2006 Supreme(SC) 353

2006(3) Supreme 484
SUPREME COURT OF INDIA
(Under Section 11(6) of the Arbitration and Conciliation Act, 1996)
B.N. Srikrishna (Chamber Judge)
Rodemadan India Limited—Petitioner
versus
International Trade Expo Centre Limited—Respondent
Arbitration Petition No. 25 of 2005
Decided on 17-4-2006
Counsel for the Parties :
For the Petitioner : R.F. Nariman, Sr. Advocate, C. Mukhopadhaya, Manu Nair, Viplav Sharma (for M/s. Suresh Shroff & Co.), Advocates.
For the Respondent : Ranjit Kumar, Sr. Advocate, Rohit Choudhary, Ms. Preeti, Ms. Sunita Ojha, Ms. B. Vijayalakshmi Menon, Advocates.

IMPORTANT POINTS
1. Determination of preliminary jurisdictional issued is mandatory for the designate under Arbitration and Conciliation Act.
2. Wide discretion is with designate under Arbitration and Conciliation Act to decide what evidence, oral or documentary is necessary to make an effective finding on preliminary jurisdictional issues.

Headnote:Arbitration and Conciliation Act, 1996—Section 11(6)—Application for appointment of a Presiding Arbitrator/Chairperson of the Arbitral Tribunal—Opposition to petition on ground that there was no arbitration agreement in existence—Conditions necessary for exercise of designate’s power u/s 11(6) of the Act and judicial determinations necessary by the designate at this stage—Determination of certain preliminary jurisdictional issues—Mandatory for designate—Question whether there existed a valid arbitral agreement—Wide discretion to decide what evidence, oral or documentary, was necessary to arrive at a finding on preliminary jurisdictional issue—Even if power u/s 11(6) be judicial in sense of requiring a judicial determination by designate of Chief Justice, it did not render the designate of Chief Justice into a Trial Court—There existed a valid arbitration agreement which contemplated that all disputes between parties be referred to arbitration—Situation was an “International Commercial Arbitration” within meaning of Section 2(1)(f) of the Act—Chairperson/Presiding Arbitrator of Arbitral Tribunal was liable to be appointed since appointed arbitrator had failed to appoint the Presiding Arbitrator.

       Held : Before examining the facts of the present petition, it is necessary to encapsulate the conditions necessary for the exercise of the designate’s power under Section 11(6) and the judicial determinations necessary by the designate at the stage of Section 11(6). In addition to the conditions already enumerated in the Section, the judgment in Patel Engineering, (2005) 8 SCC 618 provides that :

       “The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators ........” [Ibid. at p. 663 (paragraph 47), per Balasubramanyan, J.]

       Further, it has also been held that determination of certain preliminary jurisdictional issues is mandatory for the designate :

       “It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act.” [Ibid, at pp. 660-661 (paragraph 39), per Balasubramanyan, J.]

       I am, therefore, required to decide whether the preliminary conditions necessary for the exercise of the designate’s power under Section 11(6) are satisfied, especially whether there exists a valid arbitral agreement.(Paras 10 to 12)

       One more issue needs appraisal here: what kind of evidence is the designate under Section 11(6) required to place reliance on to arrive at a finding on the preliminary jurisdictional issues ? According to the judgment in Patel Engineering (supra) :

       “For the purpose of taking a decision on these aspects (preliminary jurisdictional issues), the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral tribunal. (Id.)”

       Accordingly, I am given wide discretion to decide what evidence— oral or documentary—is necessary for me to make an effective finding on the preliminary jurisdictional issues.(Paras 13 and 14)

