Clinical Desertation

Project on Competence and Jurisdiction of Arbitral

Tribunals

Under the Supervision of:

Mr. Sukesh Mishra

Submitted by:

Harshit Agarwal

7th Semester

B.A.LL.B (Hons.)

Jamia Millia Islamia

1
 TABLE OF CONTENT

INTRODUCTION

ARBITRATION

ARBITRATOR

ARBITRAL TRIBUNAL

NEED FOR ARBITRATION

COMPETENCE OF ARBITRAL TRIBUNAL TO RULE ON ITS OWN

JURISDICTION

CONCLUSION

BIBLIOGRAPHY

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 ACKNOWLEDGEMENT

I would like to express profound gratitude to Mr. Sukesh Mishra for his invaluable support,
encouragement, supervision, and useful suggestions throughout this project work. His moral
support and continuous guidance enabled me to complete my work successfully.

I am thankful and indebted to all those who helped me directly or indirectly in completion of this
project report.

Harshit Agarwal

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INTRODUCTION
The significant increase in the role of international trade in the economic development of nations
over the last few decades has been accompanied by a considerable increase in the number of
commercial disputes as well. In India too, rapid globalization of the economy and the resulting
increase in competition has led to an increase in commercial disputes. At the same time,
however, the rate of industrial growth, modernization, and improvement of socio-economic
circumstances has, in many instances, outpaced the rate of growth of dispute resolution
mechanisms. In many parts of India, rapid development has meant increased caseloads for
already overburdened courts, further leading to notoriously slow adjudication of commercial
disputes.1 As a result, alternative dispute resolution mechanisms, including arbitration, have
become more crucial for businesses operating in India as well as those doing businesses with
Indian firms.

In sum, although the huge influx of overseas commercial transactions spurred by the growth of
the Indian economy has resulted in a significant increase of commercial disputes, arbitration
practice has lagged behind. The present arbitration system in India is still plagued with many
loopholes and shortcomings, and the quality of arbitration has not adequately developed as a
quick and cost-effective mechanism for resolution of commercial disputes.

ARBITRATION

Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or

more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties
opt for a private dispute resolution procedure instead of going to court.

1
Nearly 30 million cases pending in courts (www.rtiindia.org).

4
Its principal characteristics are:

 Arbitration is consensual

Arbitration can only take place if both parties have agreed to it. In the case of future disputes
arising under a contract, the parties insert an arbitration clause in the relevant contract. An
existing dispute can be referred to arbitration by means of a submission agreement between the
parties. In contrast to mediation, a party cannot unilaterally withdraw from arbitration.

 The parties choose the arbitrator(s)

Under the WIPO Arbitration Rules, the parties can select a sole arbitrator together. If they
choose to have a three-member arbitral tribunal, each party appoints one of the arbitrators; those
two persons then agree on the presiding arbitrator. Alternatively, the Center can suggest potential
arbitrators with relevant expertise or directly appoint members of the arbitral tribunal. The
Center maintains an extensive roster of arbitrators ranging from seasoned dispute-resolution
generalists to highly specialized practitioners and experts covering the entire legal and technical
spectrum of intellectual property.

 Arbitration is neutral

In addition to their selection of neutrals of appropriate nationality, parties are able to choose such
important elements as the applicable law, language and venue of the arbitration. This allows
them to ensure that no party enjoys a home court advantage.

 Arbitration is a confidential procedure

The WIPO Rules specifically protect the confidentiality of the existence of the arbitration, any
disclosures made during that procedure, and the award. In certain circumstances, the WIPO
Rules allow a party to restrict access to trade secrets or other confidential information that is
submitted to the arbitral tribunal or to a confidentiality advisor to the tribunal.

 The decision of the arbitral tribunal is final and easy to enforce

Under the WIPO Rules, the parties agree to carry out the decision of the arbitral tribunal without
delay. International awards are enforced by national courts under the New York Convention,

5
which permits them to be set aside only in very limited circumstances. More than 140 States are
party to this Convention.

Arbitration is a binding dispute settlement procedure in which the dispute is submitted to an

arbitral tribunal consisting of a sole or an odd number of arbitrators which makes a decision in
the form of an award on the dispute that is binding on the parties and thus it finally settles the
dispute. It is a method of dispute resolution involving one or more neutral third parties who are
usually agreed to by the disputing parties and whose decision is binding2 

Arbitration at its core is a form of dispute resolution, which comprises of a private judicial
determination of a dispute by an independent third party. It is considered as a private dispute
redressal process which is widely encouraged for promoting twin motives of overcoming high
pendency of cases and reducing the cost of litigation. The prominent feature of the system is that,
instead of filing a case in court, the parties can refer their case to an arbitral tribunal whose
decision is binding and is termed as an award.

The process of arbitration can start only if there exists a valid Arbitration Agreement between the
parties prior to the emergence of the dispute. As per Section 7, such an agreement must be in
writing. The contract regarding which the dispute exists, must either contain an arbitration clause
or must refer to a separate document signed by the parties containing the arbitration agreement.
The existence of an arbitration agreement can also be inferred by written correspondence such as
letters, talex, or telegrams which provide a record of the agreement. An exchange of statement of
claim and defence in which existence of an arbitration agreement is alleged by one party and not
denied by other is also considered as valid written arbitration agreement.

Any party to the dispute can start the process of appointing arbitrator and if the other party does
not cooperate, the party can approach the office of Chief Justice for appointment of an arbitrator.
There are only two grounds upon which a party can challenge the appointment of an arbitrator –
reasonable doubt in the impartiality of the arbitrator and the lack of proper qualification of the
arbitrator as required by the arbitration agreement. A sole arbitrator or a panel of arbitrators so
appointed constitute the Arbitration Tribunal.

2
Black’s Law Dictionary -17th Edition

6
Except for some interim measures, there is very little scope for judicial intervention in the
arbitration process. The arbitration tribunal has jurisdiction over its own jurisdiction. Thus, if a
party wants to challenge the jurisdiction of the arbitration tribunal, it can do so only before the
tribunal itself. If the tribunal rejects the request, there is little the party can do except to approach
a court after the tribunal makes an award. Section 34 provides certain grounds upon which a
party can appeal to the principal civil court of original jurisdiction for setting aside the award.

Once the period for filing an appeal for setting aside an award is over, or if such an appeal is
rejected, the award is binding on the parties and is considered as a decree of the court.

A Brief History of Arbitration Law in India

Arbitration has a long history in India. In ancient times, people often voluntarily submitted their
disputes to a group of wise men of a community—called the panchayat—for a binding
resolution.3

Modern arbitration law in India was created by the Bengal Regulations in 1772, during the
British rule. The Bengal Regulations provided for reference by a court to arbitration, with the
consent of the parties, in lawsuits for accounts, partnership deeds, and breach of contract,
amongst others.4

Until 1996, the law governing arbitration in India consisted mainly of three statutes: (i) the 1937
Arbitration (Protocol and Convention) Act, (ii) the 1940 Indian Arbitration Act, and (iii) the
1961 Foreign Awards (Recognition and Enforcement) Act.5

3
K Ravi Kumar, ‘Alternative Dispute Resolution in Construction Industry’, International Council of Consultants (ICC)
papers, www.iccindia.org. at p 2. K Ravi Kumar is assistant executive engineer, Salarjung Museum, Hyderabad.
4
ibid.
5
ibid.

7
The 1940 Act was the general law governing arbitration in India along the lines of the English
Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to enforce foreign
arbitral awards (the 1961 Act implemented the New York Convention of 1958).6

The government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act) in an effort to
modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled
on the lines of the UNCITRAL Model Law. This Act repealed all the three previous statutes (the
1937 Act, the 1961 Act and the 1940 Act).7

Its primary purpose was to encourage arbitration as a cost-effective and quick mechanism for the
settlement of commercial disputes.8 The 1996 Act covers both domestic arbitration and
international commercial arbitration.

 The Arbitration Act, 1940

The Arbitration Act, 1940, dealt with only domestic arbitration. Under the 1940 Act, intervention
of the court was required in all the three stages of arbitration, i.e. prior to the reference of the
dispute to the arbitral tribunal, in the duration of the proceedings before the arbitral tribunal, and
after the award was passed by the arbitral tribunal. Before an arbitral tribunal took cognizance of
a dispute, court intervention was required to set the arbitration proceedings in motion. The
existence of an agreement and of a dispute was required to be proved. During the course of the
proceedings, the intervention of the court was necessary for the extension of time for making an
award. Finally, before the award could be enforced, it was required to be made the rule of the
court.

While the 1940 Act was perceived to be a good piece of legislation in its actual operation and
implementation by all concerned - the parties, arbitrators, lawyers and the courts, it proved to be
ineffective and was widely felt to have become outdated.9

6
The New York Convention of 1958, i.e. the 1958 Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, is one of the most widely used conventions for recognition and enforcement of foreign awards. It
sets forth the procedures to be used by all signatories to the Convention. This Convention was first in the series of
major steps taken by the United Nation since its inception, to aid the development of international commercial
arbitration. The Convention became effective on June 7, 1959.
7
The 1996 Act, Section 85.
8
Justice Ashok Bhan in his inaugural speech delivered at the conference on ‘Dispute Prevention and Dispute
Resolution’ held at Ludhiana, India, October 8, 2005.
9
Arbitration and Conciliation Act, 1996, Statement of Objects and Reasons.

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  The Arbitration and Conciliation Act, 1996

The 1996 Act, which repealed the 1940 Act, was enacted to provide an effective and expeditious
dispute resolution framework, which would inspire confidence in the Indian dispute resolution
system, attract foreign investments and reassure international investors in the reliability of the
Indian legal system to provide an expeditious dispute resolution mechanism.

The 1996 Act has two significant parts – Part I provides for any arbitration conducted in India
and enforcement of awards thereunder. Part II provides for enforcement of foreign awards. Any
arbitration conducted in India or enforcement of award thereunder (whether domestic or
international) is governed by Part I, while enforcement of any foreign award to which the New
York Convention or the Geneva Convention applies, is governed by Part II of the 1996 Act.

The 1996 Act contains two unusual features that differed from the UNCITRAL Model Law.
First, while the UNICITRAL Model Law was designed to apply only to international commercial
arbitrations,10 the 1996 Act applies both to international and domestic arbitrations. Second, the
1996 Act goes beyond the UNICITRAL Model Law in the area of minimizing judicial
intervention.11

The changes brought about by the 1996 Act were so drastic that the entire case law built up over
the previous fifty-six years on arbitration was rendered superfluous. 12 Unfortunately, there was
no widespread debate and understanding of the changes before such an important legislative
change was enacted.13 The Government of India enacted the 1996 Act by an ordinance, and then
extended its life by another ordinance, before Parliament eventually passed it without reference
to a Parliamentary Committee—a standard practice for important enactments.14 In the absence of
case laws and general understanding of the Act in the context of international commercial

10
See Article 1 of the UNICITRAL Model Law
11
S K Dholakia, ‘Analytical Appraisal of the Arbitration and Conciliation (Amendment) Bill, 2003’, ICA’s Arbitration
Quarterly, ICA, New Delhi, 2005 vol. XXXIX/No.4 at page 3. S K Dholakia is a Member of ICC International Court of
Arbitration and Senior Advocate, Supreme Court of India.
12
(1999) 2 SCC 479 (Sundaram Finance vs. NEPC Ltd.). The Supreme Court held at p 484 thus: ‘The provisions of this
Act (the 1996 Act) have, therefore, to be interpreted and construed independently and in fact reference to the
1940 Act may actually lead to misconstruction.’
13
supra, note 10.
14
supra, note 10.

