FOOD CORPORATION OF INDIA versus INDIAN COUNCIL OF ARBITRATION AND ORS. ETC.ETC.

Citation: [2003] SUPP. 1 S.C.R. 568 · Decided: 17-07-2003 · Supreme Court of India · Bench: DORAISWAMY RAJU · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
FOOD CORPORATION OF INDIA 
v. 
INDIAN COUNCIL OF ARBITRATION AND ORS. ETC.ETC. 
JULY 17, 2003 
[DORAISWAMY RAJU AND D.M. DHARMADHIKARI, JJ.] 
Indian Arbitration Act, 1996; Ss. 11 and 161/ndian Council of 
Arbitration Rules; Rules 4(6), 5, 9, JO, 13 to 22 and 37: Agreement between 
C the parties with an arbitration clause-Arbitration clause vis-a-vis !CA. 
Rules-Conflict between-ICA insisting for fresh arbitration clause-
Reference by the appellant-Answered in negative by the High Court directing 
appellant lo follow !CA Rules-Held: Any objections as to the existence/ 
enforceability/legality/validity of the arbitral clause in the agreement could 
only be adjudicated by the Tribunal after its constitution and on making a 
D reference to ii and not by the Courts. 
E 
Arbitration-Jurisdiction of the Courts-Invoking of-Held: since 
legislative intent underlying the Act is to minimize the supervisory role of the 
Courts in arbitral process, all contentious issues need to be argued/agitated 
and decided by the Arbitral Tribunal-Hence !CA directed to nominate 
arbitrator for resolving disputes referred by the parties-Directions issued-
lnterpretation of Statutes. 
Appellant-Corporation entered into agreements with the Millers for 
storage and milling of paddy in return for payments. The agreements also 
p contained an uniform/standardized arbitration clause for settlement of claims/ 
disputes between parties arising out of the contracts by referring the matters 
to Indian Council of Arbitration (ICA) - respondent. In some cases, ICA 
insisted to nominate the sole arbitrator to the Council and in other cases 
issued further instructions for compliance and also refused to proceed with 
the arbitration claims till appellant and Millers filed a fresh arbitration clause 
G undertaking that arbitrations would be conducted in accordance with ICA 
Rules. Aggrieved, appellant made a reference to the High Court. Answering 
the reference, High Court directed the appellant to follow ICA Rules. Hence 
the present appeals. 
H 
568 
F.C.I. v. INDIAN COUNCIL OF ARBITRATION 
569 
It was contended for the appellant that since there appeared to be no A 
contradiction/inconsistency between the arbitration clause and ICA Rules, 
on proper and harmonious construction of the rules, disputes had to be resolved 
by the arbitration through ICA; that since appellant did not assert its right to 
nominate the arbitrators by themselves and instead requested ICA to nominate 
arbitrators for arbitration of the matter, stand of the ICA insisting appellant B 
to nominate arbitrator was unjustified; and that ICA by taking unreasonable/ 
unwarranted stand obstructed resolution of disputes by the arbitrators 
unmindful of the heavy stakes involving public mo~ey. 
On behalf of the respondent, it was submitted that in view of the decision 
of this Court in Konkan Railway Corporation Ltd. and Anr. v. Rani C 
Construction Pvt. Ltd., 120021 2 SCC 388 the SLPs were not maintainable 
under Article 136 of the Constitution of India; that since in the arbitration 
clause stipulation as to the nomination of the arbitrator by the named 
authorities mentioned therein, ICA could not nominate arbitrator; and that 
the stipulation as to the appointment of arbitrator in the arbitration clause 
was directory in nature contrary to and in conflict with the ICA Rules. 
D 
Allowing the appeals, the Court 
HELD: 1.1. The High Court in the instant case has proceeded to adopt 
an adjudicatory role and returned a verdict recording reasons as the very 
existence or otherwise of the agreement as well as the tenability and legality E 
or otherwise of making a reference to an arbitrator. In view of such peculiar 
situation, it would be futile for the respondents to contend that the SLPs were 
not maintainable, particularly in view of the fact that any recourse to have the 
arbitrator appointed or nominated could be forestalled by the detailed judgment 
and the findings recorded by the High Court in the instant matter. Thus, the F 
details pointed out on behalf of the ICA regarding the submission as to the 
provisions of law actually invoked before the High Court, the nature of the 
application or the character of the order passed pales into insignificance. 
[577-B-D[ 
Konkan Railway Corporation ltd. and Anr. v. Rani Construction Pvt. G 
ltd., 1200212 sec 388, followed. 
Konkan Railway Cotpn. ltd. and Ors. v. Mehul Construction Co., [20001 
7 sec 201, relied on. 
· 1.2. The questions 

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