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CASE NO.:

Appeal (civil) 5880-5889 of 1997

PETITIONER:

M/S. KONKAN RAILWAY CORPORATION LTD. & ANR.

Vs.

RESPONDENT:

M/S. RANI CONSTRUCTION PVT. LTD.

DATE OF JUDGMENT: 30/01/2002

BENCH:

CJI, SYED SHAH MOHAMMED QUADRI, U. C. BANERJEE, S.N. VARIAVA & SHIVARAJ V. PATIL

JUDGMENT:

WITHC.A. Nos. 713-714/1999, C.A. No. 715/1999, C.A. No. 716/1999, C.A. Nos. 2037-2040/1999,

C.A. No. 2041/1999, C.A. Nos. 2042-2044/1999, C.A. No. 4311/1999, C.A. No. 4312/1999, C.A. N

o. 4324/1999, C.A. No. 4356/1999, C.A. No. 7304/1999 and

C.A. Nos. 7306-7309/1999.

J U D G M E N T

Bharucha, C.J.I.:

In Ador Samia Private Limited Vs. Peekay Holdings Limited & ors., [1999(8) SCC 572],

a Bench of two learned Judges of this Court came to the conclusion that the Chief Justice o

r any person or institution designated by him, acting under Section 11 of the Arbitration an

d 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 [Konk

an Railway Corporation Ltd. & ors. Vs. Mehul Construction Co., 2000 (7) SCC 201] affirmed th

e view taken in Ador 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. & Anr. Vs. Rani Construction Pvt. Ltd. [2000(8) SCC 159], a Benc

h 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 t

he matter comes to be placed before a Constitution Bench.

When it first reached before a Constitution Bench, the following order was passed :

"This reference has been made by a detailed referral order [2000(8) SCC 159].

It appears that the Chief Justice or his nominee, acting under Section 11 of the Arbitration

and Reconciliation Act, 1996, have decided contentious issues arising between the parties t

o an alleged arbitration agreement and the question that we are called upon to decide is whe

ther 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 under Section 11, have the authority to decide any

contentious issues between the parties to the alleged arbitration agreement? In other wor

ds, is the power of the Chief Justice or his nominee under Section 11 restricted to the nomi

nation of an arbitrator in cases falling under Sub-sections (4), (5) and (6) thereof?

From what we understood, the learned Solicitor General appearing for the appellant, and lear

ned 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 no

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mination of an arbitrator and the order that he makes is an administrative order.

It, therefore, becomes necessary to request the Attorney General to assist the Court. Mr. A

ndhyarujina, who is in Court but is not appearing in the matter, has advanced some submissio

ns before us. He shall also be entitled to do so when the matter is taken up again before a

Constitution Bench.

The Registry shall furnish a copy of this order and a copy of the paper books both to the At

torney General and to Mr. Andhyarujina.

Adjourned accordingly."

To determine whether the order of the Chief Justice or his designate 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 in a district, and inc

ludes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdi

ction 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 Causes;"

Section 5 reads thus :

"Extent of judicial intervention - Notwithstanding anything contained in any other law for t

he time being in force, in matters governed by this Part, no judicial authority shall interv

ene 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 subjec

t of an arbitration agreement shall, if a party so applies not later than when submitting hi

s first statement on the substance of the dispute, refer the parties to arbitration."

Section 10 states that the parties to an arbitration agreement are free to determine the num

ber of arbitrators, provided that such number shall not be an even number; failing such dete

rmination, the arbitral tribunal shall consist of a sole arbitrator.

Section 11 reads thus :

"Appointment of arbitrators - (1) A person of any nationality may be an arbitrator, unless o

therwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing

the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbit

rators, each party shall appoint one arbitrator, and the two appointed arbitrators shall app

oint 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 f

rom the date of their appointment,

the appointment shall be made, upon request of a party, by the Chief Justice or any person o

r institution designated by him.

(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbi

trator, if the parties fail to agree on the 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 re

quest of a party, by the Chief Justice or any person or institution designated by him.

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(6) Where, under an appointment procedure agreed upon by the 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 th

em under that procedure; or

(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 on the appointment procedure provides other mea

ns 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 arbit

rator, 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 impar

tial arbitrator.

