CONSTITUTIONALITY OF THE SECTION

Sec. 16 deals with the competence of the arbitral tribunal to rule on its own jurisdiction and
decide any objection with respect to the existence or validity of the arbitration agreement. Sec.
16 (5) of the new Act provides that where the arbitral tribunal rejects the plea referred to in sub
Sec. (2) and (3), he shall continue the arbitral proceeding and make an award. The rejection of
the plea is not immediately appealable or revisable. It is contended before the HC and the SC that
in the absence of the power of judicial review, the Arbitration and Conciliation Act, 1996 was
ultra-vires of the Constitution. The SC rejected the plea.1
In Lexicon Finance Limited, Unit No. II, Mumbai v.UOI, 2 the main contention was that Sec. 16
(5) of the Act is ultra vires. Repelling the contention, the Division Bench of the HC repelled the
contention.

PROPRIETY OF PROCEEDINGS WITH THE ARBITRATION WITHOUT

DECIDING THE QUESTION OF JURISDICTION

Sec. 16 makes it mandatory for the arbitrator to decide the plea of jurisdiction as and when
received before proceeding further in the arbitration proceedings. No detailed order is required to
be passed for accepting or rejecting the plea of jurisdiction. However, a party has a right to know
whether his plea of jurisdiction or objection regarding the existence and validity of arbitration
agreement has been accepted or rejected. The arbitrator may initiate the party about rejection of
the objection by a non-speaking order and may incorporate the reasons for it in the ultimate final
arbitral award.
Since the question of jurisdiction goes to the root of the matter, it is required to be settled at the
earliest and before dealing with other questions raised by the parties in the case. In Arati Dhar v.
S.K. Dutta,3the Court dealt with this aspect in detail and held the Sec. 16 (1) read with Sec. 16
(2) makes it clear that the plea relating to jurisdiction of the arbitral tribunal should be raised at
the earliest and not later than the submission of the statement of defence.

1
Babar Ali v. Union of India and Ors. (2000) 2 SCC 178.
2
2003 (2) RAJ 316 (Kar.).
3
(2003) 3 Arb. L.R. 499 (Cal.); 2003 (4) RAJ 98.
The SC clarified in Olympus Superstructure Pvt. Ltd. v Meena Vijay Khetan 4 that the use of the
words “as soon as” and “no later than” in the provision show that such a plea must be taken
without undue delay. However, the Tribunal is competent to admit a plea as mentioned above if
it considers that the reason for the delay in submitting a plea is justified.

CAN THE OBJECTION REGARDING JURISDICTION BE RAISED FOR

THE FIRST TIME IN APPLICATION UNDER SEC. 34?

Sub-Sec. (2) of Sec. 16 provides that the plea regarding lack of jurisdiction shall be raised before
the arbitral tribunal before or at the time of the submission of statement of defence and not later
than that.
In Oil and Natural Gas Corporation v. Oil Field Instrumentation 5, it has been held that objection
in terms of this Sec. can be raised even after participation in appointment of arbitral tribunal,
appearing before it and seeking time to submits the reply. This view of Bombay HC does not
appear to be inconsonance with the judicial pronouncements and the object of the Act.
In Kitiku Imports Trade Pvt. Ltd. v. Savitri Metals Ltd. And Another,6 it has been held that if such
a plea of jurisdiction is not raised before the arbitrator then it cannot be permitted to be raised for
the first time in application under Sec. 34

POSITIVE AND NEGATIVE EFFECTS OF THE DOCTRINE

The doctrine of competence-competence has two sides to it- the positive and the negative.
While the positive effect of the doctrine is that the arbitrators have the power to decide their own
jurisdiction, the negative effect states that to allow the arbitrators to rule on their jurisdiction first,
the intervention of the courts must be curtailed. It has been argued by many scholars that ‘the
arbitral tribunal should be able to decide [the jurisdictional issues] first, subject to a possible
judicial review of its decision.’ This priority given to the arbitral tribunal also signifies that the

4
(1999) 5 SCC 651: AIR 1999 SC 2102.
5
2005 (1, RAJ 69 (Bom)
6
1999 (2) Arb. L.R. 405 (Bom.)
question of validity of the arbitration agreement will be first decided by the tribunal and then the
court. The impact of this negative effect is that the court that is consulted with the question of
validity of the arbitration agreement should refrain from deciding the substantive issues of the
arbitral tribunal’s jurisdiction until the tribunal has heard them itself.
The Apex Court in the Patel Engineering case completely disregarded the implications of
the negative effect of competence-competence on the issues posed before it. As stated above, the
Court’s reasoning renders the arbitral tribunal’s power under competence-competence redundant.
This has subjected to the judgment to criticism by scholars and practitioners alike. In the UK, a
similar question arose in the case of Fiona Trust & Others v Yuri Privalov & Ors. 7 Here, the
court was mindful of the negative effect of the doctrine. The arbitral tribunal’s jurisdiction was
challenged on the ground that the main contract was procured by bribery. The Court of Appeals
declined to rule on the tribunal’s jurisdiction and referred the matter back to the tribunal itself.

EXCEPTIONS TO THE DOCTRINE OF COMPETENCE-COMPETENCE

The doctrine of competence-competence is, however, subject to the exception i.e. when the
arbitration agreement itself is impeached as being procured by fraud or deception. This exception
would also apply to cases where the parties in the process of negotiation, may have entered into a
draft agreement as an antecedent step prior to executing the final contract. If an arbitration
agreement is not valid or non−existent, the arbitral tribunal cannot assume jurisdiction to
adjudicate upon the disputes. Appointment of an arbitrator may be refused

In the case of M/S. Uttarakhand Purv Sainik v. Northern Coal Field Ltd. 8, the question before the
Honorable SC was whether the HC was justified in rejecting the application filed under Sec. 11
for reference to arbitration, on the ground that it was barred by limitation. The Honorable SC set
aside the Order of the HC and held that issue of limitation being a jurisdictional issue, the same
has to be decided by the tribunal under Sec. 16, which is based on Article 16 of the UNCITRAL
Model Law which enshrines the competence-competence principle. Such a jurisdictional issue is
to be determined having regard to the facts and the law.

7
[2007] EWCA 20.
8
SLP  (C) No. 11476 of 2018