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Modi Korea Telecommunication Ltd. v. Appcon Consultants Pvt. Ltd.

Calcutta High Court
Feb 2, 1999
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Structured Summary of the Opinion (Ruma Pal, J.)

Factual and Procedural Background

The dispute arises from agreements between the appellant and the respondent relating to radio paging services, under which the respondent procured pagers and acted through distributors. The appellant alleges the respondent (one such distributor) failed to pay lease rent running into several lakhs of rupees. In September 1996 the respondent filed a suit (TS No. 361 of 1996) before the Second Munsif at Alipore seeking cancellation of the lease agreements.

The parties' agreements contained an arbitration clause. The appellant sought interim relief under section 9 of the Arbitration and Conciliation Act, 1996; that interim application was disposed of. The appellant appointed a Senior Advocate as sole arbitrator on 19.5.97 but the respondent refused to concur. In March 1998 the appellant filed an application under section 11 of the 1996 Act seeking appointment of an arbitrator by the Chief Justice (and related directions). The appellant also filed an application under section 8 before the Second Munsif (TS No. 3612 of 1992) for referring the suit to arbitration.

The Single Judge of the High Court heard the section 11 application and on 15 July 1998 passed an order directing the Second Munsif at Alipore to dispose of the section 8 application within four weeks and adjourned the section 11 matter for four weeks. The appellant challenged that order in this appeal.

Legal Issues Presented

  1. Whether a Single Judge of the High Court, to whom arbitration matters have been allocated, has jurisdiction to entertain and decide an application under section 11(5) of the Arbitration and Conciliation Act, 1996 (i.e., to determine whether an arbitrator should be appointed), or whether that jurisdiction to appoint or to determine the matter is exclusively vested in the Chief Justice (or his designate).
  2. Whether the Single Judge's order adjourning the section 11 application until the pending section 8 application before the Munsif was disposed of was proper — specifically whether adjudication of a section 11(5) application can be made subject to disposal of a section 8 application.
  3. Whether the order of the Single Judge (dated 15 July 1998) was appealable to the Division Bench under clause 15 of the Letters Patent of the High Court, notwithstanding section 37(1) of the Arbitration and Conciliation Act, 1996 restricting appeals to specified orders under the Act.

Arguments of the Parties

Appellant's Arguments

  • The Single Judge erred in making adjudication of an application under section 11(5) subject to disposal of an application under section 8; the section 11(5) adjudication cannot be made dependent on the outcome of the section 8 application.
  • The order under appeal was not an order passed under the Arbitration Act and therefore was not governed by section 37(1); consequently the order was appealable under clause 15 of the Letters Patent as a "judgment".

