High Court Which Appointed Arbitrator U/S 11(6) Of Arbitration Act Cannot Be Classified As “Court” U/S 42: Himachal Pradesh HC

Brief Facts

A dispute arose between a government contractor and the Telecom Department with respect to two contracts in division Mandi, Himachal Pradesh which led to filing of two arbitration applications under section 11(6) of the Arbitration Act. The Arbitrator appointed passed two awards in which the department was directed to pay certain amount along with interest.

The contractor filed objections under section 34 against the awards before the District Judge who after examining sections 2, 11 and 42 of the Act held that the appropriate forum to challenge the award would be the High Court which appointed the Arbitrator.The District Judge had also observed that all arbitration proceedings were conducted at Shimla, therefore, the District Judge Mandi will have no jurisdiction to entertain the objections.

Observations:

The court observed that Section 42 starts with a non-obstante clause i.e. 'notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force'. The words 'this Part' refers to Part-I which encompasses Sections 1 – 43. As per Section 42, where an application with respect to an arbitration agreement under Part-I has been made to a Court then that Court alone will have the jurisdiction over (a) arbitral proceedings & (b) all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.

In Konkan Railway Corpn. Ltd. & others vs. Mehul Construction Co., 2000, the Supreme Court held that order of appointment of arbitrator passed under Section 11(6) was administrative in nature. The Chief Justice does not function as a Court or a Tribunal. The said order cannot be subjected to judicial scrutiny of the Supreme Court. The nature of function performed by the Chief Justice being essentially to aid, constitution of the Arbitral Tribunal cannot be held to be a judicial function.

This judgment was overruled by the Supreme Court in SBP & Co. vs. Patel Engineering Ltd. & another, 2005 wherein it was held that the mere fact that power is conferred upon Chief Justice and not on the Court presided by him, would not mean that power conferred is only administrative and not judicial.

It further noted that the Apex Court also affirmed the view taken in State of Goa vs. Western Builders, 2006 that in case of appointment of arbitrator by High Court under Section 11(6), the Principal Civil Court of Original Jurisdiction remained the District Court and not the High Court. If arbitrator is appointed by the Supreme Court, the objections can be filed before the Principal Civil Court of Original Jurisdiction as defined in Section 2(1)(e). It was also held that converse position would result in depriving the party of its valuable right to appeal under Section 37 of the Act.

In State of Maharashtra through Executive Engineer vs. Atlanta Limited, 2014 the Supreme Court held that it makes no difference, if the “principal civil court of original jurisdiction”, is in the same district over which the High Court exercises original jurisdiction, or some other district. In case an option is to be exercised between a High Court (under its “ordinary original civil jurisdiction”) on the one hand, and a District Court (as “principal Civil Court of original jurisdiction”) on the other, the choice under the Arbitration Act has to be exercised in favour of the High Court.

Having noted the above judgments, the court observed that “the High Court in exercise of its original civil jurisdiction and Principal Civil Court of Original Jurisdiction are 'Court' as defined in Section 2(1)(e) of the Act. With respect to an arbitration agreement Section 42 of the Act delineates jurisdiction of the Court and states where an application under Part-I of the Act (i.e. under Sections 1 – 43) in relation to an arbitration agreement has been moved in a Court then that Court alone will have jurisdiction not only over the arbitral proceedings but also over all subsequent applications arising out of that agreement.

All arbitral proceedings can be made in that Court alone. Section 42 applies to all applications whether made before or during arbitral proceedings or after an award is pronounced under Part-1 of the Act. The only rider is that such an application must have been made to a Court as defined.”

It further said that i the present case the arbitrator was appointed on 02.08.2019 when the Act stood amended and the words 'Chief Justice' stood replaced with the words 'High Court'. Hence appointment of arbitrator was by the High Court. The object behind replacing the words 'Chief Justice' with 'High Court' in Section 11(6) as given by the Law Commission is that “delegation of the power of 'appointment' as opposed to a finding regarding the existence/nullity of the arbitration agreement shall not be regarded as a judicial act.

The court opined that “the arbitrator was appointed by the High Court not because this High Court exercises original civil jurisdiction or in exercise of its original civil jurisdiction but because of the power given in Section 11(6) of the Act.”

It further noted that in Garhwal Mandal Vikas Nigam Ltd., 2008 the Apex Court held 'Once an arbitrator is appointed then the appropriate forum for filing the award and for challenging the same will be the Principal Civil Court of Original Jurisdiction. The expression 'Court' used in Section 34 of the Act will also have to be understood ignoring the definition of 'Court' in the Act.

It opined that in the scheme of things, if appointment is made by the High Court or by this Court, the Principal Civil Court of Original Jurisdiction remains the same as contemplated under Section 2(1)(e) of the Act.'

The court concluded that “the judgments passed by the learned District Judge Mandi on 12.01.2023 are set aside to the extent they hold that this Court alone will have the jurisdiction to entertain & decide the objections preferred under Section 34 of the Arbitration and Conciliation Act against the arbitral awards. It is held that in the instant case, jurisdiction to decide the objections preferred under Section 34 of the Act against the arbitral awards will be before the Principal Court of original jurisdiction at Shimla.”

Case Title: The Chief General Manager H.P. Telecom Circle & ors. Versus Sh. Kashmir Singh (Government Contractor)

Citation: 2025 LiveLaw (HP) 2

Case Number: Arb. Case No. 581 of 2023 a/w Arb. Case Nos. 582 to 584 of 2023

Judgment Date: 02/01/2025

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