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arbitration, several provisions of the 1996 Act were brought before the courts, which interpreted
the provisions in the usual manner.15

The Law Commission of India prepared a report on the experience of the 1996 Act and
suggested a number of amendments.16 Based on the recommendations of the Commission, the
Government of India introduced the Arbitration and Conciliation (Amendment) Bill, 2003, in
Parliament for amending the 1996 Act.17 It has not been taken up for consideration. In the
meantime, Government of India, the Ministry of Law and Justice, constituted a Committee
popularly known as the ‘Justice Saraf Committee on Arbitration’, to study in depth the
implications of the recommendations of the Law Commission of India contained in its 176th
Report and the Arbitration and Conciliation (Amendment) Bill, 2003. The Committee submitted
its report in January 2005.

Essentials of an Arbitration Agreement18

For an agreement to be considered as an arbitration agreement there must be:

 An intention of the parties to settle their differences by a private tribunal.

 Such Parties must agree in writing, to be bound by the decision of such tribunal.

 Parties must be ad-idem(consensual on the same point or effect)

Scope of Arbitration:

Scope of Arbitration is quite wide, thus a karta of a HUF, a Company and parties to an
arbitration agreement can all submit their disputes to arbitration.

15
supra, note 10.
16
The full report of the 176th Report of the Law Commission of India can be downloaded from
www.lawcommissionofindia.nic.in. The full report of the 176th Report of the Law Commission of India can be
downloaded from www.lawcommissionofindia.nic.in.
17
The Arbitration and Conciliation (Amendment) Bill, 2003 was introduced in Parliament on December 22, 2003. It
is available on the website www.lawmin.nic.in.
18
ibid

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To Quote Mr. Justice V.R Krishna Iyer of Supreme Court of India:

“Intermediate time consuming, complex and expensive court procedures impelled jurists to
search for an alternative forum less formal, more effective and speedy for resolution of disputes,
by avoiding procedural clap trap, led to the arbitration act.

General Principles and Objectives of Arbitration:

The Main Objectives Which Are Sought To Be Fulfilled By Arbitration As A Means Of

ADR Are:

 To facilitate a fair resolution of disputes by an impartial third party, without unnecessary

expense or delay. 

 One of the primary objectives of Arbitration is to facilitate disputing parties, a complete

freedom for resolving their disputes, in a manner of their choice, subject only to such
safeguards as are necessary in public interest. 

 Avoiding court’s interference in dispute resolution ,is another key feature of Arbitration

The Arbitration and Conciliation Act, 1996

General Provisions

 Definitions (Part I of the Act)

Section 1 of the Arbitration and Conciliation Act, 1996 defines the term of this Act. The
definitions are as follows:
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Section (1)

(a) “Arbitration” means any arbitration whether or not administered by permanent arbitral
institution;

(b) “Arbitration agreement” means an agreement referred to in section 7;

(c) “Arbitral award” includes an interim award;

(d) “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators;

(e) “Court” means the principal Civil Court of original jurisdiction in a district, and includes the
High Court in exercise of its ordinary original civil jurisdiction, having, jurisdiction to decide the
questions forming the subject-matter of the arbitration if the same had been the subject-matter of
a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any
Court of Small Causes;

(f) “International commercial arbitration” means an arbitration relating to disputes arising out of
legal relationships, whether contractual or not, considered as commercial under the law in force
in India and where at least one of the parties is-

(i) An individual who is a national of, or habitually resident in any country other than India;
or

(ii) A body corporate which is in corporate in any on n try other than India; or

(iii) A company or an association or a body of individuals whose central management and

control is exercised in any country other than India; or

(iv) The Government of a foreign country;

(g) “Legal representative” means a person who in law represents the estate of a deceased person,
and includes any person who intermeddles with the estate of the deceased, and, where a party
acts in a representative character, the person on whom the estate devolves on the death of the
party so acting;

(h) “Party” means a party to an arbitration agreement.

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  Receipt of written communications

(1) Unless otherwise agreed by the parties, -

 Any written communication is deemed to have been received if it is delivered to the

addressee personally or at his place of business, habitual residence or mailing address,
and
 If none of the places referred to in clause (a) can be found after making a reasonable
inquiry, a written communication is deemed to have been received if it is sent to the
addressee’s last known place of business, habitual residence or mailing address by
registered letter or by any other means which provides a record of the attempt to deliver
it.

(2) The communication is deemed to have been received on the day it is so delivered.

(3) This section does not apply to written communications in respect of proceedings of any
judicial authority.

 Waiver of right to object

A party who knows that

 Any provision of this Part from which the parties may derogate, or
 Any requirement under the arbitration agreement,
Has not been complied with and yet proceeds with the arbitration without stating his
objection to such non-compliance without undue delay or, if a the limit is provided for
stating that objection, within that period of time, shall be deemed to have waived his
right to so object

 Extent of judicial intervention

Notwithstanding anything contained in any other law for the time being in force, in matter
governed by this Part, no judicial authority shall intervene except where so provided in this
Part. 6. Administrative assistance. -In order to facilitate the conduct of the arbitral

13
 proceedings, the parties, or the arbitral tribunal with the consent of the parties, may arrange
for administrative assistance by a suitable institution or person.

 Arbitration Agreement

Arbitration agreement is defines as follows in the Act:

(1) In this Part, “arbitration agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between them in respect
of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the
form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in-

 A document signed by the parties;

 An exchange of letters, telex, telegrams or other means of telecommunication which
provide a record of the agreement; or
 An exchange of statements of claim and defence in which the existence of the agreement
is alleged by one party and not denied by the other.

(5) There reference in a contract to a document containing an arbitration clause constitutes an

arbitration agreement if the contract is in writing and the reference is such as to make that
arbitration clause part of the contract.

a. Power to refer parties to arbitration where there is an arbitration agreement

 A judicial authority before which an action is brought in a matter, which is the subject of
an arbitration agreement, shall, if a party so applies not later than when submitting his
first statement on the substance of the dispute, refer the parties to arbitration.

14
  The application referred to in sub-section (1) shall not be entertained unless it is
accompanied by the original arbitration agreement or a duly certified copy thereof.
 Notwithstanding that an application has been made under sub-section (1) and that the
issue is pending before the judicial authority, an arbitration may be commenced or
continued and an arbitral award made.

b. Interim measures, etc. by court

A party may, before or during arbitral proceedings or at any time after the making of the arbitral
award but before it is enforced in accordance with section 36, apply to a court: -

(i) For the appointment of a guardian for a minor or a person of unsound mind for the purposes
of arbitral proceedings; or

(ii) For an interim measure of protection in respect of any of the following matters, namely: -

 The preservation, interim custody or sale of any goods, which are the subject matter of
the arbitration agreement;
 Securing the amount in dispute in the arbitration;
 The detention, preservation or inspection of any property or thing which is the subject-
matter of the dispute in arbitration, or as to which any question may arise therein and
authorizing for any of the aforesaid purposes any person to enter upon any land or
building in the possession of any party, or authorizing any samples to be taken or any
observation to be made, or experiment to be tried, which may be necessary or expedient
for the purpose of obtaining full information or evidence;
 Interim injunction or the appointment of a receiver; (e) Such other interim measure of
protection as may appear to the court to be just and convenient, And the Court shall have
the same power for making orders as it has for the purpose of, and in relation to, any
proceedings before it.

 Types of Arbitration

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Arbitration may either be an ad-hoc or an institutional arbitration. While in case of an ad-
hoc arbitration, parties jointly select the arbitrator(s), to work out details of procedure, together
with arbitral tribunal, as and when a dispute arises.

 However in instances where parties to dispute agree to employ, services of an arbitration

institution, it is termed as institutional arbitration.

As against Ad-hoc Arbitration, Institutional Arbitration has many advantages, more particularly
so, because it is conducted according to its own set of rules and procedures and is duly
supervised by a professionally trained staff, Thus chances of its procedural breakdown are quite
remote.

Types of Disputes Which Can Be Referred To Arbitration, For Redressal through

Arbitration as a Mode of ADR:

Almost any type of civil dispute can be settled by ADR, Disputes related to Business, Contract,
Construction, Commercial recoveries, Family disputes, Property and Insurance are some of the
disputes open to resolution by Arbitration as a mode of ADR.

Exceptional Circumstances Where a Dispute Cannot Be Referred To Arbitration:

 Matrimonial matters ,like divorce or maintenance; 

 Insolvency matters like declaring a person as insolvent. 

 Criminal offences. 

 Dissolution or winding up of a company; 

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  Questions as to genuineness or authenticity of a will: cannot be referred to arbitration
and such matters must be decided in accordance with, law dealing with probate of wills
under succession act. 

 Disputes outside the purview of contract: cannot be referred to arbitration, only courts
are competent to interpret a contract, where it is found that the dispute raised in a suit is
outside or independent of a contract. Then arbitration clause shall not encompass such an
issue.

Subject matter of arbitration

Any commercial matter including an action in tort if it arises out of or relates to a contract can be
referred to arbitration. However, public policy would not permit matrimonial matters, criminal
proceedings, insolvency matters anti-competition matters or commercial court matters to be
referred to arbitration. Employment contracts also cannot be referred to arbitration but director -
company disputes are arbitrable (as there is no master servant relationship here). Generally,
matters covered by statutory reliefs through statutory tribunals would be non-arbitrable.

Role of the court

One of the fundamental features of the Act is that the role of the court has been minimised.
Accordingly, it is provided that any matter before a judicial authority containing an arbitration
agreement shall be referred to arbitration (Section 8 provided the non - applicant objects no later
than submitting its statement of defence on merits). Further, no judicial authority shall interfere,
except as provided for under the Act (Section 5).

In relation to arbitration proceedings, parties can approach the Court only for two purposes: (a)
for any interim measure of protection or injunction or for any appointment of receiver etc.; or (b)
for the appointment of an arbitrator in the event a party fails to appoint an arbitrator or if two
appointed arbitrators fail to agree upon the third arbitrator. In such an event, in the case of
domestic arbitration, the Chief Justice of a High Court may appoint an arbitrator, and in the case
of international commercial arbitration, the Chief Justice of the Supreme Court of India may

17
carry out the appointment. A court of law can also be approached if there is any controversy as to
whether an arbitrator has been unable to perform his functions or has failed to act without undue
delay or there is a dispute on the same. In such an event, the court may decide to terminate the
mandate of the arbitrator and appoint a substitute arbitrator.

