TMI Blog2014 (1) TMI 789X X X X Extracts X X X X X X X X Extracts X X X X ..... or appointment of the arbitrator While considering an application under Section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of “arbitrability” or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application under Section 34 of the Act, relying upon sub-section (2)(b)(i) of that section. The decisions rendered in Boghara Polyfab Private Limited (2008 (9) TMI 864 - SUPREME COURT) and Chloro Controls India Private Limited are in accord with the principles of law stated in SBP & Co. The designated Judge, as perceived from the impugned order, while dealing with an application under Section 11(6) of the Act, on an issue raised with regard to the excepted matters, was not justified in addressing the same on merits whether it is a dispute relating to excepted matters under the agreement in question or not. The designated Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... special leave, is directed against the judgment and order dated 22.7.2013 passed by the learned Judge, the designate of the Chief Justice of the High Court of Chhattisgarh at Bilaspur, in Arbitration Application No. 24 of 2012 whereby and whereunder, while dealing with an application preferred under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for brevity the Act ), has repelled the submission of the appellant herein, the respondent in the original proceedings, that the disputes raised by the applicant, being excepted matters, were squarely covered within the ambit of clause 9.3 of the agreement and hence, it was only to be referred to an expert for resolution and not to an arbitrator and, further addressing the issue on merits, opined that as the disputes are not covered under the subjectmatter of billing disputes that find place in clause 9.3 of the agreement, the parties are not under obligation to refer the matter to the expert, and, accordingly, called for the names from both the parties and taking note of the inability expressed by the counsel for the respondents therein, appointed an arbitrator to adjudicate the disputes that have arisen between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where any dispute is not resolved as provided for in clause 16.2 then only the matter shall be submitted to arbitration at the request of either of the parties by written notice in accordance with the provisions contained in the Act. 8. The High Court adverted to the meanings of billing date , billing period , billing year, clarification notice and various terms used in the agreement, scanned the anatomy of clause 9.3 of the agreement that deals with billing disputes and arrived at the conclusion that disputes raised do not come within the purview of sub-clause (a) of clause 9.3 and, accordingly, appointed an arbitrator, as has been stated hereinbefore. 9. Mr. Ranjit Kumar, learned senior counsel appearing for the appellants, criticizing the view expressed by the designated Judge, has submitted that the dispute raised by the respondent being a billing dispute which is an excepted matter, it was obligatory on the contracting parties to resolve the dispute through an expert committee by the mechanism provided in the agreement itself and the same could not have been referred to an arbitrator to be arbitrated upon. Pyramiding the said proponement, learned senior coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of learned senior counsel for the respondent, Mr. Ranjit Kumar, learned senior counsel for the appellants, would contend that the analysis made in the case of Boghara Polyfab Private Limited (supra) by the two-Judge Bench is contrary to what has been stated in SBP s case and similarly the seal of concurrence given by the three- Judge Bench in Chloro Controls India Private Limited (supra) is neither justified nor correct, and in fact, on a studied scrutiny, the lis deserves to be referred to a larger Bench. The learned senior counsel would further submit that certainty of law in its fundamental conceptuality has to be in consonance with the principles stated in larger Bench decisions and not to be allowed to exist despite striking a note of discordance. 12. To appreciate the controversy it is pertinent to refer to certain provisions, namely, Sections 8, 9, 11 and 16 of the Act. Section 8 deals with power to refer parties to arbitration where there is an arbitration agreement. The said power is conferred on a judicial authority before which an action is brought in a matter which is the subject-matter of agreement. Certain conditions precedent have been incorporated in sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al jurisdiction and also whether there exists an arbitration agreement between the parties and whether such party has approached the court for appointment of the arbitrator. The Chief Justice has to examine as to whether the claim is a dead one or in the sense whether the parties have already concluded the transaction and have recorded satisfaction of their mutual rights and obligations or whether the parties concerned have recorded their satisfaction regarding the financial claims. In examining the said aspect if the parties have recorded their satisfaction regarding the financial claims, there will be no question of any issue remaining. It is further observed therein that in the said context the Chief Justice has to examine as to whether there remains anything to be decided between the parties in respect of the agreement and whether the parties are still at issue on any such matter. If the Chief Justice does not, in the strict sense, decide the issue, in that event it is for him to locate such issue and record his satisfaction that such issue exists between the parties. It is only in that sense that the finding on a live issue is given. That apart, as observed, it is only for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by receiving the final payment without objection. 22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. 18. In the said case, it has been further held that in regard to the issues falling in second category, if raised in an application under Section 11 of the Act, the Chief Justice/his designate may decide them, if necessary, by taking evidence. Alternatively, he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. In case the Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot reexamine the same issue. The learned Judges have observed by placing reliance on SBP Co. (supra) that Chief Justice/his designate would, in choosing whether he would decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act, i.e., expediting the arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing terms:- Thus, the Bench while explaining the judgment of this Court in SBP Co. has state that the Chief Justice may not decide certain issues finally and upon recording satisfaction that prima facie the issue has not become dead even leave it for the Arbitral Tribunal to decide. 