Statutory Bar Precludes the Applicability of Arbitration and Conciliation Act, 1996

Under section 8 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the concerned judicial authority is obliged to refer the parties to arbitration, if the action brought before it is also the subject matter of an arbitration agreement.  Recently, Supreme Court of India (“Supreme Court”), while delivering the judgment in Ranjit Kumar Bose & Anr v. Anannya Chowdhury & Anr, has held that a statutory bar (in other legislation) would preclude the applicability of Arbitration Act. That is, if a legislation prohibits reference of a matter to arbitration, the Arbitration Act will not be applicable [see: sec. 2(3), Arbitration Act]. 

Facts: Through an unregistered tenancy agreement [“Tenancy Agreement”], the Appellants (Rajnit Kumar Bose & Anr.) had inducted the Respondents (Anannya Chowdhury & Anr) as tenants with respect to a shop room. Later, the Appellants terminated the Tenancy Agreement and sought the vacation of the shop premises. The Respondents did not vacate the premises; as a consequence, the Appellants filed a Title Suit against the Respondents (in a Civil Court) for eviction, arrears of rent etc. As there existed an arbitration clause in the tenancy agreement, the Respondents filed an application under section 8 of the Arbitration Act for referring the matter to arbitration. The Civil Judge dismissed the Respondent’s application; however, on filing an application against Civil Judge’s order, the High Court held in favour of the Respondents. The High Court further held that issue of arbitrability, if any, will be decided by the arbitral tribunal.

In reaching its conclusion, the High Court had relied on the decision(s) of the Supreme Court in, (i) Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums [(2003) 6 SCC 503]; (ii) Agri Gold Exims Ltd. v. Sri Lakshmi Knits & Wovens & Ors.[(2007) 3 SCC 686];  and (iii) Branch Manager, Magma Leasing & Finance Limited & Anr. v. Potluri Madhavilata & Anr. [(2009) 10 SCC 103]

Relevant Legislations: the West Bengal Premises Tenancy Act, 1997; Arbitration and Conciliation Act, 1996

Delhi High Court provides ‘Interim Measure’ (Arbitration) in Post-Award Stage

On Wednesday, the High Court of Delhi (“Delhi HC”), in the case of Organising Committee Commonwealth Games, 2010 v. M/s Nussli (Switzerland) Ltd., has allowed a petition under section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) thereby granting injunction against the Respondent [“M/s Nussli (Switzerland) Ltd.)] in ‘post-award’ stage. In reaching its conclusion, Delhi HC had declined to consider a judgment of the High Court of Bombay (“Bombay HC”), on a similar point, as a precedent.

Facts:

In 2010, the Respondent was awarded a turnkey contract for providing overlays on rental basis for the Commonwealth Games, 2010 (“Games”). In order to secure the contract’s performance, the Respondent was required to furnish a ‘performance bank guarantee’ (“PBG”) equivalent to the 10 % of the contract value (which Respondent furnished). Following the conclusion of the Games, disputes arose between the parties and the matter was referred to arbitration (in 2012). From time to time, the Respondent was restrained to encash PBG; first as a result of petition (sec.9) filed by the Petitioner and then because of a direction issued by the Arbitral Tribunal.

Partly allowing the claim of the Respondent and further allowing Appellant’s claim to a small extent, Arbitral Tribunal made an award in Respondent's favour (after adjusting amount). At this juncture, the Petitioner made a counter-claim seeking refund of a certain amount on the ground that contract was vitiated by fraud; this claim was rejected.

Following this, as Petitioner intended to challenge the arbitral award, it filed the present petition under section 9 of the Arbitration Act for keeping PBG alive. Initially, Delhi HC passed an order thereby ordering the Respondent to keep PBG alive and listed the matter for next hearing. Against this order, the Respondent preferred an appeal before the division bench of the Delhi HC - this appeal was disposed off when the Respondent agreed to keep PBG alive for certain period and the hearing of the present petition was re-opened.