Respondent's Arguments

  • The order was not appealable.
  • The High Court did not have jurisdiction to entertain the section 11 application at all because the power to appoint an arbitrator was solely vested in the Chief Justice (or a person/institution designated by him), and therefore the Single Judge lacked competence to hear or decide the section 11 application.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Union of India v. Mohindra Supply Co., AIR 1962 SC 256 Under the Arbitration Act (1940) an appeal lies only from orders specified in the Act; Letters Patent appeals must be read subject to that statutory restriction. Used to explain the general principle that a statutory provision identifying appealable orders limits the scope of Letters Patent appeals; the Court relied on it when considering the effect of section 37(1) of the 1996 Act.
State of West Bengal v. M/S Gourangalal Chatterjee, 1993 (3) SCC 1 Application of the 1940 Act rules to appealability where the order under appeal was passed under the Arbitration Act. Noted as a decision where the order under appeal was admitted to be under the old Arbitration Act; used in background discussion about appealability under statutory arbitration regimes.
Union of India v. K. Satyanarayan & Co., 1995 (1) CLJ 458 (Special Bench) Where the Arbitration Act (1940) specified appealable orders, an appeal under clause 15 of Letters Patent did not lie for orders not covered by the statutory clauses; distinguished orders that were not "under the Act". Relied upon for the proposition that a distinction exists between orders under the Act and orders not under the Act; Court noted the Special Bench did not overrule earlier decisions permitting Letters Patent appeals where the order was not an Act-order.
Tobu Enterprises Pvt. Ltd. v. Campco Industries Ltd., AIR 1984 Cal 24 When an order is not an order under the Arbitration Act, its appealability must be considered under clause 15 of the Letters Patent. Cited as authority for treating orders not enacted under the Arbitration Act as potentially appealable by Letters Patent; the Special Bench in Satyanarayan did not overrule it.
Unique Construction Co. (Pvt.) Ltd. v. Union of North Bengal Universities, 1986 (II) CHN 275 Held that if an order was not under the Arbitration Act it could be appealed under clause 15 if it satisfied the test of "judgment". Noted that the Special Bench distinguished this decision and did not accept it as bad law; the Court recorded the treatment of this line of authority.
Surekha Steel Ltd. v. Union of India, 1998 (I) CHN 13 (Division Bench) Applied reasoning from section 39(1) of 1940 Act to section 37 of 1996 Act and held no Letters Patent appeal under clause 15 for orders passed under the Act because section 37 excludes appeals other than specified. The Court observed that this Division Bench failed to take note of the later Supreme Court decision in Vanita M. Khanolkar; the present Court declined to expressly dissent but held the order before it was appealable under clause 15 for other reasons.
Vanita M. Khanolkar v. Pragna M. Pai, AIR 1998 SC 424 Even where a statutory section bars appeals from orders under it, the Supreme Court said no statutory provision can cut across the constitutional powers of a High Court to entertain Letters Patent appeals unless the statute expressly excludes such appeals. Used to show that an express exclusion is necessary to oust Letters Patent jurisdiction; applied to the question whether section 37 of the 1996 Act expressly excludes Letters Patent appeals (the Court noted section 37 lacks such express words of exclusion).
Delhi Development Authority v. Alkaram, AIR 1982 Del 365 (DB) Court competence must be restricted so as not to turn arbitration into the start of litigation; arbitration process should proceed without excessive court control. Relied upon for the statutory policy that judicial intervention is limited in arbitration matters and that courts are restricted to statutory roles to prevent arbitration becoming litigation.
Harihar Yadav v. Durgapur Projects Ltd., (unreported) No. 514 of 1998 (Single Judge) Held that the Chief Justice alone (or his designate) had the power under section 11 to carry out both components (deciding necessity of appointment and naming the arbitrator), and a Court not designated to name had no jurisdiction to determine the first component. The present Court expressly dissented from that view; it recorded the decision and then explained why it does not accept that reasoning, distinguishing appointment (naming) from the judicial determination of pre-conditions.
Shah Babulal Khimji v. Jayaben D. Kania, AIR 1981 SC 1786 Discusses the scope of "special acts" and appeals to High Court; referenced regarding the reach of special statutory provisions conferring jurisdiction. Quoted for the observation that special Acts which confer additional jurisdiction in internal appeals (e.g., section 39 of Arbitration Act) refer to such orders; used to explain the context of clause 15 appeals.
Justice of the Peace for Calcutta, 1872-80 Beng LR 433 Historic narrow interpretation of "judgment" under clause 15 as a decision affecting merits; cited as an example of narrow construction deprecated by later Supreme Court authority. Referred to as the narrow view that the Supreme Court rejected when interpreting "judgment" under clause 15; used as background to explain the broader approach adopted.
Rawatmal Bhairudan v. The Rajputana Trading Co. (Pvt.) Ltd., AIR 1973 Cal 248 Held that an order involving a jurisdictional question is a "judgment" within clause 15 and is appealable. Relied on to support the proposition that where a decision involves court jurisdiction to entertain proceedings, it is a judgment under clause 15 and hence appealable.
Tin and Allied Products Ltd. v. G. Bohlar & Co., 75 CWN 416 Order held appealable where it involved a question of jurisdiction even if the order appeared procedural. Used as an example where a procedural order was deemed appealable because the dispute turned on jurisdictional questions.
Central Bank of India Ltd. v. S.B Hosiery Mills Ltd., 70 CWN 670 Where procedure and jurisdiction are intermixed, an order may be a judgment under clause 15; adjournments connected with res judicata/jurisdictional pleas can be appealable. Cited to show that where adjournment is inter-mixed with jurisdictional issues the order falls within clause 15; applied to the present case where the adjournment was inter-mingled with jurisdiction to hear section 11.
Daulatram Agarwalla v. Champalal Ingraj, AIR 1963 Cal 337 Principle that when procedure and jurisdiction are so mixed that they cannot be separated, the order is appealable under clause 15. Relied upon in discussing when procedural orders become "judgments" because of their inseparability from jurisdictional decisions.
Sohanlal Baid v. State of West Bengal, AIR 1990 Cal 168 (DB) Assignment of business among High Court Judges is entrusted to the Chief Justice; judges derive power to hear classes of cases from such allocation. Applied to show that the Chief Justice's allocation of arbitration matters to a Single Judge empowered that Single Judge to exercise judicial functions assigned, subject to the Chief Justice retaining the exclusive naming power under section 11.

Court's Reasoning and Analysis

The Court's analysis proceeded in two inter-related strands: (A) whether the order of 15 July 1998 was appealable; and (B) whether the Single Judge had jurisdiction to entertain and decide the section 11 application.