       That an agreement dated 29.10.2003 was singed by the Directors of the Respondent-Company for and on behalf of the Respondent as well as by the Directors of the Petitioner-Company for and on behalf of the Petitioner is not in dispute. What is in dispute is that, subsequent thereto, the said agreement has been repudiated in an Extraordinary General Meeting alleged to have been held on 14.9.2004. It is further alleged that the Management Agreement dated 29.10.2003, which was signed by the Directors of the Petitioner on the one hand and the Directors of the Respondent on the other hand was merely a proposal subject to approval of the shareholders of the Respondent-Company. Certain documents are placed on record and my attention has been drawn thereto in support of this stand of the Respondent. The Petitioner, however, has emphatically denied that any resolution was passed in the Board Meeting of 14.9.2004, as alleged, by which the Management Agreement has been repudiated or rendered ineffective. One Roger Shashoua, who is a major shareholder and Director of the Petitioner-Company, is also a major shareholder and Director of the Respondent-Company, had personal knowledge as to the affairs of the Respondent-Company and, therefore, the Petitioner is aware that no such Extraordinary General Meeting of the Respondent-Company was held on 14.9.2004 at all, as alleged. However, in support of his stand, Mr. Ranjit Kumar drew my attention to copies of certain resolutions purporting to the extract of the resolution passed on 14.9.2004 at 11:00 A.M. in an Extraordinary General Meeting held at Business Centre, Hotel Park Royal Intercontinental, Nehru Place, New Delhi. This resolution is vehemently disputed by Mr. Nariman, appearing for the Petitioner-Company. It is not possible to accept the correctness of the disputed documents or to proceed on the footing that there was such a resolution passed in an Extraordinary General Meeting by which the Management Agreement of 29.10.2003 was not approved and, therefore, resolved to be treated as null and void. Mr. Ranjit Kumar then suggested that he be given an opportunity to lead evidence, including oral evidence to substantiate his stand. Exercising the discretion granted to me in Patel Engineering (supra), I decline Mr. Ranjit Kumar’s request as I do not believe that oral evidence is necessary to determine the present issue. I decline to do so for even if the power under Section 11(6) be judicial in the sense of requiring a judicial determination by the designate of the Chief Justice, it surely does not render the designate of the Chief Justice into a trial court.(Paras 15 to 17)

       (ii) Arbitration and Conciliation Act, 1996—Section 11(6)—Supreme Court Rules, 1966—Order VII Rule 1—Every cause, appeal or matter to be heard by a Bench consisting of not less than two Judges nominated by the “Chief Justice”—Contention that petition u/s 11(6) of the Act would have to be heard by a Bench consisting of not less than two Judges—Contention was untenable.

       Held : Contention is entirely misconceived for two reasons. In the first place, Article 145 of the Constitution itself proceeds by declaring that the provisions of the Article were “subject to the provisions of any law made by Parliament”. The Act is definitely a “law made by Parliament” and it does not prescribe that a petition under Section 11(6) has to be heard by a Bench consisting of at least two Judges. Second, the power under Article 145 of the Constitution and the Rules framed thereunder, are intended to govern the practice and procedure of the Supreme Court. I am unable to persuade myself to believe that, the Power exercisable by the Chief Justice under Section 11(6) of the Act is the power of the Supreme Court under the Constitution. My first impression on this issue is also confirmed by the judgment of this court in Patel Engineering, (2005) 8 SCC 618.(Para 7)

       In short, the power under Section 11(6) is the power of a designate referred to under the Section and not that of the Supreme Court, albeit that it has now been held to have judicial characteristics by reason of the judgment in Patel Engineering (supra). Since this is the power of the Chief Justice and not the power of the Supreme Court, the specification in Order VII Rule 1 of the Rules as to the minimum number of Judges, would have no application thereto. If the argument of the learned counsel is right, then even the Chief Justice cannot pass such an order unless he is sitting in a Bench with one or more companion Judge. No such intention is evidenced by Parliament in enacting Section 11(6) of the Act. Since Parliament has enacted a law under which the power is exercisable by the Chief Justice or his designate, who could be “any person or institution”, I do not think that the requirement of Order VII Rule 1 of the Rules would apply to such a situation at all. (Para 8)

       (iii) Arbitration and Conciliation Act, 1996—Sections 11(6) and 42—Application for appointment of Presiding/Chairperson Arbitrator of Arbitral Tribunal—Petitioner had already filed petition u/s 9 of the Act before High Court—Whether High Court alone could have jurisdiction upon arbitral Tribunal? No.

       Held : Finally, it is contended that as recourse had been taken by the Petitioner under Section 9 of the Act to obtain interim relief by moving the Delhi High Court by their Original Petition OMP No. 98/2005 dated 24.3.2005, by reason of Section 42 of the Act that court alone could have jurisdiction upon the arbitral tribunal. In my view, this contention has no merit as I have held earlier, neither the Chief Justice nor his designate under Section 11(6) is a “court” as contemplated under the Act. Section 2(1)(e) of the Act defines the expression “court”. The bar of jurisdiction under Section 42 is only intended to apply to a “court” as defined in Section 2(1)(e). The objection, therefore, has no merit and is rejected.(Para 25)