Conduct of arbitration proceedings:

The arbitrators are masters of their own procedure and subject to parties agreement, may conduct
the proceedings "in the manner they consider appropriate." This power includes- "the power to
determine the admissibility, relevance, materiality and weight of any evidence". 19 The only
restrain on them is that they shall treat the parties with equality and each party shall be given a
full opportunity to present his case,20 which includes sufficient advance notice of any hearing or
meeting.21 Neither the Code of Civil Procedure nor the Indian Evidence Act applies to
arbitrations.22 Unless the parties agree otherwise, the tribunal shall decide whether to hold oral
hearings for the presentation of evidence or for arguments or whether the proceedings shall be
conducted on the basis of documents or other material alone. However the arbitral tribunal shall
hold oral hearings if a party so requests (unless the parties have agreed that no oral hearing shall
be held).23

Arbitrators have power to proceed ex-parte where the respondent, without sufficient cause, fails
to communicate his statement of defence or appear for an oral hearing or produce evidence.
However, in such situation the tribunal shall not treat the failure as an admission of the
allegations by the respondent and shall decide the matter on the evidence, if any, before it. If the
claimant fails to communicate his statement of the claim, the arbitral tribunal shall be entitled to
terminate the proceedings.24

ARBITRATOR
19
Section 19 (3) and (4)
20
Section 18
21
Section 24 (2)
22
Section 19 of Act and Section 1 of the Evidence Act.
23
Section 24
24
Section 25

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Jurisdiction of the arbitrator

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. The arbitration
agreement shall be deemed to be independent of the contract containing the arbitration clause,
and invalidity of the contract shall not render the arbitration agreement void. Hence, the
arbitrators shall have jurisdiction even if the contract in which the arbitration agreement is
contained is vitiated by fraud and/or any other legal infirmity. Further, any objection as to
jurisdiction of the arbitrators should be raised by as party at the first instance, i.e., either prior to
or along with the filing of the statement of defence. If the plea of jurisdiction is rejected, the
arbitrators can proceed with the arbitration and make the arbitral award. Any party aggrieved by
such an award may apply for having it set aside under Section 34 of the Act. Hence, the scheme
is that, in the first instance, the objections are to be taken up by the arbitral tribunal and in the
event of an adverse order, it is open to the aggrieved party to challenge the award.

In SBP & Co. v. Patel Engg Ltd .25 the Supreme Court of India (in a decision rendered by a
Bench of Seven Judges) held that the nature of power conferred on the Court under Section 11 of
the Act is judicial (and not administrative) in nature. Accordingly, if parties approach the Court
for appointment of arbitral tribunal (under Section 11) and the Chief Justice pronounces that he
has jurisdiction to appoint an arbitrator or that there is an arbitration agreement between the
parties or that there is a live and subsisting dispute to be referred to arbitration and the Court
constitutes the Tribunal as envisaged, this would be binding and cannot be re-agitated by the
parties before the arbitral tribunal.

In S.B.P & Co. case the Supreme Court has defined what exactly the Chief Justice, approached
with an application under Section 11 of the Act, is to decide at that stage. The Chief Justice has
the power to decide his own jurisdiction in the sense whether the party making the motion has
approached the right court. He has to decide whether there is an arbitration agreement, as defined
in the Act and whether the person who has made the request before him, is a party to such an
agreement. He can also decide the question whether the claim was a dead one; or a long-barred
25
(2005) 8 SCC 618

19
claim that was sought to be resurrected and whether the parties have concluded the transaction
by recording satisfaction of their mutual rights and obligations or by receiving the final payment
without objection.

The Court in SBP & Co case, inter alia, concluded as follows:

(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under
Section 11(6) of the Act is not an administrative power. It is a judicial power.

(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief
Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to
another Judge of the Supreme Court.

(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power that
is exercised by the designated Judge would be that of the Chief Justice as conferred by the
statute.

(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary
aspects as indicated in the judgment. These will be, his own jurisdiction to entertain the request,
the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on the qualifications of the arbitrator
or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of
an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the
Act if the need arises but the order appointing the arbitrator could only be that of the Chief
Justice or the designated Judge.

(v) The District Judge does not have the authority under Section 11(6) of the Act to make
appointment of an arbitrator.

(vi) The High Court cannot interfere with the orders passed by the arbitrator or the Arbitral
Tribunal during the course of the arbitration proceedings and the parties could approach the
Court only in terms of Section 37 of the Act (appealable orders) or in terms of Section 34 of the
Act (setting aside or arbitral award).

20
(vii) Since it is a judicial order, an appeal will lie against the order passed by the Chief Justice of
the High Court or by the designated Judge of that Court only under Article 136 of the
Constitution to the Supreme Court.

(viii) No appeal shall lie against an order of the Chief Justice of India or a Judge of the Supreme
Court designated by him while entertaining an application under Section 11(6) of the Act.

(ix) Where an Arbitral Tribunal has been constituted by the parties without having recourse to
Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as
contemplated by Section 16 of the Act.

Procedure for determination of the arbitrators’ jurisdiction

Time-limit for the pleas as to the lack of jurisdiction

Although arbitrators have authority to rule on their jurisdiction, they cannot do it on their own
initiative. A plea as to the lack of jurisdiction has to be submitted by the respondent in due time
—under Art.16(2) not later than the statement of defence. Belated objections regularly cannot be
taken into account, as the lack of objection has to be construed as the waiver of the right to object
and conclusion of a valid arbitration agreement. Still, the arbitrators have the right to admit the
plea if the delay in their submission is considered justified.

Under one reported case, it seems that the court held that the plea has to be sufficiently
substantiated: an allegation that arbitration agreement does not exist because the party was not
successor to the main contract was held to be a substantive defence that precluded later
procedural objections as to the jurisdiction.

Challenge to arbitrator:

An arbitrator may be challenged only in two situations. First, if circumstances exists that give
rise to justifiable grounds as to his independence or impartiality; second, if he does not possess
the qualifications agreed to by the parties. A challenge is required to be made within 15 days of
the petitioner becoming aware of the constitution of the arbitral tribunal or of the circumstances
furnishing grounds for challenge. Further, subject to the parties agreement, it is the arbitral
tribunal (and not the court - unlike under the old Act of 1940) which shall decide on the

21
challenge. If the challenge is not successful the tribunal shall continue with the arbitral
proceedings and render the award, which can be challenged by an aggrieved party at that stage.
This is another significant departure from the Model Law, which envisages recourse to a court of
law in the event the arbitral tribunal rejects the challenge.26

The Indian courts have held that "the apprehension of bias must be judged from a healthy,
reasonable and average point of view and not on mere apprehension of any whimsical person.
Vague suspicions of whimsical, capricious and unreasonable people are not our standard to
regulate our vision."27

Effect of the lack of objection in the arbitral proceedings

The courts had an opportunity to evaluate the effect of lack of objections as to the jurisdiction of
the tribunal in the arbitral proceedings on subsequent setting aside proceedings. A German court
held that a party regularly loses its right to raise the lack or invalidity of the arbitration
agreement in the setting aside proceedings if there was no objection to jurisdiction in the arbitral
proceedings. As stated by the same court, failure to raise this objection amounts to conclusion of
the new arbitration agreement by passive behaviour of the party. This seems to be a generally
accepted position, both under MAL Rules and under some national arbitration laws.

However, the courts in various jurisdictions had expressed diverging views as to the
consequences of cases in which objection to jurisdiction was raised in the arbitral proceedings,
but the preliminary decision of arbitrators was not attacked under MAL 16(3) before the
competent court. In one Singapore case, the court held that a party was not prevented from
submitting an application for the setting aside of the award on the basis of lack of jurisdiction
simply because the party did not challenge arbitral decision on jurisdiction under para.(3) before
a competent court. German courts, on the contrary, held that this was a necessary prerequisite for
the successful raising of this ground in setting aside proceedings.

26
Article 13 of Model Law
27
International Airports Authority of India v. K.D. Bali & Anr; (1988) 2 SCC 360.

22
Ruling on the jurisdiction by arbitrators: preliminary decision or part of the
final award

It seems that there were no controversies regarding the recognition of arbitrators’ discretionary
powers to decide whether they would rule on jurisdiction in a separate ruling, or in the final
award. As to the consequences of such decision, one court held that decision to postpone the
ruling on jurisdiction until the final award cannot be attacked, but that in such a case only setting
aside proceedings could review whether the arbitrators erred in finding that they are competent to
decide.

If the arbitral tribunal decides on the issue of jurisdiction as a preliminary question, and
concludes that it has jurisdiction, this ruling may be subject to challenge under MAL 16(3).
Regularly, the competent authority will be a state court. However, in some jurisdictions that is
not necessarily so. For example in Croatia—whose Law on Arbitration departs slightly from the
text of the MAL in respect of designation of authority from MAL 6—parties may by their
agreement transfer the authority to control separate decisions on jurisdiction to some other
authority. Thus Croatian courts have already confirmed that the arbitration rules of an
institutional arbitration institution may replace court control with some other controlling
mechanism (e.g. with the decision of the president of the arbitral institution).

The time-limit for the application to the court is 30 days from the date when the party has
received notice of the ruling of the arbitral tribunal. As to this time-limit, a German court held
that an application was launched in due time if it was submitted to a court within the 30-day
period, notwithstanding the fact that the court to which the application was filed was not
competent.

One potentially controversial decision dealt with the consequences of the form of the preliminary
ruling by which arbitrators assert their jurisdiction. The MAL does not determine in which form
the arbitrators should decide on jurisdiction as a preliminary issue. In procedural theory, it should
be taken for granted that such a decision is of a procedural and not a substantive nature. From
that, it would follow that the arbitrators may issue it only in the form of a procedural order.
However, in some jurisdictions, such decisions are being taken in the form of arbitral awards as
well.

23
Diverging judicial opinions as to the effect of designation of the decision on jurisdiction as
‘‘arbitral award on jurisdiction’’ are noted. High German juridical authorities, while noting
strong and influential voices in the doctrine that such decisions cannot be regarded as arbitral
awards, since there are no procedural arbitral awards, have finally decided that such decisions
can take the form of arbitral award, and even be attacked in setting aside proceedings. In these
cases, however, the German courts dealt only with the preliminary decision in which the
arbitrators have declined their jurisdiction.

The view that a decision made under MAL 16(3) can take form of the award was also taken by a
Bermuda court, yet with even more far-reaching consequences. That court found that, if the
preliminary decision on jurisdiction was issued in the form of an award, it might be challenged in
separate setting-aside proceedings, even if the party successfully challenged the ruling in
accordance with the procedure set out in Art.16(3). This particular decision opens a number of
issues, including those relating to duplication of work, possible diverging decisions, and
applicability of the grounds from Art.34 MAL, etc.

Another interesting opinion on the possibility of reviewing arbitral decisions on jurisdiction was
expressed in a recent Croatian case, where the Constitutional Court, changing its previous case
law, held that it can control the arbitral ruling that declined jurisdiction on the basis of an alleged
breach of the right to access to an efficient dispute-resolution mechanism. Again, the decision
was controversial: it was issued with several dissenting opinions and criticised in the doctrine.

