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CONTENTIONS IN A.P.O, No. 329 OF 2013:-

Mr. Dipak Basu, learned Senior Advocate appearing for the appellant contended, once the Railways failed to appoint the arbitrator in spite of receipt of demand, the Chief Justice or his designate had ample power to constitute the arbitral tribunal. According to him, once the appointing authority failed to constitute the arbitral tribunal the Chief Justice or his designate had sufficient power to appoint an independent and impartial arbitral tribunal. Once a petition under Section 11 of the Arbitration and Conciliation Act, 1996 was taken up for consideration by the Chief Justice or his designate the appointing authority under the agreement would not be heard to say that the procedure for constitution of the arbitral tribunal as laid down in the arbitration agreement be strictly adhered to. In the present case, Mr. Dipak Basu contended that the arbitral tribunal constituted by the Order dated August 14, 2003 was an independent and impartial arbitral tribunal and that the constitution of such arbitral tribunal by the said order could not be assailed on the ground that the Chief Justice did not adhere to Clause 63 of the general conditions of contract. In support of his contentions Mr. Dipak Basu relied upon Deep Trading Company Vs. Indian Oil Corporation and others reported in 2013 Volume-IV Supreme Court Cases Page-35. In his fairness Mr. Dipak Basu, also drew our attention to the Bench decision reported at All India Reporter 2009 Calcutta page 59 (Niraj Kumar Bohra v. Union of India). According to Mr. Dipak Basu the Hon'ble Supreme Court in Deep Trading Company (Supra) having held that the Chief Justice or his designate need not be fettered by the appointing procedure in the arbitration agreement in constituting an arbitral tribunal the Order dated August 14, 2003 being the order of constitution of the arbitral tribunal, in the present case could not be assailed on the ground that the arbitral tribunal was not constituted in accordance with the Clause 63 of the general conditions of contract.

On the scope and ambit of a power of a Chief Justice or his designate to appoint an arbitrator Mr. Deb relied on various authorities. He submitted, a Section 11 petition was filed only upon the failure of the parties to constitute the arbitral tribunal in accordance with the agreement. A demand for arbitration was required to be made by one party to the arbitration agreement. On the failure of the party in the arbitration agreement required to constitute the arbitral tribunal and a period of 30 days elapsing from the date of demand for arbitration and such failure continuing thereafter a party to the arbitration agreement could invoke Section 11 of the Arbitration and Conciliation Act, 1996. Once such petition was filed the party entitled to constitute the arbitral tribunal forfeited its right. Once such right was forfeited the same defaulting party could not be heard to say that the Chief Justice or his designate was required to invoke the agreed procedure to constitute the arbitral tribunal. He relied on 2000 Volume 8 Supreme Court Cases page 151 (Datar Switchgears Ltd. v. Tata Finance Ltd. & Anr.) and 2006 Volume 2 Supreme Court Cases page 638 (Punj Lloyd Ltd. v. Petronet MHB Ltd.) in support of the contention that the right to nominate ceased on filing of a petition under Section 11 of the Arbitration and Conciliation Act, 1996. He contended that an arbitral tribunal constituting party could not be placed in a better position in a proceeding under Section 11 of the Arbitration and Conciliation Act, 1996, once that party failed to constitute the arbitral tribunal in terms of the agreement.

11. Sub-Section (8) provides that the Chief Justice or his designate in making the appointment under Section 11(6) should have due regard to any qualification required of the arbitrator by the agreement of the parties and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

In SBP & Co. (Supra) the Hon'ble Supreme Court held that orders constituting arbitral tribunals prior to the date of the judgment of SBP & Co. (Supra) would be governed by 2002 Volume 2 Supreme Court Cases page 388 (Konkan Railways Corporation Ltd. v. Rani Construction Private Ltd.). Till SBP & Co. (Supra) an order constituting arbitral tribunal by the Chief Justice or his designate was considered as an administrative order. In SBP & Co. (Supra) the Hon'ble Supreme Court provided that all objections as to appointment of arbitrators or arbitral tribunals made prior to SBP & Co. (Supra) were left to be decided under Section 16 of the Arbitration and Conciliation Act, 1996. It was for the arbitral tribunal to decide and dispose of such application. Once the matter reached the arbitral tribunal the Courts would not interfere with the orders passed by the arbitral tribunal and the parties could approach the Court only in terms of Section 34 and 37 of the Arbitration and Conciliation Act, 1996.

On facts the Hon'ble Supreme Court set aside the appointment and remitted the matters back to the High Court to make fresh appointment keeping in view the parameters indicated. In our humble view the law with regard to the scope and ambit of Section 11(6) and (8) of the Arbitration and Conciliation Act, 1996 was laid down in Northern Railway Administration (Supra).

On the other side of the divide as to the scope and ambit of Section 11(6) and (8) for the Arbitration and Conciliation Act, 1996, are Hbhl-Vks (J.V.) (Supra), A.D. Chakraborty & Co. (Supra) and Deep Trading Company (Supra). The Special Bench of the Delhi High Court Hbhl-Vks (J.V.) (Supra) found that the right to constitute the arbitral tribunal upon receipt of a demand for such purpose was a composite right and was incapable of being severed. Their Lordships negated the contention that there was a distinction between the power and procedure as contemplated under the arbitration clause. Their Lordships were of the view that the loss of power was bound to affect the procedure. Since the appointing authority did not constitute the arbitral tribunal within the prescribed period of 30 days it lost the power to have an arbitral tribunal constituted of its choice. Once such right was lost the rest of the prescribed procedure could not be implemented. Their Lordships relied on Datar Switchgears Ltd. (Supra) to hold that once the party which was served with the demand notice in terms of the arbitration clause failed or refused to act in making the appointment in terms of the arbitration clause within 30 days or in any case prior to the institution of a petition its right to make such appointment ceased or was forfeited. Such cessation was absolute. Their Lordships also held that the Court had jurisdiction to take necessary measures in terms of Clause 11(6) of the Arbitration and Conciliation Act, 1996 and that such expression will take within its ambit and scope to appoint independent and impartial arbitrator with reference to the accepted arbitration clause unless the Court in its discretion directed the institution specified in the arbitration clause not in default to make such appointment.