India: Scope Of Review Against An Order Passed Under Section 11 Of The Arbitration And Conciliation Act, 1996

Introduction

The Arbitration and Conciliation Act,1996 ('the Act') is a self-contained code governing all aspects of arbitration in India, including the appointment of arbitrators under Section 11 of the Act by the Chief Justice of India or Chief Justice of relevant High Court or its designate ("Chief Justice"). However, despite being a holistic code, the Act does not confer the power upon the Chief Justice to review its orders passed under Section 11(6) of the Act. It is now a settled position that the exercise of power by the Chief Justice under Section 11(6) of the Act is judicial in nature and thus amenable to review¹. However, the Courts have also held that the power of review is not an inherent power, and it must be conferred specifically or by necessary implication². Since the Arbitration Act does not expressly confer upon the Chief Justice, the power to review its orders passed under Section 11 of the Act, it is crucial to determine as to whether such orders are amenable to review or not, keeping in mind the principle of generalia specialibus non derogant.

Thus, this Article attempts to analyze whether, in the absence of any specific provision entailing review of orders passed under Section 11, there is any scope for review of such orders. In doing so, the Article shall cover two major facets namely: (i) whether the Order passed under Section 11 of the Act is amenable to review and (ii) if the answer is in affirmative, to what extent such Order can be reviewed.

Scope of Review under Section 11

In Jain Studios v. Shin Satellite Public Co. Ltd³ ("Jain Studios"), the Supreme Court dealt with the issue of maintainability of a review petition filed against an Order passed under Section 11 of the Act. In this case, the Applicant had filed the review petition on two grounds, (i) concerning the incorrect assumption that the Applicant submitted for the arbitration proceedings to be held either in London or Singapore and, (ii) permitting the Applicant to nominate the proposed person as an arbitrator.

The Court while adjudicating the issue of maintainability of the review petition and dealing with the objection of the Respondent held that once the function performed by the Chief Justice of India or his nominee is held to be judicial, it cannot be contended that an Application for review of an Order passed by Chief Justice or his nominee is not maintainable. The Court held the Order passed by the Chief Justice or his nominee under Section 11(6) of the Act is an 'order' within the meaning of Article 137 of the Constitution of India and is subject to review under Section 11(6) of the Act. Consequently, the review petition was held to be maintainable, however, the review was entertained only for a limited ground.

In consideration of the first ground, the limited prayer of the Applicant regarding the clarification/correction of the Order, being a 'procedural irregularity, was allowed by the Court. However, so far as the grievance of Applicant on merits was concerned, the Court held that the Applicant, in the guise of a review petition, was attempting to raise issues that were previously argued in the main matter and dismissed. Thus, the Court while rejecting the prayer for reconsideration of the order passed in the arbitration petition and disallowing the Applicant to nominate the proposed person as an arbitrator, held that no review petition would lie that would convert rehearing of the original matter. In doing so, the Court distinguished the Power of Review with an Appellate Power and held that an Appellate Power enables a superior court to correct all the errors committed by the subordinate court and should not be confused with a rehearing of an original matter. Additionally, the Court also held that the power of review must be exercised with extreme care and caution and only in exceptional circumstances.

Scope of Review under Section 11

Since an order passed under section 11 of the Act is amenable to review, question now arises is, to what extent such order can be reviewed.

In 2008, the Allahabad High Court in Manish Engineering Enterprises v. The Managing Director⁴ ("Manish Engineering"), was required to examine whether an Application for review of an Order granting or rejecting the prayer for appointment of an arbitrator passed by the Chief Justice is maintainable under the scheme of the Act.

The Court while examining the power of review available to Chief Justice, referred to the Apex Court decision in Patel Narshi Thakarshi v. Pradyumansinghji Arujnsinghji⁵ and ruled that power of review is not an inherent power. It must be conferred by law either specifically or by necessary implication. The Court distinguished between a procedural review and a review on merits i.e., substantive review. The Court held that in so far as a review on merits is concerned, the same can only be exercised when there is specific provision for review in the Act itself or when the same can be read into the relevant statutory provision by necessary implication. The Court further held that in contradistinction to a substantive review, a procedural review stands on a totally different footing. To avail procedural review, the applicant must establish that the procedure followed by the court, or the quasi-judicial authority suffered from such illegality that it vitiated the entire proceedings, and invalidated the order made therein, for example, the party concerned was not heard for no fault of the party.

The Court also held that the Chief Justice under Section 11 of the Act was functioning as a specified authority and not as a court. Thus, under the scheme of the Act, only when a procedural irregularity has been committed, the Order can be reviewed, but a substantive review would not be available.

Thereafter, in 2009, in Sanjay Gupta v. The Kerala State Industrial⁶ ("Sanjay Gupta"), the High Court of Kerala arrived at a similar conclusion when a review petition was filed before it against an Order passed by the nominee of the Chief Justice of this Court under Section 11 of the Act. The issue, therein, that came up for determination was whether a court holds the power to review matters concerning the merits of a case. The Court opined that unless the Act explicitly empowers the courts to review orders under Section 11 concerning the merits of a case, the same cannot be reviewed.

