The Delhi High Court recently in Oyo Hotels & Homes (P) Ltd. v. Rajan Tewari[1] (Oyo) has while deciding a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996[2] (the Act) held that a court under Section 11 of the Act has the power to set aside an appointment of an arbitrator, if the appointment is ex facie contrary to the arbitration clause, and thus is non est in law. The Court while setting aside the appointment of the sole arbitrator so appointed by one party, took recourse to Section 11(6) of the Act and appointed another arbitrator to adjudicate the disputes between the parties.
The aforesaid decision raises an important and interesting question of law as to the powers of the court to remove an already appointed arbitrator, without a party following the drill of Sections 12 to 15 of the Act[3]. This raises a further question as to whether the principle of kompetenz-kompetenz, as so often preached by courts, is violated by such a course being followed.
The Supreme Court in Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd.[4], had referred inter alia this very question to a larger Bench. It would be useful to extract the questions framed by the Supreme Court in the aforesaid case:
- Whether the jurisdiction of the Court under Section 11 extends to declaring as invalid the constitution of an Arbitral Tribunal purportedly under an arbitration agreement, especially, where the Tribunal has been constituted by an Institution purportedly acting under the arbitration agreement?
- Whether the jurisdiction of an Arbitral Tribunal constituted by an institution purportedly acting under an arbitration agreement can be assailed only before the Tribunal and in proceedings arising from the decision or award of such Tribunal and not before the Court under Section 11 of the Act?
- Whether, once an Arbitral Tribunal has been constituted, the Court has jurisdiction under Section 11 of the Act to interfere and constitute another Tribunal?
The aforesaid reference came to be decided on 10-5-2013 by the Supreme Court (2-Judge Bench) in Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd.[5] (Antrix). One of the arguments raised by the respondent in the case was that the principle of kompetenz-kompetenz would certainly apply and the Tribunal would have complete authority over the questions as to the validity of its constitution. The Supreme Court while answering the question so posed to it, clearly held that the appointment of an arbitrator can certainly be challenged by a party, but the same must be done taking recourse to Sections 12-15 of the Act, and the same cannot be done under Section 11 of the Act. In fact, the Supreme Court was categorical in holding that “In a proceeding under Section 11 of the 1996 Act, the Chief Justice cannot replace one arbitrator already appointed in exercise of the arbitration agreement.”
The view of the Bench was reinforced in another judgment titled Pricol Ltd. v. Johnson Controls Enterprise Ltd.[6] (Pricol) where Gogoi, J. dismissed the Section 11 petition on this very ground, leaving it open to the petitioners to avail other remedies available in law to challenge the appointment of the arbitrator.
Barely a month later, Gogoi, J. in Walter Bau AG v. Municipal Corpn. of Greater Mumbai[7] (Walter Bau) took a completely different view and held:
10. Unless the appointment of the arbitrator is ex facie valid and such appointment satisfies the Court exercising jurisdiction under Section 11(6) of the Arbitration Act, acceptance of such appointment as a fait accompli to debar the jurisdiction under Section 11(6) cannot be countenanced in law….The option given to the respondent Corporation to go beyond the panel submitted by the International Centre for Alternative Dispute Resolution (ICADR) and to appoint any person of its choice was clearly not in the contemplation of the parties. If that be so, obviously, the appointment of Shri Justice A.D. Mane is non est in law. Such an appointment, therefore, will not inhibit the exercise of jurisdiction by this Court under Section 11(6) of the Arbitration Act. It cannot, therefore, be held that the present proceeding is not maintainable in law. The appointment of Shri Justice A.D. Mane made beyond 30 days of the receipt of notice by the petitioner, though may appear to be in conformity with the law laid down in Datar Switchgears Ltd. v. Tata Finance Ltd.[8], is clearly contrary to the agreed procedure which required the appointment made by the respondent Corporation to be from the panel submitted by the ICADR. The said appointment, therefore, is clearly invalid in law.
