# MIS. KONKAN RAILWAY CORPORATION LTD. AND ANR v. MIS. RANI CONSTRUCTION PVT. LTD

- **Citation:** [2002] 1 S.C.R. 728
- **Court:** Supreme Court of India
- **Decided:** 2002-01-30
- **Bench:** S.P. Bharucha, Syed Shah Mohammed Quadri, Umesh C. Banerjee, S.N. Variava, Shivaraj V. Patil
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mis-konkan-railway-corporation-ltd-and-anr-v-mis-rani-construction-pvt-ltd-18459
- **Pages:** 22

## Headnote

Arbitration and Conciliation Act, 1996:
C
Section I I-Order passed by Chief Justice or his designate nominating
D
E
F
G
H
an Arbitrator-Held not adjudicatory in nature-Such an order held not
amenable to jurisdiction of Supreme Court under Article 136-UNCJTRAL
Model Law held not a guide to interpretation of Act.
The apvointment of Arbitratbrs by the Chief Justice of India Scheme,
1996:
Clause 7-Requirement of giving notice upon other party to arbitration
to show cause why nomination of arbitrator should not be made-Held badAmendment suggested.
Constitution of India, 1950: Article 136
Special Leave Petition-Order amenable ta-Must be an adjudicatory
order-Order passed by Chief Justice under Section 11 of Arbitration and
Conciliation Act, 1996 nominating and Arbitrator held not adjudicatory.
The decision by a Bench of two Judges in Ador Samia case namely,
that the order of the Chief Justice or his designate in exercise of the power
under Section 11 of the Arbitration and Conciliation Act, 1996 nominating
an Arbitrator is an Administrative order and thus not amenable to
jurisdiction of the Supreme Court under Article 136 was affirmed by a
Bench of three Judges in Konkan Railway case**. Therefore, a Bench of
two Judges referred to a larger Bench the decision of three Judges for reconsideration***. Hence these appeals.
On behalf of the appellants it was contended that (i) provisions
contained in Section 11 indicated that Chief .Justice or his designate had
728
-
....
....
,._
~-
~
}
KONKAN RAILWAY CORPN. LTD."· RANI CONSTRUCTION PVT. LTD.
729
to perform adjudicatory function (ii) section 16 of the Act enabled the A
arbitral tribunal to decide on the width of its jurisdiction but it could not
decide whether or not an arbitrator had no jurisdiction because he had
.., .+
been appointed by the Chief Justice or his designate even though the period
of thirty days of the receipt of the request to do so had not elapsed; this
was an issue which had to be decided by the Chief Justice or his designate B
and (iii) under Clause (7) of the appointment of Arbitrators by the Chief
Justice of India Scheme, 1996 the affected parties had to be given show
cause notice which implied that, on their showing cause, the issues they
raised would be decided by the Chief Justice or his designate.
"'
The Attorney-General submitted that (i) The Chief Justice or his c
designate under Section 11 performed neither an adjudicatory function
~
nor they were exercising the power of the State; (ii) Sections 12 and 13
applied even to an arbitrator who had been nominated by the Chief Justice
or his designate under Section 11; (iii) The competence of the arbitral
tribunal to rule on its own jurisdiction under Section 16 was not confined
to the width of its jurisdiction but extended to deciding whether it had D
any jurisdiction at all.
.,.
Dismissing the appeals, the Court
HELD : I. The order of the Chief Justice or his designate under
Section II of the Arbitration and Conciliation Act, 1996 nominating an E
arbitrator is .not an adjudicatory order and the Chief Justice or his
designate is not a tribunal. Such an order cannot properly be made the
subject of a petition for special leave to appeal under Article 136. [749-F)
**Konkan Railway Corporation and Ors. v. Mahul Construction Co.,
F
[2000) 7 sec 201, affirmed.
2. Article 136 empowers this Court to grant special leave to appeal
from any judgment, decree, sentence or order in any cause or matter
passed or made by any court or tribunal in the territory of India. For an
order properly to be the subject of a petition for special leave to appeal G
under Article 136 it must be an adjudicatory order, an order that
adjudicates upon the rival contentions of parties, and it must be passed
_,
by an authority constituted by the State by law for the purpose in
discharge of the State's obligation to secure justice to its people.
[744-H; 745-A; 747-Cj H
730
SUPREME COURT REPORTS
[2002] I S.C.R.
A
*Ador Samia Private Limited v. Peekay H

## Text

_Characters 0–39,884 of 53,896. This is a partial read: ask again with offset=39884 for what follows._

A
MIS. KONKAN RAILWAY CORPORATION LTD. AND ANR.
v.
MIS. RANI CONSTRUCTION PVT. LTD.
JANUARY 30, 2002
B
[S.P. BHARUCHA, CJ., SYED SHAH MOHAMMED QUADRI,
UMESH C. BANERJEE, S.N. VARIAVA AND SHIVARAJ V. PATIL, JJ.]
