Judgments and Awards

Ranjul Baruah Vs Numaligarh Refinery Ltd

The applicant raised a reference of dispute to arbitration under a contract for construction work. On the failure on the part of the appointing authority, the contractor (applicant) appointed the arbitrator as per terms of clause of agreement. After initiation of proceedings, the opposite party applied for stay of proceedings, which was allowed. Hence this application for vacation of stay was filed by the applicant.

It was held that a reading of the provisions of the arbitral clause indicated that the contractor was authorized by agreement to appoint one of the persons from the panel forwarded by him on failure on the part of the appointing authority to act upon the panel. The Chief Justice comes in only when the parties fail to act on an agreed procedure. But in a given case, where the agreement provides alternatively powers of appointment with either of the parties and the arbitrator is appointed by one of them, such appointment cannot be treated as illegal merely because the other party does not agree.

In the instant case, the appointing authority failed to forward the panel of 3 names for selection by the contractor and also failed to select any person from the panel forwarded by the contractor. It was only then the contractor invoked his powers of appointment as per terms of the agreement. The appointment of the arbitrator has been in compliance with the agreement in letter and spirit and therefore the stay order was vacated.

Ranjul Baruah Vs Numaligarh Refinery Ltd

The question of arbitrability of the dispute was determined in this matter and the plea of the opposite party, that there is no referable dispute, hence the appointment of sole arbitrator could not be sustained, was rejected by the court.

It was held that when a dispute is raised by a party to an arbitration agreement and denied by the other party, it has to be treated as a dispute within the meaning ht the arbitration clause to be adjudicated by the tribunal. One of the main objects of the Act is to minimize the supervisory role of courts in the arbitral process. The objection raised by the opposite party, therefore, is exclusively within the jurisdiction of and may be placed before the arbitral tribunal. The court, as defined in Section 2(1) (e) cannot be moved for a decision in this matter.

Earnest Builders Vs Union of India

The power of the Chief Justice and/or its designate and the arbitrator was discussed in this case. In the present case, the persona designate , having nominated the arbitrator, paradoxically himself proceeded to act as an arbitrator to decide some of the claims fell within the excepted category and were not arbitrable.

It was held that such an action undertaken by the appointing authority was beyond the scope of his jurisdiction to refer the parties to arbitration. It is for the arbitrator to decide whether he could adjudicate upon a particular claim in the light of the contract between the parties.

U/s 11, the Chief Justice or his designate, while exercising his power under the said provisions, cannot entertain or decide the issues like existence of arbitration agreement, its validity or scope or jurisdiction of the arbitrator to decide the disputes that are sought to be referred to his arbitration. The only action the Chief Justice is required to take is to nominate an arbitrator(s), if a party fails to do so within a specified time after a request to do so had been made. Regard must be had to the qualifications that are required of an arbitrator by the agreement of the parties. All other issues are to be left to the tribunal.

Sri Venkateshwara Construction Co Vs Union of India

This case discussed the power of the court to decided issues like existence of arbitration agreement, its scope and the jurisdiction of the arbitrator to decided such questions.

Held that, under the provisions of the old Act, the power to appoint an arbitrator/(s) in cases where the parties have failed to do so, was conferred upon the court under sections 8 and 20. One important aspect was that Section 20 not only empowered the court to appoint arbitrators, but also empowered it to make a reference of the disputes to such arbitrators. Such a power is absent in the new Act. Making a significant departure from the old position, now the power of appointing an arbitrator falls not upon the court but upon the Chief Justice or his designate.

It is also significant to note here that the legislation has deviated not only from the Old Act, but also from the UNCITRAL Model Law (Article 11) which authorizes a court to appoint arbitrators. This deviation was made with an intention to curtain the time consuming litigation regarding matters relating to appointment of arbitrators. Past experience showed that Sections 8 and 20 had become breeding grounds for such cumbersome litigations. Also significant is the fact that the decision of the Chief Justice in making the appointment is final, thus aiming to make this decision immune from judicial intervention.

Basant Kumar Vs United India Insurance Company Ltd

On a dispute having arisen, the petitioner availed of the remedy under the Consumer Act and obtained an order in his favour granting compensation, inspite of a remedy being available under the Arbitration Act. Thereafter, the petitioner being dissatisfied with the amount granted by the Consumer Court, filed a suit for appointment of an arbitrator.

It was held that once the claim has been adjudicated on merit, it is not open to challenge that order by having recourse before the arbitrator. An arbitrator cannot be allowed to sit over the order of the District Forum or State Commission, particularly when the matter has been adjudicated on merits. The petitioner cannot now avail benefit of arbitration though initially it was open for him to choose the remedy. The order passed under the Consumer Act is final.

UB Global Corporation Ltd Vs Kaveri Impex

The scope of the power of the Chief Justice /his nominee designate u/s 11 was discussed in this case. It was held that the power and jurisdiction of the Chief Justice/ his designate to appoint an arbitral tribunal depends on the existence of an arbitration agreement. When there is no arbitration agreement, a party has no right to file a petition u/s 11 and the Chief Justice/ his designate will have no jurisdiction to appoint an arbitrator. Such a power can only emerge only where (a) all parties admit or agree that there is an arbitration agreement or (b) the Chief Justice or his designate is satisfied prima facie about the existence of the arbitration agreement.

Meda Narsimhulu Vs Council of Scientific and Industrial Research

The power to decide the question of limitation for making an application u/s 11 for appointment of arbitrator was discussed in this matter. The Court held that it is for the arbitrator to decided the objection that the claim is barred by limitation. The jurisdiction conferred on the Chief Justice or his designate does not comprehend the power to decide debatable and arguable questions which could otherwise be decided by the arbitrator.

MMTC Ltd Vs Trimurtee Fertilizers Ltd

The petitioner had sent a notice to the respondent on 4.12.1996, requesting him to appoint the arbitrator, in response to which the respondent stated that it needed 15 days time for such appointment as their managing director was out of station. The arbitrator was duly appointed on 22.1.1997 immediately after the return of the managing director. The question was whether such an appointment was valid.

It was held that there was neither delay in appointment nor any inclination on the respondent's part not to appoint an arbitrator within the stipulated period. The legislature in its wisdom has enacted the 1996 Act and has used the expression 'shall' in Section 11(4) to achieve the objective of having arbitration through the forum of arbitration at the earliest possible opportunity. The idea is to safeguard the effort of one party not to scuttle the contractual obligation which they undertook while entering into an arbitration agreement, by not appointing an arbitrator after notice has been served to the opposite party. Therefore, if a party fails to appoint a nominee arbitrator after receipt of notice to do so, the court comes into play and on the request of the aggrieved party, shall appoint the arbitrator.

Atlaz Degi-Tel Pvt Ltd Vs Atlaz Technology Pvt Ltd

There was an agreement whereby the petitioner was to purchase respondent's business unit, pursuant to which the petitioner issued post dated cheques. A dispute arose between the parties and the petitioner applied u/s 11 for appointment of arbitrator. In the meanwhile, the respondent filed a suit u/s 138 of the Negotiable Instruments Act. The Petitioner contended that the dispute was essentially of civil nature and initiation of criminal proceedings by way of short cuts of other remedies was unacceptable.

It was held that merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. The provisions incorporated in the agreement for referring the dispute to arbitration is not an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by the breach of agreement but the arbitrator cannot conduct a trial of any act which amounts to an offence, albeit the same act may be connected with the discharge of any function under the agreement.

Although the transaction is question is a commercial transaction arising out of an agreement, offence u/s 138 NI Act appears to have been committed in the course of such transaction and as such the process issued u/s 138 should not be quashed.