Whether an Order of the Chief Justice under Section 11 of the Arbitration Act is Subject to Review

[Pinak Parikh is an Associate at Singhi & Co, Ahmedabad, and a B.A L.L.B (Corp Hons) graduate (2019) from the Institute of Law, Nirma University]

On 18 February 2020, a Division Bench of the Bombay High Court in Antikeros Shipping Corporation v. Adani Enterprises Limited observed that the order passed by the Chief Justice of India or Chief Justice of the High Court under section 11 of the Arbitration and Conciliation Act, 1996 (the “Act”), as it existed prior to Arbitration and Conciliation (Amendment) Act, 2015, for appointment of arbitrator cannot be reviewed by any courts. The Court, by way of the present decision, has resurrected the debate on whether the order passed by the Chief Justice under section 11 of the Act for appointment of arbitrator is amenable to review jurisdiction of the High Court?

Background

The Antikeros Shipping Corporation entered into an agreement 28 February 2008 with the Adani Enterprises Limited, wherein Adani Enterprises was to supply bunker fuel to Antikeros Shipping’s vessel M.T. Antikeros at Mundra port. Adani Enterprises, in terms of the agreement, supplied the fuel on 5 March 2008. Thereafter, a dispute arose between the parties regarding the quantity and quality of fuel supplied. The said agreement envisaged resolution of disputes by way of arbitration at Mumbai in accordance with the Act before a tribunal comprising of three arbitrators.

On 19 March 2009, Antikeros Shipping invoked the arbitration clause. On 13 May 2009, Antikeros Shipping appointed Mr. R.S. Cooper as its arbitrator and called upon Adani Enterprises to appoint its arbitrator. Upon the failure of Adani Enterprises to appoint the arbitrator, Antikeros Shipping on 28 February 2011 filed arbitration application no. 57/2011 under section 11 of the Act before the Bombay High Court seeking appointment of arbitrator on behalf of Adani Enterprises. Though Adani Enterprises was served with notice, it did not to appear and, thus, on 21 April 2011, a single judge of the Bombay High Court disposed of the said arbitration application and appointed Ms. J.K. Bhatt as an arbitrator on behalf of Adani Enterprises.

Thereafter, on 30 August 2018, Adani Enterprises filed a petition seeking review of the order dated 21 April 2011 passed by the single judge of the Bombay High Court. Adani Enterprises contended that since one of the parties to the arbitration, i.e., Antikeros Shipping was incorporated outside India, the arbitration between them would be termed as international commercial arbitration by virtue of section 2(1)(f) of the Act and, consequently, only Chief Justice of India has the jurisdiction to appoint arbitrator in such cases by virtue of section 11(12)(a) of the Act. Thereafter, the single judge allowed the review application filed by Adani Enterprises and held that the order dated 21 April 2011 was a nullity and non-est in law. Aggrieved by the said decision, Antikeros Shipping filed an appeal before the Bombay High Court for determination on the issue, viz., 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 arbitrator can be reviewed or not.

Issues Considered by the Court

In order to determine whether the decision of the Chief Justice under section 11 of the Act for the appointment of arbitrator can be reviewed or not, the Court considered the following issues:

  1. Whether the single judge, in allowing a review application, has carried out a substantive review or a procedural review?

  2. Whether decision of the Chief Justice can be considered as a decision of the Court?
Observations of the Court

Issue No. 1

The Court held that an application filed pleading that the court had no jurisdiction would amount to substantive review, which is not vested in the Court by the Act and, consequently, in the absence of power of substantive review conferred by the statute, no substantive review can be undertaken by the courts.

Where a court having jurisdiction to adjudicate on merits proceeds to do so, the judgment or order passed by the court can be reviewed on merits only if the court is vested with power of review by express provision or by necessary implication. There is no inherent power vested in court to review a decision on merits. At this juncture, it is pertinent to make the distinction between substantive review and procedural review. A court can undertake substantive review only if such power is conferred on court by the statute. In the absence of such power conferred by the statute, a court cannot undertake substantive review of its decision. On the other hand, every court or tribunal has inherent power to undertake procedural review of its decision and undo the same if there is any procedural illegality. Procedural review would take within its ambit the cases where party seeking review does not have to substantiate the ground that order suffers from the vice of error apparent on face of record. Therefore, the order passed is liable to be reviewed not because it was found to be erroneous, which will entail substantial review, but that it was passed in a proceeding which suffered from the vice of procedural irregularity.

The Court in the present case went on to consider whether plea of lack of jurisdiction falls under the head of substantive review or procedural review. In doing so, the Court observed that illustrative cases of procedural review includes (1) decision on a matter without sending notice to the other party, (2) proceeding on a matter under the mistaken impression that notice had been served on the other party, and (3) when a court takes up a matter on a date other than the date fixed for hearing. However, the Court in the present case observed that plea of lack of jurisdiction sought to correct an error, which is of law and is apparent on face of record, would consequently amount to substantive review. Further, section 5 of the Act limits judicial intervention to the extent provided by the Act. Therefore, in the absence of power to review on merits conferred on the court by the Act, the learned single judge could not have reviewed the order dated 21 April 2011.

Issue No. 2

The Court in the present case, relying on State of West Bengal v. Associated Contractor (2014), 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 the High Court, not being of the Supreme Court or the High Court, is the decision of a judicial authority, which is not a court of record and has no precedential value. Further, the Court observed that the power of appointment of arbitrator, though a judicial power, is not the power vested in the “court” as defined in section 2(1)(e) of the Act.

The High Court, being a court of record as enshrined under article 215 of the Constitution of India, has a duty to correct its record. The High Court’s power to prevent miscarriage of justice or to correct grave and palpable errors committed by it is plenary in nature. However, the High Court being the court of record could only undertake procedural review and not substantial review, as in the present case. Further, the decision of the Chief Justice of the High Court is not considered as decision of the courts of record, i.e., High Court. For the foregoing reasons, it could be said that High Court, being a court of record, has no power to review the decision of the Chief Justice, which is not a court.

Lastly, relying on SBP & Co. v. Patel Engineering Limited (2005), the Court held that only remedy for Adani Enterprises was to approach the Supreme Court under Article 136 of the Constitution of India.

In a nutshell, despite the High Court being the court of record, it could not have exercised its review jurisdiction in the present case for the following reasons:

  1. Though it is duty of the High Court to keep all its record in accordance with law, i.e., that it has inherent power to procedurally review its own orders, it cannot undertake substantial review, as is undertaken in the present case, of the decision unless provided by the statute.

  2. The decision of the Chief Justice of the High Court is not considered as decision of the courts of record i.e. High Court.
Conclusion

The Court in the present case, by not allowing review of the order passed by the Chief Justice under section 11 of the Act, has upheld the principle of minimal judicial intervention, which is one of the bed rock principles of the arbitration law. This is a decision in the right direction as the High Courts would be reluctant to entertain the review petitions, which they earlier did on the ground of being courts of record, thereby having inherent power to review its own decisions under article 215 of the Constitution of India.

Pinak Parikh

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