– Shruti Mishra, Prakarsh*
The authors have attempted to scrutinise the position of the Supreme Court on the ambiguity surrounding the procedure of the appointment of arbitrators, given under a specific legislation vis-a-vis the Arbitration & Conciliation Act, 1996. The authors have relied on the analysis of the landmark case in this regard – National Highways Authority of India v. Sayedabad Tea Company Ltd. And Ors. Through the lens of this judgment, the authors have delved into fault lines that the Supreme Court has failed to address.
The Latin phrase lex specialis derogat legi generali encapsulates the universally upheld principle that special laws should prevail over general laws. The Arbitration and Conciliation Act, 1996 based on the UNCITRAL Model law governs domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as well as lays down the laws relating to conciliation in India. The Act essentially acts as a general law in India for all arbitration cases that have a commercial character. Section 11, of the Act provides extensively for the appointment of an Arbitrator. However, there are multiple domestic legislations such as the Electricity Act 2003, Companies Act 2013, National Highway Act 1956 etc. that provide for an inherent redressal mechanism and appointment procedure of an arbitrator in case of any dispute.
Significance of Lex Speciali and Lex Generali in Procedure for Appointment of Arbitrators
In the presence of these special codes, the parties go for the appointment procedure prescribed thereunder. However, ambiguity arises when the appointment procedure under the codes cannot be carried out effectively and the parties resort to Section 11 of the Arbitration and Conciliation Act, 1996 to resolve the conflict in appointment. The moot question revolves around the conflict between lex speciali and lex generali in the procedure of appointment. Must the recourse under the Special Act be taken or the recourse under the broader and the more general Arbitration and Conciliation Act, 1996 should be adopted? The Supreme Court attempted to dispel this ambiguity in the case of the National Highways Authority of India v. Sayedabad Tea Company Ltd. And Ors. The authors will now examine this conflict through the lens of the Supreme Court’s judgment.
National Highways Authority of India v. Sayedabad Tea Company Ltd.
The Supreme Court, exercising its appellate jurisdiction dealt with the apparent conflict existing between the provisions of the National Highway Act, 1956 (hereinafter, NHA) and Arbitration and Conciliation Act, 1996 (hereinafter, ACA). Both Section 3G (5) of NHA, 1956 and Section 11 of ACA provide for appointment of Arbitrators. The court was posed with the question of applicability of Section 11 of the 1996 Act vis-à-vis the provisions of the NHA.
Understanding the relevant provisions of the National Highway Act, 1956:
The Act is a special legislation that holistically sets out provisions inter alia – the acquisition of land, a mechanism for the determination and disbursement of compensation for the property so acquired, and redressal for any such dispute that arises on the amount of compensation determined by the competent authority in accordance with Section 3G(7). Under the Act, as per Section 3G(5), if the compensation determined is not acceptable to either party, the compensation may then be determined by an arbitrator appointed by the Central Government.
Relevance of Section 11 of the Arbitration & Conciliation Act, 1996:
Section 11 of ACA provides for the mechanism for the appointment of an Arbitrator in case of arbitration disputes. It places a statutory limit of 30 days for the appointment of an arbitrator, failing which the provisions under the section demonstrate the recourse for the party. The section stipulates that if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon the request of a party, by the Chief Justice or any person or institution designated by him.
The appellant (NHAI) exercised its power under the Act and acquired the subject land for construction of a National Highway. The respondent, dissatisfied with the amount of compensation, invoked Section 3G (5) of the Act and filed an application for the appointment of an arbitrator thereunder. After a lapse of 30 days, on the failure of the Central Government in appointing the arbitrator, the respondent invoked Section 11(6) of the ACA. Consequently, a request was made to the Chief Justice for the appointment of an arbitrator.
After the request was filed under the ACA, the Central Government exercising its power under the NHA also appointed an arbitrator. However, the High Court noted that the right of the Central government stands forfeited since the respondent had now invoked the provisions of the ACA. The High Court appointed an arbitrator of its own for the dispute. The appellant consequently filed an appeal before the Supreme Court.
