@JUDGMENTTAG-ORDER
B. Subhashan Reddy, J
1. In this writ petition, the constitutional vires of Sections 13(4) and 16(5) of Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") is in question.
2. The 2nd respondent is a finance company and laid a claim before the 3rd respondent who is an Arbitrator (Hon''ble Sri Justice Kuppuswamy, a retired Chief Justice of Andhra Pradesh High Court). The claim relates to recovery of money said to be due on account of hire purchase agreement entered into by the writ petitioner herein. Two others, namely G. Jaganmohan Rao and Smt. Prathima Reddy are added as respondents, on the ground that they are the guarantors. Clause 15 of the agreement reads as follows:
"All disputes, differences and/or claims, arising out of this hire purchase agreement, whether during its subsistence or thereafter, shall be settled by arbitration in accordance with the provisions of Indian Arbitration Act, 1940 or any statutory amendments thereof and shall be referred to the sole arbitration of the Arbitrator nominated by the owner. The Award given by such an Arbitrator, nominated by the owner, shall be final and binding on all the parties to this agreement."
This arbitration clause was invoked by the 2nd respondent appointing 3rd respondent as the arbitrator. But, the petitioner is contesting the same on the ground that the matter is not arbitrable and that neither the 2nd respondent was entitled to appoint an Arbitrator nor was 3rd respondent entitled to embark upon the arbitration. We need not dwell on several facts for the reason that we are only called upon to judge the constitutional validity of the provisions mentioned supra. Suffice it to say that the petitioner was not witling to participate in arbitration proceedings on the grounds mentioned above and putforth an objection regarding the continual of arbitration proceedings. But, his objections were overruled and the Arbitrator proceeded further and also complied with the formality u/s 12 of the Act regarding his independence and impartiality. The petitioner did not raise any such ground with regard to independence or impartiality of the Arbitrator, but only reiterated that the matter was not arbitrable and neither 2nd respondent was entitled to seek arbitration and appoint the 3rd respondent as the Arbitrator, nor was the 3rd respondent was entitled to embark upon the enquiry. When the objection put forth by the petitioner was not acceded to, he had filed this writ petition challenging the validity of the above provisions.
3. Section 13 as a whole along with sub-sections reads:
13. Challenge procedure - (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred to in sub-section (i), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in subsection (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral Tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral Tribunal shall continue the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such arbitral award in accordance with Section 34.
(6) Where an arbitral award is set aside on an application made under sub- section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees."
It is also apt to extract Section 16 along with its sub-sections:
"16. Competence of arbitral tribunal to rule on its jurisdiction - (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose -
(a) an arbitration clause which form part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral Tribunal that the contract is null and void and shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral Tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral Tribunal shall decide on a plea referred to in sub-section (2) or subsection (3) and, where the arbitral Tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make a arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34.
4. What the petitioner aggrieved is that while the unsuccessful challenge either u/s 13(4) or Section 16(5) has got no right of appeal, the person like the 2nd respondent, if he suffers an order upholding the objection, has got a right of appeal u/s 37(1)(a) of the Act and that the same is discriminatory and violative of Article 14 of Indian Constitution.
5. Mr. E. Manohar, the learned senior Counsel appearing for the petitioner, strenuously contends that the provisions contained under Sections 13(4) and 16(5) of the Act are discriminatory for the reason that they treat the party invoking arbitration like the 2nd respondent herein differently than the party subjected to arbitration like the petitioner herein, even though, both are similarly situated and this differential treatment is discriminatory and that there is no intelligible differentia for such discrimination and as such, is infractive of the fundamental right of equality clause enshrined in Article 14 of Indian Constitution. Mr. B. Adhinarayana Rao, the learned Central Government Standing Counsel, submits that the petitioner and the 2nd respondent are not equally situated and that the discrimination with regard to non-providing of appeal to the petitioner is justified on the ground that in the event of the petitioner suffering an ward, he can always challenge the same and such challenge is provided under the grounds enumerated u/s 34 of the Act, while the 2nd respondent is not having any right to challenge on the ground available to the petitioner and as such, he is provided with a remedy of appeal at the threshold in the event of the petitioner''s claim being allowed. Mr. C.V. Mohan Reddy, the learned Counsel appearing for the 2nd respondent supports the argument of Mr. B. Adinarayana Rao and submits that the petitioner being party to the agreement containing arbitration clause, is bound by the said clause and cannot turn back and say that the matter cannot be submitted to ., arbitration and that inspite of several opportunities, the petitioner did not avail of the same and had been just protracting the litigation on untenable grounds and as objections have been over-ruled by the arbitrator, the petitioner is bound to participate in the arbitration proceedings and should he be aggrieved of the final outcome of the arbitration award, he can always avail the remedy of seeking to set aside the award as the ground which he has raised with regard to the jurisdiction of the arbitrator, is one of the grounds enumerated in Section 34 for a plea to set aside the award and as such a plea is not available to the 2nd respondent, a party seeking arbitration, providing appeal to the persons like me 2nd respondent at the threshold u/s 37(1)(a) of the Act is quite sustainable even if such an appeal is not provided to the petitioner, as such right is preserved for the petitioner to invoke Section 34 for setting aside the award and as such, even if there is any discrimination, there is an intelligible differentia for such discrimination.