Arbitration and Conciliation Act, 1996:
C
Section I I-Order passed by Chief Justice or his designate nominating
D
E
F
G
H
an Arbitrator-Held not adjudicatory in nature-Such an order held not
amenable to jurisdiction of Supreme Court under Article 136-UNCJTRAL
Model Law held not a guide to interpretation of Act.
The apvointment of Arbitratbrs by the Chief Justice of India Scheme,
1996:
Clause 7-Requirement of giving notice upon other party to arbitration
to show cause why nomination of arbitrator should not be made-Held badAmendment suggested.
Constitution of India, 1950: Article 136
Special Leave Petition-Order amenable ta-Must be an adjudicatory
order-Order passed by Chief Justice under Section 11 of Arbitration and
Conciliation Act, 1996 nominating and Arbitrator held not adjudicatory.
The decision by a Bench of two Judges in Ador Samia case namely,
that the order of the Chief Justice or his designate in exercise of the power
under Section 11 of the Arbitration and Conciliation Act, 1996 nominating
an Arbitrator is an Administrative order and thus not amenable to
jurisdiction of the Supreme Court under Article 136 was affirmed by a
Bench of three Judges in Konkan Railway case**. Therefore, a Bench of
two Judges referred to a larger Bench the decision of three Judges for reconsideration***. Hence these appeals.
On behalf of the appellants it was contended that (i) provisions
contained in Section 11 indicated that Chief .Justice or his designate had
728
-
....
....
,._
~-
~
}
KONKAN RAILWAY CORPN. LTD."· RANI CONSTRUCTION PVT. LTD.
729
to perform adjudicatory function (ii) section 16 of the Act enabled the A
arbitral tribunal to decide on the width of its jurisdiction but it could not
decide whether or not an arbitrator had no jurisdiction because he had
.., .+
been appointed by the Chief Justice or his designate even though the period
of thirty days of the receipt of the request to do so had not elapsed; this
was an issue which had to be decided by the Chief Justice or his designate B
and (iii) under Clause (7) of the appointment of Arbitrators by the Chief
Justice of India Scheme, 1996 the affected parties had to be given show
cause notice which implied that, on their showing cause, the issues they
raised would be decided by the Chief Justice or his designate.
"'
The Attorney-General submitted that (i) The Chief Justice or his c
designate under Section 11 performed neither an adjudicatory function
~
nor they were exercising the power of the State; (ii) Sections 12 and 13
applied even to an arbitrator who had been nominated by the Chief Justice
or his designate under Section 11; (iii) The competence of the arbitral
tribunal to rule on its own jurisdiction under Section 16 was not confined
to the width of its jurisdiction but extended to deciding whether it had D
any jurisdiction at all.
.,.
Dismissing the appeals, the Court
HELD : I. The order of the Chief Justice or his designate under
Section II of the Arbitration and Conciliation Act, 1996 nominating an E
arbitrator is .not an adjudicatory order and the Chief Justice or his
designate is not a tribunal. Such an order cannot properly be made the
subject of a petition for special leave to appeal under Article 136. [749-F)
**Konkan Railway Corporation and Ors. v. Mahul Construction Co.,
F
[2000) 7 sec 201, affirmed.
2. Article 136 empowers this Court to grant special leave to appeal
from any judgment, decree, sentence or order in any cause or matter
passed or made by any court or tribunal in the territory of India. For an
order properly to be the subject of a petition for special leave to appeal G
under Article 136 it must be an adjudicatory order, an order that
adjudicates upon the rival contentions of parties, and it must be passed
_,
by an authority constituted by the State by law for the purpose in
discharge of the State's obligation to secure justice to its people.
[744-H; 745-A; 747-Cj H
730
SUPREME COURT REPORTS
[2002] I S.C.R.
A
*Ador Samia Private Limited v. Peekay Holdings and Ors., (1999) 8
SCC 572; ***Konkan Railway Corpn. ltd. and Anr. v. Rani Construction Pvt.
Ltd. [2000] 8 SCC 159; Associated Cement Companies Ltd. v. P.N. Sharma
... ~
and Anr. [1965] 2 SCR 366; Jaswant Sugar Mills Ltd., Meerut v.
Lakshmichand and Ors., (1963] Supp. 1 SCR 242 and The Engineering
B
Mazdoor Sabha Representing Workmen Employed under The Hind Cycles Ltd.
and Anr. v. The Hind Cycle ltd, Bombay, [1963] Supp. 1SCR625, referred
to.
3. Section 11 of the Act deals with the appointment of Arbitrators.
There is nothing in it that requires the party other than the party making
c the request to be noticed. It does not contemplate a decision by the Chief
i;
Justice or his designate on any controversy that the other party may raise,
..
even in regard to its failure to appoint an arbitrator within the period of
thirty days. That the Chief Justice or his designate has to make the
nomination of an arbitrator only if the period of thirty days is over does
D
not lead to the conclusion that the decision to nominate is adjudicatory.
