Bombay High Court
M/S.Roptonal Ltd (Erstwhile The ... vs Anees Bazmee on 8 June, 2016
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
REVIEW PETITION (L) NO.7 OF 2016
IN
ARBITRATION APPLICATION NO.97 OF 2013
1. Roptonal Ltd (Erstwhile the Indian )
Film Company (Cyprus) Ltd. )
Omirou, 51 RIK, Aglantzia, P.C. 2121, )
Nicosia, Cyprus. )
2. Viacom 18 Media Pvt. Ltd. )
A company incorporated and registered )
under the provisions of the Companies
ig )
Act, 1956, having its office at Zion )
Bizworld, Subhas Road 'A', Vile Parle (E), )
Mumbai - 400 064. ) .. Petitioners
Versus
1. Anees Bazmee, )
An Indian Inhabitant residing at )
1502, Deep Towers, Near Shanitvan, )
Oshiwara, Andheri (W), )
Mumbai - 400 053. ) .. Respondent
---
Mr.Snehal Shah a/w Mr.Vaibhav Bhure a/w Ms.Madhu Gadodia a/w
Ms.Akshita Palvia i/by M/s.Naik Naik & Co. for the petitioners.
Mr.J.P.Sen, Senior Advocate a/w Mr.Vaibhav Goghare a/w Mr. Murlidhar
S. Khadilkar a/w Mr.Piyush Pande i/by M/s.MAG Legal for the
respondent.
---
CORAM : R.D. DHANUKA, J.
RESERVED ON : 5th May 2016
PRONOUNCED ON : 8th June 2016
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Judgment :-
. By this review petition filed by the petitioners, the
petitioners seek review/recall of the order and judgment dated 12 th June
2014 passed by this Court in Arbitration Application No.97 of 2013.
Some of the relevant facts for the purpose of deciding this petition are
as under :-
2. The Viacom 18 Media Private Limited-petitioner no.2 herein
was the original applicant along with the Indian Film Company (Cyprus)
Limited in the Arbitration Application No.97 of 2013. The said Indian
Film Company (Cyprus) Limited has merged with M/s.Roptonal Limited,
Cyprus-petitioner no.1 herein on or about 19th January 2015. The
petitioner no.1 is also a body incorporated outside India. The petitioner
no.2 is having its registered office at Mumbai.
3. By an agreement dated 12th May 2008 executed between
M/s. Indian Film Company (Cyprus) Limited and the respondent, the
respondent has been assigned and transferred in favour of the Indian
Film Company (Cyprus) Limited, all their rights, title and interest. By
virtue of a deed of novation, all such right, title and interest of the said
M/s. Indian Film Company (Cyprus) Limited and by virtue of an order
of this Court passed in Company Scheme Petition No.628 of 2012
has now vested in the petitioner no.2.
4. The dispute arose between the parties, the petitioner no.2
herein and the said M/s. Indian Film Company (Cyprus) Limited invoked
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arbitration agreement and requested for appointment of an arbitrator.
Since the respondent did not agree to appoint any arbitrator, the said
M/s.Indian Film Company (Cyprus) Limited and the petitioner no.2
herein filed an Arbitration Application (97 of 2013) under Section
11(6) of the Arbitration and Conciliation Act, 1996 (for short "the said
Act") in this Court inter alia praying for an appointment of a sole
arbitrator. The said arbitration application was opposed by the respondent
herein on various grounds by filing an affidavit-in-reply.
5. The respondent therein however did not raise any issue of
jurisdiction of the Chief Justice or his designate of this Court to hear and
entertain the said arbitration application. By an order dated 12 th June
2014, the learned designate of the Chief Justice observed that there was
no dispute that the arbitration agreement exists. The learned designate
appointed a former Chief Justice of Allahabad High Court as a sole
arbitrator by consent of the parties. In the said order, it was made clear
that except the issue that the arbitration agreement exists, all other issues
raised in the affidavit-in-reply were kept open. The said arbitration
application was disposed of by the said order dated 12th June 2014.
6. Pursuant to the liberty granted by the learned arbitrator, the
petitioners herein filed Statement of Claim before the learned arbitrator.
The respondent has filed written statement and counter-claim in the said
proceedings.
7. The petitioner no.2 and the said M/s. Indian Film Company
(Cyprus) Limited had filed Arbitration Application No.166 of 2013
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against Mr.Soham Shah under Section 11(6) of the said Act inter alia
praying for appointment of an arbitrator.
8. By an order dated 27th June 2014 passed by the then
designate of the Chief Justice, a counsel of this Court was appointed as a
sole arbitrator. By consent of the parties in the said matter, the learned
designate of the Chief Justice substituted the earlier arbitrator by
passing another order on 27th June 2014. The applicants in the said
arbitration application thereafter noticed that since the applicant no.1 in
the said arbitration application i.e.Indian Film Company Limited
[formerly The Indian Film Company (Cyprus) Limited] was a company
incorporated in Cyprus and admittedly was a body incorporated in the
country other than India the arbitration between those parties would be
an International Commercial Arbitration within the meaning of Section
2(1)(f) of the said Act and thus the application for appointment of an
arbitrator could be filed only before the Chief Justice of India under
Section 11(9) of the said Act and not under Section 11(6) of the said
Act before the Chief Justice of this Court. The applicants in the said
Arbitration Application No.166 of 2013 filed a Review Petition
bearing (L) No.32 of 2015 in this Court inter alia praying for recall of
the order dated 27th June 2014 passed by the then designate of the
Chief Justice on the ground that the then designate of the Chief Justice
had no jurisdiction to pass the said order under Section 11(6) of the
said Act since one of the parties to the said proceedings was
incorporated in the country other than India and there was an inherent
lack of jurisdiction in the learned designate of the Chief Justice to pass
any such order.
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9. The applicant applied for procedural review by filing the
said Review Petition (L) No.32 of 2015. By an order and judgment
dated 22nd February 2016, the learned designate of the Chief Justice
recalled the order dated 27th June 2014 passed in the Arbitration
Application No.166 of 2013 and dismissed the said arbitration application
being without jurisdiction. The petitioners in this review petition, have
also applied for procedural review and seek recall of the order and
judgment dated 27th June 2014 passed by the learned designate of the
Chief Justice on similar ground.
10. Mr.Shah,
learned counsel appearing for the petitioners
invited my attention to the averments made in the Arbitration Application
(97 of 2013), the averments made in the arbitration petition filed by the
petitioners under Section 9 of the said Act in this Court and the averments
made in the statement of claim filed before the learned arbitrator. He
submits that in all the pleadings filed by the petitioners referred to
aforesaid, the petitioners had placed on record that the Indian Film
Company (Cyprus) Limited was a company incorporated in Cyprus i.e.
country other than India. He submits that there was no dispute between
the parties that the said M/s. Indian Film Company (Cyprus) Limited
was a company incorporated in Cyprus i.e. one of the countries other
than India. He submits that neither the respondent raised any objection
of jurisdiction when the said Arbitration Application No.97 of 2013
filed by the petitioners was heard by the designate of the Chief Justice
of this Court nor the petitioners noticed that the said arbitration
application could not have been filed before the Chief Justice of this
High Court under Section 11(6) of the said Act in view of the arbitration
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between the parties being an International Commercial Arbitration and
thus the application ought to have been filed before the Chief Justice of
India under Section 11(9) of the said Act.