6. Hitherto, arbitrations were covered by the Indian Arbitration Act, 1940. But the same was confined for domestic arbitration. So far as foreign arbitration is concerned, two Acts, namely, The Arbitration Protocol and Convention Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1960 were operated. Experience has shown that the above Acts, instead of facilitating expeditious disposal of the claims, were dodged for years to come and the very purpose of arbitration failed as the object of arbitration is to settle the disputes faster, avoiding the cumbersome procedure of the common law Court. In order to consolidate the law of arbitration, both domestic and foreign and also to delete several provisions like Section 34 and provision tor making the award rule of the Court etc., of the Act of 1940 which proved to be obstacles in speedy disposal, the Parliament had taken cognizance of the same and also model law of International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) 1985. That being the objective of the Central Act 26 of 1996, which was preceded by an Ordinance, the interpretation given to the provisions of the Act should be to advance the object and intendment of the Act and not to thwart the same. Reading the Act as a whole and particularly, the provisions contained in Section 13, 16, 34 and 37, it leaves no doubt that when there is an arbitration clause, the party can directly invoke the arbitration and appoint an arbitrator and at the first opportunity, the party subjected to arbitration has to state his objections, even raising the question of jurisdiction of the arbitrator, as also his apprehensions of bias against the arbitrator. If his apprehensions of bias are over-ruled as also the jurisdiction to embark, the party subjected to arbitration is provided with a remedy of seeking to set aside the award by invoking Section 34 of the Act. While the ground of bias is a ground enumerated in sub-section (5) of Section 13 for challenging the award u/s 34, the other grounds like the adverse order regarding the competence of the arbitrator to arbitrate on the subject matter is a ground for setting aside the award on invoking Section 34, under sub-section (6) of Section 16 of the Act. It is needless to mention that party seeking arbitration and appointing arbitrator is estopped from raising the plea of bias against the arbitrator even at a later point of time. He is entitled to invoke the appeal remedy u/s 37(1)(a) should the arbitrator rule against him, holding that he does not have jurisdiction, upholding the plea of the party subjected to the arbitration thus, resulting in termination of arbitration proceedings. The intelligible differentia stares at us in providing such an appeal at the threshold, as without deciding the competence first, it is not desirable that arbitrator should proceed with the enquiry and once the arbitrator rules that he has got jurisdiction to deal with the matter, the party subjected to arbitration is not left remediless, but he has to wait and invoke Section 34 for setting aside the award, if he feels aggrieved. On the other hand, if the party subjected to arbitration is given an appeal at the threshold, as is given to the party seeking arbitration, entire proceedings will be stalled and it may take years to finally decide the same because of the hierarchy of the authorities and if ultimately it is held that the arbitrator has competence to deal with the matter, the proceeding have to restart, which will certainly entail in delay. As already stated above, Central Act 26 of 1996 has aimed at consolidating the law of arbitration, both domestic and foreign and to cut short the procedural aspects for providing speedy and efficacious remedy and not providing of appeal against ruling of the arbitrator upholding his competence to deal with the matter is one such step in aid of faster disposal of the arbitral proceedings, and by the by giving opportunity to the party aggrieved to question the award u/s 34 of the Act. The only thing is that the party has to wait till the award is rendered and is not given that traditional right of interrupting the proceedings at each stage of the proceeding. As such, there is a nexus for the object to be achieved i.e. speedy disposal of the arbitration proceedings and also the intelligible differentia as already mentioned supra.
7. In view of what is stated supra, we do not see any infirmity in the legal provisions attacked. The writ petition, thus, fails and is accordingly dismissed. No costs. However, we direct the parties to bear their own costs. It is needless to mention that interim orders already granted stand vacated.