The Court’s Decision
The decision of the Supreme Court favoured the Appellants. The court held that the High Court of Calcutta did not hold its competence to appoint an Arbitrator by invoking Section 11 of the 1996 Act. The court essentially relied on the principle of lex specialis and held that the application of the Arbitration & Conciliation Act was barred in view of the applicable provisions of the NHA.
Special provisions to override the application of the Arbitration Act, 1996
The principle of lex specialis states that, that if two laws govern the same factual situation, a law governing a specific subject matter overrides a law governing only general matters. The Court characterised the NHA as a special code with comprehensive provisions for the assessment of compensation, and an inbuilt mechanism for the appointment of an arbitrator in case of any dispute thereof. As it is a settled principle of law that the special law prevails over the general law, the provisions of the ACA could not have been invoked at least for the appointment of an Arbitrator in abrogating the exclusive power of the Central Government in appointing the Arbitrator as contemplated under Section 3G(5) of Act 1956. To drive home this point, the court has also relied on its judgment in Gujarat Urja Vikash Nigam Ltd. Vs Essar Power Ltd where application of the ACA was barred in view of a special provision of the Electricity Act, 2003.
Moreover, emphasising Section 3G(6) of the Act, that reads “Subject to the provisions of this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to every arbitration under this Act” the court underlined the overriding effect of this provision on the provisions of the Arbitration & Conciliation Act.
No statutory limitation period of 30 days prescribed under the NHA:
Pertinent to the court’s observation was the absence of any statutory limitation period on the appointment of an arbitrator under the provisions of NHA. Thus, the lapse of 30 days from the request for appointment of the arbitrator does not in any way engender a cause to invoke the provisions of the ACA. The remedy that is otherwise available to the party is the writ jurisdiction of the High Court under Article 226 or a suit filed for that cause. As long as the power to appoint an arbitrator is exclusively vested with the Central Government under Section 3G(5) of the 1956 Act, Section 11 of Act 1996 has no application. Consequently, the court allowed the appeal, discarded the appointment by the Chief Justice and rightfully vested the Central Government with its power under the NHA.
The court’s analysis correctly revolves around the principle of lex specialis, yet it fails to address the underlying concerns. Acts such as the NHA, which may be considered a special code barring the application of the more general ACA, fail to necessarily provide for a limitation period. The jurisprudence which governs the correlation between legislations that are ‘codes in themselves’ and the statute of limitation clarifies the position as it stands now: “where a Statute is a complete code in itself, then the application of Limitation Act has to be seen from the scope of application of the Statute and not the Limitation Act.”
Interpreting this position of law, the judiciary has held that the provisions of the Limitation Act do not apply to such codes and the powers of the Court for any redressal lie in the code exhaustively. Hence, if a party is aggrieved due to delayed action on part of the authority mentioned and the code does not provide for a limitation, it leaves the party with the sole remedy of writ jurisdiction. This only encumbers the process due to the usual delay in the hearing of such proceedings. In case of arbitration proceedings, if the lex speciali legislations do not stipulate the time frame under which the appointment has to be made the recourse will be a writ jurisdiction. This defeats the very essence of arbitration being an Alternative Dispute Mechanism meant to save the time and expenses of the parties.
Moreover, it places in the hands of the Central Government, a rather inequitable and repository power which in the present case, is the power with respect to the appointment of the arbitrators with no mechanism of accountability in cases where these authorities may misuse their power and maliciously linger the appointment procedure.
What the judiciary can do to avoid such a disconsolate scenario is to issue guidelines making it mandatory for the provisions in legislations which are intended to be complete codes in themselves to have a specific statutory period of limitation and furthermore have a secondary recourse in case of reasonable and justified delay in filing on part of the aggrieved party such as is given in Section 5 of the Limitation Act, 1963. In the current case, the decision clarified the position of conflict in the existing laws, there is still a long way to go, in order to bring up a robust mechanism for proper redressal of disputes under such special legislations.
* Shruti Mishra and Prakarsh are undergraduate students of law at the National Law Institute University, Bhopal . The authors are motivated by their interest in International Arbitration and actively contribute to academic journals through their research and writings.