11. It is submitted that since one of the companies having
been incorporated outside India, the said Arbitration Application No.97
of 2013 could not have been filed before the Chief Justice of this Court
at all and thus the order passed by the learned designate of the Chief
Justice on 12th June 2014 in the said arbitration application suffered from
inherent lack of jurisdiction, was without jurisdiction and was nullity.
12. Learned counsel for the petitioners placed reliance on the
order and judgment of this Court delivered on 22nd February 2016 in
the Review Petition (L) No.32 of 2015 which was filed by the original
respondent in the Arbitration Application No.166 of 2013 against the
original applicants who are the original applicants i.e. Indian Film Co.
Limited [formerly The Indian Film Company (Cyprus) Limited] and
M/s.Viacom 18 Media Pvt. Ltd.-petitioner no.2 herein.
13. The petitioner no.1 herein was also impleaded as a party-
respondent to the said Review Petition (L) No.32 of 2015. He submits
that the facts of this case and the facts in the said Review Petition (L)
No.32 of 2015 are identical and thus the said order and judgment of
this Court delivered on 22nd February 2016 in Review Petition (L)
No.32 of 2015 would squarely apply to the facts of this case. He
submits that this Court has held that even if the parties did not bring to
the notice of the learned designate of the Chief Justice when the
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application under Section 11 of the said Act was heard that one of the
parties to the arbitration application was a body incorporated in the
country other than India, the dispute would fall within definition of an
"International Commercial Arbitration" under Section 2(1)(f) of the said
Act, thus even by consent of the parties, learned designate of the Chief
Justice of this Court could not have appointed an arbitrator in case of
International Commercial Arbitration and thus question of waiver would
not apply to the facts of this case in view of there being inherent lack of
jurisdiction.
14.
It is submitted that this Court has already held that merely
because the review petitioner had not raised any objection before the
learned arbitrator in the written statement, the order passed by the learned
designate of the Chief Justice which order itself was without jurisdiction
and which objection could not be derogable, there would be no waiver
under Section 4 of the said Act. He submits that this Court after perusing
the statement of claim filed by the original applicant before the learned
arbitrator recorded a finding that the said claim was filed by both the
applicants including the applicant no.1-company which was incorporated
in the country other than India. This Court in the said Judgment held that
procedural review under Article 215 of the Constitution of India is
permissible.
15. It is submitted by the learned counsel for the petitioners that
the original petitioner-M/s.Indian Film Company (Cyprus) Limited which
was organized under the laws of Cyprus got merged and amalgamated
into M/s. Indian Film Company Limited which was also a foreign
incorporated entity by an order dated 4th October 2013. He submits that
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invocation of the arbitration agreement in the present proceedings was
admittedly by a body incorporated outside India. He submits that the
present petitioner no.1 is also a body incorporated outside India and has
jointly filed statement of claim with the petitioner no.2. It is submitted
that contractual/commercial agreement of the respondent was with M/s.
Indian Film Company (Cyprus) Limited which was incorporated in
Cyprus.
16. It is submitted by the learned counsel that in view of the
aforesaid admitted facts, the order passed by the learned designate of the
Chief Justice on 12th June 2014 appointing a sole arbitrator suffered
from an error apparent on the face of the record and was ex-facie without
jurisdiction. It is submitted that since the learned arbitrator has been
appointed by the learned designate of the Chief Justice of this Court who
had no jurisdiction to appoint any arbitrator under Section 11(6) in the
Arbitration Application No.97 of 2013, the arbitration being International
Commercial Arbitration, the award if any rendered by the learned
arbitrator would be contrary to Section 34(2)(a)(v) on the ground that
the composition of the arbitral tribunal was in conflict with the
provision of Part-I which the parties could not derogate. He submits
that Sections 11(6) and 11(9) of the said Act admittedly fall under Part-
I of the said Act.
17. Learned counsel for the petitioners placed reliance on the
judgment of the Supreme Court in the case of National Insurance
Company Limited Vs. Boghara Polycab Private Limited, reported in
(2009) 1 SCC 267 and in particular paragraphs 20, 21, 22.1 to 22.3
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thereof and would submit that when the application under Section 11 is
filed by a party, the Chief Justice or his designate himself has to decide
(I) whether the party making application has approached the appropriate
High Court or not, (ii) whether there was an arbitration agreement and
(iii) whether the party who had applied under Section 11 of the said
Act was a party to such an agreement or not. He submits that when the
dispute between the parties to the agreement is referred to the arbitration
without intervention of the Court, the arbitral tribunal can decide the
question affecting its jurisdiction: (i) whether there was an arbitration
agreement; (ii) whether the arbitration agreement was valid; (iii)
whether the contract in which the arbitration clause was found to be
null and void and (iv) whether the invalidity extends to the arbitration
clause also. He submits that the decision of the Chief Justice/his
designate on the issue of jurisdiction and the existence of a valid
arbitration agreement would be binding on the parties when the matter
goes to the arbitral tribunal. He submits that since the arbitration
application filed by the petitioners was not before the Chief Justice of
the proper Court having jurisdiction, the learned Chief Justice or his
designate had to dismiss the said arbitration application and there could
not have been any challenge to the appointment of the learned arbitrator
before the learned arbitrator itself by a party.
18. Learned counsel for the petitioners placed reliance on the
judgment of the Supreme Court in the Indian Bank Vs.Manilal
Govindji Khona, reported in (2015) 3 SCC 712 on the same issue.
Reliance is placed on the judgment of this Court in the case of Rosy
Blue (India) Pvt. Ltd. Vs. Orbit Corporation Ltd., reported in 2013
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SCC OnLine Bom 341 decided on 27th February 2013 in support of
his submission that there is a distinction between a procedural review
and a review on merits and that a substantive review on merits is
unavailable in respect of an order passed under Section 11 of the said
Act. He submits that the present petition filed by the petitioners is a
procedural review sought by the petitioners and not a review on merits.
Learned counsel for the petitioners placed reliance on the judgment of
the Allahabad High Court in the case of Manish Engineering
Enterprises Vs. Managing Director, IFFCO, New Delhi & Ors.,
reported in AIR 2008 All 56 in support of his submission that a
procedural review of an order passed under Section 11 of the said Act
is permissible.
19. Mr.Sen, learned senior counsel for the respondent, on the
other hand, submits that admittedly the learned arbitrator was appointed
by the learned designate of the Chief Justice by consent of both the
parties and since consent of the parties is the foundation of jurisdiction
of the learned arbitrator, any appointment made by consent of the parties,
regardless of the context, would constitute a valid appointment. He
submits that since the parties had agreed to the appointment of an
arbitrator, irrespective of fact that the said order was passed by the
learned designate of the Chief Justice of this Court under Section 11(6)
of the Act, though one of the parties to the arbitration proceedings was
incorporated in the country other than India, such appointment of the
learned arbitrator was a valid appointment and could not be challenged
on the ground that learned designate of the Chief Justice of this Court
had no jurisdiction to appoint an arbitrator or that there was inherent lack
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of jurisdiction of the designate of the Chief Justice to pass such order.