Contentions:

On behalf of the Petitioner, it was contended that since PGB would lapse before the Petitioner challenges award under section 34 of the Arbitration Act, PBG should be kept alive. It was further contended that since the Respondent is a ‘foreign entity’ with no assets in India, the Petitioner would be left remediless if its application under section 34 succeeds. Further, it was contented that in a different proceeding, PGB has been attached by the Income Department; hence, the Respondent was only interested in getting PBG released.

Waiver of 'Right to Object' Under Arbitration and Conciliation Act, 1996

Section 4 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) enumerates the conditions which, if satisfied, would subject a party (to arbitration agreement) to waive his right to object. The provision, which corresponds to Article 4 of UNCITRAL Model Law on International Commercial Arbitration (1985) (“Model Law”), can be read as follows:

“4. Waiver of right to object.- A party who knows that-

(a) any provision of this Part from which the parties may derogate, or

(b) any requirement under the arbitration agreement,

has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object”

A bare reading of the provision would indicate that a party, who ‘knowingly’ neglects the derogable provision(s) of Arbitration Act or the term(s) of arbitration agreement, cannot later plead their non-compliance. For example, objection(s), if there be any, to the High Court’s order of appointing an arbitrator should be made prior to the first arbitration hearing.[1] The participation in arbitration hearing, pursuant to appointment order, would lead the party to waive his right to object it. Before I discuss the provision further, I want to highlight the following questions:

1)    What does the provision signify when it refers to the knowledge of a party? What factors would determine such knowledge? Please note that there is a difference between ‘know’ and ‘ought to have known’. While the draft article 4 of Model Law contained the latter term, finally enacted provision did not have it.

2)    What does the phrase ‘without undue delay’ mean? 

Indian Case Laws on Section 4 and Waiver: An Analysis

Under section 4 of the Arbitration Act, there can be a waiver of both ‘derogatory’ provisions and of any ‘requirement’ under arbitration agreement. The concept of "waiver", so defined under the Arbitration Act, is applicable in a situation where there is any vagueness in the contract between the parties;[2] but, what does one mean by the term ‘waiver’? Relying on Halsbury’s  Laws of England, 4^th Edn., Vol. 16, para 1471, the Supreme Court of India (“Supreme Court”), in Ramdev Food Products (P) Ltd. v. Arvindbhai Rambhai Patel, (2006) 8 SCC 726, quoted the explanation of term ‘waiver’ as follows:

Enercon Case: Pro-Arbitration Approach and Determination of Arbitration ‘Seat’

In what can termed as an important development in Arbitration Law, the Supreme Court of India (“Supreme Court”) has delivered a 129-page judgment wherein issues such as ‘factors determining seat of arbitration’, ‘concurrent jurisdiction of foreign court’ etc. have been discussed. In Enercon (India) Ltd. & Ors v. Enercon GMBH & Anr. , the Supreme Court had to decide appeal(s) against two judgments of Bombay High Court – one judgment which allowed the application of the respondent under section 45 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and other  judgment vacating the anti-suit injunction issued against the respondent.

Before going to and discussing underlying issues, it would first be important to understand the factual background.

Factual Background: In 1994, Appellants no. 2 and 3 (“Members of Mehra Family”) entered into a Joint Venture Agreement (“JVA”) with Respondent no. 1 (“Enercon GMBH”) to incorporate Appellant no.1 [“Enercon (India) Ltd.”]. The objective behind incorporating Appellant no.1 was to manufacture and sell Wind Turbine Generators (“WTG”). In furtherance of JVA, both the parties executed certain agreements which included Share Holding Agreement and Technical Know How Agreement (“TKHA”) (these agreements were later amended). 

