Order Passed By High Court, Recording Consent Of Parties To Appoint A Specified Arbitrator, Is Not An Order 'Appointing An Arbitrator': Patna High Court

The Single Bench of Chief Justice Sanjay Karol held that once the party has filed an application under Section 14 of the A&C Act, to decide on the termination of the mandate of the arbitrator, the only remedy available to the party was to assail the order passed on the said application and thus, the petition under Section 11(6) of the A&C Act seeking appointment of an arbitrator would be barred by res judicata.

The petitioner-Bihar State Textbook Publishing Corporation Limited, issued a tender. The respondent- M/s. Patna Offset Press, was declared a successful bidder and was awarded the work order. An agreement containing an arbitration clause was entered into between the parties. Subsequently, disputes relating to the implementation of the work order arose between the parties and the petitioner cancelled the agreement. The respondent filed a writ petition before the Patna High Court challenging the cancellation of the agreement by the petitioner. The Patna High Court referred the parties to arbitration and recorded their consent to appoint a specified Arbitrator. Since the nominated Arbitrator was a Principal Lokayukta of the State of Bihar, the said Arbitrator was substituted on a modification application filed by the respondent before the Patna High Court. Accordingly, the substituted Arbitrator was appointed.

Thereafter, the petitioner filed an application under Section 14 read with Section 34 of the A&C Act seeking termination of the mandate of the substituted Arbitrator before the District Judge, which was rejected. Subsequently, the petitioner filed a petition under Section 11(6) of the A&C Act, seeking appointment of an independent and impartial arbitrator, before the Patna High Court.

The petitioner- Bihar State Textbook Publishing Corporation, submitted before the High Court that since there is specific provision for appointment of an arbitrator under Section 11 of the A&C Act, the Patna High Court in exercise of its writ jurisdiction cannot appoint an arbitrator. The petitioner added that the consent given by the parties cannot attribute jurisdiction to a Court to appoint an arbitrator in a writ petition filed under Article 226 of the Constitution of India. Contending that the Arbitrator cannot be appointed in exercise of the power under Section 8 of the A&C Act, the petitioner argued that the Arbitral Tribunal constituted by the High Court was coram non judice.

The respondent M/s. Patna Offset Press contended that since the petitioner had submitted itself to the jurisdiction of the Arbitrator and had participated in the arbitral proceedings, therefore, the petition filed by the petitioner was a mere abuse of the process of law.

Section 8 of the A&C Act provides that a judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement, shall refer the parties to arbitration on an application made by the party.

Section 14 (1)(a) of the A&C Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if he becomes de jure or de facto unable to perform his functions.

Section 14(2) provides that if a controversy remains concerning any of the grounds referred to in Section 14(1)(a), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate of the arbitrator.

The Court noted that the Supreme Court in the case of State of Goa versus M/s Praveen Enterprises (2011) had held that though the judicial authority referring the parties to arbitration under Section 8 of the A&C Act has no power to appoint an arbitrator, it may however record the consent of the parties to appoint an agreed arbitrator.

The Bench observed that after the parties had agreed to refer the dispute to arbitration and had decided on the arbitrator, the Patna High Court had referred the parties to arbitration and had recorded their consent to appoint the specified Arbitrator.

Hence, the Court added that the High Court had merely recorded the consent of the parties to appoint the specified Arbitrator and that the said order recording the consent of the parties could not be said to be an order appointing an Arbitrator; hence, the Arbitral Tribunal constituted in terms of the agreement reached between the parties was not coram non judice.

Holding that the petitioner had already exercised its right under Section 14 of the A&C Act by filing an application before the District Judge, the Court ruled that the only remedy available to the petitioner was to challenge the order passed by the District Judge in the application filed under Section 14, and that the petition under Section 11(6) of the A&C Act was barred by res judicata.

"There is yet another reason for this Court not to entertain this petition and that being the petitioner having exercised its right under Section 14 of the Act before an appropriate Court having competent jurisdiction. Even this was done after having submitted to the jurisdiction of the Arbitrator as is apparent from the order passed by the learned District Judge in dismissing such a petition. The issue raised against the Arbitrator was not that of his authority, capacity, competence or jurisdiction but that of payment of fee and/or bias. Once having elected to exercise such a right, the remedy available to the petitioner was to assail the order in accordance with law and not file the instant petition under Section 11(6) of the Act, or else Principle of Res Judicata would apply."

While rejecting the contention of the petitioner that the Arbitral Tribunal constituted was coram non judice, the High Court dismissed the petition.

"In view of the attending circumstances, it cannot be said that arbitral tribunal is coram non judice having been constituted without the jurisdiction of the High Court in the matter under Article 226 of the Constitution of India."

Case Title: The Bihar State Text Book Publishing Corporation Ltd. versus M/s Patna Offset Press

Dated: 17.08.2022 (Patna High Court)

Counsel for the Petitioner: Mr. Mrigank Mauli, Sr. Advocate; Mrs. Anukriti Jaipuriyar, Advocate; Mr. Anshuman Jaipuriyar, Advocate

Counsel for the Respondent: Mr. Nand Kishore Singh, Advocate; Mr. Jitendra Kumar, Advocate

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