2011 (2) TMI 1301 - SC - Companies Law

Arbitrator's Jurisdiction Upheld Over High Court Objection

The Supreme Court ruled that the arbitrator appointed under section 11(6) of the Arbitration and Conciliation Act had valid jurisdiction, rejecting the ... Applicability of Arbitration clause vs. statutory adjudicatory scheme - Appointment of arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 - Inherent jurisdiction of arbitrator - Arbitral tribunal's power to rule on its own jurisdiction - Finality of appointment under section 11Applicability of Arbitration clause vs. statutory adjudicatory scheme - Inherent jurisdiction of arbitrator - Finality of appointment under section 11 - Whether the sole arbitrator appointed under section 11 lacked jurisdiction because the dispute fell to be decided by the statutory tribunal under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983. - HELD THAT: - The Court held that where the parties' contract contains an arbitration clause the Arbitration and Conciliation Act, 1996 applies and not the 1983 Adhiniyam. The High Court's conclusion that the statutory Adhiniyam applied despite the existence of clause 29 in the contract was incorrect. The designate of the Chief Justice validly appointed a sole arbitrator under section 11 and that appointment attained finality. Applying the principle in SBP & Co. v. Patel Engineering Ltd., once the Chief Justice or his designate has satisfied himself that the conditions for appointment under section 11 are present, the arbitral tribunal cannot go behind that decision to rule that it lacks jurisdiction. Consequently the finding of lack of inherent jurisdiction in the sole arbitrator was unsustainable. [Paras 8, 9]The High Court's conclusion that the sole arbitrator lacked jurisdiction was set aside and the arbitrator's jurisdiction was upheld.Appointment of arbitrator under section 11 of the Arbitration and Conciliation Act, 1996 - Arbitral tribunal's power to rule on its own jurisdiction - Whether the challenge under section 34 of the Act should be proceeded with on merits by the court before which it was pending. - HELD THAT: - Having set aside the High Court's order holding the award to be without jurisdiction, the Supreme Court directed that the District Judge, Gwalior, who is seized of the section 34 petition, should proceed to consider the petition on merits in accordance with law. The earlier preliminary objection on jurisdiction, having been rejected in substance by this Court, does not foreclose adjudication of the section 34 challenge on merits. [Paras 10]The matter under section 34 is remitted to the District Judge, Gwalior for consideration on merits in accordance with law.Final Conclusion: The appeal is allowed; the High Court's order setting aside the arbitrator's award for lack of jurisdiction is set aside, and the section 34 challenge is remitted to the District Judge, Gwalior to be decided on merits in accordance with law. Issues:Jurisdiction of the arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996.Analysis:The appellant filed an application under section 11(6) of the Act before the High Court, seeking appointment of an arbitrator due to disputes arising from a work order. The Chief Justice designated a retired Judge as the arbitrator. The appellant claimed Rs.76,64,725 with interest, which the arbitrator awarded in their favor. The respondents challenged the award under section 34, arguing lack of jurisdiction of the arbitrator appointed under the Act.The District Judge rejected the respondents' objection to the arbitrator's jurisdiction, which was upheld in a review petition. The appellant's review application regarding the appointment of the arbitrator was dismissed by the High Court. The respondents appealed the decision to the High Court, which set aside the orders, stating the arbitrator lacked jurisdiction as the dispute should have been decided by a statutory tribunal under a different law.The Supreme Court referred to a previous case where it was held that once an arbitrator is appointed by the Chief Justice or designate, the tribunal cannot question its own jurisdiction. The Court ruled that the arbitrator's appointment under section 11(6) was valid, and the High Court's decision was incorrect. The High Court's order was set aside, and the District Judge was directed to proceed with the application under section 34 of the Act on its merits.In conclusion, the Supreme Court clarified the jurisdiction of the arbitrator appointed under section 11(6) of the Act, emphasizing that once appointed by the Chief Justice or designate, the tribunal's jurisdiction cannot be challenged. The Court overturned the High Court's decision, affirming the validity of the arbitrator's appointment and directing further proceedings on the application under section 34 of the Act.