SBP AND CO VS PATEL ENGINEERING LTD : CASE SUMMARY

The Supreme Court in S. B. P. and Co Vs Patel Engineering (2005) Supp 4 SCR 688  held that the functions of the Chief Justice under Section 11 of Arbitration and Conciliation Act is judicial and not administrative.

The three judge bench in Konkan Railway Corpn. Ltd Vs. Mehul Construction Co. (2000) 7 SCC 201 and constitution bench judgment in Konkan Railway Corpn. Ltd Vs. Rani Construction Pvt. Ltd. ( 2002 ) 2 SCC 388 has taken view that function of Chief Justice or his designate under Section 11 (6) is purely an administrative function.  

The Constitution Bench consisting of seven judges overruled Konkan Railway judgments in this case and held that function of the Chief Justice under Section 11 is judicial.

Whether power conferred on Chief Justice is administrative or judicial ?

The Court noted that normally a court or a tribunal is given power to determine its jurisdiction. But in case of Arbitration and Conciliation Act, 1996, Section 11 (7) gives finality to order of the Chief Justice in matters falling under Section 11 (4), (5) and (6). Once the statute creates an authority and gives finality to its decision, it cannot be said to be administrative power.

The Court noted that under Section 11 (6), the chief justice or person or institution designated by him has to decide jurisdiction, existence of arbitration agreement, and ensure whether applicant is a party. The Chief justice has also to decide whether the arbitrator appointed is fit person in terms of the provisions.

The Supreme Court observed that determination whether the chief justice has jurisdiction or existence of arbitration agreement or existence of dispute to be arbitrated or existence of conditions under Section 11 (6) or qualifications of arbitrator are essentially adjudications which affect the rights of the parties.

When the statute confers power on the highest judicial authority in a state or the country, the power has to be discharged judicially.

Can Arbitral Tribunal determine its jurisdiction under Section 16 after decision of Chief Justice under Section 11 ?

The Court noted that Section 16 grants power to the Arbitral Tribunal to determine its jurisdiction. The Supreme Court observed that once the Chief Justice or his designate has determined the conditions of appointment of an arbitrator, it will not be open for the arbitrator to rule on its jurisdiction or existence of arbitration clause.

Whether the power conferred on Chief Justice as “Persona Designata” ?

The Court observed that Parliament probably intended to exclude District Court and that is why the term “chief justice” has been used.

When power has been conferred on highest judicial authority, it is difficult to believe that power has been conferred as persona designata. Section 11 (6) empowers Chief Justice to designate another to perform the functions. Normally persona designata cannot delegate his powers.  When power has been conferred on “chief justices”  of High Court, it has been conferred as a class and not as an individual.

Whether notice has to issued to other party under Section 11  ?

The Supreme Court observed that right to be heard is fundamental feature of our procedural jurisprudence. Notice has to be issued to the other party. Such notice is not just intimation but an opportunity to the other party to be heard.

What is scope of power conferred by Chief Justice under Section 11 ?

The Chief Justice can decide his jurisdiction. He can determine existence of arbitration agreement. He can also determine the competence of  a party. He can also decide whether  claim is dead or time barred claim.

Can Chief Justice designate non-judicial institution or district judge ?

The Supreme Court held that Chief justice cannot designate non-judicial institution but can seek help of non-judicial body to identify a suitable arbitrator. Chief Justice also cannot designate a district judge.

Can order of Arbitral Tribunal be challenged before High Court under Article 226/227 ?

The Court noted that avenues have been provided under Section 34 and thereafter appeal has been provided under Section 37. Once arbitration proceedings have been initiated, parties have to wait till award is pronounced. Any order passed by arbitral tribunal prior to passing of award  is not capable to be corrected under Article 226 or Article 227.

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