A. Appealability of the Order

  1. The Court examined section 37(1) of the Arbitration and Conciliation Act, 1996 which prescribes appealability only from (a) orders under section 9 and (b) orders setting aside or refusing to set aside awards under section 34. The order under challenge did not fall within these categories.
  2. The Court surveyed prior authorities under the old 1940 Act (notably Union of India v. Mohindra Supply Co.) which held that where a statute prescribes which orders are appealable, Letters Patent appeals must be read subject to those statutory restrictions. The Court noted analogous reasoning had been applied in the Division Bench decision in Surekha Steel Ltd.
  3. The Court then considered the Supreme Court's decision in Vanita M. Khanolkar which held that a statutory bar on appeals does not automatically cut across the High Court's constitutional Letters Patent jurisdiction unless the statute expressly excludes Letters Patent appeals. The Court observed that section 37 of the 1996 Act does not contain express words excluding Letters Patent appeals.
  4. On that basis, and without expressing formal dissent from Surekha Steel Ltd., the Court concluded that the present order was appealable under clause 15 of the Letters Patent because (i) the impugned order was not an order under the Act (it made the section 11 exercise dependent on a section 8 application), and (ii) the order involved a question of jurisdiction (the right to have an arbitrator appointed) which is a recognized class of "judgment" under clause 15.

B. Jurisdiction to Entertain Section 11 Application

  1. The Court examined section 11 in detail. It noted sub-sections (4), (5) and (6) confer on the Chief Justice (or a person/institute designated by him) the power to make appointments where parties fail to agree, and that section 11(7) makes such decisions final. Section 11(8) and other provisions set out considerations and special rules for international arbitrations.
  2. The Court analyzed the meaning of "appointment." It concluded that within the context of section 11, "appoint" is used principally to mean nomination or naming of an arbitrator (the act of naming or designating an arbitrator). Parties themselves "appoint" or "name" arbitrators under the agreed procedure. The Chief Justice's exclusive power is thus primarily the power of naming the arbitrator (or designating the person/institute who will name).
  3. The Court then distinguished the naming function from the judicial function of determining whether the pre-conditions for appointment have been satisfied (i.e., whether an arbitrator should be appointed at all). The Court concluded that this latter function—judicial determination of pre-conditions—is a judicial act and falls to be exercised by a Court.
  4. The Court rejected the unreported Single Judge decision in Harihar Yadav to the extent that it held the Chief Justice alone (or his designate to name) must also determine the pre-conditions; the present Court held that such a construction would improperly vest judicial power in the Chief Justice's designate and would be impracticable (it would burden Chiefs of Courts with an impossible caseload).
  5. The Court referred to the High Court's internal assignment rules and the constitutional/legislative history (Article 225 and predecessor enactments) to explain that the Chief Justice may allocate arbitration business to a Single Judge. Given that allocation, the Single Judge is empowered to exercise the judicial function of determining whether the pre-conditions for appointment under section 11 have been fulfilled; the Chief Justice retains only the exclusive power to name the arbitrator after the judicial question is decided in favour of appointment.
  6. Applying these conclusions to the facts, the Court held that the Single Judge erred in adjourning the section 11 application because the pendency of the section 8 application before the Munsif was legally immaterial to the Single Judge's duty to decide section 11. Section 8(3) allows arbitration to commence or continue notwithstanding a pending application under section 8(1); section 11(5) employs mandatory language ("shall") that requires the appointment to be made upon fulfillment of pre-conditions.

Holding and Implications

Holding: APPEAL ALLOWED. The Division Bench set aside the Single Judge's order dated 15 July 1998 and remanded the matter to the Learned Single Judge to decide whether an arbitrator should be appointed in terms of section 11 of the Arbitration and Conciliation Act, 1996 without reference to the pending application under section 8(1) before the Munsif. Costs are to be costs in the cause.

Implications (as stated in the opinion):

  • The Single Judge, to whom arbitration matters have been allocated by the Chief Justice, has jurisdiction to entertain and decide the judicial question of whether the pre-conditions for an appointment under section 11 have been fulfilled. If the Single Judge decides that an appointment should be made, the matter must then be placed before the Chief Justice for naming (appointment in the sense of designation) of the arbitrator.
  • The Single Judge must confine itself to deciding issues under section 11 and must not make the decision dependent on the outcome of a separate section 8 application pending before a subordinate court.
  • The order under challenge was deemed appealable under clause 15 of the Letters Patent because it was not an order under the Act and involved a question of jurisdiction; consequently, Letters Patent jurisdiction remained available in the circumstances described.

Note: This summary is based exclusively on the content of the provided opinion. No information has been added beyond what appears in the text of the judgment.

Show all summary ...

Ruma Pal, J.:—This appeal involves the question of the jurisdiction of a Single Judge, who has been given the determination to hear and dispose of arbitration matters, to entertain applications under section 11 of the Arbitration and Conciliation Act, 1996 (hereafter referred to as the Act).

2. The facts giving rise to the question are briefly stated. The respondent does the business of rendering radio paging services. It procures pagers from the manufactures and appoints distributors to sell or lease the pager units to the consumers. According to the appellant the respondent was one such distributor and that in terms of the agreements between the respondent and the appellant, the respondent was to pay lease rent to the appellant. It is the appellant's case that lease rent of several lakhs of rupees fell due and payable by the respondent to the appellant.

3. In September 1996 the respondent filed a suit against the appellant in (TS No. 361 of 1996) before the Second Munsif at Alipore praying for cancellation of the lease agreements between the respondent and the appellant.

