SBP & Co. v. Patel Engineering Ltd. (2005)

Section 11 is the door through which a party with an unwilling opponent gets a tribunal at all. Whether the power exercised at that door is administrative or judicial decides three practical things: who may exercise it, whether the other side must be heard, and how far the court may go into the merits of the objection that there is no arbitration agreement.

SBP answered that question for the pre-2015 Act, and it answered it in a way Parliament later found too wide. That makes it a two-part case in the examination: cite it for the character of the s. 11 function and for the reasons the amendment was thought necessary — never for the width of the enquiry today.

The proceedings arose out of an application for appointment of an arbitrator under s. 11. What was in issue was not the merits of the underlying contract but the nature of the power exercised on such an application, and the consequences that follow from characterising it one way or the other.

The function under s. 11 is judicial, not administrative. Exercising it, the authority must decide:

1. whether it has jurisdiction to entertain the request;
2. whether there is an arbitration agreement;
3. whether the applicant is a party to it;
4. whether the conditions for exercising the power are satisfied; and
5. if appointing, the fitness of the person to be appointed.

Four consequences were drawn in the judgment:

• Delegation. Because the power is judicial, the Chief Justice of India could delegate it only to another Judge of the Supreme Court, and a High Court Chief Justice only to another Judge of that High Court — not to a District Judge or to a non-judicial institution.
• Notice. The other side must be given notice before an appointment is made.
• Challenge. No appeal lay from the decision of the Chief Justice of India; a High Court Chief Justice's decision could be challenged under Article 136.
• After constitution. Once the tribunal is constituted, courts do not interfere with its orders; recourse lies only under ss. 34 and 37.

1. Look at what is actually being decided. Deciding whether an agreement exists, whether the applicant is a party and whether the statutory conditions are met is the determination of rights between contesting parties. A determination of that kind is judicial however it is labelled.
2. Judicial power carries judicial incidents. If the decision is judicial, it cannot be made behind the other party's back, and it cannot be handed to a body that does not exercise judicial power — hence the rules on notice and delegation.
3. Finality has to come from somewhere. A judicial determination binds, so the questions decided at the s. 11 stage cannot be reopened before the tribunal; that is what makes the appointment stage decisive rather than preliminary.
4. Minimum intervention still governs the rest. Section 5 keeps the courts out once the tribunal exists, so the only later openings are ss. 34 and 37 — a point that survives the amendments untouched.

It opens the essay on court intervention. The standard structure is: s. 5 first; then the Part I sections that permit intervention (ss. 8, 9, 11, 14(2), 27, 34, 36, 37, 39, 42, 43); then SBP and the shift away from it.

State the present law carefully, because the section has changed. Under s. 11 as it now stands, the appointment on default is made by the Supreme Court or, as the case may be, the High Court, or any person or institution designated by such Court — that wording was substituted with effect from 23 October 2015, replacing the reference to the Chief Justice. Section 11(6A) requires the Court, notwithstanding any judgment, decree or order of any court, to confine itself to the examination of the existence of an arbitration agreement; s. 11(6B) declares that designating a person or institution is not a delegation of judicial power; s. 11(7) makes the decision final, with no appeal, including no Letters Patent Appeal. An application is to be disposed of as expeditiously as possible, with an endeavour to decide it within sixty days of service of notice on the opposite party.

The 2019 scheme is not in force. The Amendment Act of 2019 would have replaced court appointment with appointment by arbitral institutions designated by the Supreme Court for international commercial arbitration and by the High Courts for other arbitrations, with disposal within thirty days and a High Court panel deemed an institution where none is available. Those provisions have not been brought into force. Write the answer on the 2015 text and mention the 2019 scheme only as a reform awaiting commencement.

It disposes of the argument that the appointing authority acts merely administratively, that it may appoint without hearing the other side, or that the tribunal can reopen what was decided at the appointment stage.

It does not decide the width of the enquiry under the present section — s. 11(6A) does that, and the enquiry is now confined to the existence of an arbitration agreement — and it says nothing about the tribunal's own power to rule on jurisdiction under s. 16, which is unaffected. SBP is also one of the decisions the course recommends as a subject for a case comment, because it is finally decided, has a clear ratio, and has a traceable later statutory history.