court as stated by the Hon’ble justice.

Curiously, a bare reading of this decision and others decisions under section 11 of the Arbitration and Conciliation Act, 1996 would reveal that the orders are presumably being passed in the “civil original jurisdiction” of the Supreme Court of India, even after a categorical clarification with regard to the ambit , jurisdiction and scope of section 11 of the Arbitration and Conciliation Act, 1996 in Patel Engineering (supra) that the jurisdiction to appoint an arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996 has been conferred upon the CJI and his designate and not upon the Supreme Court.

This fact is further buttressed by fact that the Supreme Court Rules do not provide for such requests under section 11 of the 1996 Act to be decided by the Judges sitting either in Division Bench or singly under any of the applications listed under Order VII.

Furthermore, one fails to notice that such applications to the CJI or his designate are preferred under “the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996” which had been formulated by the Chief Justice of India under sub-section (10) of Section 11 of the Arbitration and Conciliation Ordinance,1996.

Thus, to conclude, civil original jurisdiction of the Supreme Court is neither invoked for requests under section 11 of the Arbitration and Conciliation Act, 1996 nor do the CJI or his designate pass such orders under the said jurisdiction but they do so under powers conferred on them and not the court as explained in Patel Engineering (supra).

Another aspect which deserves attention is the incorrect and misleading statement posted on the website of the Supreme Court, which interalia various captions/links, has the following written under ‘JURISDICTION OF THE SUPREME COURT’ wherein it is stated that “Under the Arbitration and Conciliation Act, 1996, International Commercial Arbitration can also be initiated in the Supreme Court.

Section 11 of the Arbitration and Conciliation Act, 1996 very clearly does not provide for initiation of International Commercial Arbitration but provides for a measure for appointment of an arbitrator by the CJI or his designate once the parties have failed to agree.

Following Patel Engineering, yet another aspect becomes clear that since the requests under Section 11 of the Arbitration and Conciliation Act, 1996 are decided by the CJI or his designate, the points of law decided by the CJI or his designate under section 11 do not have any precedential value (not binding on other courts) under Article 141 of the Constitution of India and the concurrent Benches and High Courts are not bound by the reasoning in such decisions in any manner.

However, since the said decisions are judicial in nature (as distinct from discretionary administrative powers), one must not forget that such decisions continue to bind the arbitrator on a decided issue, the parties to the arbitration and the doctrine of estoppel would operate qua the parties.

1 comment:

Renu Gupta said...

An interesting read.

I have one query regarding the value of decisions under Section 11 petitions, as a judicial precedent.

I do not know of any judgment of the Supreme Court or High Court which has made any such observations. In the absence of the same, and the fact that even obiter dicta sometimes is construed to be "law" as per Article 141, would it not be logical (conservative view though) to construe such decisions to also fall within the mandate of Article 141.

If not, the jurisprudence of Section 11 petitions is likely to suffer, and create uncertainty of law. Merely because it is the Chief Justice or his designate who decides the application, does not exclude the "judicial" nature of such decision (as already pointed out by you.)