In its request to the Chief Justice to make the appointment the party would
aver that this period has passed and, ordinarily, correspondence between
the parties would be annexed to bear this out. This is all that the Chief
.,.
Justice or his designate has to see. That the Chief Justice or his designate
-
has to take into account the qualifications required of the arbitrator by
E the agreement between the parties (which, ordinarily, would also be
annexed to the request) and other considerations likely to. secure the
nomination of an independent and impartial arbitrator also cannot lead
to the conclusion that the Chief Justice or his designate is required to
perform an adjudicatory function. That the word "decision" is used in the
matter of the request by a party to nominate an arbitrator does not of
,.
F itself mean that an adjudicatory decision is contemplated. (748-B-D]
4. The only function of the Chief Justice or his designate under
Section 11 is to fill the gap left by a party to the arbitration agreement or
by the two arbitrators appointed by the parties and nominate an
G arbitrator. This is to enable the arbitral tribunal to be expeditiously
~onstituted and the arbitration proceedings to commence. It might be that
though the Chief Ju~tice or his designate might have taken all due care to
nominate an independent and impartial arbitrator, a party in a given case
, _ _.,.
may have justifiable doubts about that arbitrator's independence or
impartiality. In that event it would be open to that party to challenge the
H arbitrator under Section 12, adopting the procedure under Section 13. It
KONKAN RAILWAY CORPN. LTD. 1•. RANI CONSTRUCTION PVT. LTD.
73 J
might also be that in a given case the Chief Justice or his designate may A
have nominated an arbitrator although the period of thirty days had not
expired. If so, the arbitral tribunal would have been improperly constituted
and be without jurisdiction. It would then be open to the aggrieved party
to require the arbitral tribunal to rule on its jurisdiction. Section 16
provides for this. That the arbitral tribunal may rule "on any objections B
with respect to the existence or validity of the arbitratfon agreement"
shows that the arbitral tribunal's authority under Section 16 is not
confined to the width of its jurisdiction, but goes to the very root of its
jurisdiction. There would, therefore, be no impediment in contending
before the arbitral tribunal that it had been wrongly constituted by reason
of the fact that the Chief Justice or his designate had nominated an C
arbitrator although the period of thirty days had not expired and that,
therefore, it had no jurisdiction. [748-E-H; 749-A-C]
5. The schemes made by the Chief Justices under Section 11 cannot
govern the interpretation of Section 11. If the schemes, as drawn, go
beyond the terms of Section 11, they are bad and have to be amended. To D
the extent that the Appointment of Arbitrators by the Chief Justice of
India Scheme, 1996, goes beyond Section II by requiring, in clause 7, the
service of a notice upon the other party to the arbitration agreement to
show cause why the nomination of an arbitrator, as requested, should not
be made, it is bad and must be amended. The other party needs to be given E
notice of the request only so that it may know of it and it may, if it so
chooses, assist the Chief Justice or his designate in the nomination of an
arbitrator. [749-D-E]
6. The Act ::nd the UNCITRAL Model Law are n'lt identically
drafted. Under Section 11 the appointment of an arbitrator, in the event
of a party to the arbitration agreement failing to carry out his obligation F
to appoint an arbitrator, is to be made by "the Chief Justice or any person
or institution designated by him" under clause 11 of the Model Law, is to
be made by a Court. Section 34 of the Act is altogether different from
clause 34 of the Model Law. The Model Law and judgments and literature
thereon are, therefore, not a guide to the interpretation of the Act, and, G
especially of Section I I thereof. [742-G-H; 743-A]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 58805889 of I 997.
From the Judgment and Order dated 4.7.97 of the Bombay High Court
in M.C.A. Nos. 49-58 of 1997.
H
732
SUPREME COURT REPORTS
(2002] I S.C.R.
A
WITH
C.A. Nos. 713-714, 715, 716, 2037-2040, 2041, 2042-2044, 4311, 4312,
4324, 4356, 7304 and 7306-7309 of 1999.
"- ~
Soli J. Sorabjee, Attorney General, S. Ganesh, P.P. Malhotra, S.K.
B
Dholakia, Dushyant Dave, Atul Y. Chitale Sanjiv Sen, Suchitra Atul Chitale,
B.K. Satija, S. Muralidhar, V.B. Saharya, For Mis. Saharya and Co. Dhruv
Mehta, Prakeek Jalan, Anil Katiyar V.K. Verma, P. Nagesh, K.V. Mohan, S.
Guru Krishna Kumar, L.C. Tolat, S.R. Setia, B.K. Satija, S. Muralidhar, P.S.
Sudheer K.J. Jhon, P. Venugopal, Narendra M. Sharma, R.K. Sanghi, Rajesh
Prasad Singh and Hari Shankar K. for the appearing parties.
c
)'
The Judgment of the Court was delivered by
...
