SCOPE OF POWERS OF SUPEME COURT AND HIGH COURT TO APPOINT ARBITRATOR

Section 11 (4) , (5) and (6) of the Arbitration and Conciliation Act, 1996   empowers the Supreme Court and High Courts to appoint arbitrator in certain circumstances.  

Section 11 ( 4) reads as under:

(4) If the appointment procedure in sub-section (3) applies and –

(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 third arbitrator within thirty days from date of their application

Appointment shall be made by, upon a request of a party, by the Supreme Court or as the case may be High Court or any person or institution designated by such court.

Section 11 ( 5) reads as under :

(5) Failing any agreement referred to it in sub-section (2) , in an arbitration with a sole arbitrator with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree appointment shall be made by, upon  a request of a party, by the Supreme Court or as the case may be High Court or any person or institution designated by such court.

Section 11 ( 6) reads as under :

(6) Where, under an appointment procedure agreed upon by the parties –

(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,

 a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take necessary measure, unless the agreement or the appointment procedure provides other means for securing the appointment.

In international commercial the Supreme Court has exclusive powers to appoint arbitrator while in other cases High Courts can appoint arbitrator.

Section 11 (10) empowers Supreme Court or the High Court, as the case may be, to make such scheme as the said may deem appropriate for dealing with the matters entrusted by the sub-section (4) or sub-section (5) or sub-section (6) to it.

Under Section 11 (10) the Supreme Court has made scheme called the “Appointment of Arbitrators Scheme by the Chief Justice, 1996”. A request to the Chief Justice for appointment of arbitrator has to be made in writing and accompanied by original arbitration agreement or certified copy, names and addresses of parties, names and addresses of arbitrators, names and addresses of persons or institutions involved in arbitration, qualification of arbitrators required, a brief written statement, relief and remedy sought. The Chief justice can entertain the request himself or designate any person or institution for this purpose. If Chief Justice nominates any other person or institution, request along with documents have to be sent to such person or institution. If the request does not fulfil the requirement of para 2 of the scheme, the Chief Justice or the person/institution designated can reject the request. In other cases, after hearing the parties the Chief Justice may appoint arbitrator.

WHETHER POWER TO APPOINT ARBITRATOR ADMINISTRATIVE OR JUDICIAL

The Supreme Court in Konkan Railway Corporation Ltd Vs. Mehul Construction Ltd. 2000 (7) SCC 201   had held that the power to appoint arbitrator is an administrative power. But Supreme Court overruled this view in SBP Co. Vs. Patel Engineering (2005) 8 SCC 618 and held that power to appoint arbitrator is judicial power. The consequence of judgment in SBP was that the Supreme Court or High Court had to exercise application of judicial mind and scope of judicial interference  increased.

EXTENT OF JUDICAL INTERFERENCE UNDER SECTION 11

Patel engineering and subsequent judgments had extended the scope of judicial interference in appointment of arbitrators. The scope was narrowed down by introducing Section 6A by 2015 amendment. Section 6A provides that the Supreme Court or the High Court as the case may be, whiled considering application for appointment of arbitrators will confine to examination of the existence of an arbitration agreement.

(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

Subsequent to this amendment, the Supreme Court  in Duro Felguera, S. A, Vs Gangavarain Port Ltd  5 (2017) 9 SCC 729  noted that the intention of the legislature in incorporating Section 11 (6A) was to limit the scope of the referral court’s jurisdiction to only one aspect – the existence of an arbitration agreement. To determine the existence of an arbitration agreement, the court only needs to examine  whether underlying contract contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.

The Supreme Court in Mayavati Trading (P) Ltd. Vs Pradyut Deb Burman (2019) 8 SCC 714 reiterated that examination under Section 11 (6) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense.

In Vidya Drolia Vs. Durga Trading Corporation (2021) 2 SCC 1  the Supreme Court held that the non-arbitrability of dispute can be considered by the Court at reference stage as the arbitration agreement has to satisfy the mandate of the Contract Act.

A larger bench of the Supreme Court  in N N Global Merchantile Pvt Ltd. Vs. Indo Unique Flame Ltd. Curative Petition (C) No. 44 of 2023 held  that in jurisdictions such as India, which accept the doctrine of competence-competence, only prima facie proof of the existence of an agreement must be adduced before the referral court. The referral court is not the appropriate forum to conduct a mini trial by allowing the parties to adduce evidence in regard to the existence or validity of an arbitration agreement. The determination of the existence and validity of an arbitration agreement on the basis of evidence ought to be left to the arbitral tribunal. The Supreme Court also held that lacking proper stamping or with inadequate stamping are deemed in admissible in evidence as per Section 35 of the Stamp Act. However, such agreement is not void or unenforceable. Non-stamping or insufficient stamping are curable flaw. The referral court should only consider existence of arbitral agreement. Objections regarding stamping of agreement falls under jurisdiction of the Arbitral Tribunal.

APPLICABILITY OF LIMITATION

No limitation has been provided in respect of reference for appointment of arbitrators. The Supreme Court has held in several judgments that Article 137 of the Schedule of the Limitation Act will apply to reference for appointment of arbitrators.

The Supreme Court in Arif Ajim Co. Ltd. Vs. Aptech Ltd.  (2024) 3 SCR 73 held that two pronged tests have to applied by the Court at reference stage- Firstly, whether the Petition under Section 11 (6) of the Arbitration and Conciliation Act is barred by limitation and secondly, whether the claims sought to be arbitrated are ex-facie dead claims and are thus barred by limitation on the date of commencement of arbitration proceedings.

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