The argument.

Decisions of the CJI or his delegate, under section 11 of the Arbitration and Conciliation Act, 1996 (A & C Act) have no binding value whatsoever on any court on any forum except the forums / arbitral tribunal/ parties involved in the arbitral proceeding in which such findings under section 11 has been passed.

 The main judgment

The Supreme Court of India by a 7 Judge Bench decision in S.B.P & Co. v. Patel Engineering, 2005 (9) SCALE 1 overruled its earlier 5 Judge Bench decision in the case of Konkan Railway Corporation v. Rani Construction Pvt. Ltd., (2002) 2 SCC 388.

The reasoning

Section 11 of the A &C Act provides for appointment of an arbitrator by the Chief Justice of India, in the case of international arbitration and by the Chief Justice of the High Court, in the case of domestic arbitrations.

The Supreme Court summed up its decision in Patel Engineering as under:

i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.

ii) The power under Section 11(6) 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 11(8) 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 11(6) 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 of Section 37 of the Act or in terms of Section 34 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 11(6) of the Act.

(ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.

(x) Since all were guided by the decision of this Court in Konkan Railway (supra) orders under Section 11(6) 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 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act.

(xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) 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 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. is overruled.

The Supreme Court, while coming to the aforesaid conclusions categorically held that “It is true that the power 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. One possible reason for specifying the authority as the Chief Justice, could be that if it were merely the conferment of the power on the High Court, or the Supreme Court, the matter would be governed by the normal procedure of that Court, including the right of appeal and the Parliament obviously wanted to avoid that situation, since one of the objects was to restrict the interference by Courts in the arbitral process.”

Accordingly, it is argued herein that the reasoning behind any finding by the CJI or his designate binds the arbitral tribunal, the parties, but it does not have any value as a binding precedent under Article 141 of the Constitution of India.

Article 141 states that “Law declared by Supreme Court shall be binding on all courts within the territory of India”

A request for appointment of an arbitrator, decided under section 11 of the A & C Act, not being a decision of the Supreme Court does not fall within the purview of Article 141 of the Constitution of India.

Further, Order VII of the Supreme Court Rules, 1996 intituled Constitution of Division Courts and Powers of a Single Judge does not provide for applications under section 11 of the A & C Act.

 Conclusion

Thus, on the aforesaid reasonings, in my humble opinion, decisions of the CJI or his delegate, under section 11 of the A & C Act have no binding value whatsoever on any court on any forum except the forums / arbitral tribunal./ parties involved in the arbitral proceeding in which such findings under section 11 has been passed.

 
Would be delighted to have a discussion on this proposition.