4. There is an arbitration clause in the agreements between the appellant and the respondent. The appellant filed an application under section 9 of the Act in the High Court for interim relief. The interim application has been disposed of.

5. The appellant appointed a Senior Advocate as sole arbitrator in terms of the Arbitration Clause on 19.5.97 and called upon the respondent to concur in the appointment. The respondent refused.

6. In March 1998 the appellant filed an application under section 11 of the Act in which it prayed for

“(a) An arbitrator be appointed by the Hon'ble Chief Justice of this Hon'ble Court at Calcutta in terms of the arbitration clause contained of the agreements dated 31.01.96, 28.02.96 and 30.03.96

(b) Arbitrator be directed to enter upon the reference within such time as this Hon'ble Court may be pleased to direct and to make and publish this award also within such time as this Hon'ble Court may deem fit and proper.

(c) Such further or other order to orders be passed as to this Hon'ble Court may deem fit and proper.”

7. The appellant also filed an application under section 8 of the Act before the Second Munsif at Alipore in TS No. 3612 of 1992 for referring the subject matter of the suit to arbitration.

8. The application under section 11 was taken up for hearing. The Learned Judge passed the following order on 15th July, 1998:

“It appears that an application u/s. 8 of the Arbitration and Conciliation Act, 1996 has been pending before the Learned Second Munsif at Alipore being TS No. 362 of 1996. An application has also been made before this Court by the petitioner under the Arbitration and Conciliation Act, 1996 for reference of the disputes which have arisen between the parties to the Arbitrator to be appointed by the Hon'ble Chief Justice.

Having regard to the aforesaid facts and circumstances of the case, it is expected that the Learned Second Munsif at Alipore shall dispose of the said application under section 8 of the Arbitration and Conciliation Act, 1996 forthwith and in any event within a period not later than four weeks from the date of communication of this order. The Registrar, Original Side of this Court, is directed to communicate this order to the Registrar, Alipore Judges' Court, 24-parganas (South).

The matter remains part heard and stands adjourned till four weeks hence.”

9. This order has been challenged before us. The appellant's short point is that adjudication of an application filed under section 11(5) of the Act cannot be made subject to disposal of an application filed by the applicant under section 8 of the Act.

10. The respondent has submitted that the order was not an appealable one. It has also been submitted that the Court did not have the jurisdiction to entertain the application under section 11 of the Act at all as the power was solely vested in the Chief Justice.

11. On the question of maintainability, section 37(1) of the Act provides:

“(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—

(a) granting or refusing to grant any measure under section 9;

(b) setting aside or refusing to set aside an arbitral award under section 34.”

12. The order under appeal does not fall either within clause (a) or clause (b) of sub-section (1) of section 37. According to the appellant the order under appeal was not an Order passed under the Act and therefore was not governed by section 37(1). It is stated that the order is appealable as a “judgment” under clause 15 of the Letters Patent.

13. The several decisions cited by the respondents in support of its submission that the order was not an appealable one did not deal with this submission of the appellant. Most of the decisions relate to section 39(1) of the Arbitration Act, 1940. Section 39(1) of the Arbitration Act, 1949 was similarly worded. It also provided that an appeal shall lie from specified orders passed under the Act (and from no others).

14. The Supreme Court in Union Of India v. Mohindra Supply Co. , AIR 1962 SC 256 construing section 39(1) said:

“Under section 39(1), an appeal lies from the orders specified in that sub-section and from no others. The legislature has plainly expressed itself that the right of appeal against orders passed under the Arbitration Act may be exercised only in respect of certain cases…….. it would be impossible to hold that notwithstanding the express prohibition, an appeal under the Letters Patent from an order passed in appeal under sub-section (1) is incompetent ……. Therefore, in so far as Letters Patent deal with appeals against orders passed in arbitration proceedings, they must be read subject to the provisions of section 39(1) and (2) of the Arbitration Act.”

15. It is to be emphasised that the Supreme Court was considering appeals against orders passed under the 1940 Act.

16. Similarly in State Of West Bengal v. M/S Gourangalal Chatterjee., 1993 (3) SCC 1 there was no dispute that the order under appeal was one passed under the 1940 Act.

17. Finally in the decision of the Special Bench in Union Of India… v. K. Satyanarayan & Co.…., 1995 (1) CLJ 458 the relevant question framed for decision by the Special Bench was:

“Does an appeal lie from an order passed under the Arbitration Act, in case not covered by section 39(1) of the said Act, under clause 15 of the Letters Patent where no question of jurisdiction involved?”

18. In answering that question the Special Bench relying primarily on Union Of India v. Mohindra Supply Co. (supra) held:

“The Arbitration Act, 1940 having laid down as to which orders would be appealable in terms of sub-section (1) of section 39 of the Act, no appeal under clause 15 of the Letters Patent of this Court would lie which does not come within the purview of the clauses (i) to (iv) thereof.”

