Contents

INTRODUCTION.........................................................................................................................1
APPOINTMENT OF ARBITRATORS UNDER SECTION 11 OF THE ACT......................2
Number of Arbitrators................................................................................................................2
Qualification of Arbitrators........................................................................................................2
Requirements for Filing an Application for the appointment of an arbitrator........................3
Existence of ‘Dispute’ a Precondition of the Right to Seek Appointment...............................3
Appointment of Arbitrator through Court Assistance...............................................................3
AMENDMENTs TO ARTICLE 11..............................................................................................5
UNILATERAL APPOINTMENTS: THE GENESIS OF CONFLICTS.................................7
CONCLUSION..............................................................................................................................9
  INTRODUCTION
While party autonomy is the underlying motif of the Arbitration and Conciliation Act,
1996 (“the Act”), Parliament has ensured that the Act contains adequate provisions to deal with
situations and circumstances which require intervention of courts whenever necessary. One such
provision is Section 11 of the Act which apart from granting parties the liberty to devise their
own procedure to appoint arbitrator(s) (subject to provisions of the Act) describes the extent and
role of courts in appointment of arbitrators.

Section 11 of the Act, as originally enacted, envisaged that if one of the parties failed to appoint
an arbitrator in terms of the agreement between the parties (or within 30 days of the receipt of a
request to do so from the other party, in case there is no agreed procedure), the requesting party
could approach the Chief Justice of High Court or Chief Justice of India and request the Chief
Justice to appoint the arbitrator. The appointment would then be made either by the Chief Justice
himself, or by any person or institution designated by him for this purpose.

The subject of appointment of the Arbitral Tribunal is a vexed issue that has in the past few
years, since the 2015 amendments to the Arbitration Act in India, received considerable judicial
scrutiny in the Supreme Court and the High Courts. The importance of appointing arbitrators in
which both the parties have mutual confidence, and fairness and impartiality of the arbitrator, has
been stressed in recent judgments of the Supreme Court in the context of whether a particular
party to the dispute should have the power to act as an arbitrator or appoint a sole arbitrator. The
Supreme Court has categorically laid down that where a party has an interest in the outcome of
the decision, it is not entitled to appoint and/or to participate in any manner in the appointment of
the arbitrator. In this regard, the importance of fairness of the arbitrator and absence of bias, as
well as the concept of mutual confidence of the parties in the arbitrator, has been given primacy
over the concept of party autonomy and the significance of the plain contractual text of the
arbitration agreement, at least in the context of appointment of sole arbitrators. In this project, the
endeavor is to present both the procedural process and the conflict with regard to unilateral
appointments of arbitrators as an unfairness and unequal treatment of the parties.
  APPOINTMENT OF ARBITRATORS UNDER SECTION 11 OF THE ACT
 Number of Arbitrators
The Arbitration and conciliation Act of 1996 states that parties can determine the number of
arbitrators they wish to appoint however, this should not be an even number.If they are unable to
do so, the arbitral tribunal shall consist of a sole arbitrator. The statutory requirement of odd
numbers of arbitrators is can be moved away from, which means that if they wish to exercise an
option of choosing even number of arbitrators and agree to not to challenge the award thereafter,
the award rendered would be a valid and binding. If neither of the parties challenge the
composition then any challenge to the composition must be raised by a party before the time
period prescribed under the Act, failing which it will not be open to that party to challenge the
award after it has been passed by the arbitral tribunal. The Act enables the arbitral tribunal to rule
on its own jurisdiction. A challenge to the jurisdiction of the arbitral tribunal cannot be raised,
after the submission of the statement of defense although the party might have participated in the
appointment of the arbitrator and might have appointed the arbitrator himself. Both parties can
choose the arbitrators.

 Qualification of Arbitrators
The parties should ideally follow an agreed procedure for appointing the arbitrators. However if
that fails and an application is filed in court for appointment, the Chief Justice or the person or
institution designated by him, in appointing an arbitrator, shall have due regard to any
qualification required of the arbitrator by the agreement of the parties. 1 A clause in the
agreement,which provides for settling the dispute by arbitration through arbitrators having
certain qualifications or in certain agreed manner is ordinarily followed by the courts and not
derogated from unless there are strong grounds for doing so. The appointment of an arbitrator
can be challenged within 15 days after he learns of the constitution of the arbitral tribunal or after
becoming aware of the circumstance that he does not possess the necessary qualification. It is not
open to a party, especially in government contracts, to contend that appointment of only one
arbitrator only by one of the parties to the dispute will violate the principle that no man can be a
judge in his own cause if that party had voluntarily entered into the contract with knowledge of
this fact and had thus accepted the terms and conditions of the contract. The question of its

1
Arbitration and Conciliation Act, 1996, Section 11(8)(a).
maintainability before the arbitral tribunal stating that the arbitration clause in the contract
between the parties is void and unenforceable law cannot be accepted.2

 Requirements for Filing an Application for the appointment of an arbitrator

The essential pre-conditions to be satisfied before an application for appointment of arbitrator by
Court is filed are:

(i) There should be an arbitration clause in the contract in terms of section 7;

(ii) The party filing the application should have knowledge of the arbitration agreement;
(iii) There is a dispute between the parties in relation to the contract containing the
arbitration agreement.
(iv) A notice invoking an arbitration clause has been issued and received by the other
party.

