Latest News
A FLAWED RATIONALE: SBP vs. Patel Engineering
The landmark case of SBP & Co. v. Patel Engineering Limited, (2005)[1] was a verdict passed by seven judge bench of Hon’ble Supreme Court on the Section 11 (6) of the Arbitration and conciliation Act, 1996. The said Section talks about the appointment of arbitrator and states that in a situation where either the parties are unable to decide upon an arbitrator or the two respective arbitrator appointed by the parties are unable to mutually agree on a third arbitrator or an arbitral institution is unable to complete the procedure of appointing an arbitrator, the Chief Justice or any other person or institution designated by him, on request of the parties to dispute, can make such an appointment.
Since the enactment of the Arbitration and Conciliation Act, it has been a constant debate among the Indian Judiciary that whether the power given by the said section is administrative in nature or Judicial. Before the judgement of SBP vs. Patel Engineering, in the case of Konkan Railway Corp. Ltd. v. Rani Construction (P) Ltd.[2] the Supreme Court had declared that the Chief justice power to appoint an arbitrator is Administrative in Nature. Thus, the chief justice’s role was to only appoint an arbitrator between the parties so that the procedure of Arbitration can be carried forward. Thus this case had limited the scope of judiciary’s intervention arbitration procedure.
The supreme court in the case of SBP & Co. v. Patel Engineering Limited, (2005) overturned its earlier judgement and declared that the power mentioned in the Section 11(6) is Judicial in nature. This judgement by the court has been heavily criticized and treated as an example of Judicial overreach. The appointment of power being judicial in nature gave court the authority to not only appoint an arbitrator but also to check the procedure of the arbitration, the validity of arbitral agreement, the need for arbitration in the case and other similar matters. Thus, this judgement paved a path for Judiciary to intervene in the procedure of arbitration. Not only this but the Apex Court also stated that a judicial power cannot be delegated and thus, the line “any person or institution designated by him” can only mean a judge of Supreme Court or High Court other than the said chief justice.
This judgement has proved to be against the UNCITRAL Model Laws, which states that the laws of country should strive to limit the degree of intervention of the court in the ADR methods of Justice delivery. The judiciary has also failed the purpose of the legislation which clearly does not intend to be interpreted in such a manner. Also there is a case of judicial overreach in the judgement as it is the duty of judiciary to interpret the statutes and not make laws. Yet, while interpreting Section 11 (6) the Supreme Court coined a new language by interpreting “any person or institution designated by him” as “by chief justice of high court to a judge of high court and by Supreme court to a judge of Supreme Court”.
Thus, the case of SBP & Co. v. Patel Engineering Limited, (2005) has proved itself to be an unnecessary intervention in arbitral proceedings which has expanded the scope of judicial intervention in arbitral procedure contrary to the spirit of the Aternative Dispute Resolution Mechanism.
[1] 8 SCC 618 : AIR 2oo6 SC 450 (Supreme Court of India)
[2] [2000(8) SCC 159]
- The heart of Conflict: Section 11 (6)
- Judgement of the court in SBP vs. Patel Engineering
- Criticism of the Judgement