19. In the context of the question framed it appears that the Special Bench did not hold that where a question of jurisdiction is involved, an appeal under clause 15 of the Letters Patent would not lie.

20. Significantly the Special Bench drew a distinction between those orders which were under the Act and those that were not. It noted and did not overrule the decision in Tobu Enterprises Pvt. Ltd. v. Campco Industries Ltd., AIR 1984 Cal 24 where it was held that when the order was not an order under the Arbitration Act, the question of its appealability could only be considered in the context of clause 15 of the Letters Patent. The Special Bench also distinguished but did not hold that the Division Bench decision in Unique Construction Co. (Pvt.) Ltd. v. Union of North Bengal Universities, 1986 (II) CHN 275 when it was said that as the order under appeal was not an order under the Arbitration Act an appeal could be entertained therefrom if it satisfies the test of “judgment” within the meaning of clause 15 of the Letters Patent, was bad law.

21. In the fourth decision cited by the respondent viz. Surekha Steel Ltd. v. Union of India, 1998 (I) CHN 13, the Division Bench of this Court applied the reasoning of the decisions on section 39(1) of the 1940 Act to section 37 of the 1996 Act and held that an appeal did not lie under clause 15 of the Letters Patent because:

“The impugned order is one which has been passed under the Arbitration Act which is a self contained Code as regards arbitration and section 37 which clearly excludes an appeal from an order of a Court not specified in sub-section (1) of section 37 of the Act.”

(Emphasis supplied).

22. The Division Bench failed to notice the latest decision of the Supreme Court in Vanita M. Khanolkar v. Pragna M. Pai, AIR 1998 SC 424 on section 6 of the Specific Relief Act. The section specifically bars appeals from orders passed under the section. Despite this the Supreme Court said no statutory provision can cut across the constitutional powers of the High Court to entertain an appeal under the Letters Patent unless the statutory enactment expressly excluded appeals under the Letters Patent. There are no such express words of exclusion in section 37 of the 1996 Act.

23. However it is unnecessary for the purposes of this appeal to expressly dissent from the view taken in Surekha Steel Ltd. (supra) as we are of the view that even otherwise the order is an appealable one under clause 15 of the Letters Patent.

24. The appellant in this case has relied on the provisions of section 11(5) and section 8(3) of the 1996 Act to contend that the order under appeal was not an order under the Act at all. To appreciate this submission the provisions of the two sections must be considered.

25. Section 11 deals with the appointment of arbitrators. Sub-sections (1) to (4) deal with the appointment by agreement of parties. Sub-section (5) provides:

“(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.”

26. Analysed, this sub-section states that if the pre-conditions are satisfied the appointment shall be made upon the request of a party. No other consideration can come into play before the appointment is made.

27. The intention of the Act is to facilitate the prompt resolution of disputes by recourse to arbitration. To render this effective, interference by the Court is designedly kept to a minimum. Even the issue of the existence of the arbitration agreement is now brought under the competence of the arbitrator under section 16 of the 1996 Act. Primacy has been given, as it were, to resolution of disputes by arbitration without resort to courts. This intention is expressed unequivocally in section 5 of the Act which provides:

“5. Extent of judicial intervention.—Notwithstanding anything contained in any other law for the time being in force, in matters governed by this part, no judicial authority shall intervene except where so provided in this part.”

28. This makes it clear that the Court is confined to the statutory provisions. It is restricted from exercising its powers otherwise.

29. As held by the Division Bench of the Delhi High Court in Delhi Development Authority v. Alkaram, AIR 1982 Del 365 (DB) the competence of Courts is restricted in order not to make the arbitration process the beginning of litigation instead of its end. In other words, the arbitration process must commence and proceed without control by the Courts except to the limited extent provided in the statute. This is reinforced by section 8 of the Act which deals with the powers of the Courts to refer parties to arbitration where there is an arbitration agreement. It reads as follows:

“8. Power to refer parties to arbitration where there is an arbitration agreement.—(1) 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.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.”

30. The corresponding provision in the 1940 Act was section 34. Whereas under section 34 of the 1940 Act the Court had the discretion to decide whether or not to refer the parties to arbitration even if the suit was in respect of matters covered by the arbitration agreement, under section 8(1) of the 1996 Act the Court is bound to refer the parties to arbitration.

31. The use of the word “may” in section 8(3) allows for arbitration proceedings to continue despite the fact that a suit may be pending on the same issue. This may be contrasted with section 35 of the 1940 Act under which the arbitration proceeding could not continue validly unless the suit was stayed. Section 8(3) read with the mandatory “shall” in section 11(5) and the restriction placed by section 5 show that even when a suit is pending on the subject matter of the agreement and an application under section 8(1) has been made for reference of the dispute to arbitration, the Court before which an application is made for appointment of an arbitrator under section 11 must proceed to decide the same. The fact that an application has been filed under section 8(1), has by statute and for the purpose of section 11, been made an immaterial consideration.