In support of this submission, learned senior counsel placed reliance on
the judgment of the Supreme Court in the case of Narayan Prasad
Lohia Vs. Nikunj Kumar Lohia & Ors., reported in (2002) 3 SCC 572
and more particularly paragraphs 14 to 16 thereof. Learned senior
counsel submits that even if a party has consented to the appointment
of an arbitrator, any plea that the arbitrator has no jurisdiction to decide
the dispute in issue or that he is exceeding his jurisdiction has to be
raised under Section 16 of the said Act. He submits that no such
objection is raised by the petitioners before the learned arbitrator.
20. In support of this submission, learned senior counsel relied
upon the following judgments :-
(i) The judgment of the Supreme Court in the case of Krishna
Bhagya Jala Nigam Ltd. Vs. G. Harishchandra Reddy & Ors.,
reported in (2007) 2 SCC 720 (paragraphs 6 to 9);
(ii) The judgment of the Supreme Court in the case of Union of India
Vs. Pam Development Private Limited, reported in (2014) 11
SCC 366 (paragraphs 15 to 19);
(iii) The judgment of the Supreme Court in the case of Neelakantan
& Bros. Construction Vs. Superintending Engineer, National
Highways Salem & Ors., reported in (1988) 4 SCC 462
(paragraph 2);
(iv) The judgment of the this Court in the case of Ganesh Benzoplast
Ltd., Mumbai Vs.SAF Yeast Co. Ltd., reported in 2007 (4)
Mh.L.J. 230 (paragraphs 7 to 8, 15 and 16).
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21. The next submission of the learned senior counsel for the
respondent is that since the petitioners have failed to raise such an
objection under Section 16 and has proceeded with the arbitration, the
petitioners would be precluded from challenging the award under
Section 34 of the said Act on the ground of jurisdiction or from raising
such issue of jurisdiction in any collateral proceeding. In support of this
submission, he placed reliance on the judgment of the Supreme Court
in the case of MSP Infrastructure Limited Vs. Madhya Pradesh
Road Development Corporation Limited, reported in (2015) 13 SCC
713 and in particular paragraphs 13 to 16 thereof and the judgment of
the Calcutta High Court in the case of Pradip Kumar Mandal Vs. SSK
Broking Services Pvt. Ltd. & Ors., reported in AIR 2005 Calcutta
353 and in particular paragraph 18 thereof.
22. It is submitted by the learned senior counsel that since the
petitioners themselves have applied for an appointment of an arbitrator
under Section 11 of the said Act before the Chief Justice of this Court,
the petitioners are precluded from challenging the appointment of the
learned arbitrator made by the designate of the Chief Justice and more
particularly in view of the fact that the said appointment of the learned
arbitrator was by consent of the parties. There was no inherent lack of
jurisdiction on the part of the learned designate of the Chief Justice of
this Court to appoint the learned arbitrator. He submits that the petitioners
have admittedly filed a statement of claim before the learned arbitrator
and have proceeded with the arbitration proceedings upto the stage of
evidence and thus no review petition could be filed by the petitioners
for recalling the order passed by the learned designate of the Chief
Justice on the ground raised in the petition or otherwise at this stage.
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23. In so far as the judgment of this Court delivered on 22 nd
February 2016 relied upon by the petitioners in the case of Soham Shah
Vs. The Indian Film Company Limited and Viacom 18 Media
Private Limited and M/s.Roptonal Limited, Cyprus is concerned,
learned senior counsel made an attempt to distinguish the said judgment
on the ground that in the said matter, the parties had not consented to
the appointment of the arbitrator and the said application filed under
Section 11(6) of the said Act by the applicants therein was heard and
disposed of by the learned designate of the Chief Justice on merits. He
submits that the respondent does not dispute the view taken by this
Court in the said review petition that the parties could not by consent
confer jurisdiction on the Chief justice of the High Court or his
designate to decide the application that ought to be decided by the
Hon'ble Chief Justice of India. He submits that the respondent is however
distinguishing the facts of that judgment with the facts of this matter on
the ground that both being different.
24. The next submission of the learned senior counsel for the
respondent is that the submission of the petitioners that even by consent
of the parties, no order for appointment of the arbitrator could be passed
by the learned Chief Justice or his designate under Section 11 of the
said Act in this matter is incorrect. He submits that the judgment of this
Court delivered on 22nd February 2016 would not constitute a binding
precedent since the said judgment is per incurium. In support of this
submission, learned senior counsel placed reliance on the following
judgments :-
(i) Young Vs.Bristol Aeroplane Company, Limited, reported in
(1944) KB 718 CA (pages 725-726 and 729-730);
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(ii) Lancaster Motor Company (London), Limited, reported in
(1941) KB 675 CA (pages 677-678);
(iii) Municipal Corporation Of Delhi Vs. Gurnam Kaur, reported in
(1989) 1 SCC 101 (page 110-111, paragraphs 11 and 12);
(iv) M/s.Hari Trading Corporation Vs. Bank of Baroda delivered on
23rd February 2015 in Writ Petition No.11459 of 2014 (pages 42-
43, Paragraph 17).
25. Without prejudice to the aforesaid submissions made by the
learned senior counsel and in his alternate submission, it is submitted
that since it was the petitioners' own case that the rights of the petitioner
no.1 (The Foreign Company) had fully vested in the petitioner no.2-an
Indian Company, the petitioner no.1 was not a necessary party and thus
even in absence of consent, the Chief Justice or his designate had
jurisdiction to entertain the petition filed under Section 11 of the said
Act. In support of this submission, learned senior counsel placed reliance
on the judgment of the Delhi High Court in the case of Larsen &
Toubro Ltd. Vs. D.L.F. Industries Limited, reported in (2002) SCC
OnLine 804 (Del).
26. The next submission of the learned senior counsel for the
respondent is that the present review petition filed by the petitioners is
an abuse of process of law. The petitioners herein had filed an application
under Section 11 for appointment of an arbitrator in this Court praying
for the appointment of the arbitrator, have already filed a statement of
claim without demur, after considerable delay have filed the affidavits
in lieu of examination-in-chief of their witnesses and on eve of the
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cross-examination have sought to challenge the constitution of the arbitral
tribunal by filing the present petition with an intention to delay and
defeat the arbitral proceedings though the same were initiated at the
petitioners' own instance.
27. Learned senior counsel submits that even if there is no
arbitration agreement between the parties, the Company Court in
winding up proceedings can appoint an arbitrator by consent of both the
parties. He submits that even in the civil suit, even if there was no
arbitration agreement recorded between the parties, the Court can by
consent of the parties appoint an arbitrator. He submits that similarly in
other proceedings also, any Court can appoint an arbitrator by consent
of both the parties. Issue of jurisdiction of the Court is different than
the issue of appointment of an arbitrator. He submits that once an express
consent is given by the parties to the appointment of an arbitrator, it is
not relevant as to which Court passed an order appointing an arbitrator.
He submits that even if there is any inherent defect for appointment of
an arbitrator, since the parties have acquiesced by participating in the
arbitral proceedings by filing statement of claim and the affidavits in
lieu of examination-in-chief itself, such party cannot be allowed to
challenge the appointment of an arbitrator at this stage.
