Andhra HC (Pre-Telangana)
M/S. Mic Electronics Limited,Having ... vs M/S. International Techno Media Pvt., ... on 11 November, 2011
Bench: N.V. Ramana, K.S. Appa Rao
THE HON'BLE SRI JUSTICE N.V. RAMANA AND THE HON'BLE SRI JUSTICE K.S. APPA RAO C.M.A. No. 575 of 2011 11.11.2011 M/s. MIC Electronics Limited,having its regd. office at A4/11, Electronic Complex, Kushaiguda, Hyderabad-500 062, rep., by its Managing Director Dr.M.V. Ramana Rao M/s. International Techno Media Pvt., Ltd., having its regd. office at 7, Maniprabha, Behind Sector-D4, Vasant Kunj, Delhi, rep., by its Managing Director Mr. Jatin Bansal and another. Counsel for the appellant: Sri P. Vikram Counsel for the respondent No.1: Sri B. Venkateswarlu <Gist: >Head Note: ? Cases referred: 1. AIR 1951 SC 115 2. AIR 1963 SC 1547 3. AIR 1966 SC 1089 4.AIR 1969 SC 78(1) 5.1969 (3) SCC 71 6. AIR 1985 SC 218 7.(1989) 2 SCC 163 8. (2002) 5 SCC 510 9.(2003) 5 SCC 531 10.(2005) 9 SCC 686 11.MANU/DE/1329/2010 12. MANU/DE/1704/2011 13.2002 (2) ALD 149 (DB) 14. 2001 (6) Supreme 265 15.AIR 2002 SC 78 (FB) 16. 2003 (6) SCC 503 17.(2004) 3 SCC 447 18. (2005) 10 SCC 704 19. 2001(6) Supreme 265 20. 2002(2) SCC 388 21. 2003(6) SCC 503 22. 2005 (8) SCC 618 Judgment: (Per N.V. Ramana, J.) The short question that arises in the appeal is whether a party to an agreement can file a suit questioning the unilateral appointment of Arbitrator by the other party in the light of the provisions of the Arbitration and Conciliation Act, 1996. The relevant facts are briefly stated as under: The appellant-plaintiff entered into agreement with respondent No.1-defendant No.1 on 26.08.2009 for operation of LED Screens at 50 locations for the purpose of displaying advertisements. Some disputes arose between the parties. Respondent No.1 issued notice dated 15.03.2011 to the appellant for recovery of Interest Free Deposits, payments and damages to the tune of Rs.90,23,93,191/-, with interest thereon at the rate of 24% per annum. Two days thereafter, respondent No.1, while referring to their notice dated 15.03.2011, issued another notice dated 17.03.2011 invoking clause 22 of the agreement and appointing one Mr. H.C. Sharma, Superintendent Engineer (Retired) of Delhi Development Authority, as sole Arbitrator, for resolution of the disputes that arose between them, including their claims against the appellant. The Arbitrator was called upon to enter reference immediately without any further loss of time. On the very same day, respondent No.1 informed the appellant about the invocation of arbitration clause by e-mail. The appellant, by reply e-mail dated 21.03.2011 informed respondent No.1 that appointment of Arbitrator cannot be unilateral and must be with mutual consent and the Arbitrator appointed is not acceptable to them. However, even before the appellant gave his reply, the Arbitrator appointed by respondent No.1, entered upon the reference on 19.03.2011. The Arbitrator while informing the appellant and respondent No.1 about the commencement of the arbitration proceedings, noted that after a long wait for the appellant, he is fixing the next date of hearing on 22.04.2011 at 4.30 p.m., and if any party fails to submit statement of facts/counter statements of facts and/or fails to attend the hearing(s), he will be at liberty to conduct ex parte proceedings to decide the case. Even before the expiry of the appointed day, the Arbitrator on 06.04.2011 conducted the arbitration proceedings, wherein he recorded that the appellant neither informed verbally nor in writing nor any person attended the hearing on behalf of the appellant. On 22.04.2011 the appellant addressed a letter to the Arbitrator informing him that his very appointment by respondent No.1 as Arbitrator and claim made by respondent No.1, is illegal. The appellant stated that they objected to the appointment as Arbitrator, the proper course for respondent No.1 was to seek appointment of Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Arbitration Act'). The appellant further informed the Arbitrator that he has no right whatsoever to conduct any arbitration proceedings and that he cannot call upon them to attend the hearing and that they will not participate in any unauthorized hearings. On 22.04.2011, it appears that the appellant filed letter objecting to the appointment of Arbitrator. The Arbitrator, while refusing to accept the said letter, adjourned the matter to 09.05.2011. While the proceedings before the Arbitrator were pending, the appellant on 05.05.2011 filed suit in O.S. No. 296 of 2011 on the file of the II Additional District Judge, Ranga Reddy District, L.B. Nagar, praying for the following relief: (i) Declare the appointment of the 2nd defendant i.e. Mr. H.C. Sharma as Arbitrator as contrary to the procedure prescribed in Section 11 of the Arbitration and Conciliation Act, 1996 and consequently declare the proceeding being conducted by 2nd defendant as null and void. (ii) To grant permanent injunction restraining the 2nd defendant herein, from proceeding with the arbitration on 09.05.2011 or any other future date; and (iii) To award cost of the suit and pass such other