BHARUCHA, C.J. In Ador Samia Private Limited v. Peekay Holdings
Limited and Ors., [I 999] 8 SCC 572, a Bench of two learned Judges of this
Court came to the conclusion that the Chief Justice or any person or institution
D designated by him, acting under Section 11 of the Arbitration and Conciliation
Act, 1996 (hereinafter called "The Act"), acted in an administrative capacity
and such order did not attract the provisions of Article 136 of the Constitution
of India. A Bench of two learned Judges referred for re-consideration the
"
decision in Ador Samia to a Bench of three learned Judges. The decision of
the Bench of the three learned Judges Konkan Railway Corporation Ltd. and
E Ors. v. Mehul Construction Co., [2000] 7 SCC 201 affirmed the view taken
in Ad or Samia, namely, that the order of the Chief Justice or his designate
in exercise of the power under Section 11 of the Act was an administrative
order and that such order was not amenable to the jurisdiction of this Court
under Article 136. Thereafter, in Konkan Railway Corpn. Ltd. and Anr. v.
F Rani Construction Pvt. Ltd., [2000] 8 SCC 159, a Bench of two learned
*
Judges referred to a larger Bench the decision of the three learned Judges for
re-consideration (a practice which a Constitution Bench has frowned upon).
This is how the matter comes to be placed before a Constitution Bench.
When it first reached before a Constitution Bench, the following order
G was passed :
"This reference has been made by a detailed referral order [2000]
s sec 159.
-.-- ---
It appears that the Chief Justice or his nominee, acting under
Section 11 of the Arbitration and Reconciliation Act, 1996, have
H
KONKAN RAILWAY CORPN. LTD. v. RANI CONSTRUCTION PVT. LTD. [BHARUCHA, CJ.J 733
decided contentious issues arising between the parties to an alleged A,
arbitration agreement and the question that we are called upon to
.., ,.
decide is whether such an order deciding issues is a judicial order or
an administrative order.
In the course of the short hearing before us, another question has
surfaced, which is: does the Chief Justice or his nominee, acting B
under Section 11, have the authority to decide any contentious issues
between the parties to the alleged arbitration agreement? In other
words, is the power of the Chief Justice or his nominee under Section
..
11 restricted to the nomination of an arbitrator in cases falling under
Sub-sections ( 4 ), ( 5) and ( 6) thereof?
c
..
From what we understood, the learned Solicitor General appearing
for the appellant, and learned counsel appearing for the respondents
are ad idem on this aspect. According to both of them, the power of
the Chief Justice or his nominee under Section 11 is restricted to the
nomination of an arbitrator and the order that he makes is an D
administrative order.
It, therefore, becomes necessary to request the Attorney General
to assist the Court. Mr. Andhyarujina, who is in Court but is not
appearing in the matter, has advanced some submissions before us.
He shall also be entitled to do so when the matter is taken up again E
before a Constitution Bench.
The Registry shall furnish a copy of this order and a copy of the
paper books both to the Attorpey General and to Mr. Andhyarujina .
•
Adjourned accordingly."
F
To determine whether the order of the Chief Justice or his d;signate
under Section 11 of the Act is a judicial order or an administrative order, it
is necessary to take note of certain provisions of the Act. Section 2(e) defines
a Court thus :
"( e) "Court" means the principal Civil Court of original jurisdiction G
~ r'
in a district, and includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions
forming the subject-matter of the arbitration if the same had been the
subject-matter of a suit, but does not include any civil court of a
grade inferior to such principal Civil Court, or any Court of Small H
734
SUPREME COURT REPORTS
[2002] I S.C.R.
A
Causes;"
B
c
Section 5 reads thus :
"Extent of judicial intervention - Notwithstanding anything contained
in any other law for the time being in force, in matters governed by
this Part, no judicial authority shall intervene except where so provided
in this Part."
Section 8, so far as is relevant, reads thus :
"8(1) A judicial authority before which an action is brought in a
matter which is the subject of an arbitration agreement shall, if a
party so applies not later than when submitting his first statement on
the substance of the dispute, refer the parties to arbitration."
Section I 0 states that the parties to an arbitration agreement are free to
determine the number of arbitrators, provided that such number shall not be
an even number; failing such determination, the arbitral tribunal shall consist
D of a sole arbitrator.
Section I I reads thus :
"Appointment of arbitrators - (1) A person of any nationality may be
an arbitrator, unless otherwise agreed by the parties.
E
(2) Subject to sub-section (6), the parties are free to agree on a
procedure for appointing the arbitrator or arbitrators.
F
G
(3) Failing any agreement referred to in sub-section (2), in an
arbitration with three arbitrators, each party shall appoint one arbitrator,
and the two appointed arbitrators shall appoint the third arbitrator
who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and-
(a) a party fails to appoint an arbitrator within thirty days from
the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third
arbitrator within thirty days from the date of their
appointment,
the appointment shall be made, upon request of a party, by the Chief
Justice or any person or institution designated by him.
