Aban Loyd Chile Offshore Ltd. vs Subash Projects and Marketing Ltd. and Mr. Justice K. Govindarajan (Retd.) <BR>The Food Corporation of India Vs Kevi Associates and Mr. Justice M.S. Janarthanam (Retd.)

P. Sathasivam, J.—Since the issues raised are identical in both the writ petitions, they are being disposed of by the following common order.

In W.P.No.4617 of 2005, M/s.Aban Loyd Chile Offshore Limited, Chennai-8, challenges the order dated 29.01.2005 in O.P.No.237 of

2002, in and by which the designate Judge appointed MR.JUSTICE K. GOVINDARAJAN, a retired Judge of this Court as Arbitrator to

discharge the disputes between the parties.

In W.P.No.14408 of 2005, the petitioner Food Corporation of India, Chennai-6, challenges the order dated 01.04.2005 in O.P.No.282 of 2

004, wherein the very same designate Judge appointed MR.JUSTICE M.S. JANARTHANAM, Judge (Retired) as sole Arbitrator to discharge

the dispute arising out of the Agreement No.DM/Civil/10 dated 04.11.2000 entered into between the petitioner and the respondent.

Heard Mr.Arvind P.Datar, the learned Senior Counsel for the petitioner in W.P.No.4617 of 2005, Mr.V.Srikanth, learned counsel for the

petitioner in W.P.No.14408 of 2005, Mr.R.Muthukumarasamy, learned Senior Counsel for the first respondent in W.P.No.4617 of 2005 and

Mr. P.Subbha Reddy, learned counsel for the first respondent in W.P.No.144 08 of 2005.

In the light of the order to be passed hereunder, we are of the view that there is no need to traverse all the factual details as stated by both

parties.

Mr.Arvind P.Datar, learned senior counsel for the petitioner by drawing our attention to the Seven Judge Bench judgment of the Honourable

Supreme Court in Civil Appeal 4168 of 2003 etc. 2005 SCC L.COM 706 (.S.B.P.& Co., v. Patel Engineering Ltd. and Anr.), would submit that

in view of the law laid down therein, namely, that the Chief Justice or his designate Judge has power to decide all issues on merits, including

jurisdiction, etc., the impugned order passed by the designate Judge viz., Honourable MR.JUSTICE N.V. BALASUBRAMANIAM, referring the

matter to the Arbitrator without considering the objections raised by the petitioners, cannot be sustained and is liable to be interfered with. He also

contended that inasmuch as the present writ petition is a continuation of the original proceedings, in the light of the recent judgment of the Supreme

Court, the matter has to be remitted to the Honourable Chief Justice or his designate Judge for passing fresh orders as per the dictum laid down in

the Supreme Court judgment referred to above. Mr.Srikanth, learned counsel appearing for the writ petitioner in W.P.14408 of 2005, while

adopting the argument of Mr.Arvind P.Datar, also submitted that the learned Judge has not at all considered the objection, viz., that there is no

clause in the agreement for appointment of Arbitrator.

On the other hand, Mr.R.Muthukumarasamy, learned senior counsel for the first respondent in W.P.4617 of 2005 submitted that first of all, the

present proceedings i.e., writ petitions are not like appeals and the same are not continuation of the original proceedings. Secondly, in view of the

saving clause as stated by the Honourable Supreme Court in para 46(x) of M/s. Patel Engineering Ltd., case, the said issue cannot be agitated

before this Court and all the issues, including objection relating to jurisdiction can be considered by the Arbitrator. Mr.P.Subba Reddy has also

raised similar contention.

We have carefully considered the relevant materials and the contentions raised by both sides.

In the first case, the contention before the designate Judge is that there is no arbitral clause in the contract, has not been accepted and the

respondent therein (petitioner herein) is permitted to raise the said objection before the Arbitrator. The other contention that inasmuch as the matter

in issue had been compromised in a suit by the Calcutta High Court, hence there is no need to resolve the same issue by arbitration. Here again,

the designate Judge has concluded that the question of existence of agreement after the decree in the suit before the Calcutta High Court could also

be raised before the Arbitrator.