32. The Learned Single Judge therefore could not have adjourned the section 11 application for appointment of an Arbitrator because of the pendency of the application under section 8(1) and make the exercise of power under section 11(5) dependent upon the disposal of the application under section 8(1) by the Munsif.

33. In making the appellant's right to have an arbitrator appointed in terms of section 11(5) subject to the outcome of the application under section 8(1), the Learned Judge has acted in a manner which is not envisaged under the 1996 Act. The order is not one which is referable to section 11(5) or any other provision of the Act.

34. Clause 15 of the Letters Patent confers on the litigant a right to prefer an appeal against any judgment. As far as orders under the Act are concerned, clause 15 would be subject to section 37(1), as has been held by the several decisions noted above. Where the order is not under the Act the special power and jurisdiction of the High Court under clause 15 to entertain an appeal from any judgment would be effective.

35. The observation by Fazal Ali, J. in Shah Babulal Khimji v. Jayaben D. Kania, AIR 1981 SC 1786 namely “Special Acts which could and did confer additional jurisdiction even in internal appeals to the High Court, viz., from an order passed by a Trial Judge to a larger Bench, for instance, section 39 of the Arbitration Act.” in my view refers to such orders.

36. The next question which needs determination is whether the order can be said to be a “judgment” within the meaning of clause 15.

37. The Supreme Court in Khimji's case deprecated the very narrow view on this point taken by a Division Bench of the Calcutta High Court in the case of Justice of the Peace for Calcutta (1872-80 Beng LR 433) (supra) where Sir Couch, C.J on an interpretation of clause 15 of the Letters Patent observed thus:

“We think that ‘judgment’ in clause 15 means a decision which affects the merits of the question between the parties by determining some right or liability. It may be either final, or preliminary or interlocutory, the difference between them being that a final judgment determines the whole cause or suit, and a preliminary or interlocutory judgment determines only a part of it, leaving other matters to be determined.”

38. The Supreme Court said that “a court is not justified in interpreting a legal term which amounts to a complete distortion of the word ‘judgment’ so as to deny appeals even against unjust orders to litigants having genuine grievances so as to make them scapegoats in the garb of protecting vexatious appeals. In such cases, a just balance must be struck so as to advance the object of the statute and give the desired relief to the litigants, if possible”.

39. In the case before us the object of the statute to expedite the arbitral process has in fact been defeated by deferring the decision under section 11 till the Munsif dealt with the application under section 8(1).

40. It has also been held that where a question of jurisdiction of the Court to entertain or proceed with a suit or proceeding is involved and a decision on that question is given, such decision is a “judgment” within meaning of clause 15, Letters Patent (Cal.) and is appealable.

41. This was the view of a Division Bench in Rawatmal Bhairudan v. The Rajputana Trading Co. (Pvt.) Ltd., AIR 1973 Cal 248 where it was held an order involving a jurisdictional question is appealable as a judgment under clause 15 of the Letters Patent.

42. Similarly in Tin and Allied Products Ltd. v. G. Bohlar & Co., 75 CWN 416 an order was passed granting leave to a plaintiff to withdraw his suit with liberty to file a fresh suit in the same cause subject to payment of costs by the plaintiff. On a subsequent application by the plaintiff for variation of this order to delete the clause relating to costs the Learned Judge directed the deletion. The defendant appealed contending that the Court did not have the jurisdiction to recall the order as the order had been drawn up. The plaintiff contended that the appeal was not maintainable as the order did not affect the merits of any question between the parties. The appeal was held to be maintainable by the Division Bench on the ground that the order involved a question of jurisdiction.

43. In Central Bank of India Ltd. v. S.B Hosiery Mills Ltd., 70 CWN 670 the Bank had filed a suit against its constituent in Bhagalpur. The suit was decreed. The constituent appealed. While the Bank suit was pending the constituent filed a suit in Calcutta. The bank made an application to the Patna High Court for amendment of its written statement by including a prayer for res-judicatd. It also prayed for postponement of the Calcutta suit until the decision of the appeal. The application was dismissed. The Court allowed the appeal of the bank. It was held that by disallowing the plea for res-judicata there was a final decision affecting the merits of the Calcutta suit. As far as the prayer for adjournment was concerned the Division Bench said:

“The mere order for adjournment of a case is certainly not a judgment within the meaning of clause 15 of the Letters Patent. But in this case, I shall presently point out that the relief is intimately connected with the plea of res-judicata. Therefore, where such a plea is inter-mixed with the question of jurisdiction so that they cannot be separated, it will come within the scope of clause 15 of the Letters Patent. This has been pointed out in a case cited by Mr. Ghose himself (4) Daulatram Agarwalla… v. Champalal Ingraj…., AIR 1963 Cal 337. Bose, C.J, held that where the question of procedure and the question of jurisdiction are so mixed up that one cannot be disassociated from the other, an order dealing with such question of procedure and jurisdiction is an appellable order, being a judgment within the meaning of clause 15 of the Letters Patent.”

