Supreme Court - Daily Orders
M/S Ranjit Singh & Co. vs M/S Orissa Power Transmission ... on 7 February, 2014
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2020 OF 2014
[Arising out of S.L.P (C) No.16188 of 2011]
M/s. Ranjit Singh & Co. ... Appellant
VERSUS
M/s. Orissa Power Transmission Co.
Limited & Ors.
..Respondents
O R D E R
Leave granted.
In an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, (in short the ’Act’) the High Court assumed jurisdiction to disqualify an arbitrator who had been appointed after following due procedure. In our opinion, the impugned judgment of the High Court dated 6th May, 2011 is wholly without jurisdiction.
The general conditions of contract contained in Clause 32 provided for settlement of disputes and arbitration. It was provided that any dispute or difference arising out of or in a connection with the contract shall to the extent possible be settled amicably between the parties. (32.1). All unsettled disputes shall in the first place be referred to and settled by the Engineer who, within a period of 30 days of being requested to do so, shall give a written notice of its decision (32.2). The decision of the Engineer was to be final and binding upon the parties (32.3) provided either party did not notify its intention not to accept the decision and also requesting that the dispute be referred to arbitration. In case the dispute is to be referred to arbitration, the parties were to follow the procedure under clause 32.6 which is as under :-
"Then all disputes or difference in respect of which the decision if any, of the Engineer has not become final or binding as aforesaid shall be settled by arbitration in the manner hreinafter provided. The arbitration shall be conducted by three arbitrators, one each to be named by the Contractor and the Owner and the third to be nominated by the President of the Institution of Engineers, India. If either of the parties fails to appiont its arbitrators within sixty (60) days after receipt of a notice from the other party invoking the Arbitration Clause, the President of the Institution of Engineers, India, shall have the power at the request of either of the parties to appoint the arbitrator. A certified copy of the said President making such an appointment shall be furnished to both the parties.
The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be the office of the Chief Engineer, Transmission Project, OSEB, Bhuvaneswar."
In the year 2008, certain disputes arose between the parties. Therefore on 5th February, 2008, respondent No.1 referred the disputes to the "Engineer" for adjudication in terms of the Arbitration Clause 32.2 of the GCC. The "Engineer" gave his decision on 26th March, 2008. The petitioer did not accept this decision, and informed respondent No.1, of its intention to invoke arbitration under Clause 32.6. Petitioner appointed its arbitrator on 31st March, 2008 and respondent No.1 appointed its arbitrator on 30th April, 2008. The President of the Institution of Engineers (India) appointed the third arbitrator on 2nd July, 2008. The petition under Section 11(6) of the Act was filed by respondent No.1 on 17th July, 2008 with the prayer that the appointment of the third arbitrator be declared illegal and a Presiding Arbitrator be appointed in terms of the provisions of Section 11(8) of the Act.
In such circumstances, by order dated 17th December, 2010, the High Court rejected the petition filed by respondent No.1 under Section 11(6) of the Act with the observations that respondent No.1 has got the remedy under Section 16(2) of the Act. The review petition filed by respondent No.1 seeking recall of the aforesaid order was dismissed on 21st January, 2011 with the observations that if respondent No.1 was aggrieved by the appointment of its third arbitrator, contending that the same is not in conformity of the provisions of the Act, it can raise that plea before the arbitral tribunal. Thereafter, respondent No.1 filed 2nd application for review on the ground that on 17th December, 2010, the High Court, while rejecting the petition under Section 11(6), had observed that the third arbitrator should not be a member of the arbitral tribunal at the hearing of the petition under Section 16(2) of the Act. The review petition filed by respondent No.1 was accepted by the High Court in the impugned order dated 6th May, 2011. It was directed that the third arbitrator shall not be a member of the arbitral tribunal on the petition filed by the respondent under Section 16(2) of the Act.
In our opinion, the High Court was not justified in giving such a direction. In an application under Section 11(6) of the Act, the High Court assumed the jurisdiction to disqualify the arbitrator who had been appointed after following due procedure. The High Court was fully aware that to challenge the jurisdiction of the tribunal, after it had been duly constituted in accordance with the procedure under the arbitration clause, the remedy of the parties lay before the arbitral tribunal. In the order dated 17th December, 2010, it is clearly held by the High Court that under Section 11(6) of the Act, the petitioenr can not seek a declaration that the appointment of the third arbitrator Mr. Madan Lal is illegal and without jurisdiction. The High Court had clarified that if the petitioner is aggrieved that the appointment of third arbitrator is without jurisdiction, "the same may be challenged before the arbitral tribunal and thereafter if he succeeds, steps for appointment of third arbitrator under Section 11(6) can be taken." This legal position was reiterated by the High Court in the order dated 21st January, 2011.
Section 16 of the Act clearly provides that the arbitral tribunal may rule on its own jurisdiction. Once the arbitral tribunal had been constituted, it was open to any of the parties to challenge its jurisdiction under Section 16(2). The aggrieved party would have to pursue the remedy of appeal under Section 37 or to challenge the award under Section 34. In case the plea of the respondents is accepted, the petitioner would have the right to appeal under Section 37(2)(a). However, in case the plea of respondents is rejected, it can only challenge the decision at the time when final award is challenged, in case the award is rendered against the respondents. The Chief Justice exercising the limited jurisdiction under Section 11(6) had no power to direct that the third arbitrator shall not be the member of the arbitral tribunal to decide the petition under Section 16(2). This would have the effect of disqualifying the third arbitrator. It would then lead to an undesirable situation of the arbitral tribunal consisting of an even number of arbitrators i.e. only two arbitrators. This, in turn, would be contrary to Section 10 of the Act, which provides that "the parties are free to determine the number of arbitrators, provided that such number shall not be an even number". This apart, the Chief Justice would be exercising jurisdiction vested in the arbitral tribunal under Section 16, which is not permissible.
Therefore, in our opinion, the High Court unnecessarily interfered with its earlier decisions dated 17th December, 2010 and 21st January, 2011 rejecting the petition of respondent No.1 under Section 11(6) of the Act.
In that view of the matter, the appeal is allowed and the impugned judgment of the High Court is set aside. No costs.
.................................J.
[Surinder Singh Nijjar]
..................................J.
[A.K.Sikri]
New Delhi;
February 07, 2014.
ITEM NO.41 COURT NO.8 SECTION XIA
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (Civil) No(s).16188/2011 (From the judgement and order dated 06/05/2011 in AP No.58/2008 of The HIGH COURT OF ORISSA AT CUTTACK) M/S RANJIT SINGH & CO. Petitioner(s) VERSUS M/S ORISSA POWER TRANSMISSION CO.LD.&ORS Respondent(s) (With prayer for interim relief and office report ) (for final disposal) Date: 07/02/2014 This Petition was called on for hearing today.
CORAM :
HON’BLE MR. JUSTICE SURINDER SINGH NIJJAR HON’BLE MR. JUSTICE A.K. SIKRI For Petitioner(s) Mr. Seeraj Bagga, Adv.
for Mr. Rajinder Mathur,AOR For Respondent(s) Mr. Raj Kumar Mehta,Adv.
Mr. Antaryami Upadhyay, Adv.
Ms. Ishita C. Dasgupta, Adv.
UPON hearing counsel the Court made the following O R D E R Leave granted.
The appeal is allowed in terms of the signed order.
|(Parveen Kr.Chawla) | |(Indu Bala Kapur) |
|Court Master | |Court Master |
| | | |
[signed order is placed on the file]
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