order or orders as this Hon'ble Court may deem fit and proper in the interest of justice. In the said suit, the appellant filed the present application (being I.A. No. 1393 of 2011) seeking a permanent injunction restraining the 2nd respondent from proceeding with the arbitration proceedings. Respondent No.1 filed counter to the said I.A. Even though as per the prayer in the I.A., the appellant is seeking the relief of permanent injunction, the Court below has corrected it and read it as temporary injunction. Thereafter, the Court below, having heard the rival contentions, by the order under appeal, dismissed the I.A. filed by the appellant and refused to grant temporary injunction as prayed for. This C.M.A. is directed against the said order dated 06.06.2011, passed by the Court below, dismissing the application in I.A. No. 1393 of 2011 in O.S. No. 296 of 2011, filed by the petitioner praying to grant permanent injunction restraining respondent No.2/Arbitrator, from proceeding with the arbitration proceedings. The learned counsel for the appellant made the following submissions: (1) The very scope and object of the Arbitration and Conciliation Act, 1996 is that "Arbitral Tribunal" must be constituted only with consensus and express consent of parties to the agreement. In the absence of consensus or express consent of any of the parties to the agreement, no Arbitrator can be appointed and the only course open to the parties to the agreement is to make a request under Section 11, to the Chief Justice of the concerned High Court to appoint an Arbitrator. (2) Despite the appellant's objections to the unilateral appointment of respondent No.2 as Arbitrator by respondent No.1, respondent No.1 appointed respondent No.2 as Arbitrator. This is in gross violation of the provisions of the agreement between the parties and the provisions of the Arbitration Act. Therefore, the appellant is entitled to invoke the jurisdiction of the civil court and file civil suit to declare the appointment of respondent No.2 as Arbitrator, for adjudication of the disputes between the parties, as null and void, and further seek the relief of injunction restraining respondent No.2 from proceeding further in the matter. (3) The appellant was justified in invoking the jurisdiction of the civil court challenging the appointment of Arbitrator since the prohibition imposed by Section 5 of the Arbitration Act on the judicial intervention in arbitration proceedings, is only with reference to Part I of the Arbitration Act, and not with respect to appointment of Arbitrator. The applicability of the prohibition in Section 5 depends upon the nature of proceedings. The grounds of challenge against appointment of arbitrator under Section 12 are very limited. Section 12 does not provide any ground for questioning the appointment of Arbitrator made in contravention of the provisions of the agreement between the parties or the provisions of Section 11(5). Since the appointment of Arbitrator is made in contravention of the provisions of the agreement and the provisions of Section 11(5), the same is not covered by the grounds of challenge prescribed in Section 12 and the challenge procedure prescribed in Section 13 is not applicable. (4) The power of the arbitral tribunal under Section 16(1) to rule on its own jurisdiction is only with respect to the existence or validity of the arbitration agreement. The said provision does not cover a situation where the constitution of the very arbitral tribunal is in dispute on the ground that it has been constituted in violation of the procedure contemplated under the agreement as well as the provisions of the Act. The Arbitrator cannot decide on his own appointment. (5) Since the provisions of Sections 12, 13 and 16 of the Arbitration Act, do not provide for a remedy to question the appointment of Arbitrator made in contravention of the provisions of the agreement and the provisions of the statute, the appellant has every right to file civil suit questioning the appointment of Arbitrator and the provisions of Section 5 cannot come in the way of the appellant filing the suit. (6) When an Arbitrator is appointed by the Government or Public Sector Undertaking in violation of the provisions of the agreement or the provisions of the statute, the aggrieved party can question such appointment by filing a writ petition either before this Court or the Supreme Court. In the case of private parties, if one party appoints an Arbitrator in violation of the provisions of the agreement and the provisions of the statute, the only remedy available to the other party is to question such appointment by filing a civil suit. In support of his various arguments, the learned counsel for the appellant relied upon the judgments of the Supreme Court in Rai Brij Raj Krishna v. Messrs. S.K. Shaw and Brothers1, Firm Seth Radha Kishan v. Administrator Municipal Committee, Ludhiana2, M/s. K.S. Venkataraman and Co. (P) Ltd. v. State of Madras3, Dhulabhai v. State of M.P.4, Raja Kandregula Srinivasa v. State of Andhra Pradesh5, M/s. Amar Nath Om Prakash v. State of Punjab6, A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies7, ITI