(emphasis supplied)
The aforesaid view appears to be in stark contrast to the views expressed by the Supreme Court (2-Judge Bench) in Antrix[9], and though an attempt was made to distinguish the said judgment on facts, the question remains whether a Single Judge ought to have followed the questions of law decided in Antrix[10].
Two further decisions of the Supreme Court in TRF Ltd. v. Energo Engg. Projects Ltd.[11] (TRF) and Perkins Eastman Architects DPC v. HSCC (India) Ltd.[12] (Perkins) clarified the position and reinforced the decision in Walter Bau[13]. In TRF[14] the Supreme Court (3-Judge Bench) distinguished Antrix[15] by stating that the said decision was on its facts and that the same does not lay down an absolute proposition of law that the courts cannot remove an arbitrator while exercising powers under Section 11 of the Act. The said decision found the view taken by the designate Judge in Walter Bau[16] to be in “consonance with the binding authorities” referred to in the said decision.
In Perkins[17], this question was once again raised before the Supreme Court (2-Judge Bench), which was deciding a petition under Section 11(6) of the Act. It may be noted that in the said case, an arbitrator already stood appointed, and the argument raised by the respondent was that no reliefs could be granted under Section 11(6) of the Act. While considering the authorities referred to above, the Supreme Court clearly held that there was no bar in entertaining such a petition, and finally appointed another arbitrator in place of the already appointed arbitrator.
What is interesting in the above two decisions, is that they concern primarily the eligibility of a person to be appointed as an arbitrator. The two decisions referred above, firstly find that the person so appointed as an arbitrator is/was actually disqualified by virtue of the amendments in the Act and introduction of the Fifth Schedule[18], and only then go on to appoint an arbitrator in place of the said ineligible person.
The fact situation is completely different in Oyo[19], and it was not the case of the petitioner therein that the arbitrator so appointed was ineligible. On the contrary, the case set up by the petitioner was that the manner of appointment of the sole arbitrator unilaterally by the respondent was directly contrary to the arbitration clause and as such was non est in law. The Delhi High Court in Naveen Kandhari v. Jai Mahal Hotels (P) Ltd.[20] and in Manish Chibber v. Anil Sharma[21] has taken a similar view.
The approach of the courts in the judgments referred above, appear to be a more practical, sensible and justice-friendly approach. After all courts are constituted to impart justice to litigants who knock on their doors. This is a far cry from the traditional “touch me not” approach that courts have especially in matters relating to arbitration.
The principle of kompetenz-kompetenz, if applied in the present case strictly, would have required the parties to complete the rigmarole of arbitration proceedings and wait for the eventual award before a challenge could be laid to the constitution of the tribunal under Section 34 of the Act. It is true that Section 16 of the Act provides a remedy, but the practical and sad reality is that Section 16 applications are seldom allowed, and often they are decided along with the main matter.
In my limited experience, I have found courts always struggling with technicalities in arbitration matters, be it questions as to seat, venue, jurisdiction, limitation et al. The courts often forget that arbitration is only an alternate forum of adjudication of disputes and the idea at the end of the day is to impart justice. Justice, however, seems lost in the whole process and often precious judicial time is spent only on deciding technical pleas raised by parties.
In the aforesaid context, the view of the Delhi High Court comes as a positive change, and it is hoped that the courts unshackle themselves from the technicalities and start imparting substantial justice, whether in arbitration or other matters. This decision (and others referred) is certainly a welcome step.
* Advocate, Delhi High Court. Author can be reached at mail@saurabhseth.com.
[2] Arbitration & and Conciliation Act, 1996.
[3] http://www.scconline.com/DocumentLink/QWdt5a4f.
[4] (2014) 11 SCC 574, 575.
[7] (2015) 3 SCC 800, 806.
[9] Supra Note 5.
[10] Ibid.
[13] Supra Note 7.
[14] Supra Note 11.
[15] Supra Note 5.
[16] Supra Note 7.
[17] Supra Note 12.
[18] http://www.scconline.com/DocumentLink/asRNct2u.
[19] Supra Note 1.
[20] 2018 SCC OnLine Del 9180.
[21] Arbitration Petition No. 249/2020, decided on 7-8-2020.