24
ARBITRAL TRIBUNAL

An arbitral tribunal (or arbitration tribunal) is a panel of one or more adjudicators which is
convened and sits to resolve a dispute by way of arbitration. The tribunal may consist of a sole
arbitrator, or there may be two or more arbitrators, which might include either a chairman or
an umpire. The parties to a dispute are usually free to agree the number and composition of the
arbitral tribunal. In some legal systems, an arbitration clause which provides for two (or any
other even number) of arbitrators is understood to imply that the appointed arbitrators will select
an additional arbitrator as a chairman of the tribunal, to avoid deadlock arising. Different legal
systems differ as to how many arbitrators should constitute the tribunal if there is no agreement.28

Arbitral tribunals are usually constituted (appointed) in two types of proceedings:

 ad hoc arbitration proceedings are those in which the arbitrators are appointed by the
parties without a supervising institution, relying instead on the procedural law and courts

28
Under the UNCITRAL Model Law on International Commercial Arbitration (adopted by various countries around
the world), the default number is three (Article 10(2)). However, some countries have provided that the default
number is one (see for example, section 15(2) of the Arbitration Act 1996 of the United Kingdom.

25
 of the place of arbitration to resolve any differences over the appointment, replacement,
or authority of any or all of the arbitrators; and

 institutional arbitration proceedings are those in which the arbitrators are appointed under
the supervision of professional bodies providing arbitration services, such as the
American Arbitration Association (which conducts international proceedings through its
New York-based division, the ICDR), the LCIA in London or the ICC in Paris. Although
these institutions (and many others) are headquartered in their respective cities, they are
capable of supervising the appointment of arbitral tribunals in nearly any country,
avoiding the need for the parties to involve local courts and procedures in the event of
disagreement over the appointment, replacement, or authority of any or all of the
arbitrators.

Permanent tribunals tend to have their own rules and procedures, and tend to be much more
formal. They also tend to be more expensive, and, for procedural reasons, slower 29. (Under the
UNCITRAL Model Law on International Commercial Arbitration (adopted by various countries
around the world), the default number is three (Article 10(2)). However, some countries have
provided that the default number is one (see for example, section 1530.

Composition of Arbitral Tribunal

 Number of arbitrators

(1) The parties are free to determine the number of arbitrators, provided that such number shall
not be an even number.

(2) Failing the determination referred to in sub-section (1), the arbitral tribunal shall consist of a
sole arbitrator.

29
.Under the UNCITRAL Model Law on International Commercial Arbitration
30
of the Arbitration Act 1996 of the United Kingdom

26
  Appointment of Arbitrators.

(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the
arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators,
each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and-

 A party fails to appoint an arbitrator within thirty days from the receipt of a request to do
so from the other party; or
 The two appointed arbitrators fail to agree on the third arbitrator within thirty days from
the date of their appointment,

The appointment shall be made, upon request of a party, by the Chief Justice or any person or
institution designated by him.

(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, 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 request of a party, by the
Chief Justice or any person or institution designated by him.

(6) Where, under an appointment procedure agreed upon by the parties, -

 A party fails to act as required under that procedure; or

 The parties, or the two appointed arbitrators, fail to reach an agreement expected of them
under that procedure; or
 A person, including an institution, fails to perform any function entrusted to him or it
under that procedure,

27
A party may request the Chief Justice or any person or institution designated by him to take the
necessary measure, unless the agreement on the appointment procedure provides other means for
securing the appointment.

(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the
Chief Justice or the person or institution designated by him is final.

(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator,
shall have due regard to-

(a) Any qualifications required of the arbitrator by the agreement of the parties; and

(b) Other considerations as are likely to secure the appointment of an independent and impartial
arbitrator.

(9) In the case of appointment of sole or third arbitrator in an international commercial

arbitration, the Chief Justice of India or the person or institution designated by him may appoint
an arbitrator of a nationality other than the nationalities of the parties where the parties belong to
different nationalities.

(10) The Chief Justice may make such scheme, as he may deem appropriate for dealing with
matters entrusted by sub-section (4) or sub-section (5) or subsection (6) to him.

(11) Where more than one request has been made under sub-section (4) or subsection (5) or sub-
section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or
his designate to whom the request has been first made under the relevant subsection shall alone
be competent to decide on the request.

(12)

 Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an
international commercial arbitration, the reference to “Chief Justice” in those subsections
shall be construed as a reference to the “Chief Justice of India”.
 Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any
other arbitration, the reference to “Chief Justice” in those sub-sections shall be construed
as a reference to the Chief Justice of the High Court within whose local limits the

28
 principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and,
where the High Court itself is the Court referred to in that clause, to the Chief Justice of
that High Court.

 Grounds for challenge

(1) When a person is approached in connection with his possible appointment as an arbitrator, he
shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his
independence or impartiality.

(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall,
without delay, disclose to the parties in writing any circumstances referred to in sub-section (1)
unless they have already been informed of them by him.

(3) An arbitrator may be challenged only if-

 Circumstances exist that give rise to justifiable doubts as to his independence or

impartiality, or
 He does not possess the qualifications agreed to by the parties.

(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after the appointment has been made.

 Challenge procedure

(1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an
arbitrator.

29
(2) Failing any agreement referred to in sub-section (1), 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 sub-section (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 an arbitral award in accordance with section 34.

(6) Where an arbitral award is set aside on an application made under subsection (5), the court
may decide as to whether the arbitrator who is challenged is entitled to any fees.

 Failure or impossibility to act

(1) The mandate of an arbitrator shall terminate if-

 He becomes de jure or de facto unable to perform his functions or for other reasons fails
to act without undue delay; and
 He withdraws from his office or the parties agree to the termination of his mandate.

(2) If a controversy remains concerning any of the grounds refer-red to in clause (a) of sub-
section (1), a party may, unless otherwise agreed by the parties, apply to the court to decide on
the termination of the mandate.

(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office
or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance
of the validity of any ground referred to in this section or sub-section (3) of section 12.

30
  Termination of mandate and substitution of arbitrator

(1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an
arbitrator shall terminate-

 Where he withdraws from office for any reason; or

 By or pursuant to agreement of the parties.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed
according to the rules that were applicable to the appointment of the arbitrator being replaced.

(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2),
any hearings previously held may be repeated at the discretion of the arbitral tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior
to the replacement of an arbitrator under this section shall not be invalid solely because there has
been a change in the composition of the arbitral tribunal.

Fees and expenses

The parties may make provision for the arbitrator's fees (although in some jurisdictions, whether
the parties are agreeing to submit an existing dispute to arbitration, they may not provide that
each party bears its own costs). However, the position may be different between, on the one
hand, as between the arbitrators and the parties, and on the other hand, as between the parties
themselves.

Although the parties may provide differently in the appointment of the arbitrator, the usual rule is
that the parties are jointly and severally liable for the arbitrator's fees. If the arbitrator is not paid,
then they may sue either or both parties for unpaid fees.31

31
.^ In some jurisdictions this is mandatory, see for example section 28 of the Arbitration Act 1996 of the
United Kingdom

31
In many jurisdictions, after making the award, the tribunal will order that the losing party pays
the legal costs of the winning party, and this may include the arbitrator's fees. However, this does
not affect the joint and several liability referred to above; but it does mean that the winning party
may maintain a separate action against the losing party for the unpaid costs, or to be reimbursed
for arbitrator's fees that the winning party has been forced to pay, but which the losing party was
ordered to pay.

Chairman and Umpire

Where the tribunal consists of an odd number of arbitrators, one of them may be designated as
the umpire or chairman. The selection of title actually carries some significance. When an
arbitrator is "chairman", then they will not usually exercise any special or additional powers, and
merely have a presidential function as the tribunal member who sets the agenda. 32 Where a
member of the tribunal is an umpire, they usually do not exercise any influence on proceedings,
unless the other arbitrators are unable to agree — in such cases, then the umpire steps in and
makes the decision alone.

Arbitrator advocates

In some legal systems, it used to be common for each party to the dispute to appoint an arbitrator
and for those two arbitrators to appoint a third arbitrator (who may or may not be called an
umpire). However, the two arbitrators appointed by the parties to the dispute would essentially
act as advocates for the party who appointed them, and the umpire would effectively act as a sole
arbitrator. However, such systems can lead to difficulty, as other countries may be reluctant to
enforce an arbitration award where two of the three "arbitrators" are clearly unable to
demonstrate impartiality or independence. The standards for enforcing such awards are set out in
the New York Convention, as interpreted by local law.33

32
Although in some cases the Chairman will have a casting vote if the tribunal is unable to agree on a matter.
33
See "New York Arbitration". CMS Legal. Retrieved 21 May 2012.

32
Removal

In most legal systems the parties are free to specify in what circumstances the appointment of an
arbitrator may be revoked. In default most legal systems provide either that

(i) the parties to the dispute must act jointly to remove an arbitrator, or
(ii) the other members of the arbitral tribunal must act to remove the arbitrator,
and/or
(iii) the court must act to remove an arbitrator. Most legal systems reserve a power
to the court to remove arbitrators who are unfit to act, or are not impartial.

Resignation

It is generally accepted that one cannot force a person to continue as an arbitrator against their
will, and arbitrators may resign if they are unwilling to proceed with the arbitration. Where the
arbitrator becomes aware of facts that might be seen to affect his or her impartiality, they are
often under a duty to resign. The parties are generally free to agree with the arbitrator what
should happen with respect to

(i) the arbitrator's fees, and

(ii) any liability of the arbitrator (such as wasted costs), if the arbitrator should resign, with or
without cause.

Death

The authority of an arbitrator is personal, and an appointment ceases upon death. Unless the
parties have otherwise provided, the death of a party does not usually revoke the appointment of
any arbitrator appointed by the deceased, and any agreement relating to the appointment is
enforceable in the usual way against the personal representatives of the deceased.

33
Filling a vacancy

If a vacancy arises (through resignation or death, or otherwise) then the parties are free to agree:

1. Whether, and if so, how, the vacancy shall be filled

2. Whether, and if so, to what extent, the previous proceedings shall stand

3. What effect, if any, the arbitrator's ceasing to hold office has on any appointment or order
made by that arbitrator (alone or jointly)

Most legal systems provide that, in default of agreement, a new arbitrator shall be appointed
using the provision for appointments which applied to the original arbitrator that has vacated
office;34 the tribunal itself (once reconstituted) should determinate whether, and if so, to what
extent, previous proceedings stand; and the appointments and orders made by the previous
arbitrator are unaffected.

Hearing

An "arbitration hearing" can be either procedural or evidentiary. As in court systems, a

"procedural hearing" focuses exclusively on how the proceedings are to be conducted. By
contrast, an "evidentiary hearing" is the equivalent to what in the courts of many countries would
be called a trial, with the presentation of evidence in the form of documents and witnesses.
Although evidentiary hearings are generally available as a means to assist the arbitral tribunal in
deciding contested factual issues, arbitration rules do not usually require them and leave the
means of decided disputed factual issues to the discretion of the tribunal. Many decisions of
arbitral tribunals are made without any hearing at all.

