This article has been written by Ms. Suhani Singh, a student studying B.A.LL.B[HONS.] from Teerthanker Mahaveer College of Law And Legal Studies, Moradabad. The author is 3rd year law student.
Introduction
The legal system in India is incredibly overworked and takes a long time to resolve issues. Each High Court in the nation has an average of 1.65 lakh cases waiting, and the subordinate court has more than 2.6 crore cases pending. The Arbitration and Conciliation Act, 1996 (the Act) was passed as a result, with the intention of offering a more rapid and efficient method of resolving disputes. It was an effort to promote arbitration as an alternative conflict resolution process in India and lessen the burden on the courts.
The majority of Commercial arbitration clauses in every contract they get into with other organisations, or they enter into a separate arbitration agreement entirely. The appointment of unbiased arbitrators is crucial given the heavy dependence on arbitration. The impartiality and independence of an arbitrator are the hallmarks of arbitration and a fundamental principle of natural justice, according to the Supreme Court of India. There are specified reasons for challenging an arbitrator in Section 12 of the Act. In addition, the 2015 amendment to the Act includes a schedule to this section that specifies additional factors that may lead to an arbitrator challenge.
- Meaning of Arbitral Tribunal
A single arbitrator or a panel of arbitrators make up an arbitration tribunal. A panel of one or more arbitrators that is assembled and meets to arbitrate a dispute is known as an arbitral tribunal. A single arbitrator, two arbitrators, or more arbitrators—including a chairperson or an umpire—may make up the panel.
The Model Law’s Article 16(3) further restricts the tribunal’s authority by stating that: The arbitral tribunal may rule on a plea (pertaining to the tribunal’s authority) either as a preliminary question or in an award on the merits. Any party may ask the court mentioned in Article 6 to decide the case if the arbitral tribunal rules as a preliminary question that it has jurisdiction. This court’s decision shall not be appealable. While the request is pending, the arbitral tribunal may continue the arbitration process and issue an award.
The provision for expedited, unappealable court review of the tribunal’s decision in Article 16(3) has been criticised as encouraging tribunals to determine their own jurisdiction as a preliminary question. Those jurisdictions that have adopted the Model Law and whose respective courts have construed the negative effect into this Article have supported the aforementioned interpretation of Article 16(3). In conclusion, Article 16(3) may be seen as a compromise between the two opposing views on whether judicial review is permitted at any point during the arbitral procedure.
- Challenging the Jurisdiction of an Arbitral tribunal
In arbitration, the parties hope to quickly and amicably settle their disagreements without the need for judicial intervention. With this goal in mind, the Arbitration and Conciliation Act of 1996 was passed and subsequently updated, with significant changes in 2021, to meet the demands of the evolving legal landscape. The contract that attaches the parties to one another is an arbitration agreement. According to section 7 of the Act, it is defined as a contract in which the parties agree to resolve any issues that may arise between them. Hence, it would not be incorrect to state that a well-written agreement allows the arbitral tribunal entire authority to decide on issues pertaining to the jurisdiction, seat, and venue.
The challenge method is left up to the parties. Any circumstances, such as the existence of any past or present relationship with or interest in any party or in relation to the subject matter in dispute, whether financial, business, professional, or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality, must be disclosed in writing (in the form specified in the Sixth Schedule) when a person is approached about his or her potential appointment as an arbitrator;
The disclosure requirement remains in effect throughout the arbitration process. Guidelines for determining whether circumstances exist that could give rise to justified questions about the arbitrator’s independence and impartiality are provided in the Fifth Schedule. Only after the arbitrator has been appointed may a party object for reasons of which he becomes aware.
- Reference to arbitration
The judicial authority may send a matter to arbitration under Section 8 of the Act.
This was confirmed in the case of Haryana Telecom v. Sterlite Industries, when the court determined that one of the reasons for the granting of a reference under section 8 might be the competence of an arbitral tribunal. In another instance, Booz-Allen v. SBI Home Finance, the court agreed with the argument that, in addition to the stated grounds listed for making references, section 8 also lays forth the implicit ground of the arbitral tribunal’s competence.
Section 11 of the Act limits the Court’s ability to intervene. In accordance with this clause, the Court need merely determine if a valid Arbitration Agreement exists before referring the disagreement between the parties to arbitration for resolution. As a result, the Court under Section 11 of the Act lacks the authority to determine the arbitral tribunal’s jurisdiction. SBP v. Patel Engineering, in which the Supreme Court provided its observations on the hotly contested provision determining the power of courts, also dealt with the issue of limited judicial intervention. The Court held that the power mentioned in Section 11(6) is judicial in nature.
With the addition of section 11(6A), the position was later supported in Mayawati Trade v. Pradyut Deb Burman, in which the Court outlined the authority and authority of courts under Section 11 of the Act.
- Contesting the arbitral tribunal’s authority
Competence of an arbitral tribunal to rule on its jurisdiction” is a topic covered in Section 16 of the Act. This paragraph establishes the Kompetenz-Kompetenz doctrine. Except in extremely limited circumstances that are expressly provided for by the Act, section 16 of the Act, when read in conjunction with section 5, limits the ability of any civil court to interfere with or supervise the operation of an arbitral tribunal. The Act also gives a party the chance to dispute an arbitral tribunal’s jurisdiction on a number of different grounds. To raise a jurisdictional issue in an arbitration proceeding, a party must typically submit an application to the arbitral tribunal pursuant to section 16 of the Act.
Section 16 has two aspects: first, it states that the arbitral tribunal may determine its jurisdiction without the assistance or interference of the civil courts, and second, it prohibits the courts from making a decision on this matter until the arbitral tribunal has done so. The parties cannot appeal the Tribunal’s decision to move on with the proceedings when it decides it is competent to do so until the arbitral tribunal issues an Award.
