TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 789
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....tual animation how a three-Judge Bench in Chloro Controls India Private Limited v. Seven Trent Water Purification Inc. and others (2013) 1 SCC 641 has inappositely and incorrectly understood the principles stated in the major part of the decision rendered by a larger Bench in SBP & Company v. Patel Engineering Ltd. and another (2005) 8 SCC 618 and, in resistance, Mr. Harish Salve and Dr. A.M. Singhvi, learned senior counsel for the respondent, while defending the view expressed later by the three-Judge Bench, have laid immense emphasis on consistency and certainty of law that garner public confidence, especially in the field of arbitration, regard being had to the globalization of economy and stability of the jurisprudential concepts and pragmatic process of arbitration that sparkles the soul of commercial progress. We make it clear that we are not writing the grammar of arbitration but indubitably we intend, and we shall, in course of our delineation, endeavour to clear the maze, so that certainty remains "A Definite" and finality is 'Final'. 4. The present appeal, by special leave, is directed against the judgment and order dated 22.7.2013 passed by the learned Judge, the design....
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....ble expert. As put forth by the appellant, the respondent did not accede to resolve the dispute by way of appointing an expert instead, it moved the High Court for appointment of an arbitrator. 6. In support of the application for appointment of arbitrator, it was contended before the learned designated Judge that as the claims for recovery of arrears had not been settled and the respondents therein had communicated that the claims came within the ambit of sub-clause (a) of clause 9.3 of the agreement and required the matter to be dealt with by an expert and an expert should be appointed in terms of clause 16.2 and 16.4 of the agreement and declined to take recourse to arbitration, it had become incumbent to move the court for appointment of an arbitrator. 7. The said stand and stance put forth by the respondent before the High Court was resisted by the present appellants that disputes would come within clause 16.2 of the agreement that deals with "Dispute Resolution" which provides a specific mechanism and not arbitration, for it has been clearly postulated therein that where any dispute is not resolved as provided for in clause 16.2 then only the matter shall be submitted to ar....
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.... a three-Judge Bench in Chloro Controls India Private Limited (supra) and, therefore, whether it is an excepted matter or not, despite strenuous urging of the same by the appellants, is required to be left to be adjudicated in the arbitral proceedings. The learned senior counsel would further submit that what has been opined in the SBP's case has already been reflected upon and that being the settled position of law, certainty in the realm of adjudication should be allowed to stay. That apart, it is urged by Mr. Salve and Dr. Singhvi that the designated Judge has fallen into error by delving into the merits of the matter, i.e., whether the disputes are "billing disputes" or not, for it should have been left to be adjudicated upon by the learned arbitrator. It is submitted that if any interference is warranted the said findings should be set aside and the matter should be allowed to be arbitrated upon by the learned arbitrator as other conditions precedent for invocation of the arbitration clause have been accepted and are not under assail. 11. In reply to the submissions of learned senior counsel for the respondent, Mr. Ranjit Kumar, learned senior counsel for the appellants, woul....
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....he agreement of the parties; and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator." Section 16 provides for competence of arbitral tribunal to rule on its own jurisdiction. It stipulates that 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. 13. Regard being had to the anatomy of the Act and the contours of the aforesaid provisions, a Bench of seven Judges in SBP & Co. (supra) by majority has stated about the functions to be performed by the Chief Justice or his designate to do. Or, to put it differently, what are required to be determined by the Chief Justice or his designate, have been exposited thus: - "39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the req....
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....itral procedure the Chief Justice or his designate is required to decide the issues, namely, (i) territorial jurisdiction, (ii) existence of an arbitration agreement between the parties, (iii) existence or otherwise of a live claim, and (iv) existence of the conditions for exercise of power and further satisfaction as regards the qualification of the arbitrator. That apart, under certain circumstances the Chief Justice or his designate is also required to see whether a longbarred claim is sought to be restricted and whether the parties had concluded the transaction by recording satisfaction of the mutual rights and obligations or by receiving the final payment without objection. 16. At this stage we may notice the opinion expressed by a two-Judge Bench in Shree Ram Mills Ltd. v. Utility Premises (P) Ltd. (2007) 4 SCC 599, pertaining to the issues which are to be dealt with by the Chief Justice or his designate. The two-Judge Bench, after referring to paragraph 39 in SBP & Co. (supra), opined that the Chief Justice has to decide about the territorial jurisdiction and also whether there exists an arbitration agreement between the parties and whether such party has approached the cou....
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....gated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. 22.1. The issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. 22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether claim is a dead (long-barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3. The issues (third category) which the Chief Justice/his designate should leave excl....
