Courtesy: Deeksha Rao
Introduction:
The Arbitration and Conciliation Act, of 1996 (for brevity, referred to as “Act of 1996”) was enacted to provide a pan-India framework for the mechanisms for alternative dispute resolutions. In concurrence with such an intent, the provisions of the Act have been formulated and have to be interpreted. Section 11 of the Act of 1996 gives details about the provisions related to the ‘Appointment of Arbitrators’, which exists as an important step to follow the path of arbitration, deemed to be more convenient, less expensive and less formal. However, this procedure might incorporate the intervention of High Courts and Supreme Court in some instances where the given measures fail to seek remedies.
What are the occasions where the remedies provided by the High Court can be sought as per Section 11 of the act?
1) Failure to appoint an arbitrator or arbitrators: The parties to an arbitration have the right to decide on the number of arbitrators and the procedure to appoint them as well, provided that they are odd in number. Here, the issues that could arise include-
- In the case of a sole arbitrator (sub-section 5): The parties have to appoint an arbitrator within thirty days upon receipt of a request from one party to another. However, this may not be fulfilled in many cases, and lead them under Section 11 of the Act of 1996 before the Allahabad High Court.
- In the case of three arbitrators (sub-section 3): Although the parties are free to decide the procedure through which they would appoint arbitrators, sub-section (3) of Section 11 provides a procedure, in case they are not able to draw on one. The sub-section states, “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”.
The remedy under High Courts is sought when (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment (sub-section (4) of Section 11).
2) Failure of the procedure decided upon by parties: The parties may try to find a remedy within the ambit of the High Court’s power when,
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure.
Which institutions have the power to provide for any remedy on the occasions mentioned above?
Section 11 of the Arbitration and Conciliation Act 1996 empowers the Supreme Court and the High Court to appoint arbitrators. These courts have the power to designate individuals and institutions responsible for appointing arbitrators. The Hon’ble Supreme Court deals with International Commercial Arbitration, and the High Court deals with Domestic Arbitration.
To ensure that the arbitration is presided over and dealt with properly, the Court has the power to seek disclosure on the part of the prospective arbitrator concerning any qualification and any other consideration for an independent and impartial arbitrator.
What are Arbitral Institutions?
Arbitral Institutions are organizations providing services for arbitration to parties in dispute. The Court has the power to appoint an Arbitral Institution in cases where the procedures, either decided upon by the parties or prescribed under sub-section (3) of Section 11 have failed. The Supreme Court and High Courts have the power to designate Arbitral Institutions. The Arbitration Council of India grades the Arbitral Institutions under Section 43-I of the Act. If a high court has no graded arbitral institution, the Chief Justice of the concerned high court may maintain a panel of arbitrators and also review it from time to time. These institutions are the answers provided by the Court in case any discrepancy arises between the parties in appointing arbitrators relating to procedure, timely application, or failure of the arbitration.
What is the scope of remedies provided under the section?
The remedies under section 11 of the Act of 1996 do not confine themselves to a straight-end appointment of arbitrators based on the provisions of the Act, the arbitration clauses etc. Various considerations have to be made to fulfil the motive of an unbiased and apt arbitration i.e., reassuring the spirit of impartiality.
The same has been upheld by the Allahabad High Court in M/S Bansal Construction Office vs. Yamuna Expressway Industrial Development. The Hon’ble Court widened its scope and accepted the application for the appointment of an arbitrator while recognising that the spirit of impartiality would be compromised if an application for the same was not allowed.
What is the limitation period for filing application for appointment of arbitrators?
Yes, the application for appointment of arbitrators is struck by the law of limitations. In India, the time limit to apply for an arbitrator appointment is three years from the date when the respondent receives a valid notice.
In respect to this, the court applies a two-pronged yardstick where two considerations are noted –
(1) whether the petition under Section 11(6) of the Act, 1996 is barred by limitation; and
(2) whether the claims sought to be arbitrated are ex-facie dead claims and are thus barred by limitation on the date of commencement of the arbitration proceeding.
If either of the issues is answered against the party seeking referral of disputes to arbitration, the court may refuse to appoint an arbitral tribunal.
In the case of M/s R.B.T. Industries Ltd. and another vs Jaswant Rai and others, the Allahabad High Court held that the claims are ex-facie time-barred and since there are no subsisting disputes, the application was rejected.
What is the role of the Allahabad High Court in appointing arbitrators where the arbitration clause is vague?
The Court may allow an application even if an arbitration clause is vague, as the Court will try to determine the parties’ intent. The Court will consider the parties’ conduct, correspondence, and other circumstances to determine their intent.
Supporting this stance, a full bench of the Hon’ble Apex Court in Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. vs. Jade Elevator Components while dealing with a vague and unclear arbitration clause, held that such a clause can hold validity as long as the intention to refer the parties to arbitration is clear.
Moreover, in cases where the Arbitration clause provides for the appointment of an arbitrator in a manner inconsistent with the law, an Application under Section 11(4) of the Act of 1996 can be allowed.
What are the conditions that the Allahabad High Court looks into before the appointment of an Arbitrator?
Firstly, if the other party is not before the Hon’ble Court, the High Court issues Notice to the Opposite Party. Before issuing notice, the Court looks into pertinent factors like whether an arbitrable dispute exists or not, and if the ingredients of Section 11(4) and 11(6) are fulfilled, among others.
After notice is issued and the Opposite Party presents their case, the Hon’ble Court evaluates the circumstances. Thereafter, it proposes an Arbitrator and seeks the consent of such appointed Arbitrator. The final order is passed allowing the Arbitration Application after the Proposed Arbitrator provides consent.
What happens if the Arbitrator withdraws himself from the Arbitration Proceeding?
Such circumstances may appear where the appointed arbitrator may withdraw himself from the proceeding due to any reason. In such a case, an Application under Section 11(4) of the Arbitration and Conciliation Act 1996 will not be the apt remedy. Instead, an Application under Section 15(a) read with Sub-section (2) of Section 15 of the Arbitration and Conciliation Act 1996 for “the appointment of a Subsequent Arbitrator” will lie before the Hon’ble Court.
Conclusion:
The remedies provided by the Allahabad High Court ensure that no party benefits at the detriment of another and no influence could be used on either of the parties by forcing them to comply with a specific arbitrator or a procedure. An arbitration application under Section 11(4) must contain clear reasons as to why the jurisdiction is invoked. Clear mention of the Arbitrable Dispute is a sine qua non. Moreover, the Arbitration Clause and the statutory provisions necessary for invoking the Jurisdiction of the High Court must also be stated.