No Piecemeal Adjudication in Section 11 Petitions
Section 11 of Arbitration and Conciliation Act, 1996 provides for the appointment of arbitrators. Under section 11(2) parties can agree on the procedure for appointing the arbitrator. If there is no such agreement on the procedure section 11(3) prescribes the procedure to be followed. When the arbitration is to be of three arbitrators, section 11(3) provides that “each party shall appoint one arbitrator and the two appointed arbitrators shall appoint a third arbitrator who shall act as the presiding arbitrator”.
If a party fails to appoint an arbitrator within 30 days from the receipt of request to do so from the other party or the two appointed arbitrators fail to settle on the third arbitrator within 30 days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institute designated by him under subsection (4) of section 11.
Section 11(5) similarly provides that in the case of the arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within 30 days from the receipt of the request by one party from the other to do so, the appointment shall be made, upon request of a party by the Chief Justice or any person or institute designated by him. Section 11(6) deals with a situation where the appointment procedure has been agreed upon but there is noncompliance of the agreed procedure. In this case, also any party may request “the Chief Justice or any person or institute designated by him” to take the necessary measures unless the agreement on the appointment provides other means for securing the appointment.
A decision on the matter entrusted by sub-section (4), (5) and (6) to the Chief Justice or any person or institute designated by him is final by virtue of section 11(7). Section 11(8) provides for considerations to which regard should be had before such power of appointment is exercised. Section 11(9) deals with International Commercial Arbitrations where the Chief Justice of India or any person or institute designated by him is given the powers of appointment. Section 11(11) deals with a situation where several requests are made to the Chief Justices of different High Courts or their designates. Section 11(12) (a) extends the operation of sub-sections (4), (5), (6), (7), (8) and (10) to International Commercial Arbitrations giving the power of appointment to the Chief Justice of India in place of Chief Justice of the High Court. Section 11(12) (b) clarifies that the reference to Chief Justice means the Chief Justice of the appropriate High Court. The word “appoint” has been used in section 11 to mean nomination or designation. Thus parties may appoint or name their arbitrator under Section 11(2), (3) and (4). The parties do not, in appointing an arbitrator, do more than the name or designate him.
The Supreme Court in Hindustan Copper Ltd. Vs. Monarch Gold Mining Co. Ltd. was called upon to adjudicate on the procedure adopted by the Calcutta High Court while dealing with a petition under Section 11 of the Arbitration & Conciliation Act, 1996.
In the matter of Hindustan Copper Limited, one Designate Judge first passed the order on 9.6.2011 holding that the request for appointment of the arbitrator was proper and then ordered that the application should be referred to Hon’ble Delegate of the Chief Justice for the appointment of an arbitrator. In pursuance of the order dated 9.6.2011, the matter came up before another Designate Judge and he appointed the arbitrator by an order dated 8.7.2011.
The Supreme Court has held that there can be no piecemeal adjudication of the existence of arbitral disputes under Section 11, and once an arbitral dispute is found to be existent, the same Court ought to appoint an arbitrator. The Supreme Court while dealing with this situation has held as under:
These appeals have raised the question about the procedure that is being followed by Calcutta High Court in consideration of the applications under Section 11 of the Arbitration and Conciliation Act, 1996.
When the special leave petition filed by M/s. Choudhury Construction came up for consideration before the Bench, the learned counsel for the petitioner submitted that the procedure adopted by the Designate Judge while hearing petition under Section 11 of the Act was unknown in law and not sanctioned by Section 11 inasmuch as although the Designate Judge has held that there are live disputes between the parties which have to be resolved through arbitration, yet the matter has been ordered to be placed before the Chief Justice for appointment of the arbitrator. In light of the submission made by the learned counsel, Registrar General, Calcutta High Court was ordered to be impleaded as party respondent.
In the matter of Hindustan Copper Limited, by an order dated 18.7.2012 this Court felt that the views of the Registrar General, Calcutta High Court were necessary as the issue involved was whether an application under Section 11(6) of the Act for appointment of an arbitrator could be considered in piecemeal by two Designate Judges