Interestingly, in Antikeros Shipping v. Adani Enterprises⁷ ("Antikeros Shipping"), the same question was considered by the Bombay High Court. In this case pursuant to an Application filed by the Appellant for the appointment of an arbitrator under Section 11, on behalf of Respondent, the Single Judge of Bombay High Court appointed an arbitrator. Aggrieved by the decision, the Respondent filed a Petition seeking a review of the order passed by Single Judge, on the ground that, since Appellant was a company incorporated outside India, the arbitration would be under the purview of international commercial arbitration and consequently, only the Chief Justice of India would have the jurisdiction to appoint an arbitrator by virtue of Section 11(2)(a) of the Act. The review petition was allowed by a Single Judge of the Bombay High Court on two grounds; firstly, the Single Judge was exercising the power of procedural review which is inherent and plenary in every court, and secondly, being a court of record, it is the duty of the court to correct palpable errors which have been committed, to prevent miscarriage of justice. Consequently, the Appellant preferred an Appeal before Bombay High Court to determine whether the Order passed by the Chief Justice of India or Chief Justice of the High Court under Section 11 of the Act for the appointment of an arbitrator can be amenable to review or not.

In Appeal, the Division Bench of the Bombay High Court considered two issues: (i) whether the Single Judge has carried out a substantive review or procedural review in allowing the review application filed by the Respondent and (ii) whether the decision of Chief Justice can be considered as the decision of the Court. Regarding the first issue, the Court held that it found no reason as to why the single judge has exercised procedural review. The Court held that an Application filed on the ground that Chief Justice of High Court had no jurisdiction to appoint an arbitrator, would relate to substantive review. The Court further held that the power of substantive review must be vested in a Court by a statute and in the absence of such power vested, no substantive review can be undertaken by the Court.

In consideration of the second issue, the High Court, while placing reliance on State of West Bengal v. Associated Contractor⁸, observed that the Order passed by the Chief Justice of India or Chief Justice of the High Court for appointment of arbitrator under Section 11 of the Act cannot be reviewed because the decision of the Chief Justice of India or Chief Justice of High Court, is in essence, the decision of a judicial authority, which is not a court of record. The Court further held that the High Court being a court of record could only undertake a procedural review and not substantial review, as was undertaken in the instant case. In other words, while agreeing that Constitutional Courts being superior courts of record have the inherent jurisdiction to recall their own orders, the Court held that in the instant case the Single Judge in disposing of the arbitration application was not exercising the power of a 'Court' because the power being exercised was that of a delegate of the Chief Justice of High Court. The Court further observed that though the power of appointment of arbitrator is a judicial power it is not the power vested in the 'Court' as defined in Section 2(1)(e) of the Act. Therefore, the Single Judge had no jurisdiction to entertain the petition seeking review of the Order and the remedy available to the Respondent was to challenge the said Order before the Supreme Court by filing a petition under Article 136 of the Constitution of India for the reason that no appeal lied against the Order passed under Section 11 of the Act.

Most recently, the High Court of Madhya Pradesh in Cobra-CIPL JV v. Chief Project Manager Railway Electrification⁹ has reaffirmed the dictum laid down in Jain Studios, Antikeros Shipping, and Sanjay Gupta. In this case, the non-applicant filed an Application, for recalling of the Order appointing an Arbitrator. It was contended by the non-applicant in the application for review, that the Court had no jurisdiction to pass the Order appointing Arbitrator, since Arbitrator was already appointed, and the said Order of appointment was not challenged or set aside by any court of law. The Non-applicant also drew a distinction between the procedural review and substantive review and contended that it was only making a prayer for procedural review and not substantive review.

On the other hand, the Applicant relying on Jain Studios contended that all the grounds raised in the review application were considered by this Court earlier and the appointment was accordingly ordered. The Applicant contended that Power of Review cannot be confused with an Appellate Power which enables a superior court to correct all errors committed by a subordinate court. A repetition of an old and overruled argument is not enough to reopen concluded adjudications. In view of the same, the Applicant contended that the review application for recalling the Order was not maintainable and deserves to be dismissed.

The Hon'ble High Court, following the dictum laid down in the previous decisions, held that prayer made by the non-applicant for review of the Order passed under Section 11, on the ground of jurisdiction, was not a procedural review but a substantive review. The Court held that power of review has not been specifically vested in High Court under the Act, therefore the High Court can only correct a procedural error or factual error apparent on the face of record but cannot review an order on its merits. Consequently, the Court stated that the Order of High Court could only be challenged by way of a Special Leave Petition under Article 136 of the Constitution of India before the Supreme Court.

Conclusion

The position regarding the scope and extent of judicial review of orders passed under Section 11, is no longer res integra. It has conclusively been held that courts have the inherent power to review Orders that suffer from a procedural irregularity such as incorrect hearing dates, failure to send notice, etc. However, substantive issues or issues touching upon the merits of the case such as those regarding jurisdiction of a Tribunal or veracity of evidence, etc. have no bearing whatsoever, on the power of the Courts to review the orders under Section 11 of the Act.

Footnotes

1. S.B.P. & Co. v. Patel Engineering Ltd. & Anr, (2005) 8 SCC 618.

2. Patel Narshi Thakarshi v. Pradyumansinghji Arujnsinghji, (1971) 3 SCC 844.

3. Jain Studios v. Shin Satellite Public Co. Ltd, (2006) 5 SCC 501

4. Manish Engineering Enterprises v. The Managing Director AIR 2008 All 56, (2008) SCC OnLine All 84

5. Patel Narshi Thakarshi v. Pradyumansinghji Arujnsinghji, (1971) 3 SCC 844

6. Sanjay Gupta v. The Kerala State Industrial, (2009) SCC OnLine Ker 6361

7. Antikeros Shipping v. Adani Enterprises, 2020 SCC Online Bom 277

8. State of West Bengal v. Associated Contractor (2015) 1 SCC 32

9. Cobra-CIPL JV v. Chief Project Manager Railway Electrification, High Court of Madhya Pradesh, Arbitration Case no. 96/2019, Order dated 07.12.2021

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