Existence of ‘Dispute’ a Precondition of the Right to Seek Appointment

A dispute or difference is a pre-condition of the right to arbitrate and seek an appointment. Mere
disagreement on a central issue is sufficient to constitute a dispute, a claim need not necessarily
arise. And merely raising a claim cannot satisfy the precondition of the dispute.

 Appointment of Arbitrator through Court Assistance

An arbitration agreement as defined under Section 7 of the Act is a condition precedent in order
to exercise the power to appoint an arbitrator or an Arbitral Tribunal, according to Section 11 of
the Act by the Chief Justice or his designate.

The Supreme Court has identified the duties of the chief justice or his designate. 3 First they
identified and separated the preliminary issues that arise from the application under Section 11 of
the Act into three categories, that is:

(i) Issues that the Chief Justice or his designate must decide;
(ii) Issues which the Chief Justice or his designate choose to decide
2
NandanBiomatrix Ltd. v. D1 Oils Ltd2009 4 SCC 495
3
S.B.P.& Co. v. Patel Engineering2005 8 SCC 618.
 (iii) Issues that have to be left to the Arbitral Tribunal to decide.

Section 11 of the Act provides for the procedure to appoint an arbitrator or arbitrators with court
assistance. The primary objective of seeking court interference under the Act is so that securing
the constitution of the arbitral tribunal can happen expeditiously. Parties can agree upon a
procedure for appointment of a sole arbitrator or arbitrators as under sub-section (2) of section 11
and can approach the court in the event they don’t have a procedure. The court’s jurisdiction and
the nature of its power as per section 11 has been quoted directly from the judgment4:

(i) “(i) The power of the Chief Justice of the High Court or the Chief Justice of India
under Section 11(6) of the Act 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 that court to another judge of that judge.
(iii) The Chief Justice or the designated Judge will have to decide the preliminary aspects
as indicated earlier. 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.
(iv) Designation of a District Judge as the authority under Section 11(6) of the Act by the
Chief Justice of the High Court is not warranted on the scheme of the Act.
(v) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court
would not interfere with 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 or in terms of Section 34 of the Act.

4
S.B.P.& Co. v. Patel Engineering2005 8 SCC 618.
 (vi) Since an order passed by the Chief Justice of the High Court or by the designated
Judge of that Court is a judicial order, an appeal will lie against that order only
under Article 136 of the Constitution to the Supreme Court.
(vii) There can be no appeal 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.
(viii) In a case where the parties have constituted an Arbitral Tribunal 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.
(ix) Orders under Section 11(6) of the Act have been made based on the position adopted
in an SC decision5, we clarify that appointments of arbitrators or Arbitral Tribunals
thus far made, are to be treated as valid, all objections being left to be decided under
Section 16 of the Act. As and from this date, the position as adopted in this judgment
will govern even pending applications under Section 11(6) of the Act.
(x) Where District Judges had been designated by the Chief Justice of the High Court
under Section 11(6) of the Act, the appointment orders thus far made by them will be
treated as valid; but applications if any pending before them as on this date will
stand transferred, to be dealt with by the Chief Justice of the High Court concerned
or a Judge of that Court designated by the Chief Justice.”6

For the appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act,
1996, two things have to be taken care of:

(i) That there is a dispute between the parties to the agreement and it is alive
(ii) That the arbitrator has to be appointed according to the terms and conditions of the
agreement and as per the need of the dispute.

