1) AIR 1999 SC 565 (NEPC (India) Limited Vs Sundaram Finance Limited. In the above decision, the scope of Section 9 of Arbitration & Conciliation Act was examined in a vast survey of cases and authorities laid down by the Madras High Court. The said case arose out of a hire purchase
transaction which as usual carried an arbitration clause. The buyer defaulted with an installment. The owner moved the court and obtained an order under Sec. 9 without resorting to Arbitration Clause and sought for a direction in relation to the seizure of machinery with the help of police. The order was set aside in an appeal against it. The Madras High Court was of the view that a request for arbitration for substantive relief should be there before section 9 could be used for interim relief, whether or not an arbitrator has been appointed or proceedings commenced and not before with the power of court to make orders during arbitration. Section 9 of Arbitration & Conciliation Act, 1996 has replaced Section 41 of the proceeding Arbitration Act, 1940.
2) AIR 2005 SC 4430 (State of Rajasthan Vs. Navbharath Construction Company)
This decision was rendered by Hon’ble Justice S.N. Variava and Tharun Chatterjee. The Hon’ble Apex court, while interpreting Section 13, 14 and 30 of the old Act, 1940, observed the following:
“The arbitration can not make award contrary to the terms of contract. The court further went to the extent of attributing misconduct on the part of the arbitrator, if he does so. However, unless term of contract is clear and unambiguous, arbitrator has power to interpret terms of contract and his interpretation must be accepted unless it is one which could not be reasonably possible. In this case, the Hon’ble Supreme Court referred the matter to an independent umpire to deal with the allowed claims which were passed against the terms of the contract.”
This decision was rendered by Hon’ble Justice H.K. Sama and Dr. A.R. Lakshmanan. In this case, the Supreme Court dealt with the aspect of limitation in relation to reference of disputes to arbitration. While passing the judgement, the Supreme Court pointed out that the arbitration application has to be filed within a period of 3 years when the right to apply accrues. The court elaborately dealt with Sec. 20 of the old Act, 1940 and 43 of Arbitration & Conciliation Act, 1996, with a background of Article 137 of Limitation Act, 1963.
4) 2006 (11) SCC 245 (Centro Trade Minerals and Metals Inc. Vs Hindusthan Copper Limited)
The Hon’ble Supreme Court categorically pointed out that the 1996 Act has introduced several changes of which three are worth taking note of. a) Fair resolution of a dispute by an impartial tribunal without any un-
necessary delay or expenses.
b) Party autonomy is paramount subject only to such safeguards as are necessary in public interest and
c) The arbitrary tribunal is enjoined with a duty to act fairly and impartially.
The Hon’ble Apex court also pointed out shortcomings that are very much apparent from a bear reading of Arbitration & Conciliation Act such as no provision is made for expediting awards or the subsequent proceedings in the court, where the applications are filed for setting aside the award. The another shortcoming is that an aggrieved party has to start again from the District court for challenging the award. This decision was rendered by Hon’ble Justice S.B. Sinha and Tharun Chatterjee on 09.05.06.
5) AIR 2006 SC 963 (Shin Satellite Public Company Limited Vs Jain Studios Limited)
In this case, the Hon’ble Apex court interpreted Section 7 and 11 of the new Act in relation to validity of Arbitration Agreement, application of doctrine of severability. In the said case, the Supreme Court observed as follows:
“Objectionable part expressly making arbitrator’s determination – final and binding between the parties – and declaring that parties had waived the rights of appeal or objection in any jurisdiction, the Supreme Court held that on facts, the said objectionable part is clearly severable as it is independent of the dispute being referred to and resolved by the arbitrator and court does not need to re-write contract or do something that is not contemplated by the parties – to that extent the agreement is legal and offending part can be separated and severed using a blue pencil. Further more, on facts, another clause in the agreement explicitly provided for severability and hence arbitrator appointed severing invalid part of arbitration clause. While interpreting the aforesaid section, the Hon’ble Supreme Court dealt with Section 28 of Indian Contract Act which deals with agreements in restraint of legal proceedings are void.
6) While placing reliance upon SBP & Company Vs Patel Engineering Limited reported in 2005 (8) SCC 618, the Hon’ble Apex Court held in AIR 2006 SC 2686 that an order passed by the Chief Justice of India or his nominee under Sec. 11 (6) of the new Act is indeed an order within the meaning of Article 137 of the Constitution of India and the same is subject to review.