Where it may be appropriate to do so, arbitral tribunals can make decisions solely upon
documentary evidence, which may or may not be accompanied by witness statements, which in
the US are referred to as affidavits. Witness statements represent the testimony a witness would

34
See for example, Article 15 of the UNCITRAL Model Law on International Commercial Arbitration and section 27
of the Arbitration Act 1996 of the United Kingdom.

34
give if called to testify, and on which the witness is subject to questioning by the arbitral tribunal
and, at times, cross examination by the other party.

Specific types of arbitration, for example, may rely exclusively on documents to decide disputes,
such as in the growing field of online dispute resolution. In addition, some organizations, may
specifically provide as part of their organizational bylaws or standard terms and conditions that
disputes shall be arbitrated without an oral hearing and upon documentary evidence only, an
example being certain trade associations, such as GAFTA.

Duties

The duties of a tribunal will be determined by a combination of the provisions of the arbitration
agreement and by the procedural laws which apply in the seat of the arbitration. The extent to
which the laws of the seat of the arbitration permit "party autonomy" (the ability of the parties to
set out their own procedures and regulations) determines the interplay between the two.

However, in almost all countries the tribunal owes several non-derogable duties. These will
normally be:

 To act fairly and impartially between the parties, and to allow each party a reasonable
opportunity to put their case and to deal with the case of their opponent (sometimes
shortened to: complying with the rules of "natural justice"35 and
 To adopt procedures suitable to the circumstances of the particular case, so as to provide
a fair means for resolution of the dispute.36

Procedure

35
See for example Article 18 of the UNCITRAL Model Law on International Commercial Arbitration
36
For example, in England these are codified in section 33 of the Arbitration Act 1996

35
Matters of procedure are normally determined either by the law of the seat of the arbitration, or
by the tribunal itself under its own inherent jurisdiction (depending on national law). Procedural
matters normally include:

 Mode of submitting (and challenging) evidence

 Time and place of the hearing
 Language and translations
 Disclosure of documents and other evidence
 Use of pleadings and/or interrogatories
 Use of legal advisors
 The appointment of experts and assessors

Appeal

Provisions relating to appeals vary widely between different jurisdictions, but most legal systems
recognise that the right to appeal (or, technically, the right to seek to set aside) an award in an
arbitration should be limited.

Usually such challenges are made on one of two bases:

1. That the tribunal did not have substantive jurisdiction to determine the matter; or

2. There was a serious irregularity on the part of the tribunal. Examples of serious irregularities
may include:

a. failure of the tribunal to act in accordance with the rules of natural justice, or allowing a fair
hearing;

b. The tribunal exceeding its powers (other than by exceeding its jurisdiction);

c. Failure of the tribunal to conduct proceedings in accordance with the procedure agreed by the
parties;

d. Failure of the tribunal to deal with all the issues put to it for resolution;

36
e. Uncertainty or ambiguity as to the effect of the award;

f. The award being procured by fraud, or otherwise being procured in a way contrary to public
policy;

g. Failure to comply with the requirements for the form of the award (e.g. in writing or in a
specific language);

h. Irregularities in the conduct of the proceedings.

In some jurisdictions it is also possible to appeal against an award on a point of law, however,
such appeals normally require either the permission of the other parties, or the leave of the
court.37

Specialised Institutes of Arbitration

Specialised arbitration organizations have been formed in order to settle disputes in the matter of
specialised issues, they work in only a very limited field but are experts in the work they do. For
this purpose they have made a special rules, procedures and regulations which they follow during
the proceedings of arbitration. These institutions prove very useful in the cases where a very
deep and specialised knowledge is needed in settlement, which in turn can be cost effective and
time saving.

Such specialised institutions include:

1. Arbitration and Mediation Center, WIPO

2. Center for Effective Dispute Resolution

3. German Maritime Arbitration Association

4. Maritime Arbitration Association of the United States

37
See for example section 69 of the Arbitration Act 1996 of the United Kingdom

37
5. Tokyo Maritime Arbitration Association

NEED FOR ARBITRATION

The act of 1996 has defined arbitration in the following, manner “Arbitration means any
arbitration whether or not administered by permanent arbitral institution”

A fair, just and quick process of resolution of disputes is indispensable in any democratic society
becoming increasingly aware of their human and legal rights. The human and material resources
in Courts are inadequate to meet the ever growing demands, resulting in backlog of cases and
delay in the administration of justice. Our justice delivery system is bursting at the seams and
unless timely measures are adopted, for the quick disposal of cases, particularly at the grass-roots
it will lead to very dire consequences.

In certain disputes like financial matters involving the individuals, firms and even multinational
companies, they do not want to submit to the jurisdiction of the courts of obvious reasons of

38
delay, rigid procedural rules and provisions of appeals and revisions. The simple logic is that
both the parties are not interested in getting a proposition of law on any point laid down but they
are interested to settle their money matters and for that purpose they can even give up certain
claims which they are otherwise entitled to. One such method of dispute resolution is arbitration
governed in India by the Arbitration and Conciliation Act 1996.

Jurisdiction

In most legal systems, the arbitral tribunal is able to rule upon its own jurisdiction (often referred
to as the doctrine of "Kompetenz Kompetenz" in international law). Briefly, this enables the
arbitral tribunal to determine for itself whether:

1. An arbitration agreement is valid,

2. Whether the tribunal has been properly constituted under applicable law, and

3. What matters are to be determined by the arbitration under the agreement.

The doctrine, although continental in origin, has been recognised at common law,38 and has now
been widely codified into national law.39

Extent Defined

Section 5 Extent of judicial intervention. Notwithstanding anything contained in any other law
for the time being in force, in matter governed by this Part, no judicial authority shall intervene
except where so provided in this Part.

In the case of this section the courts have tried to protect the sanctity of the section and in a
judgement in 2007 the Supreme Court held that “Superior Court’s power of judicial review has
wide amplitude but the same should not be exercised when there exists an arbitration clause.

38
See Christopher Brown Ltd v Genossenschaft Osterreichischer Waldbesitzer R GmbH [1954] 1 QB
39
See for example, Article 16 of the UNCITRAL Model Law on International Commercial Arbitration and section 30
of the Arbitration Act 1996 of the United Kingdom.

39
The Supreme Court in another case held the High Court justified in holding that photo copies of
lease agreements could be taken on record for ascertaining the existence of arbitration clause.
The Court should exercise power under Article 142 to meet the situations which cannot be
effectively and appropriately tackled by existing provisions of law.

The Apex Court however seems to have gone against the principle of sanctity of the arbitration
agreement when it held that "no party can be allowed to take advantage of inartistic drafting of
arbitration clause in any agreement as long as clear intention of parties to go for arbitration in
case of any future disputes is evident from the agreement and material on record including
surrounding circumstances."

Background to arbitration legislation:

The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act).
The Act is based on the 1985 UNICITRAL Model Law on International Commercial Arbitration
and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and Reasons of the Act
recognises that India's economic reforms will become effective only if the nation's dispute
resolution provisions are in tune with international regime. The Statement of Objects and
Reasons set forth the main objectives of the Act as follows:

i. to comprehensively cover international and commercial arbitration and conciliation as

also domestic arbitration and conciliation;

ii. to make provision for an arbitral procedure which is fair, efficient and capable of meeting
the needs of the specific arbitration;

iii. to provide that the arbitral tribunal gives reasons for its arbitral award;

iv. to ensure that the arbitral tribunal remains within the limits of its jurisdiction;

v. to minimize the supervisory role of courts in the arbitral process;

vi. to permit an arbitral tribunal to use mediation, conciliation or other procedures during the
arbitral proceedings to encourage settlement of disputes;

40
vii. to provide that every final arbitral award is enforced in the same manner as if it were a
decree of the court;

viii. to provide that a settlement agreement reached by the parties as a result of conciliation
proceedings will have the same status and effect as an arbitral award on agreed terms on
the substance of the dispute rendered by an arbitral tribunal; and

ix. to provide that, for purposes of enforcement of foreign awards, every arbitral award made
in a country to which one of the two International Conventions relating to foreign arbitral
awards to which India is a party applies, will be treated as a foreign award."

Enforcement of Arbitration Awards

Arbitration is particularly popular as a means of dispute resolution in the commercial sphere (for
a summary of the various arenas in which arbitration is usually chosen, see the specific article on
"arbitration"). One of the reasons for doing so is that, in international trade, it is often easier to
enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

Under the New York Convention 1958, an award issued in a contracting state can generally be
freely enforced in any other contracting state, only subject to certain, limited defences. Those
defences are:

1. a party to the arbitration agreement was, under the law applicable to him, under some
incapacity;

2. the arbitration agreement was not valid under its governing law;

3. a party was not given proper notice of the appointment of the arbitrator or of the
arbitration proceedings, or was otherwise unable to present its case;

4. the award deals with an issue not contemplated by or not falling within the terms of the
submission to arbitration, or contains matters beyond the scope of the arbitration (subject
to the proviso that an award which contains decisions on such matters may be enforced to

41
 the extent that it contains decisions on matters submitted to arbitration which can be
separated from those matters not so submitted);

5. the composition of the arbitral authority was not in accordance with the agreement of the
parties or, failing such agreement, with the law of the place where the hearing took place
(the "lex loci arbitri");

6. the award has not yet become binding upon the parties, or has been set aside or
suspended by a competent authority, either in the country where the arbitration took
place, or pursuant to the law of the arbitration agreement;

7. the subject matter of the award was not capable of resolution by arbitration; or

8. enforcement would be contrary to "public policy".

Virtually every significant commercial country in the world is a party to the Convention, but
relatively few countries have a comprehensive network for cross-border enforcement of
judgments of the court. Hence in many countries, particularly in emerging markets, a foreign
arbitration award is much easier to enforce than an award of the court. For example, it is very
difficult to enforce foreign judgments in the former CIS countries, but it is considerably easier to
enforce awards of an arbitration tribunal.

The other characteristic of cross-border enforcement of arbitration awards that makes them
appealing to commercial parties is that they are not limited to awards of damages. Whereas in
most countries only monetary judgments are enforceable in the cross-border context, no such
restrictions are imposed on arbitration awards and so it is theoretically possible (although
unusual in practice) to obtain an injunction or an order for specific performance in an arbitration
proceeding which could then be enforced in another New York Convention contracting state.

The New York Convention is not actually the only treaty dealing with cross-border enforcement
of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral
Awards 1927 remains in force, but the success of the New York Convention means that the
Geneva Convention is rarely utilised in practice.

Court of Arbitration for Sport

42
Jurisdiction

National Olympic Committees, have recognised the jurisdiction of the CAS and included in their
statutes an arbitration clause referring disputes to it. Through compliance with the 2009 World
Anti-Doping Code all Olympic International Federations have recognised the jurisdiction of
CAS for anti-doping rule violations.[1][2] Decisions of CAS can be appealed to the Swiss
Federal Tribunal.[3

History

With the intermixing of sports and politics, the body was originally conceived by International
Olympic Committee (IOC) President Juan Antonio Samaranch to deal with disputes arising
during the Olympics. It was established as part of the IOC in 1984.