H
(5) Failing any agreement referred to in sub-section (2), in an
-
fKONKAN RAILWAY CORPN. LTD. 1•. RANI CONSTRUCTION PVT.LTD. [BHARUCHA, CJ.) 735
arbitration with a sole arbitrator, if the parties fail to agree on the A
arbitrator within thirty days from receipt of a request by one party
from the other party to so agree the appointment shall be made, upon
request of a party, by the Chief Justice or any person or institution
designated by him.
(6) Where, under an appointment procedure agreed upon by the B
parties,
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an
agreement expected of them under that procedure; or
C
(c) a person, including an institution, fails to perform any
function entrusted to him or it under that procedure,
a party may request the Chief Justice or any person or institution
designated by him to take the necessary measure, unless the agreement D
on the appointment procedure provides other means for securing the
appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section
(5) or sub-section (6) to the Chief Justice or the person or institution
designated by him is final.
(8) The Chief Justice or the person or institution designated by him,
in appointing an arbitrator, shall have due regard to -
(a) any qualifications required of the arbitrator by the agreement
of the parties; and
(b) other considerations as are likely to secure the appointment
of an independent and impartial arbitrator.
E
F
(9) In the case of appointment of sole or third arbitrator in an
international commercial arbitration, the Chief Justice of India or the
person or institution designated by him may appoint an arbitrator of G
a nationality other than the nationalities of the parties where the
parties belong to different nationalities.
(I 0) The Chief Justice may make such scheme as he may deem
appropriate for dealing with matters entrusted by sub-section (4) or
sub-section (5) or sub-section (6) to him.
H
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c
D
E
F
G
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SUPREME COURT REPORTS
[2002) 1 S.C.R.
(!I) Where more than one request has been made under sub-section
(4) or sub-section (5) or sub-section (6) to the Chief Justices of
different High Courts or their designates, the Chief Justice or his
designate to whom the request has been first made under the relevant
sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7),
(8) and (10) arise in an international commercial arbitration, the
ref~rence to "Chief Justice" in those sub-sections shall be
construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-sections (4), (5), (6), (7),
(8) and (I 0) arise in any other arbitration, the reference to "Chief
Justice" in those sub-sections shall be construed as a reference to
the Chief Justice of the High Court within whose local limits the
principal Civil Court referred to in clause ( e) of sub-section (I)
of Section 2 is situate and, where the High Court itself is the
Court referred to in that clause, to the Chief Justice of that High
Court."
Section 12 imposes upon a person approached to be an arbitrator the obligation
to disclose to the parties in writing any circumstance that may give rise to
justifiable doubts as to his independence and impartiality. An arbitrator can
be challenged if there are circumstances that give rise to justifiable doubts
about his independence and impartiality or if he does not possess the
qualifications agreed to by the parties, but such challenge can be made only
for reasons which the party challenging becomes aware of after the appointment
has been made. Section 13 speaks of the challenge procedure. It states that
the parties are free to agree on such a procedure. Failing that, the party who
makes the challenge must within fifteen days after becoming aware of the
constitution of the arbitral tribunal or of any of the circumstances mentioned
in Section 12, send a written statement of the reasons for the challenge to the
arbitral tribunal. Unless the challenged arbitrator withdraws or the other party
to the arbitration agrees to the challenge, the arbitral tribunal shall decide
upon the challenge and if the challenge is not successful it shall continue the
arbitration proceedings and make an award. That award can be sought to be
set aside under Section 34.
Section 16 empowers the arbitral tribunal to rule on its own jurisdiction.
Clause ( 1) of Section 16 is relevant, and reads thus :
H
"(I) The arbitral tribunal may rule on its own jurisdiction, including
~
·-
'\
'
..
,._ -·
KONKAN RAILWAY CORPN. LTD. 1·. RANI CONSTRUCTION PVT.LTD. [BHARUCHA, CJ.] 73 7
ruling on any objections with respect to the existence or validity of A
the arbitration agreement, and for that purpose,-
(a) an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of
the contract; and
(b) a decision by the arbitral tribunal that the contract is null
and void shall not entail ipso jure the invalidity of the
arbitration clause.
If a party is aggrieved by an arbitral award made after rejection of his
B
plea of jurisdiction, he can challenge it in accordance with Section 34.
C
Section 34, so far as is relevant reads thus :
"(I) Recourse to a court against an arbitral award may be made only
by an application for setting aside such award in accordance with
sub-section (2) and sub-section (3).
D
(2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that -
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which
the parties have subjected it or, failing any indication thereon,
under the law for the time being in force; or
(iii) the party making the application was not given proper notice
E
of the appointment of an arbitrator or of the arbitral F
proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by
or not falling within the terms of the submission to arbitration,
or it contains decisions on matters beyond the scope of the
submission to arbitration :
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
G
(v) the composition Of the arbitral tribunal or the arbitral H
A
B
c
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738
SUPREME COURT REPORTS
(2002] I S.C.R.