In the later case, it is the grievance of the petitioner that in spite of their objection in the form of counter affidavit pointing out that there is no

clause for arbitration, the designate Judge without advertent to those objections, appointed the Arbitrator to resolve the issue. As stated in the

earlier order dated 29.01.2005, the petitioner in W.P.No.14408 of 2005 can also very well raise the same before the Arbitrator.

It is relevant to state that the above orders were passed by the designate Judge based on the decision of the Supreme Court in the case of

Konkan Railway Corporation Ltd. and Another Vs. Rani Construction Pvt. Ltd., , wherein it is held that u/s 16 of the Arbitration and Conciliation

Act, 1996 (in short ""the Act"") the arbitral tribunal has the right to rule on any objection with regard to the existence or validity of arbitration

agreement. However, in the 7 Judge Bench decision 2005 SCC L.COM 706 the Honourable Supreme Court has not accepted the dictum laid

down in Konkan Railway Corporation'' case (cited supra) and overruled the same. Their Lordships have held that the power exercised by the

Chief Justice or his designate Judge u/s 11(6) of the Act has no administrative power, but it is a judicial power. They, further held that the Chief

Justice or Designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of the said judgment. These will be,

his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence

of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators.

Clause (x) in para 46 of the said Judgment ( M/s. Patel Engineering Ltd., case,) is very relevant, which is as follows:

Since all were guided by the decision of this Court in Konkan Railway Corporation Ltd. and Another Vs. Rani Construction Pvt. Ltd., and orders

u/s 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals

thus far made, are to be treated as valid, all objections being left to be decided u/s 16 of the Act. As and from this date, the position as adopted in

this judgment will govern even pending applications u/s 11(6) of the Act"".

The above clause makes it clear that arbitrators or arbitral tribunals thus far made are to be treated as valid, all objections being left to be decided

u/s 16 of the Act. However, as and from the date of judgment of the Supreme Court i.e., 26.10.2005, the position as adopted in S.B.P.& Co., v.

Patel Engineering Ltd., and Anr. will govern even the pending applications u/s 11(6) of the Act. It is clear that if the clarification in para 46(x) is not

stated by the Supreme Court, undoubtedly, the contentions of the petitioners have to be accepted and the issue has to be remitted to the

Honourable Chief Justice or his Designate Judge. However, in view of the saving clause in para 46(x), the order passed by the Designate Judge in

these cases cannot be interfered with and as observed by the designate Judge, all objections including non-availability of an arbitral clause and

jurisdiction etc., have to be decided only by the Arbitrator. The said course cannot be adopted after 26.10.2005, whereby the Supreme Court

delivered judgment in Patel Engineering Ltd.

Mr.Arvind P.Datar by pointing out that the present writ petitions are continuation of the original proceedings, the judgment of the Supreme

Court dated 26.10.2005 is applicable and the matter has to be re-heard afresh either by the Chief Justice or his Designate Judge. We are unable

to accept the said contention, since the above writ proceedings cannot be treated as regular appeals. It is not in dispute that both the writ petitions

have been filed invoking extraordinary jurisdiction under Article 226 of the Constitution of India, questioning the order of the Designate Judge,

appointing Arbitrators. In such a circumstance, in the light of clarification made by the Honourable Supreme Court in para 46(x) of Patel

Engineering Ltd., case, we are of the view that the objection raised before the designate Judge regarding non-existence of arbitration clause,

jurisdiction, merits of the claim, etc., are to be agitated only before the Arbitrator / Arbitral Tribunal. As stated earlier, the said course is not

permissible after the judgment of the Supreme Court dated 26.10.2005. It is made clear that our present order cannot be construed that we are

rejecting the stand taken by the petitioners. As observed by the designate Judge, the petitioners are free to put forth all their objections before the

Arbitrator/Arbitral Tribunal.

In the light of what is stated, we do not find any merit in the writ petitions; consequently the same are dismissed. No costs. Connected WPMP., is

also dismissed.