44. The observations are applicable to the order under appeal. The Court did not merely adjourn the hearing. The question of adjournment was intermixed with a question of the Court's jurisdiction to entertain and dispose of an application under section 11. The submission of the respondent that the matter was directed to be listed after 4 weeks and therefore there was no final decision on the issue is unacceptable. If the Court has once granted an adjournment for the purpose of enabling the Munsif to determine the application under section 8(1), there could be no reason to expect that the same Court would hear the application under section 11, 4 weeks later, if the application under section 8(1) were still pending disposal before the Munsif. Incidentally, the application under section 8(1) is still pending before the Munsif at Alipore and the application under section 11 has been directed to go out of the list.

45. The contention of the appellant before us is that the Learned Judge did not have the jurisdiction to adjourn the application under section 11 only on the ground that an application under section 8(1) of the Act is pending. And according to the Counsel for the respondents, the Learned Single Judge could not have entertained or determined the application under section 11 at all. In the circumstances since the order under appeal was not one under the 1996 Act and since it involved a question of jurisdiction, it must be held on the basis of the authorities cited that the order is an appealable one under clause 15 of the Letters Patent.

46. But did the court have the jurisdiction to hear the application under section 11 at all? The unreported decision of a Learned Single Judge in Harihar Yadav… v. Durgapur Projects Ltd.…. No. 514 of 1998: Judgment dated 1st September, 1998) has construed the provisions of section 11 and held that the power of appointment of an arbitrator was conferred by section 11(5) on the Chief Justice or any person or institute designated by him for this purpose. The Learned Judge accepted the submission that the process of appointing an arbitrator involved consideration of two components; (1) a consideration whether in the facts and circumstances of the case the arbitrator in fact is required to be appointed and (2) the naming of the arbitrator. It was held that as the Chief Justice had not designated the Learned Judge to name the arbitrator, the court did not have jurisdiction to consider and dispose of the first component. According to the Learned Judge, the two components leading to the exercise of power of appointing the arbitrator have to be gone into by the Chief Justice alone and that if the Court had no power to appoint an arbitrator because it had not been designated to do so, it had no power also to consider any issue relevant to the appointment of an arbitrator under section 11.

47. The view, as above, of the Learned Single Judge does not commend itself for our acceptance and we accordingly, express our dissent for the reasons hereafter stated.

48. Section 11 makes a distinction between the procedure for appointment of an arbitrator and the actual appointment of the arbitrator. Under section 11(2) parties can agree on the procedure for appointing the arbitrator. If there is no such agreement on the procedure section 11(3) prescribes the procedure to be followed. When the arbitration is to be of three arbitrators, section 11(3) provides that “each party shall appoint one arbitrator and the two appointed arbitrators shall appoint a third arbitrator who shall act as the presiding arbitrator”. If a party fails to appoint an arbitrator within 30 days from the receipt of request to do so from the other party or the two appointed arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment, “the appointment shall be made, upon request of a party, by the Chief Justice or any person or institute designated by him under sub-section (4) of section 11”.

49. Section 11(5) similarly provides that in the case of the arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within 30 days from the receipt of the request by one party from the other to do so, the appointment shall be made, upon request of a party by the Chief Justice or any person or institute designated by him. Section 11(6) deals with a situation where the appointment procedure has been agreed upon but there is non compliance of the agreed procedure. In this case also any party may request “the Chief Justice or any person or institute designated by him” to take the necessary measures unless the agreement on the appointment provides other means for securing the appointment.

50. A decision on the matter entrusted by sub-sections (4), (5) and (6) to the Chief Justice or any person or institute designated by him is final by virtue of section 11(7). Section 11(8) provides for considerations to which regard should be had before such power of appointment is exercised. Section 11(9) deals with International Commercial Arbitrations where the Chief Justice of India or any person or institute designated by him is given the powers of appointment. Section 11(11) deals with a situation where several requests are made to the Chief Justices of different High Courts or their designates. Section 11(12)(a) extends the operation of sub-sections (4), (5), (6), (7), (8) and (10) to International Commercial Arbitrations giving power of appointment to the Chief Justice of India in place of Chief Justice of the High Court. Section 11(12)(b) clarifies that the reference to Chief Justice means the Chief Justice of the appropriate High Court.

51. What does “appointment” mean—is it only limited to naming or does it include the adjudicatory process as to whether appointment should be made?

52. It is clear from a reading of section 11 that the word “appoint” has been used in section 11 to mean nomination or designation. Thus parties may appoint or name their arbitrator under section 11(2), (3) and (4). The parties do not, in appointing an arbitrator, do more than name or designate him.

53. The power which has been conferred exclusively under section 11 on the Chief Justice is the power of appointment or the power to name an arbitrator. The Chief Justice may, if he so chooses, designate some other person or institute to exercise this power.