28. Mr.Shah, learned counsel for the petitioners in rejoinder
submits that powers of various Courts in appointing an arbitrator by
consent of the parties though there does not exist any arbitration
agreement is different than the powers of the Chief Justice of the High
Court or his designate to appoint an arbitrator under Section 11(6) of
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the said Act or the power of the Chief Justice of India under Section
11(9) of the said Act when there is a failure of consent of the parties to
appoint an arbitrator though an arbitration agreement exists. Learned
counsel for the petitioners placed reliance on Sections 11(2) to 11(6)
and 11(9) of the said Act. He submits that once the application under
Section 11(6) or Section 11(9) is filed before the Chief Justice of High
Court or the Chief Justice of India as the case may be, it presupposes
that there was failure of consent amongst the parties though the
arbitration agreement existed.
29.
It is submitted that once an application under Section 11(6)
or Section 11(9) is filed, a procedure as contemplated under Section
11(6) or Section 11(9) as the case may be for the purpose of
appointment of an arbitrator commences. He submits that since the
parties had failed to appoint an arbitrator in accordance with the agreed
procedure, assistance of Chief Justice of the High Court for appointment
of an arbitrator in such a situation is mandatory and not directory. He
submits that the power of the Court after amendment to Section 11
now and power of the Chief Justice or his designate prior to the
amendment in an application under Section 11(6) or Section 11(9) as
the case may be could not have been exercised by any other Court
though the parties would have agreed to appointment of an arbitrator.
The power of the Chief Justice of High Court or the Chief Justice of
India of an arbitrator as the case may be prescribed under Sections
11(6) and 11(9) respectively could be exercised only if the proceedings
under those provisions were filed before the Chief Justice of High Court
or the Chief Justice of India as the case may be. He submits that the
provisions under Sections 11(6) and 11(9) are exception to each other.
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It is submitted that the Chief Justice of India or his designate cannot
appoint an arbitrator in case of a domestic arbitration by exercising
powers under Section 11(9) and similarly, the Chief Justice of High
Court or his designate cannot appoint an arbitrator in case of
International Commercial Arbitration by exercising powers under Section
11(6), even by consent of the parties.
30. The next submission of the learned counsel for the
petitioners is that while appointing an arbitrator by learned designate of
the Chief Justice on 12th June 2014 in Arbitration Application No.97 of
2013, the consent given by the parties was only in respect of the name
of the arbitrator who was appointed by the learned designate of the
Chief Justice as a sole arbitrator. He submits that neither any consent
was given by the parties to the learned designate for appointing a sole
arbitrator under Section 11(6) of the said Act nor such consent could be
given. He submits that the learned designate of the Chief Justice has
rendered a finding on merits that the arbitration agreement exists. He
submits that the provision under Section 11 of the said Act is stand
alone provision and is different than the other provisions of law.
31. Learned counsel for the petitioners distinguishes the
judgment relied upon by the learned senior counsel for the respondent
on the ground that once an appointment was made by the Chief Justice
or his designate under Section 11(6) of the said Act, none of the parties
could have raised an objection under Section 16 of the said Act before
the learned arbitrator. He submits that even by consent of the parties,
the parties could not have conferred the jurisdiction on the learned Chief
Justice of the High Court or his designate for appointment of an arbitrator
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under Section 11(9) in case of an International Commercial Arbitration.
He submits that the question of the said judgment delivered by this
Court on 22nd February 2016 in Review Petition (L) No.32 of 2015
being per incurium did not arise. He submits that none of the judgments
thus relied upon by the learned senior counsel for the respondent would
apply to the facts of this case. He submits that all the judgments relied
upon by the learned senior counsel dealt with the issue as to whether
the objection in respect of the jurisdiction under Section 16 ought to have
been raised by the respondent before the learned arbitrator or not. He
submits that principles of law laid down by the Supreme Court in the
case of S.B.P. & Company Vs. Patel Engineering Ltd. & Anr. reported
in AIR 2006 SC 450 holding that the decision of the Chief Justice or
his designate on the issue of jurisdiction and the existence of a valid
arbitration agreement would be binding on the parties when the matter
goes to the arbitral tribunal and thus no such issue could be raised
under Section 16 of the said Act before the learned arbitrator. He
submits that the judgment of this Court in the case of Soham Shah Vs.
The Indian Film Company Limited and Anr. squarely applies to the
facts of this case and thus the order dated 12 th June 2014 passed by the
learned designate of the Chief Justice in Arbitration Application No.97 of
2013 shows inherent lack of jurisdiction of the learned designate of the
Chief Justice and thus the said order being without jurisdiction deserves
to be recalled.
REASONS AND CONCLUSIONS :-
32. I shall first decide whether this review petition filed by the
original applicants for seeking recall of the order and judgment dated 12 th
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June,2014 passed by the learned designate of the Chief Justice in an
application filed under section 11(6) of the Arbitration Act is
maintainable or not.
33. It is a common ground that the petitioner no.2 herein was the
original applicant along with Indian Film Company (Cyprus) Ltd. in the
Arbitration Application No.97 of 2013. The said Indian Film Company
(Cyprus) Ltd. has merged with M/s.Roptonal Ltd., Cyprus, the petitioner
no.1 herein on or about 19th January, 2015. The petitioner no.1 is also a
body incorporated outside India. The review petition has been filed by
the petitioners herein on the ground that the Chief Justice of this court or
his designate did not have power to appoint an arbitrator under section
11(6) of the Arbitration Act in view of the fact that one of the party to the
arbitration agreement and to the said arbitration application was
admittedly incorporated outside India and thus the arbitration being the
"international commercial arbitration" within the meaning of section 2(1)
(f) of the Arbitration Act, the application for appointment of the arbitrator
itself was not maintainable before the Chief Justice of this court but could
be maintained only before the Chief Justice of India under section 11(9)
of the Arbitration Act.
34. A perusal of the record clearly indicates that though the
review petitioners had filed the said Arbitration Application No.97 of
2013 under section 11(6) of the Arbitration Act inter alia praying for
appointment of arbitrator, no objection was raised by the respondent
about the jurisdiction of the Chief Justice or his designate to appoint an
arbitrator under section 11(6) or about maintainability of the said
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arbitration application (97 of 2013). Similarly the applicants to the said
application also did not bring this fact to the notice of the learned
designate of the Chief Justice when the said arbitration application was
heard and disposed of by an order dated 12 th June, 2014. In view of these
undisputed facts, the learned designate of the Chief Justice entertained the
said Arbitration Application (97 of 2013) filed under section 11(6) of the
Arbitration Act though the said arbitration application itself was not
maintainable before the Chief Justice of this court in view of the
arbitration being "international commercial arbitration" and could be filed
only under section 11(9) of the Arbitration Act before Chief Justice of
India. In my view the said arbitration application (97 of 2013) filed by
the review petitioners herein itself was not maintainable in this court
which issue goes to the root of the matter.
35. I shall now decide whether the order and judgment dated 12th
June, 2014 passed by the learned designate suffered from inherent lack of
jurisdiction and if so, whether this review petition invoking the
procedural review for recalling of the said order is maintainable or not.