After the expiry of TKHA, there were further negotiations between the parties. These negotiations, which were recorded in a document titled ‘Heads of Agreement’, sought to explore the possibility of agreement to transfer future technology developed by the Respondents. Following these negotiations, parties entered into ‘Agreed Principles’, which were meant to be the basis of all the final agreements. On the same day when ‘Agreed Principles’ were executed, parties also executed and signed Intellectual Property License Agreement (“IPLA”). IPLA contained an arbitration clause (Clause 18) which can be read as follows:

17 GOVERNING LAW

17.1  This  Agreement  and  any  dispute  of  claims arising out of or in connection with its subject matter are  governed  by  and  construed  in  accordance  with the Law of India.

18. DISPUTES AND ARBITRATION

18.1 All disputes.....................any  Party  may refer  dispute(s), controversy(ies) or difference(s) for resolution  to  an  arbitral  tribunal  to  consist  of  three (3) arbitrators, of who one will be appointed by each of  the  Licensor  and  the  Licensee  and  the  arbitrator appointed by Licensor shall also act as the presiding arbitrator.

18.2 ....................

18.3  A  proceedings  in  such  arbitration  shall  be conducted  in  English.  The venue of the arbitration proceedings shall be in London. The arbitrators may (but  shall  not  be  obliged  to)  award  costs  and reasonable  expenses  (including  reasonable-fees  of counsel)  to  the  Party  (ies)  that  substantially  prevail on  merit.  The provisions of Indian Arbitration and Conciliation Act, 1996 shall apply........”

As disputes arose between the parties, Respondent(s) sought to initiate arbitration proceedings thereby nominating an arbitrator. Respondents further sought to file an ‘Arbitration Claim Form’ before the English High Court. This initiation of arbitration was resisted by the Appellants on the ground that there was no ‘concluded contract (IPLA)’ and hence there was no question of arbitration. While Appellants claimed that IPLA was not a concluded contract because of its non-conformity with ‘Agreed Principles’, Respondents claimed it to be a binding contract.

Section 27 of the Arbitration and Conciliation Act, 1996 is an 'Enabling Provision' : Supreme Court

Section 27 of the Arbitration and Conciliation Act, 1996 (“1996 Act”) provides that an arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to the court for assistance in taking evidence. On Monday, the Supreme Court of India (“Supreme Court”), in the case of Delta Distilleries Limited v. United Spirits Limited & Ors,[1] has to deal with the scope of Section 27 of the 1996 act. In this post, I am explaining the relevant parts of the judgment.

(Image Source: Smooth Transitions Law Blog)

Facts: In the present case, a judgment of the Bombay High Court (“High Court”) had been challenged wherein an arbitration petition, filed by United Spirits Limited (“Respondent” before the Supreme Court), was allowed. The arbitration petition had sought to invoke the powers of the court under Section 27 of the 1996 Act. The Respondent had filed arbitration petition before the High Court when Delta Distilleries (“Appellant” before the Supreme Court”), on being ordered by the arbitral tribunal, refused to produce sales tax assessment orders. It was the contention of the appellant that such orders were highly confidential and cannot be produced before the arbitral tribunal.  Further, it was contented, for the first time before the High Court, that appellant was not in possession of those sales tax orders. The contention was rejected by the High Court. Apart from these contentions, it was further submitted on behalf of the appellant that at the highest, an adverse inference can be drawn against him under Order 21, Rule 11 of Code of Civil Procedure (“CPC”). Reliance was also placed on some other acts which do not deal specifically deal with the 1996 Act.

Is there any Right of Representation by Counsel in an Arbitration Proceeding?

In what can be considered as an important issue for arbitration jurisprudence in India, constitutionality of the clause 15.22 of Multi-Commodity Exchange of India Ltd (MCX) has been challenged before the Madras High Court (Source: The Hindu, The Business Standard and The New Indian Express newspapers).[1] The issue is important since the impugned clause prohibits the parties to represent themselves by counsel, attorney or advocate in an arbitration proceeding.[2] Clause 15.22 of the by-law reads as:

“...15.22 Appearance by Counsel, Attorney or Advocate not permitted

In arbitral proceedings, the parties to the dispute shall not be permitted to appear by counsel, attorney or advocate.”