54. This power is to be distinguished from the general power of a court to determine whether the pre-conditions for the exercise of that power have been fulfilled. This is a judicial act. The bifurcation between the two powers has been recognized in the unreported decision of Harihar Yadav v. Durgapur Projects Ltd. (supra) when it was said:

“Undoubtedly the appointment of an arbitrator, on an application made by one of the parties involves a decision making process comprising the twin vital components and elements of consideration with regard to the points in issue, or the points of controversy between the parties and the actual act of appointment of the arbitrator. The act of actual appointment of an arbitrator has always to be preceded by a consideration as to whether in the facts and circumstances of the case the arbitrator in fact is required to be appointed or not. It is not only after this issue is resolved that the question of appointment of an arbitrator arises.”

55. Given the definition of the word ‘appointment’, in our view, section 11 does not say that the Chief Justice could alone exercise the general power of judicially determining whether the pre-conditions for such appointment have been fulfilled. To hold otherwise would, not only be contrary to the express language of the section, but it would also mean that the Chief Justice could by designation clothe any person or institution with the power to discharge judicial functions.

56. Besides the legislature could not have intended to burden either the Chief Justice of India (in connection with all international arbitrations) or the Chief Justice of a High Court (in connection with all domestic arbitrations) to be addled with the impracticable task of determining the existence of the preconditions for appointment of an arbitrator/arbitrators in all cases nor to empower the Chief Justice with the power to clothe any person or authority of his choice with the discharge of judicial functions exercisable by Courts. In facts section 11 does not say anything on the matter.

57. In our view such judicial determination is to be exercised only by a Court. A Court has been defined in section 2(e) of the Act as:

“(e) ‘Court’ means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary Civil Jurisdiction, having jurisdiction to decide the question forming the subject-matter of the reference if the same had been the subject matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes.”

58. Chapter V Rule 1 of the Original Side Rules of this Court sets the limits for the exercise of original jurisdiction in the following manner:

“1. Any Judge of the High Court may, subject to any rules of Court, exercise, in Court or in Chambers, all or any part of the jurisdiction vested in the High Court on its Original Side.”

59. The rules of the Court have provided for a limitation on the power of Judges to the extent determined by the Chief Justice of the High Court. Historically, the power of the Chief Justice of a High Court is derived from the Act establishing High Courts, 1861 (24 and 25 VICT., CAP. 104) which was enacted for establishing High Courts of judicature in India. Section 14 of the Act provided:

“14. The Chief Justice of each High Court shall from time to time determine what Judges in each case shall sit alone, and what Judges of the Court, whether with or without the Chief Justice, shall constitute the several Division Courts as aforesaid.”

60. Clause 36 of the Letters Patent, 1865 continued this power of the Chief Justice of the High Court in Bengal.

61. The Government of India Act, 1915 then provided:

“108. Exercise of jurisdiction by Single Judges or Division Courts.— (1) Each High Court may by its own rules provide, as it thinks fit, for the exercise, by one or more Judges, or by Division Courts constitute by two or more Judges, of the High Court, of the original or appellate jurisdiction vested in the court.

(2) The Chief Justice of each High Court shall determine what Judge in each case is to sit alone, and what Judges of the court, whether with or without the Chief Justice, are to constitute the several Division Courts.”

62. Clause 36 of the Letters Patent was accordingly amended by the Letters Patent of 11th March, 1919 to incorporate a reference to section 108 of the Government of India Act, 1951.

63. This power, which was preserved under Article 225 of the Constitution of India, has been construed in Sohanlal Baid v. State of West Bengal [See: AIR 1990 Cal 168 (170 to 174) (DB) : (1989) II CHN 474].

“The function of assignment of judicial business amongst the judges of the High Court, whether sitting single or in Division Courts, is entrusted by law to the Chief Justice and the Judge or Judges derives its power to hear specified classes of cases only from the allocation of business among Judges made by the Chief Justice. Thus cases not covered by such allocation cannot be heard by Judge sitting singly or in Division Courts.”

64. Pursuant to this power the Chief Justice has allocated the business of hearing matters pertaining to arbitrations to a Learned Single Judge. It is for that Learned Single Judge to exercise the general power referred to earlier, leaving the power of naming the arbitrator under section 11 to the exclusive jurisdiction of the Chief Justice.

65. For the reasons stated we hold that the Learned Single Judge has the power to entertain the application under section 11 to determine whether the arbitrator should be appointed in terms of section 11 and thereafter placing the matter before the Chief Justice to name the arbitrator if the question is decided in favour of the applicant.

66. We also hold that the Learned Judge must confine himself to section 11 only in deciding the application. We accordingly allow the appeal and set aside the order dated 15th July, 1998 and remand the matter back to the Learned Single Judge for the purpose of deciding whether an arbitrator should be appointed in terms of section 11 without reference to the application under section 8(1) before the Munsif. Costs will be costs in the cause.

M.H.S Ansari, J.:—I agree.

Appeal allowed.
K.G