Holding

An order appointing an arbitrator under Section 11(6) must be a reasoned judicial order that considers the claims and objections of both parties; otherwise it is unsustainable and must be set aside.

Summary

A partnership dispute arose between the parties, and the first respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator. The Chief Justice of the Allahabad High Court appointed a retired judge as arbitrator on 9 December 2005 without providing a reasoned order, without verifying service of notice on all respondents, and without affording the parties an opportunity to raise objections. The appellants challenged this order, relying on the Supreme Court’s decision in SBP & Co. v. Patel Engineering Ltd. (2005) which held that the power under Section 11(6) is judicial and must be exercised after considering the claims and objections of both parties and after passing a reasoned order. The Supreme Court held that the High Court’s order was unsustainable, set it aside, and remitted the matter to the High Court to pass a fresh order in accordance with the principles laid down in SBP & Co. The appeal was allowed and the case was remitted for fresh consideration.

Issues considered

Whether an order appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, without a reasoned order and without adverting to the parties' claims and objections, is valid.
Whether the power exercised by the Chief Justice under Section 11(6) is administrative or judicial.
Whether an appeal against such an order lies under Article 136 of the Constitution.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6), s. 16, s. 34, s. 37

Subjects

ArbitrationSection 11(6)Appointment of arbitratorReasoned orderJudicial powerArticle 136Notice

Judgment

_,_

A RAMESHWAR DAS AGRA WAL AND ANR.
v.
KIRAN AGRA WAL AND ORS.

NOVEMBER 23, 2007
B .
'

[G.P. MATHUR AND P. SATHASIVAM,JJ.J "

Arbitration and Conciliation Act, 1996-s. I I-Application
under-Appointment of arbitrator by Chief Justice of High Court
c without passing reasoned order and without adverting to claim and
objection of the parties-Sustainability of-Held: In the light of
principles laid down in SEP & Co. 's case, order under s.11 (6) is a
judicial pronouncement-It is incumbent on part of Chief Justice or
designated Judge to consider claim of both the parties and pass
D reasoned order-Hence, order ofChiefJustice not sustainable and set
aside-Matter remitted to High Court for consideration in the light of
SEP & Co 's case.

Dispute arose between the parties. In terms of the agreement, first
E respondent filed application under section 11 of the Arbitration and
Conciliation Act, 1996 for appointment of arbitrator. High Court issued
notice to all the respondents, but most of them were not sen-ed.
Appellant sought time to file counter affidavit and stated that no dispute
remained for adjudication. The ChiefJustice of the High Court rejected
)..
F the request of the appellant and appointed a retired judge as an
arbitrator. Hence the present appeal.

Allowing the appeal and remitting the matter to High Court, the
Court
G HELD: 1. The impugned order passed by the ChiefJustice of High .
,.___,,
Court is set aside and is remitted back to the High Court to pass fresh
order in the light of the principles laid down in SEP & Co. v. Patel
Engineering Ltd and Another's case. [Para 10) [497-AJ

H 488
RAMESHWAR DAS AGRAWAL v. KIRAN AGRAWAL 489
~

2.1. From a seven-judge Bench decision of this Court in SBP & A
Co. v. Patel Engineering Ltd and Another, it is clear that the power being
exercised by the Chief Justice or the designated Judge under section
11 of the Arbitration and Conciliation Act, 1996 is not an administrative
power but it is a judicial power. An appeal would lie against that order
only under Article 136 of the Constitution to this Court. Though the B
., ..A
decision in Konkan Railway Corpn. Ltd has been overruled, the Bench
clarified that appointment ofarbitrators or Arbitral Tribunals therefore,
made are to be treated as valid, all objections being left to be decided
under section 16 of the Act. After the decision of this Court in SBP &
Co. v. Patel Engineering Ltd and Another it is incumbent on the part of c
the Chief Justice or a designated Judge to consider the claim of both
parties and pass a reasoned order. [Para 8) [494-B, C, D; 495-A, BJ

2.2. Unfortunately, the decision in SBP & Co. v. Patel Engineering
Ltd. and Another's case though decided earlier i.e. on 26.10.2005 was
D
not brought to the notice of the Chief Justice, who passed an order,
subsequent to the same i.e. on 09.12.2005. In view of the fact that an
order passed under section 11 (6) is a judicial order and in the light of
the stand of the appellants, the impugned order appointing an Arbitrator
without adverting to the claim and objection of both parties cannot be E
sustained. The order did not show any reason for appointing an
Arbitrator. Inspite of a request made for filing an affidavit opposing the
application for appointment of an Arbitrator, the ChiefJustice did not
afforded further time. Except respondent No.4, notice was not served
on the other respondents and without hearing them an order was passed
F
appointing an arbitrator. The order did not satisfy the requirement of
law laid down by this Court in SBP & Co. v. Patel Engineering Ltd and
Another's case. [Para 8) [494-D, E, F; 495-A, B, C; 496-D, E)
SBP & Co. v. Patel Engineering Ltd and Anr., [2005) 8 SCC 618,
followed. G
l·----
Konkan Railway Corporation Ltd. v. Rani Construction Private
Limited, [2002) 2 SCC 388, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5366 of
2007. H
490 SUPREME COURT REPORTS [2007) 12 S.C.R.

