Engineering Systems Limited vs M.P. Electricity Board

S.P. Khare

This is an application u/s 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred to as the ''Act'') for appointment of arbitrator.

It is not in dispute that the applicant was awarded contract by the non-applicant for "augmentation of coal handling plant" at Satpura, Thermal Power Station, Sarni by order dated 31-3-1984. The civil work was excluded from this contract. The applicant submitted the running bills. The non-applicant paid an amount of Rs. 2,82,644/- to the applicant on 17-8-1998. There is an arbitration clause in the contract. According to the arbitration agreement any dispute between the parties "in relation to or in connection with the contract" is to be referred to the two arbitrators, one to be nominated by the applicant and the other by the non-applicant. In case of disagreement between the arbitrators they would appoint an umpire. The applicant by letter dated 12-2-1999 called upon the non-applicant to agree for appointment of arbitrators as per agreement.

The applicant''s case is that the amount of Rs. 26,52,025/- is recoverable from the non-applicant and that is not being paid by the non-applicant. Therefore, there is a "dispute" between the parties and it should be decided by the arbitrators as per arbitration agreement.

The case of the non-applicant is that the amount of Rs. 2,82,644/-has been paid to be applicant in "full and final settlement" and therefore there is no "dispute" which can be decided by the arbitrators. It is also pleaded that the claim of the applicant is barred by limitation.

After hearing the learned Counsel for the parties, I am of the opinion that the issues raised by the non-applicant can be decided by the arbitrators as per Section 16 of the Act. The questions raised by the non-applicant cannot be decided u/s 11 of the Act. In Konkan Railway Corpn. Ltd. and Others Vs. M/s. Mehul Construction Co., , it has been held that when the matter is placed before the Chief Justice or his nominee u/s 11 of the Act it is imperative to bear in mind that the objective of the legislation is "to minimise the supervisory role of the Courts in the arbitral process". At this stage it would not be appropriate to entertain any "contentious issue" between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions with regard to the qualifications, independence and impartiality of the arbitrator, and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator who would decide the same. Section 16 empowers the Arbitral Tribunal to rule on its own jurisdiction as well as on objections with respect to the existence or validity of the arbitration agreement. Therefore, it would be proper to appoint an arbitrator without wasting any time. If this approach is adhered to, then there would be no grievance to any party and in the arbitral proceeding, it would be open to raise any objection as provided under the Act. The order passed by the Chief Justice or his nominee is an administrative order. The same view has been taken by the Constitution Bench of the Supreme Court in Konkan Railway Corporation Ltd. and Another Vs. Rani Construction Pvt. Ltd., . In view of these decisions the questions of arbitrability, the existence or non-existence of dispute, the limitation and other matters are to be decided by the Arbitral Tribunal after reference is made to it. These questions cannot be decided by the nominee of the Chief Justice in administrative capacity. This . is the view which has been taken by this Court also in National Dairy Development Board and Another Vs. Suraj Singh,

The application is allowed. The parties are directed to proceed with the appointment of arbitrators as per "appointment procedure" provided in the arbitration agreement.