Ten years later, a case decided by the CAS was appealed to the Federal Supreme Court of
Switzerland, challenging CAS impartiality. The Swiss court ruled that the CAS was a true court
of arbitration, but drew attention to the numerous links which existed between the CAS and the
IOC. In response, the CAS underwent reforms to make itself more independent of the IOC,
organizationally and financially. The biggest change resulting from this reform was the creation
of an "International Council of Arbitration for Sport" (ICAS) to look after the running and
financing of the CAS, thereby taking the place of the IOC. As of 2004, the majority of recent
cases considered by the CAS dealt with transfer disputes within professional association football
or with doping.

Why Arbitration is still corporate savvy?

Originally, in ancient India, ADR as we know today was the way disputes were generally settled.
The whole village by way of Gram Panchayat used to solve the problems of the villagers by
sitting together and mediating the problems faced by the two parties. Since the advent of the
modern legal system, this method of dispute settlement has largely been set aside. Today, this
age old method of dispute settlement has become corporate savvy and exclusive to big concerns.
It has become the talk of the boardrooms and the way the corporate world now looks towards
settlement of disputes.

43
The reason as to why such a phenomenon is witnessed in our country is very interesting. First of
all, the process still is a very costly affair as very few people specialize in this field that are
competent enough to arbitrate on various matters, thereby resulting in making ADR a very
exclusive and high end service. Secondly, ADR is just too flexible in nature and there is no
guarantee in its proceedings. There is no set procedure which is required to be followed while
finding solutions through ADR. Such a system juxtaposed with the modern legal system which is
time-tested, predictable and follows a set procedure, becomes a much safer and hence attractive
option for dispute settlement for the common man. Also, the Indian Law recognizes mainly
Arbitration as a way of ADR which pretty much curtails the full scope of ADR. The major
drawback due to the same is that Arbitration involves the principle of arbitrability of subject
matter. Since most matters which have a specific legislation to its name are left out due to the
non-arbitrability of its subject matter, the actual scope of ADR is heavily compromised on. It is
important that if ADR has to reach the common man and not just remain a corporate toy then it
be allowed to spread out its wings and fly.

Developments in Arbitration Laws in India

In India prior to 1996 Arbitrations were governed by Arbitration and Conciliation Act of
1940. New Act was passed in 1996 which brought changes in the said law in India. Changes
under the new Act called Arbitration and Conciliation Act of 1996 are summarized as under:

One of the important changes brought in by the Arbitration and Conciliation Act,
1996, (hereinafter referred to as the 1996 Act or Act of 1996) in the field of law concerning
arbitration, compared to the analogous provisions in the earlier enactment, Arbitration Act
of 1940 (herein after referred to as the 1940 Act or Act of 1940) is relating to `enforcement of
awards'.

Recognition of arbitral awards under the Act of 1996

In the new Act of 1996, it seems, the legislature has wisely incorporated two:

44
 (i) Conferring finality to the arbitral award under Section 35 and
(ii) Enforcement of awards in the same manner as if it were a decree of the court under
Section 36.

Section 35 gives recognition to the arbitral award as final and binding, unless impeached on
the grounds set out under Section 34.

Of course, in the Act of 1940 as an implied condition it was prescribed, in the First Schedule,
that the award is final and binding on the parties and persons claiming under them
respectively. Yet there was confusion or confrontation for some time on the point of
recognition of award unless and until decreed.

No decree necessary under the Act of 1996 for enforcement of award

Undoubtedly, arbitration is a speedy and effective remedy to resolve disputes between the
parties by experts in technical, commercial or like fields, selected by parties' own choice
as far as possible, or otherwise, with the intervention of court. Experience shows that under
the old Act of 1940 once the award is published by the arbitrator it is only the end of one
round of litigation for commencement of another round, which at times becomes more
onerous and time consuming because under Section 14 of that Act the arbitrator has to file
the award before the court, either on request of the interested party or on direction of the
court, the affected or defeated party can, seek to modify the award under Section 15, remit the
award under Section 16 or even seek to set aside the award under Section 33 for the grounds
set out in Section 30. Under the new Act of 1996, the second round of litigation to confirm
the award into a decree has been taken away, of course, subject to the power of the court to
have the final word on the award, because the award is still subject to scrutiny under Section
34 for impeachment which however gives only a narrow scope for interference by the court
compared to the grounds under 1940 Act.

In yester years the scope of interference on the ground of misconduct was very limited,
whereas, later on, courts began to scrutinize awards with lot of suspicion and circumspection.

45
 Besides, the ground of excessive jurisdiction of arbitrator got judicial acceptance as a
new dimension in challenging award and at times it went out of proportion so that ultimately
Supreme Court had to caution in State of Rajasthan Vs. Puri Construction Company Ltd.40 "It
is necessary, however, to put a note of caution that in the anxiety to render justice to the party
to arbitration, the court should not reappraise the evidences intrinsically with a close scrutiny
for finding out that the conclusion drawn from some facts, by the arbitrator is, according
to the understanding of the court, erroneous. Such exercise of power which can be exercised by
an appellate court with power to reverse the finding of fact is alien to the scope and ambit of
challenge of an award under the Arbitration Act."

Thus it is a unique feature of the arbitral award under the 1996 Act that the party need not wait
for a formal decree for enforcement of the award. Kerala High Court in Ramaswamy vs.
Principal Subordinate Judge,41 has held that the Execution Court is duty bound to accept the
execution petition with a certified copy of the award. Later on, Kerala High Court has made clear
in Sulekha Clay Mines Vs. Union of India, 42 (by J. B. Koshy J.) that the `court' defined under
Section 2 (e) of the Act 1996 (as far as Kerala is concerned), is the District Court, being the
Principal Civil Court of the District.

Enforcement of award under 1996 Act subject to two conditions

It is to be borne in mind, the enforcement of an arbitral award, though final and binding, is
again subject to two conditions under S.36.

(i) Time for making application to set aside the arbitral award under Section 34 has to expire
i.e. three months from the date of receipt of the copy of the arbitral award plus 30 days which
Court could give extension in its discretion, if concerned party proves sufficient cause,
but not thereafter.

(ii) If such an application is made it has to be refused.

40
(1994) 6 SCC 485)
41
1997 (2) KLT 393
42
2000 (1) KLT 691 = 2000 (1) KLJ 472

46
 Limitation for application to set aside award - difference under Act of 1940 and Act of
1996

Under the Act of 1940 the time limit was subject to application of the law of limitation since
provisions of Limitation Act is applicable to arbitration also, under Section 37 of the said Act.
The decision of the Supreme Court in State of A. P. Vs. Chandra Sekhara Reddy and other 43 on
22.0.1998 which has been followed by other High Court also make the point clear. The Full
Bench of the Kerala High Court had held so even before, by judgment dt. 31.3.1998 in C.M.P
No. 3131/1997 in MFA 724/97, upholding a Division Bench decision still earlier, in State of
Kerala Vs. Madhusoodanan Pillai44 in view of contrary decisions of two Division Benches.
However, under the 1996 Act the discretionary power conferred on the court for extension
of time for thirty days beyond three months followed by the expression "but not thereafter"
in S.34 (3) proviso prescribes a cut-off date.

Enforcement of Domestic Awards and Foreign Awards -

distinction

(1) Before the commencement of the 1996 Act

Regarding enforcement of domestic awards and foreign awards there are certain
differences under the two enactments of 1940 and 1996. In the 1940 Act Section 17 make
clear (apparently in the case of domestic awards) once a judgment was pronounced
according to the award a decree shall follow which always could be executed under the
provisions of the Code of Civil Procedure. The said Act is silent about enforcement of foreign
award. However, being a party to the Multilateral International Conventions, viz. the Geneva
Convention of 1927 and the New York Convention of 1958, India enacted two legislations
for enforcement of foreign arbitral awards i.e. (i) The Arbitration (Protocol and Convention)
43
(1998) 7 SCC 141
44
(1994(1) KLT 268)

47
 Act, 1937 for enforcement of foreign arbitral awards to which the Geneva Convention of
1927 applied, (ii) the Foreign awards (Recognition and Enforcement) Act, 1961 pursuant
to the New York Convention of 1958 with a distinction that the Geneva Convention ceased to
apply to those awards to which the New York Convention applied.

It is relevant in this context to note, the Geneva Convention suffered from certain defects
which hampered the speedy settlement of disputes through arbitration and thus the
New York Convention was entered into. The New York Convention seeks to remedy
those defects by providing for much more simple and effective methods of obtaining
recognition and enforcement of the foreign awards.

(2) After the commencement of Arbitration & Conciliation Act, 1996

By the enactment of 1996 adequate provisions have been brought in for enforcement of a
domestic award as also foreign award under the self same Act. Enforcement of domestic award
has been brought under Chapter VIII of Part I which contains only two sections viz. Sections 35
&36.Provisions for enforcement of foreign awards under New York Convention are provided
under Part II, Chapter I consisting of Sections 44 to 52 whereas enforcement of Geneva
Convention awards has been brought under Part II, Chapter II consisting of Sections 53 to 60.

Competence of Arbitral Tribunal to rule on

its own jurisdiction
There are an estimated 30 million cases pending in various courts in the country. Andin this
backdrop, ADR is today more preferred by businesses. Considering the speed and comparative
low cost, ADR is meant to be far superior to a black letter law. This project may deals with a
crucial aspect of Arbitral Tribunal.

JURISDICTION MEANING

48
Jurisdiction (from the Latin jus, juris meaning "law" and dicere meaning "to speak") is the
practical authority granted to a formally constituted legal body or to a political leader to deal
with and make pronouncements on legal matters and, by implication, to administer justice within
a defined area of responsibility. The term is also used to denote the geographical area or subject-
matter to which such authority applies.

General Introduction:

In all walks of life, it is usual to come across disputes, more so in business dealings. In olden
days informal system of Arbitration existed in the shape of Panchayats. The Father of Nation
Mahatma Gandhi was also a staunch believer of arbitral process for resolving the problems in
our predominantly rural society at affordable costs via Panchayat Raj. The word ‘Arbitration’
appears to have originated from the word arbitrary. The parties involved in the disputes refer
them to a peer who is supposed to be a person of nobility having capability to resolve the
disputes. There are an estimated 30 million cases pending in various courts in the country. The
criticism against the justice delivery system is continuous and we keep on hearing related phrases
like ‘Back Breaking delay’, ‘Elusive Justice’, and ‘System on the verge of brink’. Arbitration
system is a means to provide an easy and expedient mechanism for dispute resolution without the
need of resorting to a long drawn litigation. This is meant to be Justice without law. It is meant to
be far superior to a black letter law. Arbitration seeks to remove blockade caused by chocking
legal pollution. Arbitration started as a delegalization reform to resolve conflict with mutual
love and trust.