A From the final Judgment and Order dated 9.12.2005 of the High
Court of Judicature at Allahabad in A.A. No. 54 of2003.
Manoj Swarup and Lalita Kohli (for Mis. Manoj Swarup & Co.)
for t.11e Appellants.
B Jay Savla, Reena Bagga, Gaurav Agrawal and Ashutosh Lohia for
the Respondents. '> '
The Judgment of the Court was delivered by
P. SATHASIVAM, J. (1) Leave granted.
c
(2) This appeal is directed against the order dated 09.12.2005
passed by the Hon'ble Chief Justice of the High Court of Judicature at
Allahabad in Arbitration Application No. 54 of2003 appointing Hon'ble
Mr. Justice Giridhar Malviya, a retired Judge of the Allahabad High Court ..
D as Arbitrator in respect of the dispute between the parties.
(3) Respondent Nos. 4 and 5 before the High Court are the
appellants in this appeal. According to them, late Hari Prakash Agrawal
(father of respondent No. 7) and Rameshwar Das Agrawal (appellant
No.I herein) were very close relatives and they decided to carry on
E business of electronics and electrical goods and other items. They executed
a partnership deed on 15.05.1992 which contains an arbitration clause.
Subsequently, a dispute arose between the members of their two families
and by agreement dated 13.09.2002 signed by the partners, Shri Gopal
Goel ofRavindrapuri, Varanasi was appointed as sole Arbitrator to decide
F all the disputes concerning the business. Since the entire disputes between
the families were reconciled, fresh Deed of Partnership reconstituting the
three partnership firms were executed on 13.09.2002 and signed by all
the partners and witnessed by the sole Arbitrator - Shri Gopal Goel and
one Shri Vinod Kumar Jindal, one of the advisors to the Arbitrator. This
G was intimated to the bank and sales-tax authorities. After retirement of
Smt. Kiran Agrawal and her husband Shiv Kumar Agrawal on "'-·-

13.09.2002, a fresh Partnership Deed was executed on 05.07.2003 which
was also duly signed by the parties concerned. Thereafter, first respondent
herein filed an application dated 07.07.2003 under Section 11 of the
H
RAMESHWAR DAS AGRA WAL v. KIRAN AGRA WAL 491
~- [P. SATHASIVAM, J.]
Arbitration and Conciliation Act, 1996 (in short the 'Act') for appointment A
of an Arbitrator based on clause 21 of the agreement dated 15.05.1992.
On 17.10.2003, the High Court issued notice to all the 8 respondents-
therein. Thereafter, the matter was listed on 09.12.2005 and as per the
office report, most of the respondents had not been served. Shri
.. Rameshwar Das Agrawal, appellant No. I-herein was represented in the B
"' High Court through his counsel and prayed time to file counter affidavit.
It was also stated that no dispute remained for adjudication. The High
Court, after rejecting the request of the first appellant-herein, by order
dated 09.12.2005, appointed Hon'ble Mr. Justice Giridhar Malviya as
an Arbitrator. Aggrieved by the said order, the appellants preferred this c
appeal.
(4) We heard Mr. Manoj Swamp, learned counsel for the appellants
and Mr. Jay Savla and Mr. Gaurav Agrawal, learned counsel for
respondent Nos. 1 and 7 respectively.· Respondent Nos. 2 to 6 though
D
... duly served notice not chosen to contest the appeal.
(5) Mr. Manoj Swamp, learned counsel for the appellants placing
reliance on a Seven-Judge Bench decision of this Court in SBP & Co. v.
Patel Engineering Ltd. and Anr., [2005] 8 SCC 618, which was
pronounced on 26. l 0.2005, submitted that the decision on the application E
under Section 11 of the Act is a judicial pronouncement, the impugned
order of the Hon'ble Chief Justice which does not contain any reason
cannot be sustained and the same deserves to be set aside. He also
contended that the Hon'ble Chief Justice, who passed the impugned order,
has not taken care to verify whether notice had been duly served on all F
the respondents. He further contended that in any event, the High Court
ought to have granted reasonable time to file their objections. . On the
other hand, Mr. Jay Savla and Mr. Gaurav Agrawal, learned counsel for
the contesting respondents submitted that inasmuch as the appellants herein
(respondents before the High Court) did not utiliz.e the ample time provided G
>..-~-
by the High Court for filing their objection, the ultimate order of the
Hon'ble Chief Justice cannot be faulted with. He also submitted that there
is no violation of the law as declared by this Court.
(7) We have carefully perused the relevant materials and considered H
~