36. Seven Judges Bench of the Supreme Court in case of S.B.P.and
Co. vs.Patel Engineering Ltd.& Anr. AIR 2006 SC 450 has construed the
powers of Chief Justice of a High Court or his designate under section
11(6) and powers of the Chief Justice of India or his designate under
section 11(9) of the Arbitration Act at great length. The Supreme Court
has summed up the conclusion in the said judgment as under :-
i) The power exercised by the Chief Justice of the High Court or the
Chief Justice of India under Section of the Act is not an
administrative power. It is a judicial power.
ppn 21 rpl-7.16(j).doc
ii) The power under Section of the Act, in its entirety, could be
delegated, by the Chief Justice of the High Court only to another
judge of that court and by the Chief Justice of India to another judge
of the Supreme Court.
(iii) In case of designation of a judge of the High Court or of the
Supreme Court, the power that is exercised by the designated, judge
would be that of the Chief Justice as conferred by the statute.
(iv) 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. The Chief Justice or the judge designated would be
entitled to seek the opinion of an institution in the matter of
nominating an arbitrator qualified in terms of Section of the Act if
the need arises but the order appointing the arbitrator could only be
that of the Chief Justice or the judge designate.
(v) Designation of a district judge as the authority under Section of the
Act by the Chief Justice of the High Court is not warranted on the
scheme of the Act.
(vi) Once the matter reaches the arbitral tribunal or the sole arbitrator,
the High Court would not interfere with orders passed by the
arbitrator or the arbitral tribunal during the course of the arbitration
proceedings and the parties could approach the court only in terms
ppn 22 rpl-7.16(j).doc
of Section of the Act or in terms of Section of the Act.
(vii) Since an order passed by the Chief Justice of the High Court or by
the designated judge of that court is a judicial order, an appeal will
lie against that order only under Article 136 of the Constitution of
India to the Supreme Court.
(viii) There can be no appeal against an order of the Chief Justice of India
or a judge of the Supreme Court designated by him while
entertaining an application under Section of the Act.
(ix) In a case where an arbitral tribunal has been constituted by the parties
without having recourse to Section of the Act, the arbitral tribunal
will have the jurisdiction to decide all matters as contemplated by
Section of the Act.
(x) Since all were guided by the decision of this Court in Konkan
Railway Corporation Ltd. and Anr. v. Rani Construction Pvt.
Ltd. (2000)2SCC388 and orders under Section of the Act have been
made based on the position adopted in that decision, we clarify that
appointments of arbitrators or arbitral tribunals thus far made, are to
be treated as valid, all objections being left to be decided under
Section of the Act. As and from this date, the position as adopted in
this judgment will govern even pending applications under Section
of the Act.
(xi) Where District Judges had been designated by the Chief Justice of the
High Court under Section of the Act, the appointment orders thus
far made by them will be treated as valid; but applications if any
pending before them as on this date will stand transferred, to be
ppn 23 rpl-7.16(j).doc
dealt with by the Chief Justice of the concerned High Court or a
Judge of that court designated by the Chief Justice.
(xii) The decision in Konkan Railway Corporation Ltd. and Anr. v.
Rani Construction Pvt. Ltd. (2000) 2 SCC 388 is overruled.
37. It is held by the Supreme Court that the power under section
11(6) of the Arbitration Act is not conferred on the Supreme Court or on
the High Court but is conferred on the Chief Justice of India or the Chief
Justice of the High Court. The principal civil court of original jurisdiction
is normally the District Court. The Parliament did not want to confer the
power on the District Court, to entertain a request for appointing an
arbitrator or for constituting an arbitral tribunal under Section 11 of the
Act. It is held that the intention was to confer the power on the highest
judicial authority in the State and in the country, on Chief Justices of
High Courts and on the Chief Justice of India which provision is intended
to add the greatest credibility to the arbitral process. It is held that the
intention of the legislature appeared to be clear that it wanted to ensure
that the power under Section 11(6) of the Act was exercised by the
highest judicial authority in the concerned State or in the country so as to
ensure the utmost authority to the process of constituting the arbitral
tribunal.
38. It is held that when the Chief Justice of the High Court is
entrusted with the power, he would be entitled to designate another judge
of the High Court for exercising that power. Similarly, the Chief Justice
of India would be in a position to designate another judge of the Supreme
ppn 24 rpl-7.16(j).doc
Court to exercise the power under Section 11(6) of the Act. When so
entrusted with the right to exercise such a power, the judge of the High
Court and the judge of the Supreme Court would be exercising the power
vested in the Chief Justice of the High Court or in the Chief Justice of
India. It is held that only a judge of the Supreme Court or a judge of the
High Court could respectively be equated with the Chief Justice of India
or the Chief Justice of the High Court while exercising power under
Section 11(6) of the Arbitration Act as designated by the Chief Justice. A
non-judicial body or institution cannot be equated with a Judge of the
High Court or a Judge of the Supreme Court and it has to be held that the
designation contemplated by Section 11(6) of the Act is not a designation
to an institution that is incompetent to perform judicial functions.
39. Supreme Court has held that in a case where there is an
arbitration agreement, a dispute has arisen and one of the parties had
invoked the agreed procedure for appointment of an arbitrator and the
other party has not co-operated, the party seeking an arbitration, could
approach the Chief Justice of the High Court if it was an internal
arbitration or of the Supreme Court if it is an international arbitration to
have an arbitrator or arbitral tribunal appointed. The Chief Justice, when
so requested, could appoint an arbitrator or arbitral tribunal depending on
the nature of the agreement between the parties and after satisfying
himself that the conditions for appointment of an arbitrator under sub-
Section 11(6) of Section do exist. The Chief Justice could designate
another person or institution to take the necessary measures.
40. It is held that under section 11(7) of the Arbitration Act, the
said provision has given a finality to the decisions taken by the Chief
ppn 25 rpl-7.16(j).doc
Justice or any person or institution designated by him in respect of
matters falling under sub-Sections (4), (5) and (6) of Section 11. A
decision on jurisdiction and on the existence of the arbitration agreement
and of the person making the request being a party to that agreement and
the subsistence of arbitrable dispute require to be decided and the
decision on these aspects is a prelude to the Chief Justice considering
whether the requirements of sub-sections (4), (5) or sub-section (6) of
section 11 are satisfied when approached with the request for
appointment of an arbitrator. The Chief Justice or the person or
institution designated by him while functioning under section 11(6) of the
Arbitration Act is bound to decide whether he has jurisdiction, whether
there is an arbitration agreement, whether the applicant before him, is a
party, whether the conditions for exercise of the power have been fulfilled
and if an arbitrator is to be appointed, who is the fit person, in terms of
the provision. Section 11(7) makes his decision on the matters entrusted
to him, final. It is held that the powers under section 11(6) of the Act is
not conferred on the Supreme Court or on the High Court, but it is
conferred on the Chief Justice of India or the Chief Justice of the High
Court.
41. It is held that the power was conferred on the highest judicial
authority in the country and in the State in their capacities as Chief
Justices. They have been conferred the power or the right to pass an
order contemplated under Section 11 of the Act and thus such powers
were not an administrative power but were exercising judicial power.
