CASE 2
CASE 2
v.
INDIAN COUNCIL OF ARBITRATION AND ORS. ETC.ETC.
H 568
F.C.I. v. INDIAN COUNCIL OF ARBITRATION 569
It was contended for the appellant that since there appeared to be no A
contradiction/inconsistency between the arbitration clause and ICA Rules,
on proper and harmonious construction of the rules, disputes had to be resolved
by the arbitration through ICA; that since appellant did not assert its right to
nominate the arbitrators by themselves and instead requested ICA to nominate
arbitrators for arbitration of the matter, stand of the ICA insisting appellant B
to nominate arbitrator was unjustified; and that ICA by taking unreasonable/
unwarranted stand obstructed resolution of disputes by the arbitrators
unmindful of the heavy stakes involving public mo~ey.
HELD: 1.1. The High Court in the instant case has proceeded to adopt
an adjudicatory role and returned a verdict recording reasons as the very
existence or otherwise of the agreement as well as the tenability and legality E
or otherwise of making a reference to an arbitrator. In view of such peculiar
situation, it would be futile for the respondents to contend that the SLPs were
not maintainable, particularly in view of the fact that any recourse to have the
arbitrator appointed or nominated could be forestalled by the detailed judgment
and the findings recorded by the High Court in the instant matter. Thus, the F
details pointed out on behalf of the ICA regarding the submission as to the
provisions of law actually invoked before the High Court, the nature of the
application or the character of the order passed pales into insignificance.
[577-B-D[
Konkan Railway Cotpn. ltd. and Ors. v. Mehul Construction Co., [20001
7 sec 201, relied on.
· 1.2. The questions r~lating to the relevant scope, meaning, purport and H
570 SUPREME COURT REPORTS [2003) SUPP. I S.C.R.
A the effect of the arbitration clause found in the agreement between parties
concerned and the legality or propriety of the constitution of Arbitral Tribunal,
in the teeth of Rules 21 and 22 of the ICA Rules as well as question relating
to alleged contradictions or inconsistencies among those provisions are
matters which go to the jurisdiction of the Arbitral Tribunal or as to the
B existence or validity of the arbitration agreement itself which, as enjoined
under Section 16 of the Arbitration Act, fails within the jurisdiction of the
Arbitral Tribunal constituted which has enabled to adjudicate on such question
also before embarking upon an exercise to decide the dispute between the
parties or decide them simultaneously. This is the inescapable position which
inevitably flows not only from the statutory provisions contained in Section
C 16 of the 1996 Act, but that such position came to be firmly settled by the
decisions of this Court, including the one rendered by the Constitution
Bench*. [577-D-GJ
1.4. The legislative int~nt underlying the 1996 Act is to minimize the
supervisory role of Courts in arbitral process and nominate/appoint the
Arbitrator without wasting time, leaving all contentious issues to be urged
G and agitated before the Arbitral Tribunal itself. Even under the old law,
common sense approach alone was commended for being adopted in construing
an arbitration clause more to perpetuate the intention of parties to get their
>
disputes resolved through the alternate disputes redressal method of
arbitration rather than thwart it by adopting a narrow, pedantic and legalistic
interpretation. It is just and more appropriate, proper and reasonable - both
H
'
'
in law and in equity and interests of justice to direct ICA to nominate the A
Arbitrator as sought for by the appellants and place the matters before such
Arbitrator, leaving open to the parties to raise and pursue all objections and
contentions and thereby seek for the decision of the Arbitrator as envisaged
under Section 16 of the 1996 Act.1578-D-GI
From the Judgment and Order dated 10.2.2000 of the Delhi High Court
in A.A. Nos. I75, 173, 227, 228, 229, 230, 231, I 70, 253, 254, 255, 262, 445, 446,
447,449,450,451,452,453,465-469,472-474,563,656,667,668,481,482,560- c:;
562, 564, 565, 650- 654, 656, 284-293, 296-305, 308-317, 323-352, 378-391, 396-
408, 621, 238-251, 507, 655, 566-568, 470, 471 and 252of1999.