20. Thereafter, the three-Judge Bench referred to paragraph 20 of SBP Co. (supra) and stated that in Shree Ram Mills Ltd. (supra) clearly the Bench did not intend to lay down any law in direct conflict with seven-Judge Bench in SBP Co. (supra). 21. At that juncture, dealing with the classification carved out by the Court in Boghara Polyfab Private Limited (supra), the three-Judge Bench observed that it draws its origin from para 39 of the judgment in SBP Co. (supra) and thereafter proceeded to state thus: - 124. The foundation for Category (2) in para 22.2 of National Insurance Co. Ltd. is directly relatable to para 39 of the judgment of this Court in SBP Co. and matters falling in that category are those which, depending on the facts and circumstances of a given case, could be decided by the Chief Justice or his designate or even may be left for the decision of the arbitrator, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned senior counsel has also drawn immense inspiration from paragraph 25 of the judgment of the said case wherein, while discussing about the jurisdiction of the Chief Justice, it has been stated that he has to enquire whether the conditions for exercise of his power under Section 11(6) of the Act exist in the case and only being satisfied in that behalf could he appoint an arbitrator or an Arbitral Tribunal on the basis of the request. It further observed that it is difficult to say that when one of the parties raises an objection that there is no arbitration agreement, raises an objection that the person who has come forward with a request is not a party to the agreement, the Chief Justice can come to a conclusion on those objections without following an adjudicatory process. Thereafter the seven-Judge Bench stated thus: - Can he constitute an Arbitral Tribunal, without considering these questions? If he can do so, why should such a function be entrusted to a high judicial authority like the Chief Justice. Similarly, when the party raises an objection that the conditions for exercise of power under Section 11(6) of the Act are not fulfilled and the Chief Justice comes to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached 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 has used the phraseology subsistence of an arbitral dispute required to be decided . It is emphatically submitted that it has to be read in harmony with the words used in paragraph 25, namely, when there existed no arbitral dispute . In this backdrop it is propounded that the decisions in Boghara Polyfab Private Limited (supra) and Chloro Controls India Private Limited (supra) require reconsideration. 27. Mr. Salve and Dr. Singhvi, learned counsel for the respondent, in their turn, have submitted that paragraph 39 in SBP Co. (supra) speaks about the role of the Chief Justice in definitive exactitude and the same has been emphatically stated in sub-para (iv) of para 47 where there is summation of the conclusions. Quite apart from the above, it is contended that in Chloro Controls India Private Limited (supra) the three-Judge Bench has correctly understood the decision in SBP Co. (supra) and, accordingly, did not differ with the classification carved out in Boghara Polyfab Private Limited (supra). 28. At this junc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it. In the words of Halsbury (4th edn., Vol. 26, para 573) The concrete decision alone is binding between the parties to it but it is the abstract ratio decidendi, as ascertained on a consideration of the judgment in relation to the subject matter of the decision, which alone has the force of law and which when it is clear it is not part of a tribunal s duty to spell out with difficulty a ratio decidendi in order to bound by it, and it is always dangerous to take one or two observations out of a long judgment and treat them as if they gave the ratio decidendi of the case. If more reasons than one are given by a tribunal for its judgment, all are taken as forming the ratio decidendi. [Emphasis added] 32. In State of Orissa v. Mohd. Illiyas (2006) 1 SCC 275, it has been stated thus: - 12. According to the well-settled theory of precedents, every decision contains three basic postulates: (i) findings of mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gments 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 a time a judge uses a phrase or expression with the intention of emphasizing a point or accentuating a principle or even by way of a flourish of writing style. Ratio decidendi of a judgment is not to be discerned from a stray word or phrase read in isolation. 37. From the aforesaid authorities it is luculent that the larger Bench in SBP Co. (supra), after deliberating at length with regard to the role of the Chief Justice or his designate, while dealing with an application under Section 11(6) of the Act, has thought it appropriate to define what it precisely meant in paragraph 39 of the judgment. The majority, if we allow ourselves to say so, was absolutely conscious that it required to be so stated and hence, it did so. The deliberation was required to be made as the decision in Konkan Railway Corporation Ltd. v. Rani Construction (P) Ltd. (2002) 2 SCC 388 where the Constitution Bench had held that an order passed by the Chief Justice under Section 11(6) is an administrative order and not a judicial one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 the meaning of the term arbitrability and stated that arbitrability has different meanings in different contexts. The Court enumerated three facets which relate to the jurisdiction of the Arbitral Tribunal. In sub-para (ii) of the said paragraph it has been stated that one facet of arbitrability is whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the excepted matters excluded from the purview of the arbitration agreement. On a careful reading of the said judgment we find that the learned Judges have referred to paragraph 19 of SBP Co. (supra) and thereafter referred to Section 8 of the Act and opined what the judicial authority should decide. Thereafter the Court proceeded to deal with nature and scope of the issues arising for consideration in an application under Section 11 of the Act for appointment of the arbitrator and, in that context, it opined thus: - While considering an application u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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