In the case of Union of India v. East Coast Boat Builders, the court noted that the legislature’s intention was crystal clear: there would be no appellate process and the legislature would not interfere with the arbitral tribunal’s procedures. In the case that the arbitral tribunal finds in its favour and determines that it has jurisdiction, the party who is aggrieved by this order may either appeal the decision under section 37 of the Act or wait until the procedures are over before contesting the award under section 34 of the Act.
- Contesting the jurisdiction in response to the counterclaim’s filing
A party is not automatically disqualified from asserting the claim of jurisdiction just because it took part in the selection of the arbitrator, according to subclause 2 of section 16: first, the submission of a statement of defence is the last opportunity to contest the tribunal’s jurisdiction. The Madhya Pradesh High Court allowed a party to amend its pleadings while challenging the award under section 34 to include the ground for challenge of jurisdiction in MsP Infrastructure v. M.P. Road Development Corporation. The Supreme Court later overturned this position, holding that it is obvious from a cursory reading of the Act that the objection of jurisdiction should be raised after the submission of the statement of defence.
However, the Supreme Court allowed the objection to the arbitral tribunal’s jurisdiction to be raised under a Section 34 Petition before the Court, blatantly violating the provisions of Section 16 and the goal of minimal court intervention, in the case of Lion Engineering Consultants v. the State of M.E., wherein a new plea overruled the plea of allowing the amendment by the M.P. High Court. Because there is no statutory requirement to define the position, the Courts have taken a flexible stance and, ideally, left the decision up to the arbitral tribunal and the Civil Courts.
In the case of Pankaj Arora v. AVV Hospitality, the Court maintained the arbitral panel’s discretion and declined to interpret section 16(5) as requiring the arbitral tribunal to decide on any jurisdictional challenges at the commencement of a dispute.
- Relevant Cases
- In Jiwan Kumar Lohia v. Durga Dutt Llohia, the Supreme Court noted that a reasonable suspicion of bias in the opinion of a reasonable man can be a good foundation for terminating an arbitrator’s appointment.
- The Bombay High Court ruled in the case of Anuptech Equipment Pvt Ltd v. Ganpati Cooperative Housing Society Ltd that the arbitration proceedings, including any orders made by the arbitrator, would be completely null and void if the arbitrator appointed for any reason did not meet the qualifications stipulated by the parties in the arbitration agreement.
- The swift resolution of the conflict is the most crucial goal of bringing any disagreement to an arbitrator for adjudication, according to the Delhi High Court in the case of Union of India v. Somnath Chadha. It was decided that any unjustifiable delay or carelessness in the arbitrator’s nomination or the start of the proceedings would undermine the arbitration’s objectives. The court may step in and appoint an arbitrator in these situations.
- In the case of Sankar and Sankar v. State of West Bengal, it was decided that if a person who is permitted to appoint an arbitrator under the arbitration clause neither appoints a suck arbitrator nor enters on the reference himself and there is silence for more than one year, there would be a case of failure and negligence and the court could appoint an arbitrator himself in such a situation.
- Conclusion
The 2015 amendment to the Act seeks to advance arbitration in India and give the highest level of transparency and dependability surrounding it. With the modification, Section 12 has gained significantly greater significance, and it is hoped that this will make arbitration a far more popular alternative to using the courts. The process that must be followed when an arbitrator is being challenged on the grounds listed in Section 12 is outlined in Section 13. There are a number of instances under which an arbitrator’s mandate may be terminated, as stated in Sections 14 and 15. As they aid the parties in receiving justice when the arbitrator is at fault, all of these provisions form the basis of arbitration.
The examination of this subject requires that, in any arbitration dispute, legislative reference should be kept to a minimum and precedents should receive more weight. According to case law and the doctrine of Kompetenz-Kompetenz, an arbitral tribunal may consider any question of jurisdiction arising after its establishment. The Act has made it plain that the judicial authorities’ ability to intervene in this matter is somewhat constrained. The structure of the clauses easing the procedure of objecting to the jurisdiction of the arbitral tribunal reveals India’s pro-arbitration stance and its goal to create a cavity-free alternative dispute settlement mechanism. In order to further the goal of making arbitration a process characterized by self-sufficiency and minimal court interference, Section 16 is one of the key components of the Arbitration and Conciliation Act, 2021.
Therefore, it can be deduced that the jurisdictional defence may be asserted at any time prior to the submission of the Statement of Defence or even during the challenge to the Arbitral Decision. If the arbitral tribunal rejects the jurisdictional argument, it will proceed with the arbitration and issue an Arbitral Award, which can be contested by the party who was wronged through an appeal under Section 34 of the Act. The arbitral proceedings will end in accordance with Section 32 of the Act if the arbitral tribunal accepts the claim of lack of jurisdiction, and it will not continue with the arbitration on the merits. Nonetheless, Section 37 allows for an appeal of such a decision. In the case of Lion Engineering Consultants v. State of M.P., the same was acknowledged. The scope of challenging an arbitral award under Section 34(2)((i) of the Act was expanded by this decision. The impact of Section 16(2) of the Act has also been lessened as a result of this judgement.
According to our assessment, the current legal framework allows for a minimal amount of judicial interference with arbitral tribunal procedures. According to Section 16, the arbitral tribunal may also make decisions within its own territorial jurisdiction.
The legislators removed the ability of the parties to file an appeal against the arbitral tribunal’s decision while determining its jurisdiction in order to fulfil their intention of giving the parties a second yet quick method for adjudicating the issue.
Sources Uses for Research: –
- https://papers.ssrn.com
- https://legalpedia.co.im
- https://indiankanoon.org
- https://www.brillopedia.net
- https://viamediationcentre.org
- https://icsid.worldbank.org
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