Even late Shri Nani Palkhiwala remarked succinctly, “If I were appointed a dictator of this
country, in the short span of my appointment and assassination, I would promulgate a law
making all commercial disputes compulsorily referable to arbitration.” With the long British
Rule in India, we had two enactments for Arbitration, viz. the Act of 1899 and 1940.After
independence of India, it was observed that the Act of 1940 has outlived its utility and was not in
line with economic reforms introduced in India. Hence the Arbitration and Conciliation Act,
1996 came into force on 25-1- 1996. In the PREAMBLE of the act, it stated that, “Whereas the
United Nations Commission on International Trade law has adopted the UNCITRAL Model Law
on International Commercial Arbitration in 1985; and whereas the General Assembly of the
United Nations has recommended that all countries give due consideration to the said Model

49
Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific
needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has
adopted the UNCITRAL Conciliation Rules in 1980; AND WHEREAS the General Assembly of
the United Nations has recommended the use of the said Rules in cases where a dispute arises in
the context of international commercial relations and the parties seek on amicable settlement of
that dispute by recourse to conciliation; AND WHEREAS the said Model Law and Rules make
significant contribution to the establishment of a unified legal framework for the fair and
efficient settlement of disputes arising in international commercial relations; AND WHEREAS it
is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid
Model Law and Rules;” For the first time a novel provision has been introduced under 16.

This section 16 provides that:

‘(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:

(a) an arbitration clause which forms part of a contract shall be treated as an agreement
independent of the terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void 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. 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. The arbitral tribunal may, in either case, admit a later plea if it considers the delay
justified.

(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.

50
(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) of sub-section

(3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral
proceedings and make an 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.Before filing statement of defence, a party can
challenge jurisdiction of Arbitral Tribunal, which it is bound to decide.

(7) The arbitral tribunal may rule on a plea either as a preliminary question or in an award on the
merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party
may request, within thirty days after having received notice of that ruling, the court specified in
article 6 to decide the matter, which decision shall be subject to no appeal; while such a request
is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

Today, the right of the arbitrators to rule on their own jurisdiction is an almost fully
uncontroversial part of the well-established doctrine and practice in international arbitration. The
provision of Art.16 MAL in its basic idea now really reflects the globally harmonised approach
to the issue universally called Kompetenz Kompetenz. Practically all countries recognise the right
of the tribunal to decide on their jurisdiction, subject to the subsequent court control. This is also
demonstrated by some 20 cases collected in CLOUT, which all, without exception, assert the
right of arbitrators to rule on their own jurisdiction. Yet, in certain details, the law is still
different, even in the countries that have adopted the MAL.

There is now a ‘‘wide consensus that the arbitral tribunal has the power to rule on all aspects of
its own jurisdiction’’. Reported decisions have showed that the courts recognise the right of the
arbitral tribunal to determine:

 whether arbitration agreement exists between the parties.

 whether the matter in dispute comes within the scope of the arbitration agreement.

51
  what is the proper interpretation of the arbitration agreement.
 whether the arbitration agreement is valid or was terminated.

It is manifest and goes without saying that the arbitrator being a creature of the agreement, must
operate within the four corners of the said agreement and cannot travel beyond the same. This
power u/s 16 is unique in the Act. Now the Act itself provides that the arbitral tribunal can rule
on its jurisdiction. It is axiomatic that no ruling can be given only after hearing both the parties.
If the challenge succeeds, the appeal lies u/s 37[2][a]. If the challenge is rejected, the same can
be challenged u/s 34[2][a][v] of the Act.

The language employed u/s 16 of the Act clearly shows that the said provision is only an
enabling one conferring the requisite powers on the Arbitral Tribunal to decide whether there is
any existence of clause in the arbitration agreement. However, mere attendance on earlier dates
in the arbitral proceedings does not debar the party from raising objections only if statement of
defense is yet not filed. In case of illegal contract, the parties by acquiescence cannot confer
jurisdiction on court. When the question is raised about non-existence or invalidity of the
arbitration agreement, the arbitral tribunal is bound to decide. Arbitration clause contained in the
agreement being an integral part of the same, would automatically perish if that agreement itself
were non-est. An admitted liability can be no ground for arbitration since it is devoid of dispute.

Ordinarily the courts do not interpret an arbitration agreement by applying strict rules of
construction, which are normally applied to a conveyance and other formal documents. In such
cases, it is necessary to apply a common sense approach and not be allowed to be thwarted by a
narrow pedantic or too legalistic view. Arbitrability is certainly an issue, which can be objected
to by the party. The Chapter IV of the Act is titled as ‘Jurisdiction of the Arbitral Tribunals’.
Under that chapter, Section 16 is enacted which bears the title ‘Competence of Arbitral Tribunal
to rule on its own Jurisdiction.’ The Arbitral Tribunal is now empowered under the new Act to
rule on its own jurisdiction, including ruling on any objections with respect to existence or
validity of the Arbitration Agreements.

The party can now contest that; the Arbitral Tribunal is lacking the powers necessary to
adjudicate upon this reference. A procedure laid down in Section 16 of the Arbitration and

52
Conciliation Act, 1996 cannot be bypassed, as all the parties to the reference are duly clothed
with the inherent rights to object to the jurisdiction, domain, precincts, confines, portal,
boundaries, realm of the Arbitral Tribunal and its authority. The Arbitration and Conciliation
Act, 1996 mandates that prior to assumption of the jurisdiction, the plea u/s 16 shall be decided
as it strikes at very authority.

The Arbitral Tribunal cannot acquire, possess and get seized of the jurisdiction when the claim
has become time barred. The contention goes to the very root of the jurisdiction of the Arbitral
Tribunal, when the Arbitral Tribunal suffers from inherent want of the jurisdiction because of
Time barred claim. Consequently, the jurisdiction is taken away. The party can advert the
attention of the arbitrator to the foundation or substratum or bedrock or the jurisdictional facts
necessary for conferring of or vesting in the jurisdiction to this Arbitral Tribunal by making an
averment that a claim has to be within the framework of the Byelaws of the NSE. This is sine
qua non for giving the jurisdiction to the Arbitral Tribunal in the reference. Apropos the ratio of
judgments heavily relied upon by the party it should be noted that any judgments and orders of
courts cannot be construed or interpreted like acts of parliament or as mathematical theorems.
The concluding words alone cannot be blindly applied de hors the actual findings and directions
contained in the judgments.

On the other hand, the averments of the party are not sufficient to clothe the Arbitral Tribunal
with the jurisdiction necessary to initiate this reference. Be that as it may, there ought to be merit
in the contentions advanced by the party. It is a well-settled proposition that a proceeding is a
nullity when the authority conducting it has no power to have seizing over the reference.

The Arbitral Tribunal ought to be fortified by the arguments advanced and the plea raised by the
party ought to be quite tenable and sustainable in the eyes of law. The Arbitral Tribunal must be
persuaded to accede to the submissions and then only accordingly uphold the preliminary
objection for interdiction at the very threshold. There must be a clear-cut case to prove that the
reference is totally devoid of the jurisdiction, dominion and portal. The Limitation Act, 1963
applies to the Arbitration and Conciliation Act, 1996. The law does not help one who sleeps
over his rights to the alleged claim. Delay defeats Justice and equity adds only promptitude and
resultant consequences. Defaulting party should bear the hardship of his own default in lodging

53
the time barred claims and ought not to transmit the hardship to the other party after the
impugned claim is allowed to be time barred.

U/S 16(5) of the Act, the Arbitral Tribunal shall pass an order whenever, a plea is raised u/s
16(2). Section 16 is undoubtedly an enabling Section. Under the circumstances, the Arbitral
Tribunal ought to refuse to deal with the matter at all, if it comes to a conclusion that, it has no
jurisdiction to deal with the matter in this reference.

Thus when the alleged dispute is not Arbitrable and falls outside the purview of the Honourable
Arbitral Tribunal because the claim travels beyond the time barred jurisdiction and no
jurisdiction can be arrogated in such a case. Although the decision u/s 16 is not award, it is
always a good practice to record reasoning u/s 31[3] so that the same can form part of final
award and shall enable all parties to convince the court to translate the logic behind the same
when put to challenge u/s 34.Section 16(2) in The Arbitration And Conciliation Act, 1996

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 pica merely because that he has appointed, or participated in the appointment of, an
arbitrator. The order embodying the decision u/s 16(5) pursuant to the application u/s 16(2) is
not an interim award. As was held

 In the case of Uttam Singh v/s Hindustan Steel45.

Even the Honourable High Court having Judicature at Bombay had also an occasion to
substantiate this ratio in a recent case wherein they refused to treat that as an Interim Award and
hence not challengeable u/s 34 of the Act. When a party raises a preliminary issue to be decided
in priority, the Arbitral tribunal cannot proceed with the merits without passing a speaking order
u/s 16(5) r.w.s. 16(2) of the Act.

 This view is held in the case of Southern Gas Ltd v/s Visveswariya Iron & Steel Ltd 46
by the Apex Court of India,

45
AIR 206 MP 1982
46
[9 SCC 555]

54
which is binding on all the authorities functioning there under. In the case of Premier Fabricators
v/s Heavy Engineering Corp.47, the Supreme Court held that, “Where the Arbitrator was required
to decide in the first place with reasons the question of Arbitrability, but he gave a composite
award consisting of a lump sum, it was held that the whole award was vitiated because it could
not be said that the question of Arbitrability was considered as implication.”

 Thus, the importance of preliminary issue was clearly upheld by the Apex Court also
in the case of T. N Electricity v/s Bridge Tunnel Constructions48.

However, it would be wrong to assume that this power given to arbitrator precludes the Chief
Justice or his designate to decide a question as to the existence of arbitration clause u/s 11.

 In the case of Perfect Equipment Pvt. Ltd vs. Prestige Enterprises 49

It was held that, “Even if agency agreement [containing Arbitration clause] is terminated,
respondent is entitled to refer dispute to Arbitration u/s 16(1)(a)” and after agreeing to
appointment of an Arbitrator, the petitioner cannot complain that respondent should have first
right to resolve dispute amicably.”

 In the case of D-Ionic India Pvt. Ltd. Vs. State of Rajasthan50

It was held that, “Section 16 confers power upon arbitrator to rule on its own jurisdiction
including any objection with respect to existence or validity of Arbitration Agreement.”

Even though the contract may be void, the Arbitral clause has to be considered as an independent
agreement and will not suffer the consequences of being void. Hence it will be open to the
Arbitral Tribunal to decide the issue of voidness of the contract while considering the dispute
under the arbitral clause. [G.R. Didwania vs.A.C.Choksey51].

