JESMAJO INDUSTRIAL FABRICATIONS - KARNATAKA PVT LTD Vs. INDIAN OIL CORPORATION LIMITED A CORPORATION BEING GOVERNMENT OF INDIA

JUDGEMENT

(1.) THE applicants have moved under Section 11 of the Arbitration and Conciliation Act, 1996. It is their case that there is an arbitral clause in the contract between the parties. The applicants invoked the arbitral clause by their letter dated 16th March, 2001. The Respondents failed to nominate the arbitrator. As the respondents had failed to nominate their arbitrator, the present application was filed invoking the provisions under Section 11 (6) of the Act. Under Section 11 (6) it is contended that it would not be the named arbitrator in the contract who is to be appointed as arbitrator but it is open to the designated authority or to the chief Justice to nominate an impartial person to decide the disputes including the claims and counter claims of the parties. This power can be spelt out from the language of Section 11 and can be resorted to in the event a person or authority referred to under the arbitral clause chooses to abdicate its duty or responsibilities to nominate the arbitrator. In support thereof, reliance has been placed on various authorities which will be adverted to in the course of the order. This therefore, is the question that has to be answered. On the other hand, on behalf of the Respondents, their learned counsel contends that the letter dated 16. 3. 2001 is not an invocation of the arbitral clause. The Petitioners having not invoked the arbitral clause, the question of nominating an arbitrator by the designated authority designated under the Act does not arise. It is further contended that once that be the case, Section 11 Could not have been invoked by Petitioners herein. Alternatively, it is contended that assuming that section can be invoked, it is only the authority named who can be directed to nominate the arbitrator as that is the procedure agreed between the parties. Section 11 does not confer power on the learned Chief Justice or his designate to supplant the terms of the contract between the parties. All that it provides is that the authority has to issue a direction to direct nomination or appointment of the arbitrator by the said authority. Reliance has again been placed on various judicial pronouncements etc. Such a nomination, it is contended, is a nomination by the designate but in terms of the contractual terms between the parties. Only if the contract does not provide for a named person to be nominated or the contract does not provide a term for the procedure for appointment, will the designate under Section 11 make a nomination. Otherwise, even on failure by the named authority under the contract, what the designate will do is to nominate or direct nomination in terms of the contractual terms so as to specifically constitute the Arbitral Tribunal at the earliest.

(2.) WITH the above, we may now consider the issue that has arisen considering the powers conferred on the Chief Justice or his designate under Section 11 of the Act of 1996. The nature of the power is no longer res integra having been decided by the Apex Court in Konkan Railways v. Rani Construction 2002 (2) S. C. C. 388. While considering the nature of the power conferred under Section 11, the Apex Court has observed that the order of the Chief justice or his designate under Section 11 nominating an arbitrator is not an adjudicatory order as the Chief Justice or his designate is not a tribunal. The issue referred to the Constitution Bench was for the purpose of deciding the controversy as to the real nature of the power conferred under Section 11. The Apex Court has held and considering its earlier judgements that the power is administrative in character. Bearing this in mind, the issue will have to be answered. Section 11 (6) may now be reproduced :

(3.) THAT will require determination firstly whether Petitioners have invoked the arbitral clause and there has been refusal by the named authority. The several situations contemplated would be to enquire if for example no arbitrator is named to act as sole arbitrator then to fill in the gap by nominating arbitrator considering that the parties have failed to appoint one. Similarly in the case of more than one arbitrator, where two arbitrators appointed cannot agree to the name of third then to secure appointment of the third arbitrator in the like cases. The third situation, as in our case, when the person including an institution fails to perform any function entrusted under that procedure. What happens in the third situation if the person or institution named, does not take steps to nominate. Does that result in the learned Chief Justice or his designate securing the appointment other than in terms of the contract. Is that the necessary measure contemplated. If the answer is yes, that would mean that the contract between the parties can be displaced by an authority exercising administrative powers. It is well settled proposition of law that the contract between the parties has to be given effect to. It is only a court under powers conferred which can rewrite the contract to the extent possible between the parties for the purpose of effectively deciding the disputes and controversies and for making an effective order or decree. The other situation is when the statute itself clearly so provides. In all other cases, the contract has to be performed in the manner it has to be performed.