492 SUPREME COURT REPORTS [2007] 12 S.C.R.
--
A the rival submissions.
(8) Before analyzing the claim of both the parties, it is relevant to
note that the Hon'ble Chief Justice of the Allahabad High Court passed
the impugned order appointing a retired Judge of the High Court as an
B
Arbitrator on 09.12.2005. On 26.10.2005, a Seven-Judge Bench of this
Court in SEP & Co. v. Patel Engineering Ltd. and Anr., (supra) ~
..
reviewed the entire legal position and issued various directions in the matter
of appointment of Arbitrator. The larger Bench has also overruled the
earlier decision in Konkan Railway Corporation Ltd. v. Rani
c toConstruction Private Limited, [2002] 2 SCC 388. It is useful to refer
the conclusions arrived at by the larger Bench which read thus:
"47. We, therefore, sum up our conclusions as follows:

(i) The power exercised by the Chief Justice of the High Court or
the Chief Justice oflndia under Section 11(6) of the Act is not an
D
administrative power. It is a judicial power.
(iz) The power under Section 11(6) of the Act, in its entirety, could
be delegated, by the Chief Justice of the High Court only to another
Judge of that Court and by the Chief Justice of India to another
E Judge of the Supreme Court.
(iii) In case of designation of a Judge of the High Court or of the
Supreme Court, the power that is exercised by the designated
Judge would be that of the Chief Justice as conferred by the statute.
F (iv) The Chief Justice or the designated Judge will have the right
to decide the preliminary aspects as indicated in the earlier part of
this 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
G exercise of his power and on the qualifications of the arbitrator or
~- '"""
arbitrators. The Chief Justice or the designated Judge would be
entitled to seek the opinion of an institution in the matter of
nominating an arbitrator qualified in terms of Section 11 (8) of the
Act if the need arises but the order appointing the arbitrator could
H
RAMESHWAR DAS AGRAWAL v. KIRAN AGRAWAL 493
[P. SATHASIVAM,J.]
only be that of the Chief Justice or the designated Judge. A
(v) Designation of a District Judge as the authority under Section
11 (6) of the Act by the Chief Justice of the High Court is not
warranted on the scheme of the Act.

(vi) Once the matter reaches the Arbitral Tribunal or the sole B
• ; ~ arbitrator, the High Court would not interfere with the orders
passed by the arbitrator or the Arbitral Tribunal during the course
of the arbitration proceedings and the parties could approach the
Court only in terms of Section 37 of the Act or in terms of Section
34 of the Act. c
>(• (vii) Since an order passed by the Chief Justice of the High Court
or by the designated Judge of that Court is a judicial order, an
appeal will lie against that order only under Article 136 of the
Constitution to the Supreme Court. D
~
(viii) There can be no appeal against an order of the Chief Justice
oflndia or a Judge of the Supreme Court designated by him while
entertaining an application under Section 11 (6) of the Act.
(ix) In a case where an Arbitral Tribunal has been constituted by E
the parties without having recourse to Section 11 (6) of the Act,
the Arbitral Tribunal will have the jurisdiction to decide all matters
as contemplated by Section 16 of the Act.
(x) Since all were guided by the decision of this Court in Konkan F
~
Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. 2 and orders
under Section 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 under Section 16 G
;....,__..,, of the Act. As and from this date, the position as adopted in this
judgment will govern even pending applications under Section 11(6)
of the Act.
(xi) Where District Judges had been designated by the Chief
H
494 SUPREME COURT REPORTS [2007] 12 S.C.R.

A Justice of the High Court under Section 11 (6) of the Act, the
appointment orders thus far made by them will be treated as valid;
but applications if any pending before them as on this date will stand
transferred, to be dealt with by the Chief Justice of the High Court
concerned or a Judge of that Court designated by the Chief Justice.
B
(xii) The decision in Konkan Rly. Corpn. Ltd. v. Rani
Construction (P) Ltd is overruled."