Ltd. v. Siemens Public Communications Network Ltd.8, Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya9, Dharma Prathishthanam v. Madhok Construction (P) Ltd.10. In the light of the above, the learned counsel for the appellant concluded that the Court below committed an error in refusing to grant temporary injunction, restraining respondent No. 2 from proceeding with the arbitration proceedings, and prayed that the order under appeal be set aside and the C.M.A. be allowed. In response, the learned counsel for respondent No.1 made the following submissions: (1) The purpose of the Arbitration Act is to minimize the supervisory role of Courts in the arbitral process. This is evident from Clause 4(v) of the Statement of Objects and Reasons. Even if the entire allegations made by the appellant are true, the suit filed by the appellant is not maintainable in the light of the prohibition on intervention by judicial authority in Section 5. Under Section 5 the Courts can only intervene to the extent provided for in Part-I of the Act. Under Part-I, the intervention of the court is confined only with respect to matters falling under Sections 8, 9, 11, 34 and 37. (2) Under Section 16(1) of the Arbitration Act, it is the arbitrator, who has to rule on his jurisdiction, including ruling on any objection with respect to the existence or validity of arbitration agreement. All conceivable pleas/objections, including the jurisdiction of the Arbitrator, has to be raised by a party under Section 16(2), not later than the submission of the statement of defence. Under Section 16(3), a party can also raise objection, if during the course of arbitration proceedings, the Arbitrator exceeds the scope of authority. Under Section 16(5), the Arbitrator will consider and decide such objections, and if the Arbitrator rejects the plea, he will continue with the arbitral proceedings and make an arbitral award. If the party is aggrieved by such an arbitral award, Section 16(6) enables the parties to make an application under Section 34 to set aside such award. (3) The arbitration proceedings are at the stage of issuing notices. Having regard to the above provisions, the appellant can raise all objections before the arbitrator, who is entitled to adjudicate upon the same under Section 16(1). The appellant has not filed its statement of defence, wherein the appellant can raise its objection regarding jurisdiction as stipulated in Section 16(2). It is not known in whose favour the arbitrator may decide the objection on jurisdiction. Even before the appellant submitting its statement of defence and raising the plea of the arbitrator's jurisdiction, the appellant cannot maintain the present suit. (4) Even assuming that in the appointment of respondent No.2 as Arbitrator is not valid, respondent No.1 has not followed the procedure contemplated under the agreement or the statute for challenging the same. The appellant having entered his appearance before the Arbitrator, the appellant has no option except to participate in the arbitration proceedings, and if aggrieved by the award that may be passed by the Arbitrator, the appellant can question the same under Section 34(v), by raising the question as to composition of the arbitration tribunal. (5) Since the appellant has the efficacious remedy of getting the disputes resolved through arbitration, and also has the remedy of filing an application under Section to set aside the award, the present suit, having regard to the provisions of Section 41(h) of the Specific Relief Act, 1963 is not maintainable. The counsel for respondent No.1, therefore, submitted that the appellant is not entitled to maintain the present suit challenging the appointment of arbitrator, much less seek the relief of injunction against the arbitrator from proceeding with the arbitration proceedings. In support of his arguments, he placed reliance on the following precedents - The Handicrafts and Handlooms Exports Corporation of India Limited v. Ashok Metal Corporation11, Devinder Kumar Gupta v. Realogy Corporation12, Cultor Food Science Inc. v. Nicholas Piramal India Ltd.13, Kvaerner Cementation India v. Bajranglal Agarwal14, M/s. Konkan Railways Corporation Ltd. v. M/s. Rani Construction Pvt. Ltd.15, Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums16, Secur Industries Ltd. v. Godrej & Boyce Mfg. Co. Ltd.17 and Shree Subhlaxmi Fabrics (P) Ltd. v. Chand Mal Baradia18. Therefore, the counsel for respondent No.1 concluded that no exception can be taken to the order under appeal passed by the Court below refusing to grant temporary injunction restraining respondent No.2 from proceeding further in the matter, and prayed that the C.M.A. be dismissed. In the light of the arguments advanced by the parties, the sole question that fall for consideration in this appeal is: 1) Whether a party to the agreement can file a suit questioning the unilateral appointment of Arbitrator by the other party in the light of the provisions of the Arbitration and Conciliation Act, 1996? Before we proceed to answer the above questions, we feel it appropriate to refer the relevant