APPOINTMENT OF ARBITRATOR UNDER SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996

[Mr. M. GOVINDARAJAN]

Introduction

Arbitration and conciliation are alternatives to the resolution of commercial disputes whether domestic or international commercial arbitration.  The main object of the Act is to provide speedy and alternative solution to the dispute and avoid protraction of litigation.  The arbitration is entirely different in its procedure from the normal civil suits.  In arbitration the arbitrator, who will resolve the dispute between the parties to the dispute, is appointed by the parties to the agreement or by the Court.  Section 11 of the Arbitration and Conciliation Act, 1996 prescribes the procedure for appointment of arbitrator.

Number of arbitrators

The parties are free to determine the number of arbitrators, provided that such number shall not be an even number.  Failing the said determination the arbitral tribunal shall consist of a sole arbitrator.  In arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as Presiding Arbitrator. 

Appointing Authority

The arbitrator is to be appointed as per the procedure accepted by the parties to the dispute.  If the parties to the dispute cannot able to appoint an arbitrator then the parties may approach the Court for the appointment of arbitrator.

Procedure for appointment of an arbitrator

The following is the procedure involved in the appointment of arbitrator-

Sole arbitrator

Any party may make a request to the other party for the appointment of sole arbitrator.  The other party receiving the request is to agree with such appointment of sole arbitrator and appoint the sole arbitrator.  If there is no agreement in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within 30 days from the receipt of a request from the other party to so agree the appointment shall be made, upon the request of a party by the Supreme Court or High Court or any person or institution designated by such Court.

More arbitrators

If there is an agreement for the appointment of three arbitrators each party shall appoint one arbitrator.  The two appointed arbitrators shall appoint a third arbitrator who shall act as a Presiding arbitrator.  If a party fails to appoint an arbitrator within 30 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, the request shall be made to the Court for the appointment of arbitrator.

Domestic arbitration

 A domestic arbitration is one where the following two ingredients are present-

• both the parties to the arbitration agreement are the nationals or residents of the same country; and
• the agreement provides for arbitration in the country of the parties to the arbitration agreement. 

The application for appointment of arbitrator in domestic arbitration shall be disposed of by the High Court or the person or the institution designated by such High Court as expeditiously as possible and an endeavor shall be made to dispose of the matter within a period of 60 days from the date of service of the notice on the opposite party.

International Commercial arbitration

The parties are free to agree on a procedure for appointing the arbitrator(s) in international commercial arbitration.  The agreement can provide for a tribunal consisting of three arbitrators and each party will appoint one arbitrator and the two appointed arbitrators will appoint the third arbitrator who will act as a Presiding arbitrator.  If one of the parties does not appoint an arbitrator within 30 days, or if the two appointed arbitrators do not appoint the third arbitrator within 30 days, the party can request the Supreme Court having jurisdiction to appoint an arbitrator.  The Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities for the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10).

Disclosure by arbitrator

The Court before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator and have due regard to-

• any qualifications required of the arbitrator by the agreement of the parties; and
• the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

Time limit

The application for the appointment of arbitrator shall be disposed by the Supreme Court or High Court or the person or institution designated by such Court.  The application shall be disposed as expeditiously as possible.  The said application shall be disposed within 60 days from the date of service of notice of the opposite party. 

Fees payable to the arbitrator

Fees is required to be payable to the arbitrator or arbitrators who conducted arbitration and pass(es)  an award.  The fees is payable by both the parties to the dispute.  The fees payable may be fixed by the agreement itself or as per the agreement reached by the parties or as the demand put forth by the arbitrator(s).  There is no specific provision as to the quantum of fee payable to arbitrator or arbitrators.

Appeal

Appeal is common in any law to be filed against the order of any lower authority by the aggrieved person. 

A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or the High Court or the person or institution designated by such Court is final.   No appeal including letters patent appeal shall lie against such decision.

Letter patent appeal is an appeal by a petitioner against a decision of a single judge to another bench of the same court. It was a remedy provided when high courts were first created in India in 1865. This is an only remedy which is available in court to the petitioner against the decision of a single judge of a High Court; otherwise, a remedy would lie with only in the Supreme Court.