From the above, it is clear that the power being exercised by the Chief
Justice or the designated Judge under Section 11 is not an administrative
C power but it is a judicial power. It is also clear that an appeal would lie
against that order only under Article 136 of the Constitution oflndia to
this Court. Though the decision in Konkan Railway Corpn. Ltd (supra)
has been ovemtled, the Bench has clarified that appointment of arbitrators
D or Arbitral Tribunals therefore, made are to be treated as valid, all
objections being left to be decided under Section 16 of the Act.
Unfortunately, the above decision in SBP & Co. v. Patel Engineering
Ltd and Anr. (supra) though decided earlier i.e. on 26.10.2005 has not
been brought to the notice of the Chief Justice, who passed an order,
E subsequent to the same i.e. on 09.12.2005. In view of the fact that an
order passed under Section 11 (6) is a judicial order and in the light of
the stand of the contesting respondents before the High Court, the
appellants in this Court, the impugned order appointing an Arbitrator
without adverting to the claim and objection of both parties cannot be
F sustained. The order of the High Court reads as under:
"Shri Vijay Kumar Singh has appeared for the respondent. The
prayer for filing affidavit is turned down.
For the purpose of acting as Arbitrator in this matter Hon 'ble
G Giridhar Malviya of26, Hamilton Road, a retired Judge of this High
Court is hereby nominated.
Sd/-
Ajoy Nath Ray
C.J."
H
RAMESHWAR DAS AGRAWAL v. KIRAN AGRAWAL 495
[P. SATHASIV AM, J.]
-· As rightly pointed out by learned counsel for the appellants, the order A
does not show any reason for appointing an Arbitrator. As said earlier,
after the decision of this Court in SEP & Co. v. Patel Engineering Ltd.
and Anr. (supra) it is incumbent on the part of the Chief Justice or a
designated Judge to consider the claim of both parties and pass a reasoned
order. B
....
Apart from the above infirmity, learned counsel for the appellants
has also brought to our notice that in spite of a request made for filing an
affidavit opposing the application for appointment of an Arbitrator, the
Chief Justice has not afforded further time. It is also pointed out that except c
respondent No.4-therein, notice had not been served on the other
respondents and without hearing them an order has been passed appointing
an Arbitrator. We verified the order sheet of the High Court (Annexure-
P4) which is available at page 50 of the paper-book. The relevant details
are reproduced hereunder:- D
"ORDER SHEET
Arbitration case No. 54 of 2002
Xxxx xxxx xxxx
E
14.07.05 Case
Shri Y.P. Singh Advocate and Ajay Kumar Singh have
filed Vakalatnama on behalf of the respondent No.4
Notices issued to respondents fixing 17.12.2002 have F
been returned after service as under:
Respondent No.7 Returned undelivered cover with report
"Not Known".
Respondent No.6 Returned undelivered cover with report G
"Not Known".
Respondent No.8 Returned undelivered cover with report
"Not Known".
H
496 SUPREME COURT REPORTS [2007] 12 S.C.R.

A Respondent No. I Returned undelivered cover with report
"Not Known".
Respondent No.3 Returned undelivered cover with report
"Not Known".

B Respondent No.2 Notice has not returned after service Put
up for Orders
Sd/-
Section Officer
Copying (D) Department
C High Court, Allahabad."
As rightly pointed out that whether notice duly served on all the
respondents was not verified before passing the order on 09.12.2005.
In our opinion, the following conclusion would emerge:
D (i) All the respondents therein except respondent No.4, notice
was not served in the application for appointment of arbitrator.
(ii) Even the served respondent was not afforded adequate
opportunity to file his objection.
E (iii) The order does not satisfy the requirement oflaw laid down
by this Court in SEP & Co. v. Patel Engineering Ltd and
Anr. (supra)
(9) In view of the above, we have no other option except to set
F aside the impugned order and remit the same for passing fresh order. Since
respondents I and 7 herein are represented by their counsel and notice
had duly been served on the other respondents in this Court and none
appeared for them, they are permitted to file their objections, if they so
desire within a period of 4 weeks from the date of receipt of copy of this
G judgment. Considering the fact referred to above, we make it clear that
no further notice need be issued by the High Court. We constrain to arrive
at such conclusion since all of them (except Shivkumar Agrawal) are
members of one family residing at No.20, Gurdas Colony, Varanasi and
all of them were duly served notice in this Court.
H
y
RAMESHW AR DAS AGRA WAL v. KIRAN AGRA WAL 497
. [P. SATHASIV AM, J.]
(10) We, therefore, set aside the impugned order dated 09.12.2005 A
passed by the Chief Justice of Allahabad High Court and remit the same
to the High Court to pass fresh order as early as possible as observed
above and in the light of the principles laid down in SBP & Co. v. Patel
Engineering Ltd and Anr. (supra).
B
(11) The Civil Appeal is allowed to the extent mentioned above. No
costs.
NJ. Appeal allowed.