(9) In the case of appointment of sole or third arbitrator in an international commercial ar

bitration, the Chief Justice of India or the person or institution designated by him may app

oint an arbitrator of a nationality other than the nationalities of the parties where the pa

rties belong to different nationalities.

(10) The Chief Justice may make such scheme as he may deem appropriate for dealing with matt

ers entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him.

(11) Where more than one request has been made under sub-section (4) or sub-section (5) or s

ub-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-sec

tion 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 reference to "Chief Justice" in those sub-s

ections 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 (10) arise in

any other arbitration, the reference to "Chief Justice" in those sub-sections shall be const

rued as a reference to the Chief Justice of the High Court within whose local limits the pri

ncipal Civil Court referred to in clause (e) of sub-section (1) of Section 2 is situate and,

where the High Court itself is the Court referred to in that clause, to the Chief Justice o

f that High Court."

Section 12 imposes upon a person approached to be an arbitrator the obligation to disclose t

o the parties in writing any circumstance that may give rise to justifiable doubts as to hi

s 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 n

ot 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 t

o agree on such a procedure. Failing that, the party who makes the challenge must within f

ifteen days after becoming aware of the constitution of the arbitral tribunal or of any of t

he circumstances mentioned in Section 12, send a written statement of the reasons for the ch

allenge to the arbitral tribunal. Unless the challenged arbitrator withdraws or the other pa

rty 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 proceedin

gs 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 Se

ction 16 is relevant, and reads thus :

"(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any object

ions with respect to the existence or validity of the arbitration agreement, and for that pu

rpose,-

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(a) an arbitration clause which forms part of a contract shall be treated as an agreement in

dependent 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 plea of jurisdict

ion, he can challenge it in accordance with Section 34.

Section 34, so far as is relevant reads thus :

"(1) Recourse to a court against an arbitral award may be made only by an application for se

tting aside such award in accordance with sub-section (2) and sub-section (3).

(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 subjecte

d 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 of the appointment of an

arbitrator or of the arbitral 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 t

erms 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 b

e 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

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance

with the agreement of the parties, unless such agreement was in conflict with a provision o

f this Part from which the parties cannot derogate, or, failing such agreement, was not in a

ccordance 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

law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation.- Without prejudice to the generality of sub-clause (2), it is hereby de

clared, 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 appeal

able by reason of Section 37. Also appealable are the orders relating to the jurisdiction o

f the arbitral tribunal under Section 16.

It is convenient at this stage to set out the scheme framed by the Chief Justice of

India under Section 11(10) of the Act. It is representative of the schemes framed by the Hi

gh Courts under the same provision.

"THE APPOINTMENT OF ARBITRATORS BY THE CHIEF JUSTICE OF INDIA SCHEME, 1996

No.F.22/1/95/SCA/Genl.- In exercise of the powers conferred on the Chief Justice of India un

der sub-section (10) of section 11 of the Arbitration and Conciliation Ordinance, 1996, I he

reby make the following Scheme.

1. Short title.- This Scheme may be called the Appointment of Arbitrators by the Chief Justi

ce of India Scheme, 1996.

2. Submission of request.- The request to the Chief Justice under sub-section (4) or sub-sec

tion (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;

(c) the names and addresses of the arbitrators, if any, already 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 proced

ure agreed upon by them;

(e) the qualifications required, if any, of the arbitrators by the agreement of the parties;

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(f) a brief written statement describing the general nature of the dispute and the points at

issue;

(g) the relief or remedy sought; and

(h) an affidavit, supported by the relevant document, to the effect that the condition to be

satisfied under sub-section (4) or sub-section; (5) or sub-section (6) of section 11, as th

e case may be, before making the request to the Chief Justice, has been satisfied.

3. Authority to deal with the request.- Upon receipt of a request under paragraph 2, the Chi

ef 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 desig

nates any person or institution under paragraph 3, he shall have the request along with the

documents mentioned in paragraph 2 forwarded forthwith to such person or institution and als

o have a notice sent to the parties to the arbitration agreement.

5. Seeking further information.- The Chief Justice or the person or the institution designat

ed by him under paragraph 3 may seek further information or clarification from the party mak

ing the request under this Scheme.

