Beg To Differ – The Judgement Of Bombay High Court In Haresh Chinnubhai Shah Vs. Rajesh Prabhakar Jhaveri And Anr.

Introduction :

1.In a current judgement the Bombay Higher Court in Haresh Chinnubhai Shah Vs. Rajesh Prabhakar Jhaveri and Anr. (decided on 04.11.2003) 2004 (1) Arb. LR 536 (Bombay): 2004(1) Mh LJ 1109 : (2004) 10 CLA-BL Supp (Snr.) 34 (Bom) held (in para 11) that “incorrect composition of the Arbitral Tribunal is a ground for setting aside of an award. In the present case, it is shown that the composition of the Arbitral Tribunal was not in accordance with law not in accordance with section 10 of the Act not in accordance with the directions and order below section 11 of the Act passed by the designate of Hon’ble Chief Justice. The award is, as a result, liable to be set aside and is accordingly, set aside.” It is respectfully submitted that the point of law decided in the judgement does not seem to be correct for the causes detailed beneath.

1.1 The short information and background of the case are provided in para 9 of the judgement which reads hence : “There is however a greater lapse on the component of the Arbitrators. Section ten of the Act lays down that the parties are totally free to decide the quantity of Arbitrators offered that such number shall not be an even quantity. As a result, Arbitral Tribunal cannot consist of an even quantity of Arbitrators. The first order dated 10th August, 2001 passed by the designate of the Chief Justice under Section 11 of the Arbitration Act appointed two Arbitrators with a path that they shall be cost-free to appoint a presiding Arbitrator. Implicit in the order was that the two Arbitrators would appoint the third presiding Arbitrator and would not act unless they appointed the presiding Arbitrator. The second order dated 21st December, 2001 by the designate of Chief Justice is more explicit and says that Mr. Mehta and Mr. Dave shall pick the presiding Arbitrator and proceed with the Arbitration. It clearly mandates that the two Arbitrators had to select the presiding Arbitrator ahead of they chose to proceed additional. This path was in consonance with Section ten of the Act. It is nobodys case that the two Arbitrators appointed a presiding Arbitrator. Presiding Arbitrator was in no way appointed and the Arbitral Tribunal consisted of only even quantity of members contrary to the provision of Section ten of the Act and contrary to the orders passed by the designate of the Hon’ble Chief Justice below Section 11 of the Act. Two Arbitrators, therefore, could not have proceeded with the Arbitration, significantly much less could have proceeded ex-parte.”

2. A 3 judge bench of Supreme Court in Bhatia International V. Bulk Trading S A and one more [2002]47 CLA-BL SUPP 63 (SC) observed that the very object of the Arbitration and Conciliation Act of 1996 (hereinafter ‘the Act’), was to establish a uniform legal framework for the fair and effective settlement of disputes arising in international industrial arbitration. The following principles are compiled from this judgement

Court has to choose that interpretation which represents true intention of legislature.

two.1 The conventional way of interpreting a statute is to seek the intention of its makers. If a statutory provision is open to far more than a single interpretation then the court has to select that interpretation which represents the accurate intention of the Legislature. This job usually is not an straightforward a single and numerous troubles arise on account of a variety of causes, but at the same time, it need to be borne in thoughts that it is impossible even for the most imaginative Legislature to forestal exhaustively scenarios and situations that might emerge soon after enacting a statute where its application may be known as for. It is in such a predicament that the Courts’ duty to expound arises with a caution that the court ought to not try to legislate.

Rules of interpretation of a Statute

2.two. If a language utilized is capable of bearing much more than one building, in deciding on the true which means, regard should be had to the consequences, resulting from adopting the option constructions. A construction that final results in hardship, severe inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the method which the statue purports to regulate has to be rejected and preference need to be provided to that building which avoids such results. (see Johnson v. Moreton [1978] three All ER 37 and Stock v. Frank Jones (Tripton) Ltd. [1978] 1 All ER 984). In choice out of diverse interpretations the court will adopt that which is just affordable and sensible rather than that which is none of those items, as it might be presumed that the Legislature must have used the word in that interpretation which least offends our sense of justice.

two.three Even although the mentioned Act is now an integrated law on the subject of arbitration, it can not and does not provide for all contingencies. An arbitration getting a creature of agreement in between the parties, it would be not possible for the Legislature to cover all aspects.