In the present petition, it has been contended that the impugned clause violates the right to avail the legal assistance in an arbitration proceedings. It was further contended that any award, which is made without allowing the petition to appear by a legal counsel before the arbitration proceedings, can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). Under Section 34 of the Arbitration Act, an arbitral award may be set aside by the court if the party can show that it could not present the case. This comes down to the question whether, in the absence of a counsel or attorney or advocate, it can be said that the concerned party was not able to present its case before the arbitral tribunal.

What’s in the number of Arbitrators? : An analysis of Section 10 of the Arbitration and Conciliation Act, 1996

In order to ensure that an arbitral proceeding is run smoothly, it is imperative to have the presence of arbitrators. In some situations, arbitral proceedings may require the presence of several arbitrators. However, there is also a possibility that, in some situations, the presence of a single arbitrator may be sufficient for the conduct of arbitral proceedings. Section 10 of the Arbitration and Conciliation Act, 1996 (“Arbitration”) provides that the number of such arbitrators shall not be in even. Section 10(1) of the Arbitration Act reads as:

“…..The parties are free to determine the number of arbitrators, provided that such number shall not be an even number.”

Given this situation, will an arbitration agreement, providing for an even number of arbitrator, become invalid? In this post, while focusing on the decisions of the Supreme Court of India (“Supreme Court”), we will explain this issue pertaining to Section 10 of the Arbitration Act.

Comparison between UNCITRAL Model Law and Arbitration Act, 1996

Section 10 of the Arbitration Act is based on Article 10 of the 1985 UNCITRAL Model Law on International Commercial Arbitration (“Model Law”).[1]Article 10(1) of the Model Law reads as:

“….The parties are free to determine the number of arbitrators”

A difference can be seen between Section 10 of the Arbitration Act and Article 10 of the Model Law. While Model Law does not require the parties to provide for an odd number of arbitrators, such requirement is present in Arbitration Act. If Parliament of India (“Parliament”) has added such words, there must have been a reason behind it. Did Parliament intend to render arbitration agreement, contrary to Section 10 of Arbitration Act, as invalid? Before arriving at any conclusion, it is important to see the take of the Supreme Court on the issue.

Interim Measures under Section 9 of the Arbitration and Conciliation Act, 1996

Section 9 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) provides for a situation whereby a party, before the enforcement of an arbitral award, can approach a court for interim measures. For instance, interim measures can be sought against any goods which are the subject-matter of arbitration. Importance of such measures cannot be easily neglected, especially when it affects the enforceability of the contingent arbitral award. Supreme Court of India (“Supreme Court”) has, in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.[1], held that Section 9 of the Arbitration Act, by virtue of being in Part I, is applicable where the place of arbitration is in India. Though the reasoning was ambiguous, this has, for the time being, become the legal position.

Nature of Power under Section 9 of the Arbitration Act

The court, under Section 9 of the Arbitration Act, is empowered to grant interim measures. Such measures, as the language of the section suggests, can be granted even before the commencement of arbitration proceedings. Since the measures are of "interim" character, a careful consideration is always required.

In Arvind Constructions Co. (P) Ltd. v. Kalinga Mining Corpn.,[2] it was held by the court that exercise of power under Section 9 of the Act must be based on well-recognised principles governing the grant of interim injunctions and other orders of interim protection or the appointment of a Receiver. That is, it would not be correct to say that the power under Section 9 of the Act is totally independent of the well-known principles of interim injunctions.[3]As regard the applicability of Specific Relief Act, 1963 to an application, under Section 9 of the Arbitration Act, it was held by the Supreme Court, in Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd.,[4] that:

“When the grant of relief by way of injunction is, in general, governed by the Specific Relief Act, and Section 9 of the Act provides for an approach to the court for an interim injunction, we wonder how the relevant provisions of the Specific Relief Act can be kept out of consideration.”