6. Rejection of request.- Where the request made by any party under paragraph 2 is not in ac

cordance with the provisions of this Scheme, the Chief Justice or the person or the institut

ion designated by him may reject it.

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 a

s may seem to him or is likely to be affected by such request to show cause, within the time

specified in the notice, why the appointment of the arbitrator or the measure proposed to b

e taken should not be made or taken and such notice shall be accompanied by copies of all do

cuments 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 complaint from either par

ty to the arbitration agreement or otherwise is of opinion that the person or institution de

signated 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 wit

h the request himself or designate another person or institution for that purpose.

9. Intimation of action taken on request.- The appointment made or measure taken by the Chie

f Justice or any person or institution designated by him in pursuance of the request under p

aragraph 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 r

eceipt 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 instit

ution makes appointment or arbitrator or takes the necessary measure,

pay an amount of Rs. 15,000 in accordance with the terms of such notice towards to costs inv

olved in processing the request.

13. Interpretation.- If any question arises with reference to the interpretation of any of

the provisions of this Scheme, the question shall be referred to the Chief Justice, whose de

cision shall be final.

14. Power to amend the Scheme.- The Chief Justice may, from time to time, amend by way of ad

dition or variation any provision of this Scheme."

The three Judge Bench whose judgment is to be reconsidered framed the following two

questions for consideration:

"(1) What is the nature of the order that is passed by the Chief Justice or his nominee i

n 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 ope

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n 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 Com

mission on International Trade

Law established by the United Nations. It said that if a compariso

n was made between the language of Section 11 of the Act and Article 11 of the Model Law it

was apparent that the Act had designated the Chief Justice of a High Court in cases of domes

tic arbitration and the Chief Justice of India in cases of international commercial arbitrat

ion to be the authority to perform the function of appointment of an arbitrator whereas unde

r 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 legislative intent that the arbitral process should be

set in motion without any delay and leave all contentious issues to be raised before the arb

itral tribunal. At that stage it was not appropriate for the Chief Justice or his designat

e to entertain any contentious issues between the parties and decide the same. A bare readi

ng of Sections 13 and 16 made it clear that questions with regard to the qualifications, in

dependence and impartiality of the arbitrator and in respect of the jurisdiction of the arbi

trator could be raised before the arbitrator, who would decide the same. If a contingency a

rose where the Chief Justice or his designate refused to make an appointment, the party seek

ing 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 executiv

e. In other words, it would be a case of non-performance of his duty by the Chief Justice

or his 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 pe

rformed by the Chief Justice or his designate being essentially to aid the constitution of t

he arbitral tribunal, it could not be held to be a judicial function, as otherwise the legis

lature would have used the expression "court" or "judicial authority". It was, therefore, h

eld that an order under Section 11 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 related to the Model Law, and

learned counsel's argument. It then stated, "In the light of the above contentions and mate

rial, which in our opinion have a substantial bearing on the matter, and further inasmuch a

s this question is one arising almost constantly in a large number of cases in the various H

igh Courts, it is desirable that this Court re-examines the matter".

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 an

d Rules are intended to deal with international commercial arbitration and conciliation, the

y could, with appropriate modifications, serve as a model for legislation on domestic arbitr

ation and conciliation. The present Bill seeks to consolidate and amend the law relating to

domestic arbitration, international commercial arbitration, enforcement of foreign arbitra

l awards and to define the law relating to conciliation, taking into account the said UNCITR

AL Model Law and Rules". That the Model Law was only taken into account in the drafting of

the said 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 arbitrati

on 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 differe

nt 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, especially, of Section 11

thereof.

Learned counsel for the appellants submitted that Section 11 of the Act laid down co

nditions precedent to the Chief Justice or his designate naming an arbitrator in that, as fo

r 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 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 re

quest contested this position, it was for the Chief Justice or his designate to decide the i

ssue. 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 on sub-section (8), which

requires the Chief Justice or his designate to have due regard to the qualifications requir

ed 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 su

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bmission, these also indicated that the Chief Justice or his designate had to perform an adj

udicatory function in naming an arbitrator. Learned counsel submitted that Section 16 of the

Act enabled the arbitral tribunal to decide on the width of its jurisdiction but it could n

ot 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 t

he request to do so had not elapsed; this was an issue which had to be decided by the Chief

Justice or his designate. Reliance was placed upon clause 7 of The Appointment of Arbitrat

ors 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 showin

g cause, the issues they raised would be decided by the Chief Justice or his designate. Rel

iance was placed upon Associated Cement Companies Ltd. Vs. P.N. Sharma and Anr., (1965) 2

SCR 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 e

ssential requirements in this behalf were satisfied, namely, the appointment of the Chief Ju

stice was an appointment by the State; the Chief Justice or his designate were independent o

f the executive; there was a duty cast upon them to decide judicially; and they had the powe

r to enforce their decision.