2.4. The Supreme Court further observed (in para 35) “Lastly, it must be stated that the mentioned Act does not appear to be a nicely drafted legislation. As a result, the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta can’t be faulted for interpreting it in the manner indicated above”.

3. Now an humble try is produced by me to go over the principles declared by the Supreme Court in Narayan Prasad Lohia v. Nikunj Kumar Lohia and others [2002] 5 CLA-BL-Supp I (SC) : 2002 Arb. W.L.J. 425 (SC) (decided on 20th February, 2002)

A party can challenge the composition of arbitral tribunal prior to the arbitral tribunal itself

3.1 It has been held by a Constitution Bench of the Supreme Court, in the case of Konkan Rly. Corporation Ltd. v. Rani Construction (P) ltd. [2002] two SCC 388 that section 16 enables the arbitral tribunal to rule on its personal jurisdiction. It has been held that under section 16 the arbitral tribunal can rule on any objection with respect to existence or validity of the arbitration agreement. It is held that the arbitral tribunal’s authority beneath section 16 is not confined to the width of its jurisdiction but goes also to the root of its jurisdiction.

three.two A 3 judge bench of Supreme Court in Narayan Prasad Lohia case (supra) held that Section 16(2) tends to make it clear that a challenge to the composition of arbitral tribunal can be taken even although the party could have participated in the appointment of the arbitrator and/or could have himself appointed the arbitrator. Needless to state a celebration would be cost-free, if it so chooses, not to raise such a challenge. Therefore a conjoint reading of sections ten and 16 shows that an objection to the composition of the arbitral tribunal is a matter which is derogable. It is derogable simply because a celebration is cost-free not to object inside the time prescribed in section 16(two). If a celebration chooses not to so object, there will be a deemed waiver beneath section 4 (italicized supplied).

Parties can decide even quantity of arbitrators

4. The Supreme Court in Narayan Prasad Lohia case (supra) further held that even if parties offer for appointment of only 2 arbitrators, that does not mean that the agreement becomes invalid. Beneath section 11(3) the two arbitrators ought to then appoint a third arbitrator who shall act as the presiding arbitrator. Such an appointment ought to preferably be created at the beginning. Even so, we see no reason, why the two arbitrators cannot appoint a third arbitrator at a later stage, i.e., if and when they differ. This would make certain that on a difference of opinion the arbitration proceedings are not frustrated. But if the two arbitrators agree and give a widespread award there is no aggravation of the proceedings. In such a case their frequent opinion would have prevailed, even if the third arbitrator, presuming there was one, had differed. Thus, we do not see how there would be waste of time, money and expense if a celebration, with open eyes, agrees to go to arbitration of two persons and then participates in the proceedings.

five. Article 141 of Constitution of India : The law declared by the Supreme Court shall be binding on all courts inside the territory of India.

five.1 Binding force of Supreme Court decisions : All Courts in India are bound to stick to the decision of the Supreme Court even even though they are contrary to choices of the House of Lords (I.T. Commr. V. Shrinibbai, A. 1965 Bom. 586 Punjabi v. Shamrao, A. 1955 Nag. 293) or the Privy Council (Dwarka Das v. Sholapur Spinning Co., A. 1954 S.C. 119)

five.2 ‘Law declared’ : In case of conflict among decisions of the Supreme Court itself, it is the newest pronouncement which will be binding upon the inferior Courts, unless the earlier was of a larger Bench. If the later decision is that of a larger Bench, the earlier choice will be deemed to have been overruled and entirely wiped out. This rule is followed by the Supreme Court itself.

Conclusion :

five.three The law declared by the Supreme Court in Narayan Prasad Lohia case (supra) is binding on the Bombay Higher Court and consequently, it is respectfully submitted that the point of law decided in Haresh Chinnubhai Shah Vs. Rajesh Prabhakar Jhaveri and Anr. (supra) does not seem to be correct. It appears that the judgement of Supreme Court in Narayan Prasad Lohia case (supra) was not taken into the notice of Hon’ble Bombay High Court.
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