 In the case of Pharmaceutical Products of India Ltd. Vs Tata Finance Ltd.52 the

47
4 SCC 319
48
4 SCC 121
49
44 SCL 74 (MUM)
50
44 SCL 67 (Del)
51
4 CLA-BL SUPP-SNR-7 BOM
52
41SCL 259

55
Bombay High Court held that, ‘A decision on a question whether proceedings before arbitrators
should be stayed or not cannot be subject matter of a final arbitral award, not even an interim
award. It would be simply a decision u/s 16.” In the case of East Coast Boat Builders 53 it was
held that, ‘Where the jurisdiction of an arbitrator is challenged, and the arbitrator rejects it, his
decision is not appealable. It is not an interim award.” Normally the power of granting specific
performance is discretionary and the discretion has been conferred by Specific Relief Act only
on civil courts. Merely because the sections of the Specific Relief confer discretion on courts to
grant specific performance of a contract does not mean that parties cannot agree that the
discretion will be exercised by arbitral tribunal of their choice.

 Olympus Superstructures pvt. Ltd. Vs Meena Khetan.54

An Arbitration clause is severable from and independent of other terms of contract. The decision
of the Arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of
the Arbitration clause. Thus even if the contract is non-est, the arbitration clause is not rendered
invalid. It is still within its competence to decide its validity.

 Brawn Lab Ltd. vs. Fitty Int’.55

Decision of the arbitrator that the contract was null and void or termination of main contract by
performance or otherwise, will not render the arbitration clause invalid. Olympus Superstructures
Pvt. Ltd. Vs. Meena Khetan56.

 In the case of S.N. Transport vs. GCM. Synthetics57

it was held that a party canal ways raise the challenge to existence or validity of the Arbitration
Agreement u/s 16[5]at any stage and the arbitrator is bound to decide the same. Section 16
conspicuously avoids adverbial clause ‘unless otherwise agreed’ so that the parties cannot
modify the power. Under the enabling section 16[1], the arbitral tribunal has discretion to
exercise power conferred due to word ‘May’ therein. However, section 16[5] uses word ‘shall’,
hence mandatory. U/s 16[2], the objection as to jurisdiction is to be raised not later than the
53
AIR 1999 DEL 44
54
2 ARB LR 695 SC
55
l GmBH (2000) 2 Arb LR 64 DEL
56
2ARB LR 695 SC
57
1999(3) MLJ 216

56
submission of the statement of defence but u/s 16[3], objection as to scope of authority is to be
raised as soon as a matter alleged to be beyond the scope of its authority is raised. U/s 16[4], the
Arbitral Tribunal is authorised to admit the plea even later if it considers that the delay was
justified. U/s 16[6], the aggrieved party is already given the right to challenge the award u/s 34.
The effect of conjoint reading of various sections like 16, 34 etc. is that if no plea is raised u/s
16, the party cannot raise it later u/s 34.But this is a grey area where later proceedings u/s 34 is
barred or not is subject to interpretations. When an application is made u/s 11[6] for an
appointment of an arbitrator, no objection can be raised that the claim fell outside the purview of
arbitration; hence they could not be referred to arbitration because this power rests with the
Arbitrator himself.

 Sharma & Sons vs. E-in-C. Army.58

The Supreme Court observed that section 16[5] does not violate the basic structure of the
Constitution as the order thereunder is certainly subject to any judicial scrutiny even if after
award is passed as per the time and manner laid down by the Act passed by the Parliament.
Babar Ali vs. Union of India59 Thus the power of the Arbitral Tribunal to rule on its jurisdiction
is unique.

 Court clarifies jurisdiction of arbitral tribunal in relation to scope of contract

In Oil and Natural Gas Corporation v Wig Brothers Builders and Engineers Pvt Ltd January
18, 2011 the Supreme Court reaffirmed the principle that, pending adjudication before it, an
arbitral tribunal cannot go beyond the scope of the contract. The court held that in the event that
any arbitral award is found to violate the express provision contained in the contract which is the
subject matter of the proceeding, such award will be beyond the tribunal's jurisdiction and thus
merit interference. In the present case the arbitrator, while passing his award, overlooked a
clause of the contract which imposed a specific bar on the award of any compensation for any act
which led to a delay in the execution of the work, and awarded damages for a delay in

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2 ARB LR 31 AP
59
2 SCC 178

57
completion of the work. The Supreme Court set aside the award to the extent that the arbitrator
had proceeded in manifest disregard of the express terms of the contract.

Facts

The appellant entrusted a construction job to the respondent under a contract dated October 11
1983. Clause 25 of the contract provided for the settlement of disputes by arbitration. Certain
disputes arose between the parties and the parties were referred to a sole arbitrator under the
contract. Several claims and counterclaims were made, and the arbitrator held, among other
things, that the delay in completion of the work was due to the fault of both the appellant and the
respondent contractor, and that both were equally liable for the delay. Accordingly, the arbitrator
awarded damages against the appellant for the loss incurred on account of the delay in
completion of the contract, which was attributable to the appellant.

The appellant challenged the award by filing a petition under Sections 30 and 33 of the
Arbitration Act 1940. The civil court dismissed the petition and made the award rule of the court.
On appeal, the High Court upheld the judgment of the civil court. Aggrieved by the above
decision, the appellant challenged the arbitrator's award before the Supreme Court, insofar as he
had awarded compensation for the delay in completion of the contract on account of the
appellant's failure to perform its contractual obligations under the first claim.

Decision

The Supreme Court allowed the appeal and held that the arbitrator had exceeded his jurisdiction
by awarding damages against the appellant while ignoring the express bar contained in Clause
5A of the contract. This clause specifically barred any claim for damages and provided for a time
extension for the completion of work in case delay was caused by any act of the appellant in the
execution of the work.

While considering the matter before it, the court reiterated the following well-settled principles:

 The court does not examine the award as an appellate court. It will not re-examine the
material on record.

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  An award is not open to challenge on the grounds that the arbitrator reached a wrong
conclusion or failed to appreciate some facts.

 If an error is apparent on the face of the award, or there is misconduct on the part of the
arbitrator or legal misconduct in conducting the proceedings or in making the award, the
court will interfere with the award.

While allowing the appeal, the court referred to and relied on several judgments. It observed that
in Associated Engineering Co v Government of AP (and Rajasthan State Mines and Minerals Ltd
v Eastern Engineering Enterprises), it had already been established that:

"the arbitrator is the creature of the contract between the parties and hence if he ignores the
specific terms of the contract, it would be a question of jurisdictional error which could be
corrected by the court and for that limited purpose, agreement is required to be considered.
Therefore, the arbitrator cannot award an amount which is ruled out or prohibited by the terms
of the agreement."

The Supreme Court observed that in Ramnath International Construction (P) Ltd v Union of
India it had considered a similar situation wherein the contract contained a clause which
provided a clear bar to any claim for compensation for delays, in respect of which extensions had
been sought and obtained. The court held that:

"such a clause amounts to a specific consent by the contractor to accept extension of time alone
in satisfaction of claims for delay and not to claim any compensation; and that in view of such a
bar contained in the contract in regard to award of damages on account of delay, if an
arbitrator awards compensation, he would be exceeding his jurisdiction."

In view of the above, the appeal was allowed in part and the court concluded that the arbitrator
had exceeded his jurisdiction by awarding damages and ignoring the express bar contained in the
contract. The court observed that

"in the event of the work being delayed for whatsoever reason, the Respondent will only be
entitled to extension of time for completion of work but will not be entitled to compensation or
damages."

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With regard to the other claims, the award was not disturbed and the judgment of the lower
courts was affirmed.

Comment

The Supreme Court has once again clarified that an arbitral tribunal cannot exercise its power ex
debito justitiae (as a matter of right). The arbitrator's jurisdiction is confined to the four corners
of the agreement from which it derives authority, and only such orders may be passed as may be
the subject matter of reference. The arbitral tribunal has no jurisdiction to make an award against
the specific terms of the contract executed between the parties. Therefore, any award made in
manifest disregard of the contract, despite being bona fide, will be deemed arbitrary.

 In State of U.P. v. Allied Constructions60, this Court held:

"...Interpretation of a contract, it is trite, is a matter for arbitrator to determine Section 30

of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation.
Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set
aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is
precluded from reappraising the evidence. Even in a case where the award contains reasons,
the interference therewith would still be not available within the jurisdiction of the Court,
unless, of course, the reasons are totally perverse or the judgment is based on a wrong
proposition of law. As error apparent on the face of the records would not imply closer
scrutiny of the merits of documents and materials on record. One it is found that the view of
the arbitrator is a plausible one, the Court will refrain itself from interfering..."

CONCLUSION

The Parliament has enacted the Arbitration and Conciliation Act with a view to provide speedy
remedy by arbitration and to achieve this objective, section 5 of the Act puts a complete bar on

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2003 (6) SCALE 265

60
the intervention of the courts matter where there exists an arbitration clause. It is relevant to
mention that prior to coming into force of the Act, the Arbitration Act, 1940 was the law in the
force relating to arbitration and section 34 of the repealed Act being para material to section 5 of
the Act also provided that in respect to matter covered by arbitration proceeding in a court were
not maintainable. However, the language used in section 5 of the Act is more stringent and
unequivocal insofar as the bar to the jurisdiction of any judicial authority is concerned. Whereas
in section 34 of the 1940 Act only civil suits were practically barred as would be clear from the
language used in section 5 of the Act, every judicial authority has been barred from intervening
in respect of a matter which is governed by Part-I of the Act. [13] Arbitration is a sum of many
parts. There are benefits and costs and the reminder that one is incomplete without the other. As
things stand today, arbitration is poised to effect great changes to the ways in which dispute
resolution is conducted. It brings with it the solemnity and finality of the judicial process and
couples it with the procedural flexibilities of non-conventional dispute resolution methods. There
is, however, an equally pressing need to recognize that much more can and should be done to
improve the conduct of arbitral proceedings in India but most importantly, we, the researchers,
feel that there is a need to effect a change in perceptions. As our nation moves towards
increasing litigiousness, alternative methods of dispute resolution might just provide the key to
resolving the problems of overburdened case loads, long pendency of cases and an all too
frequent case of justice delayed. For long, the problem plaguing the effective implementation of
ADR methods has been their perception as being subordinate to the court process- a perception
shared and fostered by lawyers and people alike. It is imperative, that this be changed and this
can only be achieved if there is active engagement from all the stakeholders in this process.
Certainly, there are some disputes inherently unsuited for alternative channels but there are so
many more which fit perfectly within the vision envisaged for if a system of rendering justice
that runs concurrent to the Courts. It is necessary for the Courts themselves to mandate recourse
to ADR methods in inter alia international commercial disputes, employment disputes,
matrimonial cases, compoundable criminal offences, to name just a few. At the end of the day,
what should take precedence is the provision of justice, in substance more than in form. As our
country grows and flowers, taking wing on issues unimagined before, it is time also for our
dispute resolution systems, the undisputed backbone of our nation, to follow suit.

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BIBLIOGRAPHY

 https://www.lexology.com/
 https://indiankanoon.org/
 https://www.lawtimesjournal.in/

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 https://www.wipo.int/laws/
 https://www.lexuniverse.com/arbitration/india/The-
Arbitral-Tribunal-and-its-Powers/
 “Indian Journal on Arbitration Law” VOLUME II: ISSUE
2 by P. Panjwani & H. Pathak

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