The learned Attorney General, on notice, made submissions that were adopted by learn

ed counsel for the respondents. The Attorney General drew our attention to Section 5 of the

Act, which mandated that no judicial authority should intervene except to the extent provid

ed 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 parti

es to arbitration. The emphasis of the Act, in the learned Attorney General's submissio

n, was to expedite the proceedings of the domestic tribunal to which 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 t

hat 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 req

uest to it to do so had been made, and in so nominating an arbitrator the Chief Justice or h

is designate was to have regard to the qualifications that were required of the arbitrator b

y the agreement of the parties and to other considerations which were likely to secure the a

ppointment of an independent and impartial arbitrator. This the Chief Justice or his design

ate had to do on an ex facie basis; no element of adjudication came into it. The learned A

ttorney General drew attention to Sections 12 and 13 which provided for a challenge to an ar

bitrator in respect of whom there were doubts about independence or impartiality. The provi

sions of Sections 12 and 13 applied even to an arbitrator who had been nominated by the Chie

f Justice or his designate under Section 11. In the submission of the learned Attorney Gene

ral, the competence of the arbitral tribunal to rule on its own jurisdiction under Section 1

6 was not 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 th

e right to approach a court to set it aside on the stated grounds, which included the compos

ition 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. Th

e learned Attorney General drew our attention to the judgments of this Court in The Engineer

ing Mazdoor Sabha Representing Workmen Employed under The Hind Cycles Ltd. & Anr. Vs. The Hi

nd Cycle Ltd., Bombay [1963 Supp. (1) SCR 625] and Jaswant Sugar Mills Ltd., Meerut Vs. Laks

hmichand & Ors. [1963 Supp. (1) SCR 242] to submit that a tribunal was a body that exercised

an adjudicatory function. The Chief Justice or his designate under Section 11 performe

d neither an adjudicatory function nor they were exercising the power of the State. The

y were not, therefore, tribunals and their orders under Section 11 could not be made the sub

ject of petitions for leave to appeal under Article 136.

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 the nomination of an arbitrator by the Chief Justice or his des

ignate under Section 11 of the Act to be subject to Article 136 such nomination must be (a)

a judgment, decree, determination, sentence or order (b) passed or made by any court or trib

unal in the territory of India. The question is whether such nomination is a determination

or order and whether it is made by a tribunal, as contended by learned counsel for the appel

lants. There is in the line of authority of this Court on the subject a recurring theme.

In the judgment cited by learned counsel for the appellants himself, namely, the case of Ass

ociated Cement Companies Ltd., a Constitution Bench said, "The question which we have to dec

ide in the present appeal is whether the State Government is a tribunal when it exercises it

s authority under R.6(5) or R.6(6) ........... The main and basic test, however, is whether

the adjudicating power which a particular authority is empowered to exercise has been confer

red on it by a statute and can be described as a part of the State's inherent power exercise

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d in discharging its judicial function. Applying this test, there can be no doubt that the

power which the State Government exercises under R.6(5) and R.6(6) is a part of the State's

judicial power. It has been conferred on the State Government by a statutory Rule and it ca

n be exercised in respect of disputes between the management and its welfare officers. The

re is, in that sense, a lis; there is affirmation by one party and denial by another, and th

e dispute necessarily involves the rights and obligations of the parties to it."