provisions of the Arbitration and Conciliation Act, 1996. Section 5 states: Extent of judicial intervention Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. (emphasis supplied) Section 7 deals with "arbitration agreement". It states that arbitration agreement means an agreement by the parties to submit to arbitration. It may be in the form of an arbitration clause in a contract or in the form of a separate agreement. It shall be in writing. A reference to the arbitration agreement in a contract, makes that arbitration clause, part of the contract. Section 8 empowers the court to refer the parties to arbitration where there is an arbitration agreement between the parties. Section 11 which deals with Appointment of Arbitrators states as follows: Appointment of Arbitrators: (1)A person of any nationality may be an arbitrator, unless otherwise 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 arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, 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 request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon by the parties,- (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) 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 means for securing the appointment. Section 12 which deals with grounds for challenge, to the appointment of Arbitrator, states as follows: Grounds for challenge (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. (2) ................... (3) An arbitrator may be challenged only if- (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. Section 16 which deals with the competence of arbitral Tribunal to rule on its jurisdiction, states as follows: Competence of arbitral Tribunal to rule on its jurisdiction (1) The arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement............... (2) A plea that the arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral Tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral Tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral Tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with (section 34). (emphasis supplied) Section 34 which deals with application for setting aside arbitral award, states as follows: Application for setting aside arbitral award: 1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub- section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if- (a) the party making the application furnishes proof that- ........................... (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 of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (emphasis supplied) Section 37 which deals with appealable orders states: Appealable orders: (1) .............. (2) An appeal shall also lie to a court from an order of the arbitral tribunal-- (a) Accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; (emphasis supplied) We have elaborately reproduced the relevant provisions since the appellant has contended that the 1996 Act does not provide for a remedy for unilateral appointment of an Arbitrator. In the present case, the agreement between the appellant and respondent No. 1 contains an arbitration clause, which states as follows: That this agreement shall be governed by and construed in accordance with the laws applicable in India and will be subject to the jurisdiction of the Courts in Hyderabad. Any dispute arising out of or in relation to this agreement shall, unless resolved amicably, be referred to arbitration in accordance with the Arbitration and Conciliation Act, 1996. From a plain reading of the above arbitration clause, it is evident that the parties have not agreed to any procedure for appointment of arbitrator. The parties have only agreed to refer an unresolved dispute to arbitration in accordance with the Arbitration and Conciliation Act, 1996. The facts as narrated above, no doubt discloses that the appointment of respondent No.2, as arbitrator, by respondent No.1, is not with mutual consent of the appellant and respondent No.1. In spite of the appellant taking an objection that his appointment is not in accordance with the provisions of Section 11 of the Arbitration Act, respondent No.2 proceeded ahead with the arbitration proceedings. We, therefore, have to examine whether the aforesaid facts enable the appellant to file a suit questioning the appointment of Arbitrator in the light of the prohibition contained in Section 5 and the remedy prescribed in Section 16 and Section 34 of the Arbitration Act. Section 5 which begins with a non-obstante clause, categorically states that in matters governed by Part-I, no judicial authority shall intervene except where it has been specifically provided in Part-I of the Arbitration Act. Under Part- I, the intervention of the judicial authority is permitted only in respect of matters falling under Sections 8, 9, 11, 34 and 37. In view of the non-obstante clause in Section 5, the provisions of the Arbitration and Conciliation Act, 1996 over-ride the provisions of the Code of Civil Procedure, 1908 with respect to matters covered by Part-I. Therefore, we have to examine whether the suit filed by the appellant relates to a matter covered by Part-I. If the