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....d satisfaction that there remains a live issue in between the parties. The same thing is about the limitation which is always a mixed question of law and fact. The Chief Justice only has to record his satisfaction that prima facie the issue has not become dead by the lapse of time or that any party to the agreement has not slept over its rights beyond the time permitted by law to agitate those issues covered by the agreement. It is for this reason that it was pointed out in the above paragraph that it would be appropriate sometimes to leave the question regarding the live claim to be decided by the Arbitral Tribunal. All that he has to do is to record his satisfaction that the parties have not closed their rights and the matter has not been barred by limitation. Thus, where the Chief Justice comes to a finding that there exists a live issue, then naturally this finding would include a finding that the respective claims of the parties have not become barred by limitation." Thereafter, the three-Judge Bench explained the decision in following terms:- "Thus, the Bench while explaining the judgment of this Court in SBP & Co. has state that the Chief Justice may not decide certain issu....
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....matters as per the agreement have to be decided by the Chief Justice or his designate. Drawing our attention to paragraph 9 of the said judgment learned senior counsel has submitted that the larger Bench has clearly observed that while functioning under Section 11(6) of the Act, a Chief Justice or the person or the institution designated by him, is bound to decide whether he has jurisdiction, whether there is an arbitration agreement, whether the applicant before him is a party, whether the conditions for exercise of the power have been fulfilled, and if an arbitrator is to be appointed, who is the fit person, in terms of the provisions and the condition for exercise of power is dependent upon the nature of the agreement and the arbitration clause and in its sweep it commands that there should be an adjudication in respect of excepted matters and once it is found that they are excepted matters, an arbitrator should not be appointed in respect of such matters or the disputes should not be referred to arbitration. 23. The learned senior counsel has also drawn immense inspiration from paragraph 25 of the judgment of the said case wherein, while discussing about the jurisdiction of th....
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....understanding of the ratio decidendi we think it apt to reproduce the relevant portion which has intellectually stimulated the learned senior counsel for the appellants: - "... the basic requirement for exercising his power under Section 11(6), is the existence of an arbitration agreement in terms of Section 7 of the Act and the application before the Chief Justice being shown to be a party to such an agreement. It would also include the question of the existence of jurisdiction in him to entertain the request and an enquiry whether at least a part of the cause of action has arisen within the State concerned. Therefore, a decision on jurisdiction and on the existence of the arbitration agreement and of the person making the request being a party to that agreement and the subsistence of an arbitral dispute require to be decided and the decision on these aspects is a prelude to the Chief Justice considering whether the requirements of sub-section (4), sub-section (5) or subsection( 6) of Section 11 are satisfied when approached with the request for appointment of an arbitrator." 26. The aforesaid passage is pressed into service for the Simon pure reason that the seven-Judge Bench h....
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....ly deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all." [Emphasis supplied] 31. In Krishena Kumar v. Union of India and others (1990) 4 SCC 207 , the Constitution Bench, while dealing with the concept of ratio decidendi, has referred to Caledonian Railway Co. v. Walker's Trustees (1882) 7 App Cas 259 : 46 LT 826 (HL) and Quinn (supra) and the observations made by Sir Frederick Pollock and thereafter proceeded to state as follows: - "The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to the decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a pre-existing rule of law, either statutory or judge-made, and a minor premise consisting of the material facts of the case under immediate consideration. If it is no....
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....age, we may also profitably refer to another principle which is of assistance to understand and appreciate the ratio decidendi of a judgment. The judgments rendered by a court are not to be read as statutes. In Union of India v. Amrit Lal Manchanda and another (2004) 3 SCC 75, it has been stated that observations of courts are neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their context. The observations must be red in the context in which they appear to have been stated. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. 36. In Som Mittal v. Government of Karnataka (2008) 3 SCC 574, it has been observed that judgments are not to be construed as statutes. Nor words or phrases in judgments to be interpreted like provisions of a statute. Some words used in a judgment should be read and understood contextually and are not intended to be taken literally. Many ....
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....nd we respectfully concur with the same. We find no substance in the submission that the said decisions require reconsideration, for certain observations made in SBP & Co. (supra), were not noticed. We may hasten to add that the three-Judge Bench has been satisfied that the ratio decidendi of the judgment in SBP & Co. (supra) is really inhered in paragraph 39 of the judgment. 38. Before parting with this part of our ratiocination we may profitably reproduce the following words of Lord Denning which have become locus classicus: - "Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it." 39. The aforesaid passage has been referred to in Amrit Lal Machanda and another (supra). 40. We will be failing in our duty if we do not take note of another decision in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and others (2011) 5 SCC 532 on which Mr. Ranjit Kumar has heavily relied upon. He has drawn our attention to paragraph 34 where the Court has dealt with....