In Jaswant Sugar Mills Ltd., cited by the learned Attorney General, this Court said, "The ex

pression "determination" in the context in which it occurs in Article 136 signifies an effec

tive expression of opinion which ends a controversy or a dispute by some authority to whom i

t is submitted under a valid law for disposal. The expression "order" must have also a simi

lar meaning, except that it need not operate to end the dispute. 'Determination' or 'order'

must be judicial or quasi-judicial; purely administrative or executive direction is not cont

emplated to be made the subject-matter of appeal to this Court. The essence of the authorit

y of this Court being judicial, this Court does not exercise administrative or executive pow

ers, i.e., character of the power conferred upon this Court, original or appellate, by its c

onstitution being judicial, the determination or order sought to be appealed from must have

the character of a judicial adjudication". The Court went on to state that to make a decisi

on or an act judicial, the following criteria must be satisfied:

"(1) it is in substance a determination upon investigation of a question by the applicati

on of objective standards to facts found in the light of pre-existing legal rule;

(2) it declares rights or imposes upon parties obligations affecting their civil rights; and

(3) that the investigation is subject to certain procedural attributes contemplating an oppo

rtunity of presenting its case to a party, ascertainment of facts by means of evidence if a

dispute be on questions of fact, and if the dispute be on question of law on the presentatio

n of legal argument, and a decision resulting in the disposal of the matter on findings base

d upon those questions of law and fact."

The Court added, "But every decision or order by an authority under a duty to act judicially

is not subject to appeal to this Court. Under Article 136, an appeal lies to this Court fr

om adjudications of courts and tribunals only. Adjudication of a court or a tribunal must d

oubtless be judicial : but every authority which by its constitution or authority specially

conferred upon it is required to act judicially, is not necessary a tribunal for the purpose

of Article 136."

In the case of The Engineering Mazdoor Sabha, a Constitution Bench said:

"For invoking Art. 136(1), two conditions must be satisfied. The proposed appeal must be fr

om any judgment, decree, determination, sentence or order, that is to say, it must not be ag

ainst a purely executive or administrative order. If the determination or order giving rise

to the appeal is a judicial or quasi-judicial determination or order, the first condition i

s satisfied. The second condition imposed by the Article is that the said determination or

order must have been made or passed by any Court or Tribunal in the territory of India. The

se conditions, therefore, require that the act complained against must have the character of

a judicial or quasi-judicial act and the authority whose act is complained against must be

a Court or a Tribunal. Unless both the conditions are satisfied, Art. 136 (1) cannot be inv

oked."

The Court added:

"...The Tribunals which are contemplated by Art. 136(1) are clothed with some of the powers

of the courts. They can compel witnesses to appear, they can administer oath, they are requ

ired to follow certain rules of procedure; the proceedings before them are required to compl

y with rules of natural justice, they may not be bound by the strict and technical rules of

evidence, but, nevertheless, they must decide on evidence adduced before them; they may not

be bound by other technical rules of law, but their decisions must, nevertheless, be consist

ent with the general principles of law. In other words, they have to act judicially and rea

ch their decisions in an objective manner and they cannot proceed purely administratively or

base their conclusions on subjective tests or inclinations...".

To put it concisely, for an order properly to be the subject of a petition for special leav

e to appeal under Article 136 it must be an adjudicatory order, an order that adjudicates up

on the rival contentions of parties, and it must be passed by an authority constituted by th

e State by law for the purpose in discharge of the State's obligation to secure justice to i

ts people.

Section 11 of the Act deals with the appointment of arbitrators. It provides that t

he parties are free to agree on a procedure for appointing an arbitrator or arbitrators. In

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the event of there being no agreement in regard to such procedure, in an arbitration by thr

ee arbitrators each party is required to appoint one arbitrator and the two arbitrators so a

ppointed must appoint the third arbitrator. If a party fails to appoint an arbitrator withi

n thirty days from the request to do so by the other party or the two arbitrators appointed

by the parties fail to agree on a third arbitrator within thirty days of their appointment,

a party may request the Chief Justice to nominate an arbitrator and the nomination shall be

made by the Chief Justice or any person or institution designated by him. If the parties ha

ve not agreed on a procedure for appointing an arbitrator in an arbitration with a sole arbi

trator and the parties fail to agree on an arbitrator within thirty days from receipt of a r

equest to one party by the other party, the nomination shall be made on the request of a par

ty by the Chief Justice or his designate. Where an appointment procedure has been agreed up

on by the parties but a party fails to act as required by that procedure or the parties, or

the two arbitrators appointed by them, fail to reach the agreement expected of them under th

at procedure or a person or institution fails to perform the function entrusted to him or it

under that procedure, a party may request the Chief Justice or his designate to nominate an

arbitrator, unless the appointment procedure provides other means in this behalf. The

decision of the Chief Justice or his designate is final. In nominating an arbitrator the Ch

ief Justice or his designate must have regard to the qualifications required of the arbitrat

or in the agreement between the parties and to other considerations that will secure the nom

ination of an independent and impartial arbitrator.

