Supreme Court Streamlines Arbitration Applications Process

The Supreme Court addressed procedural issues concerning applications under Section 11 of the Arbitration and Conciliation Act, 1996, at the Calcutta High Court. It ruled that the entire Section 11 application must be handled by either the Chief Justice or the Designate Judge, not both in a two-tier process. The Court deemed the piecemeal consideration of applications by two Designate Judges as legally impermissible, emphasizing the judicial nature of the function under Section 11. The impugned orders were set aside, and the arbitration petitions were restored to the High Court for proper consideration, ensuring a unified judicial approach by a single authority.

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Issues Involved:
1. Procedure followed by Calcutta High Court in applications under Section 11 of the Arbitration and Conciliation Act, 1996.
2. Legality of piecemeal consideration of applications under Section 11 by two Designate Judges.
3. Judicial nature of the Chief Justice's or Designate Judge's function under Section 11.

Detailed Analysis:

1. Procedure followed by Calcutta High Court in applications under Section 11 of the Arbitration and Conciliation Act, 1996:
The appeals raised questions regarding the procedure adopted by the Calcutta High Court in handling applications under Section 11 of the Arbitration and Conciliation Act, 1996. Specifically, it was contended that the Designate Judge's practice of referring matters to the Chief Justice for the appointment of an arbitrator, despite recognizing the existence of live disputes, was not sanctioned by Section 11. The Supreme Court emphasized that the entire application under Section 11 must be handled by either the Chief Justice or the Designate Judge, not by both in a two-tier process.

2. Legality of piecemeal consideration of applications under Section 11 by two Designate Judges:
The case of Hindustan Copper Limited illustrated the issue where one Designate Judge determined the propriety of the request for an arbitrator and referred the matter to another Designate Judge for the actual appointment. The Supreme Court found this practice legally impermissible, asserting that Section 11 does not envisage a bifurcated procedure where one judge handles the preliminary aspects and another makes the appointment. This piecemeal approach was deemed inconsistent with the judicial nature of the function under Section 11.

3. Judicial nature of the Chief Justice's or Designate Judge's function under Section 11:
The Supreme Court, referencing the seven-Judge Bench decision in SBP & Co. v. Patel Engineering Ltd., clarified that the function under Section 11 is judicial, not administrative. The Chief Justice or the Designate Judge must handle the application in its entirety, including determining the existence of an arbitration agreement, the validity of claims, and the qualifications of the arbitrator. The Court overruled the Division Bench decision in Modi Korea Telecommunication Ltd., which had differentiated between the procedure for appointment and the actual appointment of the arbitrator, stating that such a distinction is unfounded.

Conclusion:
The Supreme Court set aside the impugned orders and restored the arbitration petitions to the High Court for appropriate consideration in line with the judicial nature of Section 11. The Court clarified that orders and awards already finalized under the previous procedure would remain unaffected. The appeals were allowed to the extent of correcting the procedural approach, ensuring that the entire application under Section 11 is handled by a single judicial authority, either the Chief Justice or the Designate Judge, without bifurcation.

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