Case laws

Special Act

In GUJARAT URJA VIKASH NIGAM LTD. VERSUS ESSAR POWER LTD. [2008 (3) TMI 654 - SUPREME COURT] the Supreme Court held that section 86(1)(f) of the Electricity Act is a special provision and will override the general provisions of section 11 of the Arbitration and Conciliation Act, 1996.  Hence Section 11 has no application to the question as to who can adjudicate/arbitrate upon disputes between licensees and generating companies and only section 86(1)(f) of the Electricity Act shall apply.

No arbitration clause

In SOUTH DELHI MUNICIPAL CORPORATION VERSUS SMS AAMW TOLLWAYS PRIVATE LTD. - 2018 (11) TMI 1229 - SUPREME COURT, Arbitration has always been understood to mean the process by which a dispute is resolved by an arbitrator chosen or acceptable to both sides under an arbitration agreement between the two parties. In the present case, under Clause 16 of the Agreement only the party dissatisfied by the order of the Competent Officer can approach the Commissioner.  It is, therefore, not possible to hold that the proceedings before the Commissioner constitutes as an arbitration.   The present Clause 16 and in particular Clause 16.3 does not provide for the reference of any dispute that may arise between the parties to an Arbitrator. The purpose of this Clause is to vest the Competent Officer and the Commissioner with supervisory control over the execution of work and administrative control over it from time to time and thus to prevent disputes. The intention is not to provide for a forum for resolving disputes. Thus, in the present circumstances no Arbitrator could have been appointed by the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Appointment according to procedure

In CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION VERSUS M/S ECI-SPIC-SMO-MCML (JV) A JOINT VENTURE COMPANY - 2019 (12) TMI 841 - SUPREME COURT, in the present matter, after the respondent had sent the letter dated 27.07.2018 calling upon the appellant to constitute Arbitral Tribunal, the appellant sent the communication dated 24.09.2018 nominating the panel of serving officers of Junior Administrative Grade to act as arbitrators and asked the respondent to select any two from the list and communicate to the office of the General Manager. By the letter dated 26.09.2018, the respondent conveyed their disagreement in waiving the applicability of Section 12(5) of the Amendment Act, 2015. There is an express provision in the modified clauses of General Conditions of Contract, as per Clauses 64(3)(a)(ii) and 64(3)(b), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers [Clause 64(3)(a)(ii)] and three retired Railway Officers retired not below the rank of Senior Administrative Grade Officers [Clause 64(3)(b)].

The Supreme Court observed that when the agreement specifically provides for appointment of Arbitral Tribunal consisting of three arbitrators from out of the panel serving or retired Railway Officers, the appointment of the arbitrators should be in terms of the agreement as agreed by the parties. That being the conditions in the agreement between the parties and the General Conditions of the Contract, the High Court was not justified in appointing an independent sole arbitrator ignoring Clauses 64(3)(a)(ii) and 64(3) (b) of the General Conditions of Contract and the impugned orders cannot be sustained.

Number of arbitrators

In IBI CONSULTANCY INDIA PRIVATE LIMITED VERSUS DSC LIMITED - 2018 (4) TMI 781 - SUPREME COURT, it was held that it is a cardinal principle of the Arbitration and Conciliation Act that the parties are free to decide the number of arbitrators, provided, it is an odd number, as well as the procedure for appointing them.   However, if the parties are not able to agree on the said procedure, or constitute the Arbitral Tribunal to their mutual satisfaction, either of the party has an option to route to an appropriate remedy under Section 11 of the Act, which provides detailed machinery for appointment of Arbitrator through judicial intervention.

Rejection of application

In M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITED VERSUS NORTHERN COAL FIELD LIMITED - 2019 (11) TMI 1281 - SUPREME COURT the issue which has arisen for consideration by the Supreme Court,  is whether the High Court was justified in rejecting the application filed under Section 11 for reference to arbitration, on the ground that it was barred by limitation.  Limitation is a mixed question of fact and law.  The question of limitation involves a question of jurisdiction.  If the arbitral tribunal finds that the claim is a dead one, or that the claim was barred by limitation, the adjudication of these issues would be on the merits of the claim.  The tribunal has the obligation to decide the plea; and if it rejects the plea, the arbitral proceedings would continue, and the tribunal would make the award.   The Supreme Court set aside the impugned judgment and order dated 11.01.2018 passed by the High Court, and direct that the issue of limitation be decided by the arbitral tribunal. With the consent of Counsel for the parties, the Supreme Court appointed Mr. Justice (Retd.) A. M. Sapre, former Judge of this Court, as the Sole Arbitrator to decide the dispute.