Konkan Railway Corporation Ltd. vs Rani Construction Pvt. Ltd.

Konkan Railway Corporation Ltd. vs Rani Construction Pvt. Ltd. (2002)

LAW POINT

Article 136 of the Constitution empowers the Supreme Court to grant special leave to appeal from any judgment, decree, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.

BACKGROUND AND ISSUES

In Ador Samia Private Limited Vs. Peekay Holdings Limited & Ors. [1999], the court had held that the order of the Chief Justice or his designate in exercise of the power under Section 11 of the Arbitration Act was an administrative order and that such order was not amenable to the jurisdiction of Supreme Court under Article 136.

The decision of the Bench of the three learned Judges affirmed this view in Konkan Railway Corporation Ltd. & Ors. Vs. Mehul Construction Co., [2000]. Thereafter, in the present case, a Bench of two learned Judges referred to a larger Bench the decision of the three learned Judges for re-consideration. This is how the matter came to before a Constitution Bench. Two issues which were to be decided in this case was-

  1. Whether such an order was a judicial order or an administrative order, and
  2. Does the Chief Justice or his nominee, acting under Section 11, have the authority to decide any contentious issues between the parties to the alleged arbitration agreement?

A related question was-

  1. Even if the said order is held to be administrative in nature what is the remedy open to the person concerned if his request for appointment of an arbitrator is turned down by the learned Chief Justice or his nominee, for some reason or other?

HELD

The Court observed-

The three Judge Bench noted that the Act was based upon the UNCITRAL Model framed by the Commission on International Trade Law established by the United Nations. It said that if a comparison was made between the language of Section 11 of the Act and Article 11 of the Model Law it was apparent that the Act had designated the Chief Justice of a High Court in cases of domestic arbitration and the Chief Justice of India in cases of international commercial arbitration to be the authority to perform the function of appointment of an arbitrator whereas under the Model Law that power had been vested in the court.

When the matter is placed before the Chief Justice or his designate under Section 11 it was not appropriate for the Chief Justice or his designate to entertain any contentious issues between the parties and decide the same. The only function of the Chief Justice or his designate under section 11 is, to fill the gap left by a party to the arbitration agreement or by the two arbitrators appointed by the parties and nominate an arbitrator. This is to enable the Arbitral Tribunal to be expeditiously constituted and arbitration proceedings to commence.

A bare reading of Sections 13 and 16 made it clear that questions with regard to the qualifications, independence and impartiality of the arbitrator and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator, who would decide the same. If a contingency arose where the Chief Justice or his designate refused to make an appointment of the arbitrator, the party seeking the appointment had the remedy of ‘mandamus.’ An intervention was possible by a court in the same way as an intervention was possible against an administrative order of the executive.

The nature and function performed by the Chief Justice or his designate being essentially to aid the constitution of the arbitral tribunal, it could not be held to be a judicial function. It was, therefore, held that an order under Section 11 refusing to appoint an arbitrator was not amenable to the jurisdiction of this Court under Article 136 of the Constitution. Section 11 does not contemplate a decision on any controversy, the party other than the requesting party may raise. Facts that nomination is to be made after expiry of 30 days and qualifications of arbitrators along with considerations likely to secure nomination of independent and impartial arbitrator are to be taken into account, do not mean that an adjudicatory function is to be carried out.

To put it concisely, for an order properly to be the subject of a petition for special leave to appeal under Article 136 it must be an adjudicatory order, an order that adjudicates upon the rival contentions of parties, and it must be passed by an authority constituted by the State by law for the purpose in discharge of the State’s obligation to secure justice to its people.

Hence, the bench dismissed the appeal.

 

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