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a provision
of this Part from which the parties cannot derogate, or, failing
such agreement, was not in accordance with this Part; or.
(b) the court finds that -
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the Jaw for the time being
in force, or
(ii) the arbitral award is in conflict with the public policy of
India.
Exp/anation.-Without prejudice to the generality of sub-clause
(2), it is hereby declared, for the avoidance of any doubt, that an
award is in conflict with the public policy of India if the making
of the award was induced or affected by fraud or corruption or
was in violation of Section 75 or Section 81."
An order setting aside or refusing to set aside an arbitral award under Section
34 is appealable by reason of Section 37. Also appealable are the orders
relating to the jurisdiction of the arbitral tribunal under Section 16.
It is convenient at this stage to set out the scheme framed by the Chief
E Justice of India under Section 11(I0) of the Act. It is representative of the
schemes framed by the High Courts under the same provision.
"THE APPOINTMENT OF ARBITRATORS BY THE CHIEF
JUSTICE OF INDIA SCHEME, 1996
F No.F.2211195/SCA/Gen/.- In exercise of the powers conferred on the Chief
Justice of India under sub-section ( 10) of section 11 of the Arbitration and
Conciliation Ordinance, 1996, I hereby make the following Scheme.
G
H
I. Short title.-This Scheme may be called the Appointment of Arbitrators
by the Chief Justice of India Scheme, 1996.
2. Submission of request.-The request to the Chief Justice under sub-section
(4) or sub-section (5) or sub-section (6) of section 11 shall be made -in
writing and shall be accompanied by-
(a) the original arbitration agreement or a duly certified copy thereof;
(b) the names and addresses of the parties to the arbitration agreement;
v-
'
KONKAN RAILWAYCORPN. LTD. 1•. RANI CONSTRUCTION PVT.LTD. [BHARUCHA, CJ.] 739
(c)
the names and addresses of the arbitrators, if any, already A
appointed;
(d) the name and address of the person or institution, if any, to
whom or which any function has been entrusted by the parties to
the arbitration agreement under the appointment procedure agreed
upon by them;
B
(e) the qualifications required, if any, of the arbitrators by the
agreement of the parties;
(f)
a brief written statement describing the general nature of the
dispute and the points at issue;
(g) the relief or remedy sought; and
c
(h) an affidavit, supported by the relevant document, to the effect
that the condition to be satisfied under sub-section (4) or subsection; (5) or sub-section (6) of section 11, as the case may be,
before making the request to the Chief Justice, has been satisfied. D
3. Authority to deal with the request-Upon receipt of a request under
paragraph 2, the Chief Justice may either deal with the matter entrusted to
him or designate any other person or institution for that purpose.
4. Forwarding of request to designated person or institution-Where
the Chief Justice designates any person or institution under paragraph 3, he E
shall have the request along with the documents mentioned in paragraph 2
forwarded forthwith to such person or institution and also have a notice sent
to the parties to the arbitration agreement.
5. Seeking further itiformation-The Chief Justice or the person or the F
institution designated by him under paragraph 3 may seek further information
or clarification from the party making the request under this Scheme.
6. Rejection of request-Where the request made by ar.y party under
paragraph 2 is not in accordance with the provisions of this Scheme, the
Chief Justice or the person or the institution designated by him may reject it. G
7. Notice to affected persons-Subject to the provisions of paragraph
6, the Chief Justice or the person or the institution designated by him shall
direct that a notice of the request be given to all the parties to the arbitration
agreement and such other person or persons as may seem to him or is likely
to !">~ affected by such request to show cause, within the time specified in the H
740
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A notice, why the appointment of the arbitrator or the measure proposed to be
taken should not be made or taken and such notice shall be accompanied by
copies of all documents referred to in paragraph 2 or, as the case may be, by
information or clarification, if any, sought under paragraph 5.
8. Withdrawal. of authority-If the Chief Justice, on receipt of a
B complaint from either party to the arbitration agreement or otherwise is of
opinion that the person or institution designated by him under paragraph 3
has neglected or refused to act or is incapable of acting he may withdraw the
authority given by him to such person or institution and either deal with the
request himself or designate another person or institution for that purpose.
c
D
E
F
G
H
9. Intimation of action taken on request-The appointment made or
measure taken by the Chief Justice or any person or institution designated by
him in pursuance of the request under paragraph 1 shall be communicated in
writing to-
(a) the parties to the arbitration agreement;
(b) the arbitrators, if any, already appointed by the parties to the
arbitration agreement;
(c) the person or the institution referred to in paragraph 2( d);
(d) the arbitrator appointed in pursuance of the request.
10. Requests and communications to be sent to Registrar.-All requests
under this Scheme and communications relating thereto which are addressed
to the Chief Justice shall be presented to the Registrar of this court, who shall
maintain a separate Register of such requests and communications.
