2002 (3) TMI 884 - HC - Companies Law

Enforceability of Arbitration Agreement Upheld; Chief Justice's Role Clarified

Krishak Bharati Co-operative Ltd. Versus Alutec Inc.

Krishak Bharati Co-operative Ltd. Versus Alutec Inc. - [2003] 41 SCL 334 (DELHI) Issues Involved:1. Validity and clarity of the arbitration agreement.2. Procedure for appointment of arbitrators.3. Nature of the order passed by the Chief Justice or his designate under Section 11 of the Arbitration and Conciliation Act, 1996.4. Maintainability of the writ petition.Detailed Analysis:1. Validity and Clarity of the Arbitration Agreement:The core issue revolves around the arbitration agreement's validity and clarity. The petitioner argued that the arbitration agreement was vague, as it lacked a fixed procedure for appointing arbitrators. The agreement did not specify the number of arbitrators or the method of their appointment. The respondent, however, maintained that a valid arbitration agreement existed between the parties.The court acknowledged that both service agreements contained an arbitration clause, which stipulated that disputes should be referred to arbitration under the Indian Arbitration Act, 1940. Despite the petitioner's contention, the court found that the arbitration agreement was valid and enforceable.2. Procedure for Appointment of Arbitrators:The arbitration clause did not specify the number of arbitrators or the procedure for their appointment. The learned Single Judge interpreted the clause to mean that the parties intended to appoint more than one arbitrator. Consequently, it was held that the disputes should be referred to two arbitrators and one umpire, in accordance with the Arbitration Act of 1940.The court referred to Section 11 of the Arbitration and Conciliation Act, 1996, which outlines the procedure for appointing arbitrators when the parties fail to agree. The learned Single Judge appointed two retired Judges as arbitrators and directed them to appoint a third arbitrator.3. Nature of the Order Passed by the Chief Justice or His Designate:The petitioner argued that the order passed by the learned Single Judge was not an administrative order but an adjudicatory one, as it involved determining the existence of an arbitration agreement and the constitution of the arbitral tribunal. The respondent countered that the order was administrative, based on the Supreme Court's decision in Konkan Railway Corpn. Ltd. v. Rani Construction P. Ltd.The court reaffirmed that the Chief Justice or his designate's role under Section 11 is administrative, aimed at filling the gap left by the parties in appointing an arbitrator. The decision is not adjudicatory and cannot be challenged through a writ petition.4. Maintainability of the Writ Petition:The petitioner filed a writ petition challenging the appointment of arbitrators, arguing that the arbitration agreement was vague and the order was not administrative. The respondent contended that the writ petition was not maintainable, citing the Constitution Bench decision in Konkan Railway Corpn. Ltd. v. Rani Construction P. Ltd.The court held that the writ petition was not maintainable. It emphasized that objections regarding the constitution of the arbitral tribunal should be raised before the arbitral tribunal itself, as provided under Sections 12, 13, and 16 of the Arbitration and Conciliation Act, 1996. The court also noted that the petitioner had withdrawn a Special Leave Petition (SLP) before the Supreme Court, which further undermined the maintainability of the writ petition.Conclusion:The court dismissed the writ petition, reaffirming that the Chief Justice or his designate's order under Section 11 is administrative and not subject to judicial review through a writ petition. The court also emphasized that any objections regarding the arbitration agreement's validity or the arbitral tribunal's constitution should be raised before the arbitral tribunal. The petitioner was ordered to pay costs quantified at Rs. 5,000.