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Supreme
Court redefines section 11 of Arbitration and Conciliation Act,
1996.
In
a landmark judgment delivered on October 26, 2005 by a seven judge
bench of the Supreme Court of India, ("Court") in the matter
of S.B.P. and Co. V/s Patel Engineering Ltd. and Another, the
Court, inter alia, held that the power exercised by the Chief
Justice of the High Court or the Chief Justice of India under
Section 11(6) of the Arbitration and Conciliation Act, 1996 ("Act")
is not an administrative power but a judicial power. The judgment
overrules the judgment delivered in the matter of Konkan Railway
Corporation Ltd. and Another v. Rani Construction Pvt. Ltd. It
is clarified that the judgment will not have a retrospective effect
but from the date of the judgment, the position as adopted in
the judgment will govern even pending applications under Section
11(6) of the Act.
The
Court observed that whether there was an arbitration agreement,
was not merely a jurisdictional fact for commencing the arbitration
itself, but it was also a jurisdictional fact for appointing an
arbitrator on a motion under Section 11(6) of the Act. A Chief
Justice could appoint an arbitrator in exercise of his power only
if there existed an arbitration agreement and without holding
that there was an agreement, it would not be open to him to appoint
an arbitrator saying that he was appointing an arbitrator since
he has been moved in that behalf and the applicant before him
asserts that there is an arbitration agreement. The Court further
observed that acceptance of such an argument, with great respect,
would reduce the high judicial authority entrusted with the power
to appoint an arbitrator, an automaton and sub-servient to the
arbitral tribunal, which he himself brings into existence.
The
Court held that power under Section 11(6) 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 contrary to the existing power of delegation
to any institution as per the Act. The Court further held that
Chief Justice or the designated judge will have the right to decide
the preliminary aspects such as his own jurisdiction, 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 appeal against the Order passed under section 11 (6) of the
Act, will lie under Article 136 of the Constitution of India to
the Supreme Court. 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.
This
judgment will have a far-reaching impact on the scope of adjudication
of the applications for appointment of arbitrators filed under
section 11 (6) of the Act. The judgment reduces the length of
arbitration proceedings as it limits the number of appeals against
order passed under section 11 (6) of the Act but increases the
judicial intervention at the stage of appointment of arbitrators.
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You
can direct your queries or comments to the authors
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Source:
S.B.P.
and Co. V/s Patel Engineering Ltd. and Another
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