42. In my view since one of the parties to the arbitration
agreement was admittedly incorporated outside India, the arbitration
ppn 26 rpl-7.16(j).doc
being "international commercial arbitration" within the meaning of
section 2(1)(f) of the Arbitration Act, the application for appointment of
an arbitrator in case of any breach of the agreed procedure for
appointment of an arbitrator could be filed only before the Chief Justice
of India under section 11(9) when the said arbitration application (97 of
2013) came to be filed and not before the Chief Justice of this court. In
my view in the facts of this case, only the Chief Justice of India or his
designate could appoint an arbitrator under section 11(9) of the
Arbitration Act and not Chief Justice of this court or his designate. None
of the party brought these facts to the notice of the learned designate of
the Chief Justice when the said order dated 12th June, 2014 was passed by
the learned designate but they gave consent insofar as name of the learned
arbitrator is concerned.
43. In my view even by consent of parties, the learned designate
of the Chief Justice of this court could not have appointed an arbitrator
under section 11(6) of the Arbitration Act in view of the arbitration being
"international commercial arbitration" within the meaning of section 2(1)
(f) of the Arbitration Act. In my view, the said order dated 12 th June,
2014 passed by the learned designate of the Chief Justice suffered from
inherent lack of jurisdiction and thus can be recalled by the learned
designate of the Chief Justice of this court by exercising powers to have
procedural review permissible under Article 215 of the Constitution of
India.
44. Supreme Court in case of M/s.Sangham Tape Company vs.
Hans Raj (2005) 9 SCC 331 and in case of Kapra Mazdoor Ekta Union
ppn 27 rpl-7.16(j).doc
vs. Birla Cotton (2005) 13 SCC 777 has carved out a distinction between
the powers of court to review on merits and the procedural review. It is
held that where a Court or quasi judicial authority having jurisdiction to
adjudicate on merit proceeds to do so, its judgment or order can be
reviewed on merit only if the Court or the quasi judicial authority is
vested with power of review by express provision or by necessary
implication. It is held that the procedural review belongs to a different
category. In such a review, the Court or quasi judicial authority having
jurisdiction to adjudicate proceeds to do so, but in doing so ascertains
whether it had committed a procedural illegality which goes to the root of
the matter and invalidates the proceeding itself, and consequently the
order passed therein. Supreme Court has also given various illustrations
in the said judgment as to when a court or quasi judicial authority
exercise power of procedural review.
45. The Allahabad High Court in case of Manish Engineering
Enterprises vs. Managing Director, IFFCO, (supra) has adverted to the
above referred Supreme Court judgments and has held that the court can
entertain a procedural review if it had committed a procedural illegality
which goes to the root of the matter and invalidates the proceeding itself,
and consequently, the order passed therein. In my view the said
arbitration application (97 of 2013) filed by the petitioner herein before
the Chief Justice of this court under section 11(6) of the Arbitration Act
though one of the party to the arbitration agreement was incorporated
outside India admittedly and the arbitration being the "international
commercial arbitration", itself was not maintainable before the Chief
Justice of this court, the order passed by the learned designate of the
ppn 28 rpl-7.16(j).doc
Chief Justice consequently in such proceedings which were not
maintainable before the Chief Justice of this court invalidates not only the
proceedings itself but also the order passed by the learned designate of
the Chief Justice therein.
46. In my view the applicants to the said arbitration application
having committed a procedural illegality which goes to the root of the
matter and was filed before the Chief Justice of a wrong court, not having
jurisdiction, the said proceedings itself being illegal and without
jurisdiction, the order passed by the learned designate of the Chief Justice
therein also became illegal and without jurisdiction. In my view the
petitioners have thus rightly filed the present proceedings inter alia
praying for exercise of the procedural review by the learned designate of
the Chief Justice and for recall of the order dated 12th June, 2014. The
judgments of Supreme Court in case of M/s.Sangham Tape Company
(supra) and in case of Kapra Mazdoor Ekta Union (supra) squarely
apply to the facts of this case. I am in respectful agreement with the
views expressed by the Allahabad High Court in case of Manish
Engineering Enterprises (supra). This court in case of Rosy Blue (India)
Pvt. Ltd. (supra) has adverted to the judgment of Supreme Court in case
of Kapra Mazdoor Ekta Union (supra) and has taken the same view.
47. The Supreme Court in case of National Insurance
Company Limited (supra) has adverted to the said judgment in case of
S.B.P.and Co. vs.Patel Engineering Ltd.& Anr. (supra) and has held that
while deciding an application under section 11, the Chief Justice or his
designate will have to decide whether the party making the application
ppn 29 rpl-7.16(j).doc
has approached the appropriate High Court or not and whether there is an
arbitration agreement and whether the party who has applied under
section 11 of the Act, is a party to such an agreement or not. In my view,
since none of the parties raised objection when the said Arbitration
Application No.97 of 2013 was heard by the learned designate of the
Chief Justice of this court about the jurisdiction of the Chief Justice or his
designate to entertain, try and dispose of the said arbitration application
on the ground that the same was without jurisdiction, the learned
designate of the Chief Justice of this court appointed an arbitrator in the
circumstances stated aforesaid. Merely because the parties had agreed to
the name when the said order came to be passed or even if the parties
would have agreed to the appointment of an arbitrator without suggesting
the name, in the circumstances stated aforesaid, the learned designate of
the Chief Justice of this court could not have made any appointment of an
arbitrator in view of the said arbitration application itself being without
jurisdiction.
48. Insofar as submission of the learned senior counsel for the
respondent that since the parties had agreed to the appointment of an
arbitrator, irrespective of the fact that the said order was passed by the
learned designate of the Chief Justice of this court under section 11(6) of
the Act, though one of the party to the arbitration proceeding was
incorporated in the country other than India, such appointment was a
valid appointment and could not be challenged on the ground of their
being inherent lack of jurisdiction is concerned, in my view there is no
merit in this submission of the learned senior counsel for the respondent.
As referred to aforesaid, Supreme Court in case of S.B.P.and Co. vs.Patel
ppn 30 rpl-7.16(j).doc
Engineering Ltd.& Anr. (supra) has at great length discussed the
legislative intent while conferring the powers on the Chief Justices of
High Courts and Chief Justice of India under section 11(6) and 11(9)
respectively.
49. In my view the powers of a Chief Justice of the High Court
or his designate under section 11(6) or the powers of the Chief Justice of
India or his designate under section1 11(9) of the Arbitration Act cannot
be equated with the powers of a court hearing the other matters between
the parties where there was no arbitration agreement recorded originally
between the parties. Even if the parties have not recorded any arbitration
agreement who are parties to such proceedings, the parties can arrive at
an arbitration agreement even in such proceedings and agree to refer the
disputes to the arbitration by recording such agreement in respect of the
disputes which are capable of being adjudicated upon by arbitration. The
parties in a winding up proceedings or in a civil suit or in a writ petition
or in the other proceedings of similar nature if agreed to record a
arbitration agreement for the first time, such arbitration agreement can be
recorded by such court in which such proceedings are pending and refer
their disputes to arbitration which are capable of being adjudicated upon
in an arbitration.