11. Delivery and receipt of written communications-The provisions of
sub-sections (1) and (2) of section 3 of the Arbitration and Conciliation
Ordinance, 1996 shall, so far as may be, apply to all written communications
received or sent under this Scheme.
12. Costs for processing requests-The party making a request under
this Scheme shall, on receipt of notice of demand from-
(a) the Registry of the court where the Chief Justice makes the
appointment of an arbitrator or takes the necessary measure, or
(b) the designated person or the institution as the case may be, where
such person or institution makes appointment or arbitrator or
~
..
y -
KONKAN RAILWAY CORPN. LTD. ''· RANI CONSTRUCTION PVT. LTD. [BHARUCHA, CJ.] 7 41
takes the necessary measure,
pay an amount of Rs. 15,000 in accordance with the terms of such
notice towards costs involved in processing the request.
A
13. Interpretation-If any question arises with reference to the
interpretation of any of the provisions of this Scheme, the question shall be B
referred to the Chief Justice, whose decision shall be final.
14. Power to amend the Scheme-The Chief Justice may, from time to
time, amend by way of addition or variation any provision of this Scheme."
The three Judge Bench whose judgment is to be reconsidered framed C
the following two questions for consideration:
"(!) What is the nature of the order that is passed by the Chief
Justice or his nominee in exercise of power under sub-section ( 6) of
Section 11 of the Act?
(2) Even if the said order is held to be administrative in nature what
is the remedy open to the person concerned if his request for
appointment of an arbitrator is turned down by the learned Chief
Justice or his nominee, for some reason or other?"
The three Judge Bench noted that the Act was based upon the UNCITRAL
Model framed by the Commission on International Trade Law established by
the United Nations. It said that if a comparison was made between the language
of Section 11 of the Act and Article 11 of the Model Law it was apparent
D
E
that the Act had designated the Chief Justice of a High Court in cases of
domestic arbitration and the Chief Justice of India in cases of international F
commercial .arbitration to be the authority to perform the function of
appointment of an arbitrator whereas under the Model Law that power had
been vested in the court. When the matter was placed before the Chief Justice
or his designate under Section 11 it was imperative for the Chief Justice or
his designate to bear in mind the legislativeJntent that the arbitral process G
should be set in motion without any delay ll!ld leave all contentious issues to
be raised before the arbitral tribunal-< At jhit stage it was not appropriate for
~
the Chief Justice or his designate to entertain any contentious issues between
the parties and decide the same. A bare reading of Sections 13 and 16 made
:t clear that questions with regard to the qualifications, independence and
impartiality of the arbitrator and in respect of the jurisdiction of the arbitrator H
742
SUPREME COURT REPORTS
[2002] I S.C.R.
A could be raised before the arbitrator, who would decide the same. If a
contingency arose where the Chief Justice or his designate refused to make
an appointment, the party seeking the appointment was not without remedy.
An intervention was possible by a court in the same way as an intervention
was possible against an administrative order of the executive. In other words,
it would be a case of n:m-performance of his duty by the Chief Justice or his
B designate and, therefore, a mandamus would lie. In such an event there
would not be any inordinate delay in setting the arbitral process in motion.
The nature and function performed by the Chief Justice or his designate
being essentially to aid the constitution of the arbitral tribunal, it could not
be held to be a judicial function, as otherwise the legislature would have used
C the expression "court" or "judicial authority". It was, therefore, held that an
order under Section I 1 refusing to appoint an arbitrator was not amenable to
the jurisdiction of this Court under Article 136 of the Constitution.
In the referring judgement the Bench of two learned Judges noted the
material relied upon by learned counsel for the appellant before them, which
D related to the Model Law, and learned counsel's argument. It then stated, "In
the light of the above contentions and material, which in our opinion have a
substantial bearing on the matter, and further inasmuch as this question is one
arising almost constantly in a large number of cases in the various High
Courts, it is desirable that this Court re-examines the matter".
E
It is convenient at this stage itself to deal with the argument based on
the Model Law. The Statement of Objects and Reasons of the Act states,
"Though the said UNCITRAL Model Law and Rules are intended to deal
with international commercial arbitration and conciliation, they could, with
appropriate modifications, serve as a model for legislation on domestic
F arbitration and conciliation. The present Bill seeks to consolidate and amend
the law relating to domestic arbitration, international commercial arbitration,
enforcement of foreign arbitral awards and to define the law relating to
conciliation, taking into account the said UNCITRAL Model Law and Rules''.