There is nothing in Section 11 that requires the party other than the party making t

he request to be noticed. It does not contemplate a response from that other party. It doe

s not contemplate a decision by the Chief Justice or his designate on any controversy that t

he 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 o

f an arbitrator only if the period of thirty days is over does not lead to the conclusion th

at the decision to nominate is adjudicatory. In its request to the Chief Justice to make th

e appointment the party would aver that this period has passed and, ordinarily, corresponden

ce between the parties would be annexed to bear this out. This is all that the Chief Justic

e or his designate has to see. That the Chief Justice or his designate has to take into ac

count the qualifications required of the arbitrator by the agreement between the parties (wh

ich, ordinarily, would also be annexed to the request) and other considerations likely to se

cure the nomination of an independent and impartial arbitrator also cannot lead to the concl

usion that the Chief Justice or his designate is required to perform an adjudicatory functio

n. That the word 'decision' is used in the matter of the request by a party to nominate an

arbitrator does not of itself mean that an adjudicatory decision is contemplated.

As we see it, 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 arbitrator. This is to enable the arbitral tribu

nal to be expeditiously constituted and the arbitration proceedings to commence. The functi

on has been left to the Chief Justice or his designate advisedly, with a view to ensure that

the nomination of the arbitrator is made by a person occupying high judicial office or his

designate, who would take due care to see that a competent, independent and impartial arbitr

ator is nominated.

It might be that though the Chief Justice 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 w

ould be open to that party to challenge the arbitrator under Section 12, adopting the proced

ure under Section 13. There is no reason whatever to conclude that the grounds for challeng

e under Section 13 are not available only because the arbitrator has been nominated by the C

hief Justice or his designate under Section 11.

It might also be that in a given case the Chief Justice or his designate may have no

minated an arbitrator although the period of thirty days had not expired. If so, the arbitr

al tribunal would have been improperly constituted and be without jurisdiction. It would th

en be open to the aggrieved party to require the arbitral tribunal to rule on its jurisdicti

on. Section 16 provides for this. It states that the arbitral tribunal may rule on its own

jurisdiction. That the arbitral tribunal may rule "on any objections with respect to the e

xistence or validity of the arbitration agreement" shows that the arbitral tribunal's author

ity under Section 16 is not confined to the width of its jurisdiction, as was submitted by l

earned counsel for the appellants, but goes to the very root of its jurisdiction. There wou

ld, 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 nomina

ted an arbitrator although the period of thirty days had not expired and that, therefore, i

t had no jurisdiction.

The schemes made by the Chief Justices under Section 11 cannot govern the interpreta

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tion of Section 11. If the schemes, as drawn, go beyond the terms of Section 11 they ar

e bad and have to be amended. To the extent that The Appointment of Arbitrators by the Chie

f Justice of India Scheme, 1996, goes beyond Section 11 by requiring, in clause 7, the servi

ce of a notice upon the other party to the arbitration agreement to show cause why the nomin

ation of an arbitrator, as requested, should not be made, it is bad and must be amended. Th

e other party needs to be given 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 arb

itrator.

In conclusion, we hold that the order of the Chief Justice or his designate under Se

ction 11 nominating an 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 petitio

n for special leave to appeal under Article 136. The decision of the three Judge Bench in

Konkan Railway Corporation Ltd. & ors. Vs. Mehul Construction Co. is affirmed.

We record our appreciation of the assistance rendered by the learned Attorney General as Ami

cus Curiae.

In the result, the appeals are dismissed. No order as to costs.

.......................................CJI.

..........................................J.

(Syed Shah Mohammed Quadri)

..........................................J.

(U.C. Banerjee)

..........................................J.

(S.N. Variava)

..........................................J.

(Shivaraj V. Patil)

January 30, 2002.

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