M J Antony: Chief Justice's role in arbitration

OUT OF COURT

The new Arbitration and Conciliation Act was passed in 1996 with the object of minimising judicial intervention in arbitral proceedings. However, it seems that the draftsmen have left too many gray areas in the legislation. Several provisions had to be examined repeatedly in the past few years. One such ambiguous provision is Section 11 of the Act on which a seven-judge constitution bench pronounced its latest judgement two weeks ago (M/s SBP & Co vs Patel Engineering Ltd).

The clause deals with a situation where there is an arbitration agreement and one party seeks the appointment of an arbitrator while the other party does not co-operate in the settlement. In such cases, the party seeking arbitration can approach the chief justice of the high court if it is domestic arbitration, or of the Supreme Court if it is an international arbitration. The chief justice or a judge designated by him will hear and decide the request.

In 2000, a three-judge bench of the Supreme Court had ruled that the Chief Justice, in such circumstances, was exercising his administrative jurisdiction. This view was reiterated in 2002 by a five-judge constitution bench in Konkan Railway Corporation Ltd vs Rani Construction Pvt Ltd. However, doubts continued to persist over the role of the chief justice. Therefore, several disputes were referred to the seven-judge constitution bench. It has now over-ruled the previous view declared in the Konkan Railway judgement and held that the chief justice is exercising his judicial power.

According to the new decision, the chief justice has an adjudicatory role while functioning under Section 11 of the Act. He has to decide whether he has jurisdiction, whether there is an arbitration agreement, whether the conditions for exercise of the power have been fulfilled, who is the right person to be appointed as arbitrator and other similar issues. These are all adjudications that affect the rights of the parties. This function cannot be called administrative, according to the judgement.

"One of the objects of conferring power on the highest judicial authority in the state or in the country for constituting the arbitral tribunal is to ensure credibility in the entire arbitration process," the judgement said, and pointed out that the fact that the power is conferred on the chief justice and not on the court presided over him does not mean that he is using his administrative power and not judicial power.

The main conclusions of the Supreme Court can be summed up thus. The power exercised by the chief justice is judicial and not administrative; the power can be delegated by the chief justice of the high court to another judge of that court and by the Chief Justice of India to another judge of the Supreme Court. The designated judge, in such cases, will be exercising the power conferred on the chief justice. The judge will be entitled to seek the opinion of an institution in the matter of nominating an arbitrator but the ultimate decision to appoint the arbitrator would only be that of the judge. The high court chief justice cannot delegate his authority to a district judge. Once the matter reaches the arbitral tribunal, the high court would not interfere with the orders passed by the arbitrator during the course of the course of the arbitration proceedings.

Since an order passed by the chief justice of a high court or the designated judge is a judicial order, an appeal would lie against that order only to the Supreme Court, by special leave petition. There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court.

This new interpretation is likely to cut short the length of arbitration proceedings as the number of appeals has been reduced. An administrative order could be challenged in several ways, in different high courts and then to the Supreme Court. The avenues for questioning the judicial decisions are limited. Thus, the new judgement will have a salutary effect on arbitration in future.

However, the successful working of the Act, modelled on the UN model for international arbitration, depends upon the willingness or ingenuity of the legal community. Appeals moved under the Arbitration Act 1940, are still being decided by the Supreme Court. The new Act has speeded up arbitration, but only marginally. Therefore, one recalls the remark of the Supreme Court in an earlier judgement when it lamented on the state of arbitration then: "the lawyers laugh and the litigants weep!"