Arbitration Act: Section 11 jurisdiction not a mere cosmetic exercise to examine existence of agreement: Calcutta High Court

The jurisdiction of a Court under Section 11 of the Arbitration and Conciliation Act, 1996 (Act) is not limited to simply examining whether a valid arbitration agreement exists and then referring every such case to arbitration, the Calcutta High Court observed on Thursday. [BK Consortium Engineers Private Limited v. Indian Institute of Management, Calcutta].Justice Shekhar B Saraf quipped that if this were the case, the functions laid out under Section 11 of the Act could have been delegated to artificial intelligence, thereby "eliminating the need for applicability of a judicial mind and relieving the courts of the sedulous task of adjudicating such matters."."... in a Section 11 application, the Court is not supposed to undertake a meager cosmetic exercise to examine the existence and/or validity of the arbitration agreement, and then simply refer the matter to arbitration just because the arbitration clause is valid", the judgment stated..Section 11 of the Act deals with the appointment of arbitrators, and also includes provisions for appointment of an arbitrator by the High Court and the Supreme Court in certain circumstances, on an application being made for the same. .The Court observed that while party autonomy and independence of the arbitral tribunal are the cornerstones of creating an arbitration-friendly atmosphere, this does not mean that the courts are supposed to act as mere spectators in every Section 11 application.The objective of judicial intervention is to ensure the efficacy and utility of the arbitration process, the Judge went on to explain."Just like water is crucial to a fish’s survival, the presence of an arbitrability element in a Section 11 application is a must for it to be accepted and referred to an arbitrator for further adjudication. For instance, if a person appears to be dead and when on examination of the pulse, it is palpably evident that there is no life left, one is not supposed to send the body to the operation theatre but rather to a morgue", he added..Every case does not call for reference to arbitration and courts act as doorkeepers to decline referral to arbitration in certain circumstances, the Judge observed. Guidelines on these circumstances have been set out in a number of case laws, including the Supreme Court's ruling in Vidya Drolia and Ors. v. Durga Trading Corporation, Justice Saraf observed..One such circumstance is when the claims made in a dispute are time-barred under the law of limitation, the Court further pointed out. The Court found that the case it was dealing with was one such case where the claims were ex-facie time-barred. .Urging that the claim was still alive, the petitioner had contended that both parties had nominated arbitrators after the stated limitation period, the Court declined to consider this as an event that would extend the limitation period. The Court also noted that the respondent had expressly stated that the claim was barred by limitation even in as it nominated an arbitrator. .In any case, the Court concluded that the consent of the parties was irrelevant to accounting for the limitation period. Limitation is not something to be decided by the consent of the parties, the Court said, adding that it is something that is statutorily mandated and judicially enforced. ."If there is a boundary drawn by the legislature and enforced by the judiciary, parties cannot act outside of it on the grounds that their consent should be the primary consideration in such cases ", the Court said. .Explaining the significance of adhering to the law of limitation, the Court added,"While time should never be a hindrance in dispensing justice, the same would not mean that the time for claiming recourse to a remedy never ends as this would defeat the very purpose for which such remedies exist.".In the course of the judgment, the Court also tackled contentions concerning a clause in the contract between the parties concerning the appointment of an arbitrator. Referring to various case laws, Justice Saraf reiterated that a unilateral appointment of an arbitrator by a party who has some sort of interest in the final outcome or decision is not permissible."For arbitration to be seen as a viable dispute resolution mechanism and as an alternate recourse to litigation, the independence of arbitration process outside the purview of undue influence and favor needs to be ensured in both letter and spirit. And in case of non-adherence to such principles, the courts must step in", the Court said. .The Judge observed that the natural justice principle of nemo judex in causa sua i.e. that no one should be made a judge in his own cause is relevant to arbitration cases as well. For arbitration decisions to be respected and accepted as decrees of the court, a similar level of integrity in the appointment of arbitrators must be ensured, he emphasised. .Having found that the claims raised were time-barred, the Court ultimately dismissed the arbitration petition filed before it. .Senior Advocates Jayanta Kumar Mitra and Dhruba Ghosh, and advocates Sakya Sen, Dola Adhikari, Rohit Banerjee, Sunil Gupta, Altamash Alim and Ajeyaa Choudhury appeared for the petitioner. Advocates Sabyasachi Chowdhury, Bhaskar Mukherjee, and Nafisa Yasmin appeared for the respondents. .[Read Judgment]