WITH
A.K. Ganguli, A.T. Patra, Nipun Malhotra for Mis. O.P. Khaitan & Co.,
Rajan Narain, Ms. Puja Sharma, S.L. Aneja, Balbir Singh Gupta, Pradeep
Kumar Bakshi, Balraj Dewan, R. Nedumaran, A.P. Mohanty and Mrs. Arnita E
Gupta for the Respondents.
These appeals are dealt with tugether since they involve identical F
questions for consideration on almost similar set of facts.
A The FCI, in the course of its functions and day to day transaction of
its business, entered into agreements with the Millers for storage-cum-milling
of FCI paddy stored in Millers premises into conventional raw/parboiled rice
and delivering the rice as per the out-turn stipulated for different varieties of
paddy and delivery of the same in return for the payments to be made on the
B rates agreed to between them. The relevant contracts, apart from containing
the detailed terms and conditions for carrying out thereof, also contained an
uniform and standardized arbitration clause, for settlement of claims and
disputes arising out of such contracts through the Council. It appears, in
some cases, that the Council asked the FCI to forward the name of the sole
Arbitrator to the Council for proceeding with the matter further and in yet
C another case the Council asked the FCI to get the rice mills concerned to
convey directly to the !CA their consent.
II. Whether the Registrar, LC.A. has any jurisdiction to direct the
claimant to get fresh agreement signed. If so, what is the effect of D
failure to obtain such fresh agreement and in such case which will be
the forum for adjudication of dispute between the parties.
Jll. Whether the Registrar, LC.A., in asking for the new requirement
under question No. I & II as above, is justified in his decision not to
proceed with the case further, and also to ask the Petitioner F.C.I. to E
seek approval of Respondents No.2 and 3 for appointment of a common
Arbitrator upon the F.C.l. for obtaining consent from Respondents
Nos.2 and 3 afresh in this respect''.
The stand of the FCI in respect of those questions seems to have been
that, having regard to Rules 4(b), 5, 9, 10, 13, 14 to 19, 20 to 22 & 37 of the F
ICA Rules and a proper understanding of the same, the direction to get any
fresh agreement for arbitration is contrary to law, that the arbitral proceedings
in these cases have already been commenced on 15.10.1997 when the request
for the dispute to be referred to arbitration was received by the respondents,
that the request made by the appellants is not inconsistent, in any manner,
with the ICA Rules or the provisions of the Act and consequently the ICA G
could not have refused to comply with the request to refer and proceed with
the claims in accordance with law. The same was opposed by the respondents.
The learned Single Judge of the High Court, by his order dated I0.2.2000
in A.A.Nos.175, 173 etc. of 1999, held the petitions before the Court to be not H
574 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A maintainable on the view that the proceedings necessary for the Coun to take
steps for the appointment of the Arbitrator have not been fu Ifilled. The
learned Judge observed further that the arbitration clause in question envisaged
the appointment of Arbitrator by the FC! whereas if it is to be appointed by
the ICA, it can be only with the consent of the parties, which, according to
the Court, was wanting in these cases. Rule 22(a) of the ICA Rules was
B considered to be in direct conflict with the arbitration clause entered into
between parties in this regard and once the power to appoint the Arbitrator
is given under the arbitration clause in this ca~e to the Senior Regional
Manager/Zonal Manager of the FCI, no power could be said to have been
given to the !CA to appoint an Arbitrator and that it is only after an Arbitrator
C has been appointed by the FCI in terms of the agreement the rules of the ICA
were required to be followed as to the procedure for conduct of the same and
not before that stage and consequently there was no failure on the part of
the ICA in these cases to call for the interference of the Court. Aggrieved,
these appeals have been filed.
D Heard the learned senior counsel appearing on either side. Shri G.L.
