2009 (5) TMI 956 - SC - Indian Laws

Court invalidates arbitration order, rules on improper arbitrator appointment. Parties allowed Civil Court adjudication and Limitation Act benefits.

The High Court set aside the order referring a dispute to arbitration, ruling that the appointment of an arbitrator based on a specific clause in the ... Validity of Appointment of the arbitrator by the HC exercising jurisdiction u/s 11 (6) of the Arbitration and Conciliation Act, 1996 - Heading of arbitration clause is replaced by another clause - Applicability of replaced clause on an agreement, entered into between the appellant and the respondents, one of whom is a private party - Rule of Interpretation of the section heading or marginal note - There is a clause No. 14 with the caption 'Settlement of Disputes/Arbitration'. The aforesaid clause 14 in the Agreement, however, was scored out and the same was replaced by another clause No. 14 the caption 'Arbitration with regard to the commercial disputes between the Public Sector Enterprises inter se and Public Sector Enterprises and Government Departments.' HELD THAT:- The aforesaid clause No. 14 relates to disputes of commercial nature arising between the Public Sector Enterprises inter se and between the Public Sector Enterprises and Government Departments. The text that follows also makes the said position clear which provides that after the award is given by the arbitrator in the department of public sector enterprises, reference for setting aside or revision of the award is to be made to the Law Secretary, Department of Legal Affairs, Ministry of Law & Justice, Government of India. The said clause, therefore, concerns the commercial disputes arising between the Public Sector Enterprises inter se and between such enterprises and Government Departments. The said clause will have no application to an agreement which is entered into between the appellant and the respondents, one of whom is a private party. Since that arbitration clause is not applicable to the case in hand, therefore, the appointment of the arbitrator by the Calcutta High Court exercising jurisdiction under Section 11 (6) of the Act was improper. Rule of Interpretation of the section heading or marginal note - It is well settled rule of interpretation that the section heading or marginal note can be relied upon to clear any doubt or ambiguity in the interpretation of any provision and to discern the legislative intent. The section heading constitutes an important part of the Act itself, and may be read not only as explaining the provisions of the section, but it also affords a better key to the constructions of the provisions of the section which follows than might be afforded by a mere preamble. We, accordingly, set aside the said order. Issues involved:Interpretation of arbitration clause in excavation contract.Analysis:The appeal was against an order referring a dispute to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996. The respondents sought appointment of an arbitrator based on clause No. 14 in the excavation contract. However, it was found that the original clause 14, which dealt with disputes between Public Sector Enterprises, had been replaced with a different clause 14 related to commercial disputes involving Public Sector Enterprises and Government Departments. This replacement clause was not applicable to the private parties involved in the current dispute, making the appointment of the arbitrator by the High Court improper.The judgment emphasized the importance of interpreting clauses based on their headings and context to understand the legislative intent fully. It was noted that the section heading or marginal note could help clarify any ambiguity in the interpretation of a provision. In the realm of commercial contracts like arbitration agreements, understanding the context was crucial for a comprehensive interpretation. The Court highlighted the significance of not solely relying on the text but considering the context to grasp the true meaning of a clause.As a result, the order referring the dispute to arbitration was set aside, granting the respondents the liberty to approach the Civil Court for adjudication of the disputes arising from the contract. The respondents were also entitled to the benefit of Section 14 of the Limitation Act. The appeal was disposed of accordingly.