7) Reference under section 9 of the new Act - The Hon’ble High Court of A.P. while interpreting Section 9 of the new Act, observed that aggrieved
party may seek interim reliefs before or during arbitral proceedings or at any time after making arbitral award but before it is enforced. The same has been reported in 2006 (2) ALT 70 – The decision was rendered by Hon’ble Mr. Justice DSR Varma and B. Seshasayana Reddy while deciding the issue between Sai Priya Construction Company Vs K. Anantha Kumari.
8) As the issue in relation to the nature of order to be passed by the Chief Justice was not discussed in the earlier decisions rendered by various courts including Sundaram Finance Case, the said issue was raked up in Konkan Railway Corporation Vs Rani Constructions Pvt. Limited (2002 Vol. II SCC 388) and again in Konkan Railway Corporation Vs Mehul Construction Company (2000 Vol. VII SCC 201). In relation to the same, the Constitution Bench of the Supreme Court of India, while deciding such issue in between SBP & Company Vs Patel Engineering Limited and another, discussed the scope of Section 11 (6) of the new Act and thereby over-ruled the judgement rendered in 2002 Vo. II SCC 388. The Supreme Court in that regard came to a conclusion that the function which is exercised under Sec. 11 (6) is administrative, pure and simple, neither judicial nor quasi judicial. On the basis of various findings, the Hon’ble Apex court came to the following conclusions.
(i) The function performed by the Chief Justice of the High Court or Chief Justice of India under Sec. 11 (6) of the new Act is administrative, pure and simple and neither judicial nor quasi judicial.
(ii) The function to be performed by the Chief Justice under Sec. 11 (6) of the Act may be performed by him or by “any person or institution designated by him.
(iii) While performing the function under Sec. 11 (6), the Chief Justice should be prima facie satisfied that the conditions laid down in Sec. 11 are satisfied.
(iv) The arbitrary tribunal has power and jurisdiction to rule “on its own jurisdiction” under Sec. 16 (1) of the Act.
(v) Where the arbitrary tribunal holds that it has jurisdiction, it shall continue with the arbitral proceedings and make an arbitral award.
(vi) A remedy available to the party aggrieved is to challenge the award in accordance with Sec. 34 or Sec. 37 of the Act.
(vii) Since the order passed by the Chief justice under Sec. 11 (6) of the Act is administrative, a writ petition under Article 226 of the Constitution of India is maintainable. A letter of patent appeal/intra court appeal is competent. A special leave petition under Article 136 of the Constitution also lies to this court.
(viii) While exercising extra-ordinary jurisdiction under Article 226 of the Constitution, however, the High Court will be conscious and mindful of the relevant provisions of the Act including Sections 5, 16, 34 to 37 as also the object of the legislation and exercise its power with utmost care, caution and circumspection.
(ix) The decision of the constitution bench in Konkan Railway Corporation reported in 2002 Vol. II SCC 388 to the extent that it held the function of Chief Justice under Sec. 11 (6) of the Act as administrative in consonance with settled legal position and lays down correct law on the point.
(x) The decision of the constitution bench in Konkan Railway Corporation as stated above to the extent it held clause No.7 of “the appointment of Arbitrators by the Chief Justice of India scheme 1996” providing for issuance of notice to affected parties as “beyond the term of Sec. 11” and bad on that ground is not in accordance with law and doers not state the legal position correctly.
(xi) Since the Chief Justice is performing administrative functions in appointing an Arbitral tribunal, there is no “duty to act judicially” on his
part. The doctrine of “duty to act fairly” however, applies and the Chief Justice must issue notice to the person or persons likely to be affected by the decision under Sec. 11 (6).
(xii) All appointments of arbitrary tribunals so far made without issuing notice to the parties affected are held legal and valid. Henceforth, however, every appointment will be made after issuing notice to such person or persons. In otherwords, the judgement will have prospective operation and it will not affect past appointments or concluded proceedings.
The above decision was rendered by their lordships, Hon’ble Justice R.C. Lahoti, Chief Justice of India, B.N. Agarwal, Arun Kumar, J.P. Madhur, A.K. Madhur, P.K. Balasubramanian and C.K. Thakker and the same is reported in 2005 (8) SCC 618.