suit relates to matters governed by Part-I of the Arbitration and Conciliation Act, 1996, the suit will not be maintainable in view of Section 5. In the present suit, the appellant has sought for a declaration of the appointment of the Arbitrator as null and void and to grant a permanent injunction restraining respondent No.2 from proceeding with the arbitration proceedings. The appellant is questioning the appointment of the Arbitrator on the ground that the arbitrator does not have jurisdiction since he was appointed unilaterally and without the consent of the appellant. The provisions of the Arbitration Act, dealing with the jurisdiction of the arbitral tribunal may be summarized below: (1) The parties are free to agree on a procedure for appointment of an Arbitrator [Section 11(2)]. If no such procedure is prescribed in the agreement, the parties shall take recourse to the Court under Section 11 if the arbitrator agreement contemplates sole Arbitrator. If the agreement contemplates three Arbitrators, each party shall appoint one Arbitrator and the two appointed Arbitrators shall appoint a third Arbitrator [Section 11(3)]. (2) If a party believes that the arbitral tribunal does not have jurisdiction, an objection can be raised before the arbitral tribunal as per the procedure prescribed in Section 16. (3) The arbitral tribunal has the power to rule on its own jurisdiction [Section 16(1)]. If an objection is raised with respect to the jurisdiction of the arbitral tribunal, the arbitral tribunal shall decide on the objection [Section 16(5)]. (4) If the arbitral tribunal takes a decision rejecting a plea that it does not have jurisdiction, it can continue with the arbitration proceedings and make an arbitral award [Section 16(5)]. (5) If a party is aggrieved by the decision of the arbitral tribunal rejecting its plea that the arbitral tribunal does not have jurisdiction, it may make an application for setting aside such award in accordance with Section 34 [Section 16(6)]. Section 34 enumerates the grounds on which an arbitral award can be challenged. One of the grounds of challenge is that the composition of the arbitral tribunal was not in accordance with the agreement of the parties [Section 34(2)(a)(v)]. (6) If the arbitral tribunal accepts the plea raised under Section 16(2) that it does not have jurisdiction, and passes an order, an aggrieved party can file an appeal against such an order under Section 37(2)(a). Thus, the questioning of appointment of arbitrator for lack of jurisdiction is clearly a matter covered by Part-I of the Arbitration Act. Part-I clearly provides the procedure for questioning the jurisdiction of the arbitral tribunal and also provides the remedies if the arbitral tribunal either accepts or rejects the plea on jurisdiction. Therefore, the suit filed by the appellant is not maintainable in view of prohibition in Section 5. The ruling of the Supreme Court in Kvaerner Cementation India v. Bajranglal Agarwal19 is instructive and directly applicable to the facts of the present case. In the said case, a suit was filed for a declaration that the arbitral proceedings are without jurisdiction since there does not exist any arbitration clause in the contract. The Bombay High Court held that in view of Section 5 and Section 16 of the Arbitration Act, the arbitral tribunal has the power and jurisdiction to rule on its own jurisdiction and it therefore, refused to interfere with the civil court order refusing an injunction against the arbitral proceedings. On appeal to the Supreme Court, the counsel for the appellant contended that the jurisdiction of the civil Court was not ousted since the party is challenging the very existence of an arbitration agreement which would confer jurisdiction in the arbitral tribunal. However, the Supreme Court rejected the contention and observed as follows: There cannot be any dispute that in the absence of any arbitration clause in the agreement, no dispute could be referred for arbitration to an arbitral Tribunal. But, bearing in mind the very object with which the Arbitration and Conciliation Act, 1996 has been enacted and the provisions thereof contained in Section 16 conferring the power on the arbitral Tribunal to rule on its own jurisdiction including ruling on any objection with respect to existence or validity of the arbitration agreement, we have no doubt in our mind that the Civil Court cannot have jurisdiction to go into that question. A bare reading of Section 16 makes it explicitly clear that the arbitral Tribunal has the power to rule on its own jurisdiction even when any objection with respect to existence or validity of the arbitration agreement is raised and a conjoint reading of subsections (2), (4) and (6) of Section 16 would make it dear that such a decision would be amenable to be assailed within the ambit of Section 34 of the Act. In this view of the matter, we see no infirmity with the impugned order so as to be interfered with by this Court. (emphasis supplied) This ruling is directly applicable to the facts of the present case. In view of the procedure prescribed in Section 16, the appellant can