Reference to Arbitration under Section 8, Arbitration and Conciliation Act, 1996

With a view to avoid traditional court system, arbitration has, over a period of time, been able to secure a unique position. Despite all of its flaws, arbitration has now become a popular means of alternative dispute resolution. To make sure that no party, having agreed to arbitrate, institutes a suit before a civil court, Section 8 was inserted in Arbitration and Conciliation Act, 1996 (“Act”).

Assume a situation where a matter or issue, falling within the scope of arbitration agreement, is adjudicated by the court. This would certainly defeat the very purpose of arbitration. As far the Part I of the Act is concerned, this situation has been taken care of under Section 8.

Substantive requirement of Section 8 of the Arbitration Act, provided in sub-section (1), can be read as:

                                  “A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.”

From a bare reading of the section, it becomes clear that judicial intervention is sought to be minimised. Let us now proceed and analyse the section. Since the Act is based on 1985 UNCITRAL Model law on International Commercial Arbitration (“Model Law”),[1] it is vital to first compare Section 8 in its light.

Section 8 of Arbitration Act and Article 8 of UNCITRAL Model Law

Section 8 of the Act has not exactly followed the language of Article 8 of Model Law. Firstly, Model Law uses the term “court”, while Section 8 of the Act uses the term “judicial authority”. Now, there can be situations when an authority, which is not a court, can nonetheless act judicially [Example: Tribunals]. Secondly, last line of Article 8 of the Model Law is not present in the Section 8 of the Act:

                            

      “................unless it finds that the agreement is null and void, inoperative or incapable of being performed”

Contrary to this, Section 8 of the Act nowhere mentions this requirement. One probable reason can be the encouragement that was sought to given to arbitration, with minimum judicial interference. In Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd,[2] Supreme Court held that (3-judge bench decision):

                                  “Unlike Section 45, the judicial authority under Section 8 has not been conferred the power to refuse reference to arbitration on the ground of invalidity of the agreement. It is evident that the object is to avoid delay and accelerate reference to arbitration leaving the parties to raise objections, if any, to the validity of the arbitration agreement before the arbitral forum and/or post-award under Section 34 of the Act.” (emphasis supplied)

Since the question of minimum judicial interference has arisen, it would be interesting to refer Section 5 of the Act which puts a limit on the judicial intervention. Though the objective of minimum judicial interference finds support in Section 5 of the Act, it has been held that the same should not be used for interpreting Section 8 of the Act.[3]

As to what is “judicial authority”, we have already analysed it in another post. However, to provide a brief overview, the term “judicial authority” has been retained especially in view of policy of least intervention, which cannot be limited only to the courts.[4]

Use of the term “judicial authority”, in Section 5 and Section 8 of the Arbitration Act, 1996, is also not a recognition by Parliament that Part I will apply to the international commercial arbitrations held outside India.[5]This point is important given the criticism of Bhatia International v. Bulk Trading S.A. judgment, which made Part I applicable to arbitrations held outside India.[6]

To know more about the term “judicial authority”, see this post -  "Judicial Authority" under Section 8 of the Arbitration and Conciliation Act, 1996

Conditions to be satisfied for the application of Section 8

For the application of Section 8 of the Act, there are certain conditions which need to be satisfied. The conditions which are required to be satisfied under sub-sections (1) and (2) of Section 8 before the court can exercise its powers are:[7]

            (1) There must be an arbitration agreement;

(2) A party to the agreement brings an action in the court against the other party;

(3) Subject-matter of the action is the same as the subject-matter of the arbitration agreement;

(4) The other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.

(5) Along with the application the other party tenders the original arbitration agreement or duly certified copy thereof.

