2008 (8) TMI 876 - SC - Companies Law

Supreme Court clarifies finality of Arbitration Act decisions, allows writ petition against Designate's order

The Supreme Court clarified the interpretation of Section 11 of the Arbitration & Conciliation Act, 1996, emphasizing that decisions made by the ... Whether the order of the High Court is a non speaking order and it upholds the preliminary objection of the respondent without assigning any reason? Whether a writ petition under Article 227 was maintainable against the order of the Civil Judge, Senior Division (designate of the Chief Justice) and the High Court was wrong in assuming that the writ petition was not maintainable? Held that:- Reference to section 11(6) of the Act includes reference to section 11(4) of the Act and reference to a District Judge as designate, will also include reference to Civil Judge, Senior Division, as designate. his Court has repeatedly stressed that Article 136 is not intended to permit direct access to this Court where other equally efficacious remedy is available and the question involved is not of any public importance; and that this Court will not ordinarily exercise its jurisdiction under Article 136, unless the appellant has exhausted all other remedies open to him. Therefore the contention that the order of the Civil Judge, Sr. Division rejecting a petition under section 11 of the Act could only be challenged, by recourse to Article 136 is untenable. Appeal allowed and set aside the order of the High Court. Issues:1. Interpretation of Section 11 of the Arbitration & Conciliation Act, 1996 regarding the appointment of arbitrators.2. Jurisdiction of High Court in entertaining writ petitions against orders under Section 11 of the Act.Analysis:Issue 1: Interpretation of Section 11 of the Arbitration & Conciliation Act, 1996 regarding the appointment of arbitratorsThe case involved a collaboration agreement between the parties for a project, which included a clause for arbitration in case of disputes. When disputes arose, the appellant appointed an arbitrator, but the respondent failed to do so. The appellant then filed a petition under Section 11(4) of the Act for the appointment of an arbitrator. The Designate initially dismissed the petition, stating that the matter had been decided by the Board for Industrial and Financial Reconstruction (BIFR). The High Court upheld the dismissal, citing a previous Supreme Court judgment in SBP & Co. Vs. Patel Engineering Ltd. The appellant challenged this decision, arguing that the High Court's order lacked reasoning and that a writ petition under Article 227 was maintainable against the Designate's order.The Supreme Court examined the relevant provisions of Section 11 of the Act, emphasizing that decisions made by the designate under subsections (4), (5), or (6) are final. As no appeal was permissible against the designate's order, the appellant's recourse was through a writ petition under Article 227. The Court clarified that the decision in SBP did not preclude the filing of a writ petition against the Designate's order, as the power exercised by the Designate was judicial in nature. The Court held that the High Court erred in rejecting the writ petition and allowed the appeal, setting aside the High Court's order.Issue 2: Jurisdiction of High Court in entertaining writ petitions against orders under Section 11 of the ActThe respondent argued that the appellant should have sought remedy through an appeal under Article 136 of the Constitution, as per the SBP judgment. The Supreme Court, however, distinguished between orders made by the Chief Justice or designated Judge of a High Court under Section 11 and those made by a subordinate court functioning as a Designate. The Court reiterated that Article 136 was not intended for direct access to the Supreme Court when alternative remedies were available. Therefore, the contention that the Designate's order could only be challenged through Article 136 appeal was deemed untenable. The Court emphasized that the SBP decision did not affect the maintainability of the writ petition filed by the appellant before the High Court. Consequently, the Court allowed the appeal, directing the High Court to reconsider the matter in accordance with the law.In conclusion, the Supreme Court clarified the interpretation of Section 11 of the Act regarding the appointment of arbitrators and affirmed the jurisdiction of the High Court to entertain writ petitions against orders made by the Designate under the Act.