Appointment of Arbitrator by CJ - judicial or administrative order? Analysis
I write this post in continuation to an earlier post which introduces the question - whether the decision of the Chief Justice in appointing an arbitrator is a judicial or administrative order? The earlier post may be accessed here.
Unlike other issues, where I discuss arguments from one side completely and then the other, for this issue, I would address each argument and its counter argument at the same time.
Argument 1: Purpose of Highest Judicial Authority.
The major thrust by the majority in the Patel Engineering Case, was that, when a statute confers a power or imposes a duty on the highest judicial authority in the State or in the country, and has made its decision final on matters its decides, then that decision cannot be purely administrative and that the authority has to act judicially.
Honb'le C.K Thakker J. gave a dissenting opinion on this argument, and explained that the purpose of selecting the Chief Justice and in conferring upon him the power to appoint an arbitrator is to ensure complete independence, total impartiality and highest degree of credibility in arbitral process, as the office occupied by them would infuse greater confidence in the procedure in appointing an arbitrator. But that does not mean that the Chief Justice is exercising judicial or quasi-judicial power. Thus the intention of the legislature is selecting an authority like the Chief Justice was to bring credibility in arbitral process and nothing more.
Both arguments appear equally convincing and this question – "Why would the legislature choose to confer power to appoint an arbitral tribunal on the highest judicial authority in the state/country? " remains intriguing.
Argument 2: Impact of the Principle of "Kompetenz - Kompetenz"
Section 16(1) of the Arbitration and Conciliation Act, 1996 which provides 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 incorporates the principle popularly know as Kompetenz – Kompetenz.
The majority in Patel Engineering held that Section 16(1) doesn’t mean that only the Arbitral Tribunal can decide the question of existence and validity of the arbitration agreement. It does not preclude the Chief Justice from deciding that question if it arises before him under a Section 11 application. It further held that, it would be incongruous to say that after the Chief Justice had appointed an arbitral tribunal, the arbitral tribunal can turn round and say that the Chief Justice had no jurisdiction or authority to appoint the tribunal, and that is why his decision is given finality under Section 11(7).
On the other hand, Honb'le C.K Thakker J. opined that,
first, finality of the order has nothing to do with the nature of function to be performed by the Chief Justice. Statutory finality has been given to prevent appeal, review or revision against the decision. Secondly, the function of the Chief Justice under Section 11 is to be performed on a prima facie satisfaction. Thirdly, he explains, that, the principle of Kompetenz- Kompetenz is a rule of "chronological priority" and not that the arbitrator is the sole judge to decide upon his jurisdiction. This means that, it is the rule whereby arbitrators must have the first opportunity to hear challenges relating to their jurisdiction. Their decision however remains subject to subsequent review by the courts, which in the Indian context is provided for under Section 34 of the Act.
On reading Honb'le Justice Thakker’s opinion, it may be said that, while appointing an arbitral tribunal under Section 11, the only function of Chief Justice is to take into consideration the qualifications of the arbitrator as required by the agreement, and to see that an impartial arbitrator is appointed (which is mandatory under section 11). The Chief Justice can at most satisfy himself on a prima facie basis, whether an arbitration agreement exists but cannot decide the contentious issues between the parties. Going by this interpretation, a situation where the arbitral tribunal under Section 16(1), can turn round and say that the Chief Justice had no jurisdiction or authority to appoint the tribunal, (as feared by the majority), will not arise. Also, therefore, there will be no conflict between Section 11(7) and Section 16(1) of the Act.
I will consider some more arguments on this issue in subsequent posts.
Unlike other issues, where I discuss arguments from one side completely and then the other, for this issue, I would address each argument and its counter argument at the same time.
Argument 1: Purpose of Highest Judicial Authority.
The major thrust by the majority in the Patel Engineering Case, was that, when a statute confers a power or imposes a duty on the highest judicial authority in the State or in the country, and has made its decision final on matters its decides, then that decision cannot be purely administrative and that the authority has to act judicially.
Honb'le C.K Thakker J. gave a dissenting opinion on this argument, and explained that the purpose of selecting the Chief Justice and in conferring upon him the power to appoint an arbitrator is to ensure complete independence, total impartiality and highest degree of credibility in arbitral process, as the office occupied by them would infuse greater confidence in the procedure in appointing an arbitrator. But that does not mean that the Chief Justice is exercising judicial or quasi-judicial power. Thus the intention of the legislature is selecting an authority like the Chief Justice was to bring credibility in arbitral process and nothing more.
Both arguments appear equally convincing and this question – "Why would the legislature choose to confer power to appoint an arbitral tribunal on the highest judicial authority in the state/country? " remains intriguing.
Argument 2: Impact of the Principle of "Kompetenz - Kompetenz"
Section 16(1) of the Arbitration and Conciliation Act, 1996 which provides 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 incorporates the principle popularly know as Kompetenz – Kompetenz.
The majority in Patel Engineering held that Section 16(1) doesn’t mean that only the Arbitral Tribunal can decide the question of existence and validity of the arbitration agreement. It does not preclude the Chief Justice from deciding that question if it arises before him under a Section 11 application. It further held that, it would be incongruous to say that after the Chief Justice had appointed an arbitral tribunal, the arbitral tribunal can turn round and say that the Chief Justice had no jurisdiction or authority to appoint the tribunal, and that is why his decision is given finality under Section 11(7).
On the other hand, Honb'le C.K Thakker J. opined that,
first, finality of the order has nothing to do with the nature of function to be performed by the Chief Justice. Statutory finality has been given to prevent appeal, review or revision against the decision. Secondly, the function of the Chief Justice under Section 11 is to be performed on a prima facie satisfaction. Thirdly, he explains, that, the principle of Kompetenz- Kompetenz is a rule of "chronological priority" and not that the arbitrator is the sole judge to decide upon his jurisdiction. This means that, it is the rule whereby arbitrators must have the first opportunity to hear challenges relating to their jurisdiction. Their decision however remains subject to subsequent review by the courts, which in the Indian context is provided for under Section 34 of the Act.
On reading Honb'le Justice Thakker’s opinion, it may be said that, while appointing an arbitral tribunal under Section 11, the only function of Chief Justice is to take into consideration the qualifications of the arbitrator as required by the agreement, and to see that an impartial arbitrator is appointed (which is mandatory under section 11). The Chief Justice can at most satisfy himself on a prima facie basis, whether an arbitration agreement exists but cannot decide the contentious issues between the parties. Going by this interpretation, a situation where the arbitral tribunal under Section 16(1), can turn round and say that the Chief Justice had no jurisdiction or authority to appoint the tribunal, (as feared by the majority), will not arise. Also, therefore, there will be no conflict between Section 11(7) and Section 16(1) of the Act.
I will consider some more arguments on this issue in subsequent posts.
Nicely described.
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