TaxTMI 
TaxTMI 
2002 (2) TMI 1242
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....ether these two persons acted as arbitrators or mediators. That is a matter of contention between the parties which we are, at present, not called upon to decide. For the purposes of this order, we are presuming that the parties had agreed to the arbitration of these two persons. 4. The parties made their respective claims before these two persons. All parties participated in the proceedings. On 6-10-1996, an award came to be passed by the said Mr. Pramod Kumar Khaitan and Mr. Sardul Singh Jain. 5. On 22-12-1997, the 1st respondent filed an application in the Calcutta High Court for setting aside the award dated 6-10-1996. On 17-1-1998, the 2nd respondent filed an application for setting aside this award. One of the grounds, in both these applications, was that the arbitration was by two arbitrators, whereas under the Arbitration and Conciliation Act, 1996 ('the Act') - there cannot be an even number of arbitrators. It was contended that, consequently, the award was unenforceable and not binding on the parties. These contentions found favour with a Single Judge of the Calcutta High Court who set aside the award on 17-11-1998. On 18-5-2000, the appeal was also dismissed. Hence....
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....ed his right to so object. 5. Extent of judicial intervention.-Notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where so provided in this Part. ****** 10. Number of Arbitrators.-(1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number. (2) Failing the determination referred to in sub-section (1), the Arbitral Tribunal shall consist of a sole arbitrator. 11. Appointment of arbitrators.-(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (5), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies, and- (a)a party fails to appoint an arbitrator within thirty days from the receip....
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.... of different High Courts of their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request. (12)(a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to 'Chief Justice' in those sub-sections shall be construed as a reference to the 'Chief Justice of India'. (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to 'Chief Justice' in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. 16. Competence of Arbitral Tribunal to rule on its jurisdiction.-(1) the Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purp....
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....bitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v)The composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b)the court finds that- (i)the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii)the arbitral award is in conflict with the public policy of India." 7.1 The said Act was enacted to consolidate and amend the law relating to domestic and international commercial arbitration and for matters connected therewith and incidental thereto. One of the objects of the said Act is to minimise the role of courts in the arbitration process. It is with this object in mind that section 5 has been provided. Judicial authorities should not interfere except where so provided in the Act. Further, section 34 categorically provides that the a....
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....ave to start litigation or a fresh arbitration all over again. He submits that this would result in a colossal waste of time, money and energy. He submits that to avoid such waste of time, money and energy, the Legislature has, in public policy, provided in a non-derogatory manner, that the number of arbitrators shall not be even. 11. He submits [that] section 16 does not provide for any challenge to the composition of the Arbitral Tribunal. He submits that a reading of section 34(2)(a)(v ) shows that the Legislature contemplated a challenge to the composition of the Arbitral Tribunal. He submits that significantly, section 16 does not provide for a challenge to the composition of the Arbitral Tribunal. He submits that an invalid composition of the Arbitral Tribunal goes to the root of the jurisdiction. He submits that an Arbitral Tribunal which has been illegally constituted would have no jurisdiction or power to decide on the question of its inherent lack of jurisdiction. He submits that section 16 does not cover and would not govern such a challenge. Mr. Venugopal submits that the High Court was right in setting aside the award on this ground. He submits that this Court shoul....
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....s ground. Mr. Dwivedi submits that even presuming that section 34(2)(a)( v) permitted a challenge on the ground of composition of the Arbitral Tribunal, still the Court may refuse to set aside the award. He points out that the words used, in section 34, are 'an arbitral award may be set aside by the court'. He submits that in this case, the respondents had entered into such an agreement. He submits that they had participated in the arbitral proceedings without any objection. He submits that there could be no law which permits a party who has so appointed and participated and then resile and seek to have the award set aside. He submits that it would be against public policy to permit waste of time, money and energy spent in the arbitration by having the award set aside. He submits that it would also be inequitable to permit such a party to challenge the award on this ground. He submits that the impugned order of the High Court cannot be sustained and requires to be set aside. 14. We have heard the parties at length. We have considered the submissions. Undoubtedly, section10 provides that the number of arbitrators shall not be an even number. The question still remains whether sec....
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...., therefore, a derogable provision. 17. We are also unable to accept Mr. Venugopal's argument that, as a matter of public policy, section 10 should be held to be non-derogable. Even though the said Act is now an integrated law on the subject of arbitration, it cannot and does not provide for all contingencies. An arbitration being a creature of agreement between the parties, it would be impossible for the Legislature to cover all aspects. Just by way of an example, section 10 permits the parties to determine the number of arbitrators, provided that such number is not an even number. Section 11(2) permits parties to agree on a procedure for appointing the arbitrator or arbitrators. Section 11 then provides how arbitrators are to be appointed if the parties do not agree on a procedure, or if there is failure of the agreed procedure. A reading of section 11 would show that it only provides for appointments in cases where there is only one arbitrator or three arbitrators. By agreement, parties may provide for appointment of 5 or 7 arbitrators. If they do not provide for a procedure for their appointment, or there is failure of the agreed procedure, then section 11 does not contain a....
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....h agreement' show that an award can be set aside if the agreement is in conflict with a provision of Part I of the said Act or if there is no agreement which is in consonance with the provisions of Part I of the said Act. In other words, according to Mr. Venugopal, even if the composition or procedure is in accordance with the agreement of the parties, an award can be set aside if the composition or procedure is in conflict with the provisions of Part I of the said Act. According to Mr. Venugopal, the words 'failing such agreement' do not mean that there should be no agreement in respect of the composition of the Tribunal or the arbitral procedure. According to Mr. Venugopal, an agreement in respect of the composition of the Arbitral Tribunal or arbitral procedure which is not in consonance with a provision of Part I of the said Act would be invalid in law and, therefore, would be covered by the phrase 'failing such agreement'. He submits that the words 'failing such agreement' mean failing an agreement which is in consonance with a provision of Part I of the said Act. He submits that section 34(2)(a)( v) entitles the respondents of challenge the award and have it set aside. 19.....