Case Note & Summary
The writ petition arose from a dispute over a work order dated 09/05/2018 awarded by Western Coalfields Limited to M/s Ambey Mining Pvt Ltd for crushing ROM coal in Pench Area. Petitioners alleged that respondents falsely represented minimum daily quantity of 3000 tons of coal but provided average of about 188.42 tons per day, causing heavy financial losses and leaving manpower and crusher largely unutilized. Petitioners requested foreclosure or settlement of disputes under the NIT clause or CIL circular dated 07/04/2017 providing arbitration. After respondents failed to reply to letters dated 23/02/2021 and 12/03/2021, petitioners filed writ petition under Article 226 seeking mandamus directing respondent No.1 to proceed with arbitration. Respondents opposed maintainability, arguing that the Arbitration and Conciliation Act 1996 is a complete code; questions of arbitrability must be decided under Section 11(6A) or 16; and the circular is inoperative under Section 12(5) because it mandates only a person appointed by Competent Authority of CIL/CMD to act as arbitrator, making CMD ineligible. Petitioners countered that the doctrine of severability preserves the arbitration agreement even if one part is invalid, relying on TRF Limited v. Energo Engineering Projects Ltd. They argued that acting as arbitrator and power to appoint are distinct; employment by a State instrumentality is not per se a bar, citing Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd. They also contended that a clause restricting arbitrator to a particular person interferes with the power under Section 11(8) and should be ignored, citing Perkins Eastman Architects DPC v. HSCC (India) Ltd. Petitioners also drew attention to an order of Madhya Pradesh High Court where in a similar matter respondents agreed to arbitration. The court first addressed maintainability under Article 226, noting the prayer clauses and pleadings showed that the entire grievance was based on the CIL circular for settlement of disputes through arbitration. It referred to Section 7 of the Act defining arbitration agreement and to Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. for the principle that civil or commercial disputes which can be decided by a court are in principle capable of arbitration unless excluded. The court observed that arbitration is a private dispute resolution mechanism giving contractual authority to the tribunal. The provided judgment text ends before the final decision, so the final holding and directions are not available. The judgment was reserved on 19/06/2021 and pronounced on 02/08/2021.
Headnote
A) Arbitration Law - Arbitration Agreement - Validity and Existence - Arbitration and Conciliation Act, 1996, Section 7 - The petitioners relied on a CIL circular dated 07/04/2017 as providing an arbitration mechanism despite no arbitration clause in the NIT; the court referred to Section 7 which defines arbitration agreement and observed that arbitration agreement gives contractual authority to the arbitral tribunal and that civil or commercial disputes are arbitrable unless excluded (Paras 21-24). B) Arbitration Law - Maintainability of Writ Petition - Alternative Remedy - Arbitration and Conciliation Act, 1996, Section 11(6A), 16; Constitution of India, Article 226 - Respondents contended that the Act is a complete code and questions of arbitrability must be decided under Section 11(6A) or 16, making the writ petition not maintainable; petitioners argued interpretation of the circular was necessary to decide whether to proceed under Section 11(6) or other law; the court took up maintainability first (Paras 10, 15-16, 19). C) Arbitration Law - Ineligibility of Arbitrator - Section 12(5) and Seventh Schedule - Arbitration and Conciliation Act, 1996, Section 12(5) - Respondents argued that the CMD is not eligible to act as an arbitrator in view of Section 12(5) and that no steps were taken under the proviso to waive applicability; petitioners argued that employment by a State instrumentality is not per se a bar and that acting as arbitrator and power to appoint are distinct (Paras 7, 12, 17). D) Arbitration Law - Doctrine of Severability - Survival of Arbitration Agreement - Arbitration and Conciliation Act, 1996, Section 11 - Petitioners argued that right to arbitration survives even if one part of the arbitration agreement is invalid and placed reliance on TRF Limited v. Energo Engineering Projects Ltd.; the court noted this argument (Para 11). E) Arbitration Law - Appointment of Arbitrator - Interference with Judicial Power - Arbitration and Conciliation Act, 1996, Sections 11(8), 12(5) - Petitioners contended that a clause restricting arbitrator to a particular person interferes with the power of the Chief Justice or designate under Section 11(8) and should be ignored as contrary to the Act; reliance was placed on Indian Oil Corporation and Perkins Eastman (Paras 12-13). F) Arbitration Law - Scope of Section 11(6A) - Existence of Arbitration Agreement - Arbitration and Conciliation Act, 1996, Section 11(6A) - Respondents stated that the court must decide whether an arbitration agreement exists at the appointment stage; petitioners said if the circular is valid then only the question of who will be arbitrator remains for Section 11(6) (Paras 8, 10, 15).
Issue of Consideration
Whether the writ petition under Article 226 is maintainable when the Arbitration and Conciliation Act, 1996 provides remedies under Section 11(6) and Section 16; whether the arbitration clause in the CIL circular dated 07/04/2017 is valid and operative considering Section 12(5) of the Arbitration Act; whether the doctrine of severability applies to preserve the arbitration agreement if part of it is invalid; whether a person employed by a State instrumentality is per se ineligible to act as arbitrator and whether acting as arbitrator is distinct from power to appoint; whether a clause restricting appointment of arbitrator to a specific person interferes with the power of the Chief Justice under Section 11(8) and should be ignored.
Final Decision
Not mentioned in the provided text.
Law Points
- Arbitration agreement defined under Section 7 of Arbitration and Conciliation Act
- 1996
- arbitration agreement gives contractual authority to arbitral tribunal
- civil or commercial disputes are arbitrable unless excluded
- Section 12(5) ineligibility of arbitrator
- doctrine of severability preserves arbitration agreement despite invalid part
- distinction between acting as arbitrator and power to appoint
- Section 11(6A) scope of court at appointment stage
- Arbitration Act is a complete code
- writ petition under Article 226 maintainability when alternative remedy exists
- Section 11(8) power of Chief Justice to appoint arbitrator
- employee of State instrumentality not per se barred from acting as arbitrator.