(6) Whether the reliefs sought in the suit are those that can be adjudicated and granted in arbitration.[8]

(7) Whether all the parties to the suit are parties to the arbitration agreement.[9]

As far as the requirement under sub-section (2) is concerned, even a duly certified copy is acceptable.[10]Further, the photocopies of the lease agreements could be taken on record under Section 8 of the Arbitration Act for ascertaining the existence of arbitration clause.[11]

Mandatory nature of Section 8

On comprehending the language of Section 8 of the Act, it would become clear that a judicial authority is obliged to refer the parties to arbitration. The provision is not discretionary in nature but mandatory. A civil court has no jurisdiction to entertain a suit after an application under Section 8 of the Act is made for arbitration.[12] That is, if an application, having satisfied the requirement of Section 8, is made, the court has to refer the parties to arbitration.[13]Its application cannot be denied merely on a plea of estoppel.[14]

"First Statement on the Substance of the Dispute"

Under Section 8 of the Act, a party, seeking for arbitration, should so apply ‘not later than when submitting his first statement on the substance of the dispute’. In Rashtriya Ispat Nigam Ltd. v. Verma Transport Co.,[15] Supreme Court held that the expression “first statement on the substance of the dispute” contained in Section 8(1) of the Act is different from the expression “written statement”.[16]It was held that:

                                  “The expression “first statement on the substance of the dispute” contained in Section 8(1) of the 1996 Act must be contradistinguished with the expression “written statement”. It employs submission of the party to the jurisdiction of the judicial authority. What is, therefore, needed is a finding on the part of the judicial authority that the party has waived its right to invoke the arbitration clause. If an application is filed before actually filing the first statement on the substance of the dispute, in our opinion, the party cannot be said to have waived its right or acquiesced itself to the jurisdiction of the court. What is, therefore, material is as to whether the petitioner has filed his first statement on the substance of the dispute or not, if not, his application under Section 8 of the 1996 Act, may not be held wholly unmaintainable. We would deal with this question in some detail, a little later.”[17]

Hence, reply to an interim injunction application would not deprive a person from making an application under Section 8 of the Act. It is also evident from sub-section (3) of Section 8 that the pendency of an application under Section 8 before any court will not come in the way of an arbitration being commenced or continued and an arbitral award being made.[18] Further, the judicial authority `referring the parties to arbitration' under section 8 of the Act, has no power to appoint an arbitrator.[19]

Inclusion of “Third Party” in Arbitral Reference

Arbitration agreement is based on the principle of party autonomy. Hence, under Section 8, it would be very difficult to force a non-signatory to arbitration agreement to arbitrate. In Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya,[20] Supreme Court was of the view that:

                                  “.....there is no provision in the Act that when the subject-matter of the suit includes subject-matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject-matter of the suit to the arbitrators”.

Further, in this case, court held that if a matter lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement; there is no question of application of Section 8.[21]The issue of inclusion of non-signatory was once again brought before the Supreme Court in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc.[22]Though, in this case, court was dealing with Section 45 of the Act, correctness of the law in Sunkandya Holdings (supra) was questioned. Court, however, declined to examine the correctness of Sukanya Holdings (supra) thereby stating that:

                                  “...in that case the Court was concerned with the disputes of a partnership concern. A suit had been filed for dissolution of partnership firm and accounts also challenging the conveyance deed executed by the partnership firm in favour of one of the parties to the suit. The Court noticing the facts of the case emphasised that where the subject-matter of the suit includes the subject-matter for arbitration agreement as well as other disputes, the Court did not refer the matter to arbitration in terms of Section 8 of the Act. In the case in hand, there is a mother agreement and there are other ancillary agreements to the mother agreement. It is a case of composite transaction between the same parties or the parties claiming through or under them falling under Section 45 of the Act. Thus, the dictum stated in para 13 of the judgment of Sukanya [(2003) 5 SCC 531] would not apply to the present case.” (emphasis supplied)

Unlike Chloro Controls (supra), the issue in Sukanya Holdings (supra) was not related to a composite transaction but to a partnership firm. It would be interesting to see the viewpoint of the court if an issue, related to composite transaction, comes before it under Section 8.