5
Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd2000(8) SCC 159.
6
S.B.P & Co. v. Patel Engineering2005 8 SCC 618.
  AMENDMENTs TO ARTICLE 11
Parts of Section 11 of the Act were amended by Section 6 of the Arbitration and Conciliation
(Amendment) Act, 20157 (“the 2015 Amendment Act”), which came into force w.e.f. October
23, 2015. The 2015 Amendment Act effectively entrusted the responsibility of appointing the
arbitrator to the Supreme Court or any person or institution designated by it. The 2015
Amendment Act also introduced a timeline for the disposal of a Section 11 application by
introducing sub-section (13). Notably, this timeline of sixty days from the date of service of
notice on the opposite party is only directory and the Supreme Court or the person or institution
designated by it are required to make an endeavour to adhere to this time-period.
The Supreme Court has not designated an institution for exercising the powers under the Act and
therefore continues to hear Section 11 applications itself. However, pursuant to Section 11(10) of
the Act (before its amendment in 2015), the Chief Justice of India formulated ‘The Appointment
of Arbitrators by the Chief Justice of India Scheme’ on May 16, 1996 (“the Scheme”) which is
still in force. Therefore, the provisions of the Act, the Supreme Court Rules, 2013 8 (“the SC
Rules”), and the Scheme govern Section 11 applications.
Section 11 of the Act now stands substantially amended by the Arbitration and Conciliation
(Amendment) Act, 20199 (“the 2019 Amendment Act”). The amended Section 11 entrusts the
appointment of the arbitrator in the arbitral institutions designated by the Supreme Court. These
arbitral institutions, in turn, are to be graded by the Arbitration Council of India (“ACI”) (a body
to be established by the Central Government pursuant to Section 43-B of the 2019 Amendment
Act) – this gradation, according to Section 43-I, will be “on the basis of criteria relating to
infrastructure, quality and calibre of arbitrators, performance and compliance of time limits for
disposal of domestic or international commercial arbitrations, in such manner as may be
specified by the regulations”. The most significant change to Section 11 in the 2019 Amendment
Act is therefore that the task of appointing an arbitrator where the parties fail to do so, is
entrusted to an arbitral institution (as opposed to the Supreme Court or the High Court, as the
case may be), thereby substantially streamlining the process of the appointment of an arbitral
tribunal. This article does not delve into details of the amendments brought about by the 2019
Amendment Act, including with respect to the process of gradation by the ACI, or the pool of

7
The Arbitration and Conciliation (Amendment) Act, 2015.
8
The Supreme Court Rules, 2013.
9
The Arbitration and Conciliation (Amendment) Act, 2019.
arbitral institutions that may be selected by it, or the choice of potential arbitrators that each of
these institutions may in turn have. The focus of this article is on the changes introduced, to the
extent that they would have an impact on the timelines for the disposal of Section 11
applications. However, until the relevant sections of the 2019 Amendment Act are notified, the
Supreme Court will continue appointing arbitrators.

 UNILATERAL APPOINTMENTS: THE GENESIS OF CONFLICTS

In case of unilateral appointment of an arbitrator, there are very little chances of dropping the
perverse incentive that an arbitrator might have in ruling in favor of his appointing party. A party
to a dispute is only concerned with one thing i.e. a favourable award and therefore, it exercises
its right of unilateral appointment, like everything else, with that overriding objective in mind.

The practice of unilateral appointments is jeopardizing the Institution of Arbitration as a whole,

as it damages the trust that the process generates. Incidentally, unilateral appointments lead to a
high number of challenges to arbitrators which eventually delays the resolution of disputes
thereby, defeating the very purpose of arbitration.

The sequitur to the foregoing approach is that there are sufficient safeguards available under the
Act against the risk of bias and partiality by a party-appointed arbitrator. References are often
made to “Party Autonomy”. However, the legitimacy of arbitration is pyramided on the parties’
confidence in arbitrators. Unfortunately, the existing checks and balances under the Act are
inadequate to protect against the “menace” of unilateral appointments.

In  Ace Pipeline Contracts Private Ltd. v Bharat Petroleum Corporation  while deciding on the
question of impartiality and independence of a named arbitrator, the Hon’ble Supreme Court
held that

“Once a party has entered into an agreement with eyes wide open it cannot wriggle out of the
situation that if any person of the respondent-BPCL is appointed as arbitrator he will not be
impartial or objective. However, if the appellant feels that the arbitrator has not acted
independently or impartially, or he has suffered from any bias, it will always be open to the
party to make an application under Section 34 of the Act to set aside the award on the ground
that arbitrator acted with bias or malice in law or fact.”
The Law Commission in its 246th Report10 was of the view that-

“..a sensible law cannot, for instance, permit appointment of an arbitrator who is himself a party
to the dispute, or who is employed by (or similarly dependent on) one party, even if this is what
the parties agreed”.

By way of the amended Section 12 of the Act, the grounds which are likely to give rise to
justifiable grounds of bias have been identified in Fifth Schedule. Further, by virtue of Section
12(5) of the Act, any person who falls under any of the categories specified in the Seventh
Schedule shall be ineligible to be appointed as the arbitrator.

Interestingly, categories in Fifth Schedule and Seventh Schedule have attempted to include all
possible aspects so as to reduce preliminary disputes arising from independence and impartiality
of an arbitrator.