Sanghi, learned counsel for the Food Corporation of India, the appellants
herein, both at the time of hearing and in the written submissions, vehemently
contended that the orders of the High Court, under challenge, suffer from
serious infirmities and the reasons assigned therefor are untenable in law. It
E is contended for the appellants that there is no inconsistency or contradiction
between the clause for arbitration as contained in the agreement between the
parties and the provisions contained in the !CA Rules and that a proper and
harmonious construction have to be made of the same keeping in view the
firm determination of the contracting panies to have the disputes resolved
and determined by means of arbitration through the medium of the !CA. The
F High Court, according to the appellants, ought to have properly reconciled
the arbitration clause and the relevant ICA Rules to ensure the resolution of
the dispute by arbitration rather than create an unjustified and unwarranted
stalemate in the matter. Strong reliance is sought to be placed on the language
of the arbitration clause in the contract and the provisions contained in Rules
G 16, 21 and 22 of the ICA Rules to justify the stand of the appellants. It is
equally contended on behalf of the appellants that when at no point of time
the appellant asserted for any right in them to nominate the arbitrator
themselves and instead had been all along requesting the ICA to nominate
the arbitrator to facilitate arbitration in accordance with its procedure, the
stand taken for the !CA to insist upon a fresh consent for proceeding in the
H matter further was wholly unjustified. The ICA was said to be taking varying
....... F.C.I. v. INDIAN COUNCIL OF ARBITRATION [RA.JU . .I.] 575
stands at different stages to justify its unreasonable and unwarranted stand A
in obstructing the resolution of the dispute between parties amicably by
means of arbitration, unmindful of the heavy stakes involving public money
in the process. Reliance has been also made on the case law purporting to
support their stand.
Shri A.K. Ganguli, learned senior counsel appearing for the !CA, during B
the course of arguments followed by a written submissions, strenuously
contended that in view of the decision reported in Konkan Railway
Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd., [2002] 2 SCC 388
the order passed on an application under Section 11 (6) of the 1996 Act is
not adjudicatory in nature and the Judge passing the same is not a Tribunal C
and, therefore, the SLPs are not maintainable under Article 136 of the
Constitution of India. In view of the decisions reported in [2002] 2 SCC 388
(supra) and Konkan Railway Corporation Ltd. and Ors. v. Mehul Construction
Co., [2000] 7 SCC 201), it is also urged that in the teeth of the applications
filed before the High Court under Section 11(6) of the 1996 Act, it is not now
open to the appellants to contend that the same was not under the said D
provisions of law and the order passed could not be viewed as one passed
under the said provisions. Reiterating the stand taken and justifying the
course of action adopted by the !CA, it is being contended that in the teeth
of the stipulation contained in the arbitration clause in the agreement between
parties enabling the Senior Regional Manager/Zonal Manager of the E
Corporation to appoint/nominate an Arbitrator out of the persons in the panel
of Arbitrators maintained by the !CA, the question of nomination by the
Registrar of the !CA, as envisaged under Rule 22 of the ICA Rules, does not
arise and that the claims on the FCI to the contrary are not sustainable in law.
Strong reiteration is made by assigning several reasons as to why the
application filed by the appellants before the High Court must be viewed to F
be one invoking powers under Section 11(6) of the 1996 Act and not otherwise
as now claimed on behalf of the appellants. It is further urged that if at all
there had been failure to resolve the matter by means of arbitration it was due
to the lapse on the part of the appellants to nominate the arbitrator as per
its own arbitration clause and the same was not attributable to the !CA. The G
appointment of Arbitrator in the arbitration clause in the agreement between
parties is said to be directly contrary to and in conflict with the procedure
for appointment/nomination of the Arbitrator under the rules of ICA and,
therefore, there are no merits in these appeals.
Shri Rajiv Datta, learned senior counsel appearing for some of the H
576 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A Millers-Private Parties and the other learned counsel appearing for similar
such parties, who adopted his contentions, for the Millers, strenuously
contended at the time of hearing and in the written submission that no
exception could be taken to the stand of the ICA in all these matters and that
not only the appeals are not maintainable in view of the decisions of this
Court noticed supra, but the arbitration clause in the agreement and the ICA
B Rules being directly in conflict, the ICA could not have nominated the arbitrator
to proceed with the arbitration clause as sought for by the appellants.
Contentions similar to those raised by the ICA are reiterated on behalf of the
Millers too, besides contending that in the absence of any fresh agreement
between parties, there is no scope for resolving disputes by means of
C arbitration. Adverting to certain clauses in the contract, it has been also
contended for the Millers that the arbitration clause, apart from being one
sided, could be invoked only by the Millers and the disputes, if any, to be r
raised by the FCI are outside the purview of the said arbitration clause.
A such decisions have to be made or taken only by the Arbitral Tribunal itself
to which the reference had been made, and avoid committing the very same
mistake committed by the High Court.
..