Above analysis contains a brief overview of Section 8 of the Arbitration and Conciliation Act, 1996

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[1] UNCITRAL Model Law on International Commercial Arbitration, 1985

[2] Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234, 248; See also India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd., (2007) 5 SCC 510, 516

[3] Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531, 535

[4] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552

[5] Id, at 622

[6] Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105

[7] P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539, 542; Magma Leasing & Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103, 114

[8] Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, 542

[9] Id

[10] Atul Singh v. Sunil Kumar Singh, (2008) 2 SCC 602, 609

[11] Bharat Sewa Sansthan v. U.P. Electronics Corpn. Ltd., (2007) 7 SCC 737, 747

[12] Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503, 515

[13] Kalpana Kothari v. Sudha Yadav, (2002) 1 SCC 203, 208; Magma Leasing & Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103, 114; P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539, 542; Agri Gold Exims Ltd. v. Sri Lakshmi Knits & Wovens, (2007) 3 SCC 686, 691; Rashtriya Ispat Nigam Ltd. v. Verma Transport Co., (2006) 7 SCC 275, 284; SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618, 648

[14] Id

[15] (2006) 7 SCC 275

[16] Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, 544

[17] Rashtriya Ispat Nigam Ltd. v. Verma Transport Co., (2006) 7 SCC 275, 289

[18] Vijay Kumar Sharma v. Raghunandan Sharma, (2010) 2 SCC 486, 489

[19] State Of Goa vs M/S Praveen Enterprises on 4 July, 2011

[20] Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531, 535

[21] Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531, 536

[22] Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641

“Judicial Authority” under Section 8 of the Arbitration and Conciliation Act, 1996

Section 8 of the Arbitration and Conciliation Act, 1996 (“Act”) makes it mandatory for a “judicial authority” to refer the parties to arbitration given certain conditions are satisfied.[1] However, Act does not define as to what a “judicial authority” can be. Hence, confusion is inevitable as regard the authorities which can come under the ambit of this term.

Under Section 8, power is conferred not on an administrative authority, but on a judicial authority; and hence, such an authority has to act judicially while considering Section 8 of the Act.[2]If a body is acting judicially, then need of compliance with certain judicial principles becomes necessary, for eg., compliance with the principle of natural justice. It is in this light that one has to see the scope of the term “judicial authority”.

Term “Judicial Authority” would certainly include the court as defined in Section 2(e) of the Act. However, it would also include other courts and may even include a special tribunal like the Consumer Forum.[3]Inclusion of such term, and not the court per se, can also be attributed to the fact that least intervention should be done in matters related to arbitration.[4]

Supreme Court of India (“Supreme Court”), while deciding the case of Management Committee, Montfort Senior Secondary School v. Vijay Kumar, considered the scope of the term “judicial authority”.[5] In this case, court referred to an English judgment:

“In R. v. London County Council [(1931) 2 KB 215 : 100 LJKB 760 : 144 LT 464 (CA)] judicial authority was defined as under:

“It is not necessary that it should be a court in the sense in which this Court is a court; it is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition and it is not necessary to be strictly a court.”

It can be said that, as long as an authority is competent to exercise “judicial functions”, it can very well come under the ambit of Section 8. The interpretation of this term becomes important when one is concerned with “first statement on the substance of the dispute”. In other words, the important question is as to before which authority, or “judicial authority”, can a person waive his right by not challenging the action because of the presence of arbitration clause. There can be a situation where a defendant submits such a statement before an authority which is not judicial in nature. In such case, it would be hard to say that Section 8 of the Act would be applicable.

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[1]See  Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd., (2005) 7 SCC 234; Kalpana Kothari v. Sudha Yadav, (2002) 1 SCC 203; Rashtriya Ispat Nigam Ltd. v. Verma Transport Co., (2006) 7 SCC 275

[2] SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618

[3] Id; See also Fair Air Engineers Pvt. Ltd v. N.K. Modi (“the District Forum, State Commission and National Commission are judicial authorities, for the purpose of Section 34 of the Arbitration Act”)

[4] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, ¶ 125

[5] Management Committee, Montfort Senior Secondary School v. Vijay Kumar, (2005) 7 SCC 472