challenge the jurisdiction of the arbitral tribunal and if he is aggrieved by the decision of the arbitral tribunal, it can file an application under Section 34 questioning the award. In Konkan Railway v. Rani Construction20, the Supreme Court further held that even if the Chief Justice or his designate under Section 11 wrongly constitutes the Arbitral Tribunal, the aggrieved party can question the jurisdiction and the constitution of the arbitral tribunal under Section 16. The relevant observation is reproduced below: "It might also be that in a given case the Chief Justice or his designate may have nominated an arbitrator although the period of thirty days had not expired. If so, the Arbitral Tribunal would have been improperly constituted and be without jurisdiction. It would then be open to the aggrieved party to require the Arbitral Tribunal to rule on its jurisdiction. Section 16 provides for this. 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 existence or validity of the arbitration agreement" shows that the Arbitral Tribunal's authority under section 16 is not confined to the width of its jurisdiction, as was submitted by learned counsel for the appellants, but goes to the very root of its jurisdiction. There would, therefore, be no impediment in contending before the Arbitral Tribunal that it had been wrongly constituted by reason of the fact that the Chief Justice or his designate had nominated an arbitrator although the period of thirty days had not expired and that, therefore, it had no jurisdiction." (emphasis supplied) The Apex Court, has followed the ratio laid down in the above judgment in HPCL v. Pink City Midway Petroleum21. This Court in Madhucon Projects Ltd., Hyd. v. B. Girijapathi Reddy & Co. Hyd., following the judgment in HPCL v. Pink City Midway Petroleum, held that a suit questioning the appointment of arbitrator on the ground that the appointment is unilateral and is violative of the provisions of Section 11(5) and 11(6) of the Arbitration and Conciliation Act, is not maintainable. While observing that if an agreement between the parties provides for arbitration, the civil court is under a legislative mandate to refer the parties to arbitration, held as follows: Such objections as to the validity of the appointment of arbitrator and the jurisdiction of the arbitral tribunal are amenable to challenge before the arbitral tribunal itself. Section 16 of the Act provides that the Tribunal may rule on its own jurisdiction, including ruling of any objections with respect to this existence or validity of the arbitration agreement and an aggrieved party on a decision, may challenge the decision in accordance with Section 34 of the Act. (emphasis supplied) It is the contention of the counsel for the appellant that since the Apex Court by its judgment in SBP & Company v. Patel Engineering22, has over-ruled the above judgment in Konkan Railway, the ratio laid down therein, is no more good law and will not assist respondent No.1 in any manner, cannot be accepted. The Apex Court in the said judgment, has reiterated the above ratio, and has merely over-ruled the ratio laid down in Konkan Railway that the Chief Justice under Section 11 of the Act, exercises judicial function and not administrative functions. Since the appellant has the remedy of questioning the appointment of arbitrator under Section 16(1) and (2) by contending that he has no jurisdiction to arbitrate the dispute between the parties, and has further remedy of assailing the award under Section 34 in case the award is passed against them, and having regard to the prohibition contained in Section 5 of the Act, the present suit is not maintainable. Since the suit filed by the appellant seeking to declare the appointment of respondent No.2, as arbitrator, by respondent No.1, is itself is not maintainable, the question of declaring the proceedings being conducted by respondent No.2 as illegal or to grant injunction restraining respondent No.2 from proceeding with the arbitration proceedings, does not arise. Accordingly, the question is answered in favour of respondent No.1 and against the appellant. In Kvaerner Cementation India v. Bajranglal Agarwal, the Supreme Court while holding that the suit is not maintainable gave the following direction: The petitioner who is a party to the arbitral proceedings may raise the question of jurisdiction of the Arbitrator as well as the objection on the ground of non- existence of any arbitration agreement in the so-called dispute in question and such an objection being raised, the Arbitrator would do well in disposing of the same as a preliminary issue so that it may not be necessary to go into the entire gamut of arbitration proceedings. In the present case, the appellant has already questioned the jurisdiction of the Arbitrator and the Arbitrator would do well in disposing of the same as a preliminary issue so that it may not be necessary to go into the entire gamut of arbitration proceedings. With the above observation, the appeal is dismissed. No costs. ________________ N.V. RAMANA, J.
_________________ K.S. APPA RAOI, J Dated:11th November, 2011