50. In my view even when such courts exercise such powers by
recording arbitration agreement for the first time in such proceedings,
such courts cannot and does not exercise powers under section 11 of the
Arbitration Act which powers are specifically conferred only on the Chief
Justice of a High Court or his designate or the Chief Justice of India or
ppn 31 rpl-7.16(j).doc
his designate as the case may be. In my view the learned senior counsel
for the respondent is thus not correct in his submission that if by consent
of parties, if an arbitrator can be appointed by courts in the proceedings
other than the arbitration proceedings, the Chief Justice of the High Court
or his designate can also appoint an arbitrator by consent of parties even
if the arbitration was "international commercial arbitration" and one of
the party to the arbitration agreement had been incorporated outside
India. In my view there is no substance in the submission of the learned
senior counsel that once consent was given by the parties to appoint an
arbitrator in a proceeding under section 11, such party cannot challenge
the jurisdiction of the Chief Justice or his designate to appoint an
arbitrator though there was inherent lack of jurisdiction of the Chief
Justice or his designate to pass such order.
51. Insofar as judgment of Supreme Court in case of Narayan
Prasad Lohia (supra) relied upon by the learned senior counsel for the
respondent is concerned, the Supreme Court on conjoint reading of
Sections 11 and 16 has held that the objections to the composition of the
arbitral tribunal as a matter which is derogable because a party is free not
to object within the time prescribed under section 16(2) and if a party
chooses not to so object, there will be a deemed waiver under section 4.
In the said matter the arbitral proceedings were conducted by the two
arbitrators. The respondent did not raise any objection in the arbitral
proceedings about the composition of the arbitral tribunal of two
members by raising an objection under section 16 of the Arbitration Act.
Supreme Court held that the two arbitrators could appoint a third
arbitrator at a later stage if and when they differ to ensure that on a
ppn 32 rpl-7.16(j).doc
difference of opinion the arbitration proceedings were not frustrated.
Supreme Court held that the provisions of section 10 which provides that
the number of arbitrator shall not be an even number is a derogable
provision and thus if an objection is not raised under section 16 before the
learned arbitrator, it would amount to waiver of a right to object
subsequently in view of the section 4 of the Arbitration Act.
52. In my view even if the original applicant did not bring to the
notice of the learned designate of the Chief Justice that the arbitration
application filed by the applicant was not maintainable before the Chief
Justice of this court or the respondent did not raise any objection about
the maintainability of the said arbitration application before the Chief
Justice of this court and agreed to the name of the learned arbitrator
being appointed, since it was a case of lack of inherent jurisdiction of the
learned Chief Justice or his designate to pass any order under section
11(6) of the Arbitration Act in view of one of the parties having
incorporated outside India, it would not amount to any waiver on the part
of the either party under section 4 of the Arbitration Act. In my view, the
provisions of section 11(6) or section 11(9) are not derogable and thus the
question of waiver under section 4 of the Arbitration Act does not arise.
The judgment of Supreme Court in case of Narayan Prasad Lohia
(supra) relied upon by the learned senior counsel for the respondent thus
does not assist the respondent and is clearly distinguishable in the facts of
this case.
53. Insofar as submission of the learned senior counsel for the
respondent that the petitioners herein not having raised any objection
ppn 33 rpl-7.16(j).doc
under section 16 of the Arbitration Act before the learned arbitrator and
having participated in the arbitral proceedings are precluded from
challenging the appointment of the learned arbitrator made by the learned
designate of the Chief Justice is concerned, Supreme Court in case of
S.B.P.and Co. vs.Patel Engineering Ltd.& Anr. (supra) has dealt with
this issue at great length. It is held that in a case where the arbitral
tribunal has been constituted by the parties without having recourse of
section 11(6) of the Act, the arbitral tribunal will have jurisdiction to
decide all the matters as contemplated under section 16 of the Act.
Admittedly in this case, the learned arbitrator was appointed by the
intervention of the court under section 11(6) of the Arbitration Act and
thus no objection under section 16 could have been raised by a party
before the learned arbitrator. The principles laid down by the Supreme
Court in case of S.B.P.and Co. vs.Patel Engineering Ltd.& Anr. (supra)
squarely applies to the facts of this case. I am respectfully bound by the
said judgment. The judgments relied upon by the learned senior counsel
for the respondent in case of (1) Krishna Bhagya Jala Nigam Ltd.
(supra), (2) Union of India vs. Pam Development Private Limited
(supra), (3) Neelakantan & Bros. Construction (supra) and (4) Ganesh
Benzoplast Ltd. Mumbai (supra) do not apply to the facts of this case
and are clearly distinguishable. Since the issue of jurisdiction had not
been raised by the respondent to the said arbitration application such
issue was thus deemed to have been rejected by the learned designate of
the Chief Justice.
54. Insofar as submission of the learned senior counsel that the
petitioners having failed to raise an issue of jurisdiction under section 16
ppn 34 rpl-7.16(j).doc
before the learned arbitrator, the petitioners are precluded from
challenging the award under section 34 of the Arbitration Act on that
ground is concerned, the learned arbitrator has admittedly not rendered
any arbitral award and thus this court need not go into the issue whether
such issue not having been raised before the learned arbitrator can be
permitted to be raised in a petition under section 34 of the Arbitration Act
or not. The judgment of Supreme Court in case of MSP Infrastructure
Limited (supra) and judgment of Calcutta High Court in case of Pradip
Kumar Mondal (supra) would not apply to the facts of this case and are
clearly distinguishable.
55. Insofar as submission of the learned senior counsel for the
respondent that the petitioners themselves had applied for an appointment
of an arbitrator under section 11 before the Chief Justice of this court, the
petitioners are precluded from challenging the order appointing the
learned arbitrator passed by the designate of the Chief Justice and also on
the ground that the petitioners have admittedly filed a statement of claim
and the proceedings are proceeded upto the stage of commencement of
evidence is concerned, in my view there is no merit in this submission of
the learned senior counsel. The respondents themselves have not raised
any issue of jurisdiction before the learned designate of the Chief Justice
in the said arbitration application filed by the petitioners under section
11(6). In the facts of this case, there was inherent lack of the jurisdiction
on the part of the learned designate of the Chief Justice to appoint the
learned arbitrator. Merely because the petitioners have filed a statement
of claim before the learned arbitrator or have filed affidavit of evidence,
that would not confer jurisdiction on the learned arbitrator since he has
ppn 35 rpl-7.16(j).doc
been appointed by the learned designate of the Chief Justice of this court
who had no jurisdiction to entertain the arbitration application filed by the
petitioners under section 11(6) in view of the admitted fact that one of the
party had incorporated outside India. In any event, since the issue of
jurisdiction was not raised by the respondent before the learned designate
of the Chief Justice in the said arbitration application, the issue of
jurisdiction was deemed to have been rejected by the designate by the
learned Chief Justice in the said order. The learned arbitrator thus in my
view could not have re-opened the said issue.
56.
Since the said order was passed by the designate of the Chief
Justice who had inherent lack of jurisdiction, the only remedy of the
petitioners was to file a review petition by applying for procedural review
which is rightly done by the petitioners in this case. Be that as it may, the
issue of jurisdiction under section 16 could not have been raised by the
claimants in the arbitral proceedings. The issue of jurisdiction if any
could be raised only by the respondents under section 16 not later filing
statement of defence.