The recent decision in  Voestalpine Schienen GmbH v Delhi Metro Rail Corporation
Ltd. involved the issue of appointment of retired government employees as arbitrators. The
Hon’ble Supreme Court held as under:

“25. ..It cannot be said that simply because the person is retired officer who retired from the
government or other statutory corporation or public sector undertaking and had no connection
with DMRC (party in dispute), he would be treated as ineligible to act as an arbitrator..

29. Time has come to send positive signals to the international business community, in order to
create healthy arbitration environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report, duty becomes more onerous in
Government contracts, where one of the parties to dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests with it. In the instant case
also, though choice is given by DMRC to the opposite party but it is limited to choose an
arbitrator from the panel prepared by the DMRC. It, therefore, becomes imperative to have a
much broad based panel, so that there is no misapprehension that principle of impartiality and
independence would be discarded at any stage of the proceedings, especially at the stage of

10
https://lawcommissionofindia.nic.in/reports/
constitution of the arbitral tribunal. We, therefore, direct that DMRC shall prepare a broad-
based panel on the aforesaid lines, within a period of two months from today.”

The Act is silent on whether one of the parties to the arbitration agreement could be the
appointing authority. A three-judge bench of the Hon’ble Supreme Court has dealt with this issue
to some extent in TRF Ltd. v Energo Engineerin g (“TRF”) wherein the issue involved was
whether the person who was required to arbitrate upon the disputes, which had arisen under the
terms and conditions of the contract, once ineligible by operation of law, would still be eligible
to nominate a person as an arbitrator. The court held as under:

“57….By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has
become ineligible by operation of law, he cannot nominate another as an arbitrator. The
arbitrator becomes ineligible as per prescription contained in Section 12(5) of the Act. It is
inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to
say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have
a building without the plinth. Or to put it differently, once the identity of the Managing Director
as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated.
Therefore, the view expressed by the High Court is not sustainable and we say so.”

Though the decision in TRF is a progressive one, however, it does not clearly state that one party
to an arbitration could no longer be an appointing authority as it only deals with the limited issue
that if a person was ineligible to act as an arbitrator, such person could not appoint another in its
place.

 CONCLUSION
There are several reasons for the parties to want to have the power to nominate its own arbitrator
to an Arbitral Tribunal consisting of three members or more. Primarily, perhaps it gives a greater
sense of control over the proceedings to the party and makes it feel that the arbitrator nominated
by the party will help it win its case, but this then equally applies to the expectations of the other
side which has nominated its own arbitrator. The purpose it serves perhaps is thus only to give
psychological comfort to the party rather than any particular advantage. In any case if indeed one
party was to have any such advantage, then it would defeat the basic purpose of having a fair and
impartial mechanism to resolve disputes. Secondly, there are other factors where a party either
feels that it may be that the arbitrator appointed by it would have a better understanding in terms
of any specialised skill or knowledge, but then that could be taken care of even if appointments
are made by an independent party or institution, and for that purpose alone there is no necessity
perhaps to have unilateral appointments. As an extension of the first point above a party may
also feel that an arbitrator nominated by it may have a better understanding of its case, or from a
particular cultural understanding point of view, but this purpose can also be well achieved by
other mature mechanisms. In fact, the net result of the exercise of unilateral appointments may
well only turn out to be counter-productive to the parties as it prevents the free flow and
exchange of thoughts between the arbitrators on account of mutual mistrust. As Hans Smit
comments,

The presence of a partisan arbitrator on a panel will normally reduce, if not eliminate, the free
exchange of ideas amongst the members of the panel. The chair will be less receptive to
arguments that appear to be moved by partisan considerations or made join one of the
arbitrators.11

Party autonomy and practical necessities or preferences of parties are a factor to consider for the
purpose of lending acceptability to arbitration as a mechanism for alternate dispute resolution,
but at the same time, equally, if not more, the key aspect that needs to be examined and
considered is to reduce the possibility of doubt concerning the neutrality, impartiality, and
independence of arbitrators. Perhaps the best solution is to have appointments to be made by a
neutral body, which is impartial, reputed, and effective. Alternatively, as a middle way, such an
institution (a neutral body) can even formulate a list of arbitrators that are duly vetted, and the
parties can then be made to select from that list. This would reduce the chances of the arbitrator
being biased towards the appointing party. Either which way, the need of the hour is to evolve a
suitable framework for appointments to multi-arbitrator panels. 

11
Duarte, Herman, “Unilateral Appointments of Arbitrators: Perverse Incentives in International Arbitration?” (20-
5-2012). Latin American and the Caribbean Law and Economics Association Annual Conference, XVI edition,
Available at SSRN: <https://ssrn.com/abstract=2063186> or <http://dx.doi.org/10.2139/ssrn.2063186>.