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A Comment on Shreejee Traco (I) (P) Ltd. v. Paperline International Inc.
by N. Swaminathan*
Cite as : (2004) PL WebJour 9
This review is intended to analyze and examine the vires and legal tenability of an administrative order rendered by the designate of the Chief Justice of India under Section 11(4) Arbitration and Conciliation Act, 1996 vis-à-vis the judgment of the Supreme Court in Bhatia case1. In the case2 under comment the designate of the Chief Justice of India, dismissed the petition filed by Shreejee and declined to appoint an arbitrator on a petition filed under Section 11(4) of the Arbitration and Conciliation Act, 1996 seeking appointment of arbitrator for and on behalf of the respondent, namely, M/s Paperline International Inc.
It is true that Bhatia case1 received serious criticism3. However, the fact that the learned designate of the Chief Justice was bound to follow the law laid down by the Supreme Court in Bhatia case1 should be noted.
In the instant case, the petitioner (a company incorporated in India having its principal office at Delhi) and respondent (a company incorporated in New York) entered into a contract under which the respondent had agreed to supply facial tissue paper. The pro forma invoice issued by the respondent contained an arbitration clause, which reads as under:
“Any disputes or claims will be submitted to arbitration in New York.”
The goods when arrived at Nhava Sheva Port in Mumbai, the petitioner found, on due inspection, that it did not match with the sample of goods. The petitioner contended that the respondent had committed breach of contract and claimed damages and refund of L/C with interest. The petitioner appointed its own arbitrator and called upon the respondent to nominate its arbitrator within 30 days so that both the nominated arbitrators could appoint a presiding arbitrator. The respondent maintained silence to the demands of the petitioner. The petitioner, forced by the noncooperative attitude adopted by the respondent, filed a petition under Section 11(4) of the Arbitration and Conciliation Act, 1996 before the Chief Justice of India, being an International Commercial Arbitration, seeking appointment of arbitrator for and on behalf of the respondent.
The designate of the Chief Justice of India held the petition to be not maintainable in view of the fact that the arbitration clause in the agreement admittedly contemplates arbitration proceeding to be held at “New York”. He further opined that Section 11 falls in Part I of the Arbitration and Conciliation Act, 1996 and that this part, would apply to only those arbitrations which are held in India in view of clear and unambiguous language employed in Section 2(2). He dismissed the petition.
It may be noted that the aforesaid order of the designate of the Chief Justice is only an “administrative order”. The Constitution Bench of the Supreme Court in the case of Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd.4, affirmed the decision in Konkan Rly. Corpn. Ltd. v. Mehul Construction Co.5 which held that the Chief Justice or his designate for the purpose of Section 11 of the Arbitration and Conciliation Act, 1996 does not function as a court or tribunal and the order passed by the Chief Justice or his designate is only an administrative order. It further held that the order made by the Chief Justice or his designate could not be the subject-matter of special leave petition under Article 136 of the Constitution of India. It can only be challenged in a writ petition under Article 226 of the Constitution of India. Therefore, the order of the designate of the Chief Justice of India, dismissing the petition, is only an administrative order. The learned Judge was not functioning as a judge or tribunal and the resultant order passed by him can only be assailed in a writ petition under Article 226 of the Constitution of India.
It is trite law that the administrative order has to be in consonance with the statute and the precedents laid by the Supreme Court. Article 141 of the Constitution of India mandates that the law declared by the Supreme Court shall be binding on all courts within the territory of India. Article 144 obligates, without any exception, that all authorities, be it civil or judicial in the territory of India shall act in aid of the Supreme Court. Thus, the judgments and interpretations placed by the Supreme Court are itself law.
It is submitted with respect that interpretation of the designate of Chief Justice of sub-section (2) of Section 2 that Part I “would apply where the place of arbitration is in India, tantamounts to saying that it will not apply where the place of arbitration is not in India” runs contrary to the interpretation placed by the Supreme Court in Bhatia case1, wherein the Supreme Court held that: (SCC para 21)
“By omitting to provide that Part I will not apply to international commercial arbitrations which takes place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India.”6
Thus the order rendered by the designate of the Chief Justice of India in Shreejee Traco (I) (P) Ltd. v. Paperline International Inc.2 declining to appoint an arbitrator, on the premise that the arbitration clause contemplates arbitration to be held outside India and reading Section 2(2) to the effect that Part I of the Act is applicable only to arbitrations held in India, is contrary to the law laid down in Bhatia International v. Bulk Trading1.
The Supreme Court in Bhatia case1 has held that Part I of the Arbitration and Conciliation Act would equally apply to international commercial arbitrations held outside India, unless any or all of the provisions have been excluded by agreement between the parties.
The order of the designate of the Chief Justice of India is per incuriam, since it is rendered without considering the law laid down by the Supreme Court in Bhatia case1.
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