That the Model Law was only taken into account in the drafting of the said
G Act is, therefore, patent. The Act and the Model Law are not identically
drafted. Under Section 11 the appointment of an arbitrator, in the event of a
party to the arbitration agreement failing to carry out his obligation to appoint
an arbitrator, is to be made by "the Chief Justice or any person or institution
designated by him"; under clause 11 of the Model Law it is to be made by
a court. Section 34 of the Act is altogether different from clause 34 of the
H Model Law. The Model Law and judgments and literature thereon are,
-
KONKAN RAILWAY CORPN. LTD. v. RANI CONSTRUCTION PVT. LTD. [BHARUCHA, CJ.J 743
therefore, not a guide to the interpretation of the Act and, especially, of A
Section 11 thereof.
Learned counsel for the appellants submitted that Section 11 of the Act
laid down conditions precedent to the Chief Justice or his designate naming
an arbitrator in that, as for example, in sub-section(4)(a) the party had to fail
to appoint an arbitrator within thirty days from the receipt of a request to do B
so from the other party. If the party who was alleged to have failed to appoint
an arbitrator within thirty days of the receipt of the request contested this
position, it was for the Chief Justice or his designate to decide the issue.
Reliance was placed upon sub-section (7) of Section 11, which refers to a
"decision" on the matter entrusted to the Chief Justice or his designate, and C
on sub-section (8), which requires the Chief Justice or his designate to have
due regard to the qualifications required of the arbitrator by the agreement of
the parties and other considerations as are likely to secure the appointment
of an independent and impartial arbitrator. In learned counsel submission,
these also indicated that the Chief Justice or !\is designate had to perform an
adjudicatory function in naming an arbitrator. Learned counsel submitted that D
Section 16 of the Act enabled the arbitral tribunal to decide on the width of
its jurisdiction but it could not decide whether or not an arbitrator had no
jurisdiction because he had been appointed by the Chief Justice or his designate
even though the period of thirty days of the receipt of the request to do so
had not elapsed; this was an issue which had to be decided by the Chief E
Justice or his designate. Reliance was placed upon clause 7 of The Appointment
of Arbitrators by the Chief Justice of India Scheme; it was submitted that the
affected parties had to be given notice by reason of that clause to show cause,
which implied that, on their showing cause, the issues they raised would be
decided by the Chief Justice or his designate. Reliance was placed upon
Associated Cement Companies Ltd. v. P.N. Sharma and Anr., [1965] 2 SCR F
366, to contend that the Chief Justice or his designate functioned as a tribunal
so as to attract Article 136 to the order naming an arbitrator. It was submitted
that the four essential requirements in this behalf were satisfied, namely, the
appointment of the Chief Justice was an appointment by the State; the Chief
Justice or his designate were independent of the executive; there was a duty G
cast upon them to decide judicially; and they had the power to enforce their
decision.
The learned Attorney General, on notice, made submissions that were
adopted by learned counsel for the respondents. The Attorney General drew
our attention to Section 5 of the Act, which mandated that no judicial authority H
744
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[2002] I S.C.R.
A should intervene except to the extent provided in the Act, and to Section 8,
which required a judicial authority before which an action was brought in a
matter which was the subject of an arbitration agreement to refer the parties
to arbitration. The emphasis of the Act, in the learned Attorney General's
submission, was to expedite the proceedings of the domestic tribunal to which
B the parties had agreed to submit their disputes. It was in this light that the Act
had to be read. Section 11 did not require the Chief Justice or his designate
to perform any adjudicatory function. All that the Chief Justice or his designate
was required to do was to nominate an arbitrator if a party to an arbitration
agreement had failed to do so within the specified time after a request to it
to do so had been made, and in so nominating an arbitrator the Chief Justice
C or his designate was to have regard to the qualifications that were required
of the arbitrator by the agreement of the parties and to other considerations
which were likely to secure the appointment of an independent and impartial
arbitrator. This the Chief Justice or his designate had to do on an ex facie
basis; no element of adjudication came into it. The learned Attorney General
drew attention to Sections 12 and 13 which provided for a challenge to an
D arbitrator in respect of whom there were doubts about independence or
impartiality. The provisions of Sections 12 and 13 applied even to an arbitrator
who had been nominated by the Chief Justice or his designate under Section
11. In the submission of the learned Attorney General, the competence of the
arbitral tribunal to rule on its own jurisdiction under Section 16 was not
E confined to the width of its jurisdiction but extended to deciding whether it
had any jurisdiction at all. Section 34 gave a party adversely affected by an
arbitral award the right to approach a court to set it aside on the stated
grounds, which included the composition of the arbitral tribunal. An order
under Section 34 was appealable under Section 37, as was an order accepting
the plea that the arbitral tribunal did not have jurisdiction. The learned Attorney
F General drew our attention to the judgments of this Court in The Engineering
Mazdoor Sabha Representing Workmen Employed under The Hind Cycles
Ltd. & Anr. v. The Hind Cycle Ltd., Bombay, [1963] Supp. I SCR 625 and
Jaswant Sugar Mills Ltd., Meerut v. Lakshmichand & Ors., [1963] Supp. I
SCR 242 to submit that a tribunal was a body that exercised an adjudicatory
I
G function.