57. Insofar as judgment of this court delivered on 22 nd February,
2016 in case of Soham Shah (supra) relied upon by the learned counsel
for the petitioners and distinguished by the learned senior counsel for the
respondent is concerned, learned senior counsel for the respondent has
fairly conceded that the parties could not by consent confer the
jurisdiction on the learned Chief Justice of the High Court or his
designate to decide the application which could have been decided by the
Chief Justice of India only. I do not propose to rely upon such judgment
ppn 36 rpl-7.16(j).doc
in case of Soham Shah (supra) as a precedent in this matter since the said
judgment was also delivered by the designate of the Chief Justice and
cannot be considered as a binding precedent. I however propose to take
the same view in the facts and circumstances of this case independently.
58. Insofar as the submission of the learned senior counsel that
the said judgment dated 22nd February, 2016 in case of Soham Shah
(supra) would not constitute a binding precedent since the said judgment
is per incuriam is concerned, the learned senior counsel for the
respondent could not point out as to how the said judgment is per
incuriam. Be that as it may, since I have not proposed to rely upon the
said judgment as a binding precedent, it is not necessary to consider the
submission of the learned senior counsel that the said judgment is per
incuriam. The judgments in case of (1) Young vs.Bristol Aeroplace
Company Limited (supra), (2) Lancaster Motor Company (London)
Limited (supra), (3) Municipal Corporation of Delhi (supra) and (4)
M/s.Hari Trading Corporation (supra), relied upon by the learned senior
counsel on this issue thus would not apply to the facts of this case.
Reliance placed thereon is misplaced.
59. Insofar as submission of the learned senior counsel for the
respondent that since it was the petitioners' own case that the rights of the
petitioner no.1 had fully vested in the petitioner no.2 an Indian company,
petitioner no.1 was not a necessary party and thus in absence of its
consent, the Chief Justice or his designate had jurisdiction to entertain the
petition under section 11 of the Arbitration Act is concerned, a perusal of
the statement of claim filed by the petitioners before the learned arbitrator
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forming part of record of these proceedings clearly indicates that both the
petitioners have applied for reliefs in the arbitral proceedings. There is
thus no merit in this submission of the learned senior counsel. Reliance
placed on the judgment of Delhi High Court in case of Larsen & Tourbo
(supra) on this issue is thus misplaced.
60. Insofar as submission of the learned senior counsel for the
respondent that the present review petition filed by the petitioners is an
abuse of process of law in view of the petitioners having filed a
statement of claim and affidavit in lieu of examination in chief is
concerned, it is a matter of record that the respondent also did not raise
any issue of jurisdiction before the learned arbitrator or before the learned
designate of the Chief Justice in the arbitration application filed by the
petitioners. Merely because statement of claim or affidavit of evidence is
filed by the petitioners, it would not preclude the petitioners from seeking
procedural review in view of the fact that the said order passed by the
learned designate of the Chief Justice was without jurisdiction and nullity.
In my view there is thus no merit in this submission of the learned senior
counsel.
61. In my view the powers of the Chief Justice of High Court or
his designate under section 11(6) and power of Chief Justice of India or
his designate can be exercised only when there is failure of consent of
parties though there is an arbitration agreement exist and cannot be
equated with powers of court in other proceedings where there was no
arbitration agreement recorded between the parties initially. Pursuant to
the powers conferred on the Chief Justice of the High Courts and the
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Supreme Court, courts have framed schemes for appointment of arbitrator
and have framed rules. Since the parties had failed to appoint an
arbitrator in accordance with the agreed procedure, the assistance of the
Chief Justice of the High Court or the Chief Justice of India for
appointment of an arbitrator in such a situation is mandatory and not
directory. Such powers under section 11(6) or under section 11(9) cannot
be exercised by any other court even by consent of parties. Similar
powers which vest in the Chief Justice of India under section 11(9) could
not have been exercised by the Chief Justice of a High Court or his
designate under section 11(6) even by consent of parties. The provisions
under section 11(6) and 11(9) are exception to each other.
62. Supreme Court in case of Zuari Cement Ltd. vs. Regional
Director, ESIC Hyderabad & Ors. (2015) 7 SCC 690 has held that where
there is want of jurisdiction, the order passed by the court/tribunal is a
nullity or non est. What is relevant is whether the court had the power to
grant the relief asked for. Supreme Court has dealt with an order passed
by the High Court directing the appellant to approach the ESI Court
constituted under section 74 of the ESIS Act for the reliefs which the
appellant had claimed in the writ petition. None of the parties to the said
proceedings challenged the order of the High Court but subjected
themselves to the jurisdiction of the ESIS Court. It is held by the
Supreme Court that neither order of the High Court nor the act of the
corporation subjecting itself to the jurisdiction of the ESIS Court would
confer the jurisdiction upon ESIS Court to determine the question of
exemption from the operation of the Act. It is held that by consent, the
parties cannot agree to jurisdiction in the court to try the dispute when the
ppn 39 rpl-7.16(j).doc
court does not have jurisdiction. It is held that the objection as to want of
jurisdiction can be raised at any stage when the court lacks jurisdiction,
the fact that the parties earlier acquiesced in the proceedings is of no
consequence. Though the High Court had directed one of the parties to
approach the ESIS Court constituted under section 74 of the ESIS Act and
such party had approached the ESIS Court pursuant to the said order
passed by the High Court, the Supreme Court having held that the ESI
Court could not have decided the said issue involved in the said
proceedings, the order passed by the ESI Court was declared the non est.
63.
Insofar as submission of the learned counsel for the
petitioners that the parties had given consent only in respect of the name
of the learned arbitrator who was appointed by the learned designate of
the Chief Justice and no consent for appointment of the sole arbitrator is
concerned, a perusal of the said order dated 12th June, 2014 clearly
indicates that the parties had agreed to the name of a former Chief Justice
of Allahabad High Court as a sole arbitrator. Be that as it may, even by
consent for appointment of an arbitrator by parties could not have
conferred jurisdiction on the learned designate of the Chief Justice under
section 11(6) for the reasons recorded aforesaid. In my view the present
proceeding is seeking procedural review of the order dated 12th June,
2014 is thus maintainable. The petitioners have made out a case for recall
of the order dated 12th June, 2014 passed by the learned designate of the
Chief Justice and the said order thus deserves to be recalled.
64. In my view since the designate of the Chief Justice did not
have power to appoint an arbitrator in case of international commercial
ppn 40 rpl-7.16(j).doc
arbitration and such power vest only in the Chief Justice of India under
section 11(9)of the Arbitration Act, even such an order passed by the
learned designate of the Chief Justice would not confer the jurisdiction on
the learned arbitrator though the parties to the arbitration application had
not raised any objection about maintainability of the said arbitration
application and had acquiesced in the arbitration application filed before
the Chief Justice of this court and the same was of no consequence. In
my view, the judgment of Supreme Court in case of Zuari Cement Ltd.
(supra) squarely applies to the facts of this case. I am respectfully bound
by the said judgment.
65. I, therefore, pass the following order:-
(a) Order dated 12th June, 2014 passed by the learned designate of the
Chief Justice in arbitration application No.97 of 2013 is recalled.
(b) Arbitration Application No.97 of 2013 is dismissed being without
jurisdiction.
(c) Review Petition (L) No.7 of 2016 is allowed in the aforesaid terms.
(d) No order as to costs.
(R.D. DHANUKA, J.)
