ARBITRATION PROCEEDINGS

There is abundant material on purpose, intent and resolution of the legislature when
the Arbitration and Conciliation Act, 1996 ("the Act") was enacted. There is also
adequate information on the amendment to the Act in 2015. Over two decades, since
the time the Act has come into effect read with amendments from time to time,
arbitration undeniably has evolved to a great extent.

There is an internationally accepted principle in arbitration of "kompetenz-

kompetenz"1 to enable the arbitrators to rule on their own jurisdiction. The said
principle though not applicable with same vigour across the world, the concept of
the same is absolute alien in India. This article seeks to highlight how over a period
of time a balance has been created vis-à-vis judicial intervention and arbitration.

Further, considering the underlying principle of passing of the Act was to reduce the
burden of the Courts in India and not to keep them outside purview of the Act
altogether. On the plain reading of the Act, it is perused that at several stages of
arbitration proceedings the Courts are requested to perform the server-side work.
Further, arbitration does not end with the passing of an award, since, the Act
provides for recourse to Courts in case if any party wants to challenge the same.

In Coppee-Lavalin SA/NV v Ken-Ren Chemicals and Fertilisers Limited, 1 which was

decided before the Arbitration Act, 1996 (United Kingdom) was enacted, a
distinction was drawn between three groups of measures that involve the court in
arbitration, the first being purely procedural steps which an arbitral tribunal cannot
order or cannot enforce (e.g. issuing a witness summons to a third party), the second
being designed to maintain the status quo (e.g. the granting of an interim injunction)
and the third being designed to ensure the award has its intended practical effect by
providing a means of enforcement if the award is not voluntarily complied with.

Section 2(1)(e) of the Act defines Court as under:-

1
[1994] 2 All E.R. 449.
"Court" means--

(i) in the case of an arbitration other than international commercial arbitration, the Principal
Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not
include any Civil Court of a grade inferior to such principal Civil Court, or any Court of
Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its
ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other
cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to
that High Court;

The definition of Court in Section 2(1)(e) has been altered into two sub-parts. Part (i)
includes cases other than international commercial arbitration and Part (ii) includes
court for the purposes of international commercial arbitration.

It was held in S.M. Suparies v Karnataka Bank Limited3  that District Courts are
deemed to be principal civil courts of original jurisdiction. The Principal Civil Judge
of the District alone has jurisdiction to decide questions forming the subject-matter
of arbitration and not any other judge.

In the matter of application for setting aside an award, it has been held that the Civil
Court at Calcutta is not the Principal Civil Court of Original Jurisdiction for the city
of Calcutta. It is a civil court of inferior grade. It does not come within the definition
of Court. Only the High Court has jurisdiction to entertain application under the
Act. 4Thus, only a Principal Civil Court in a district having original jurisdiction and
includes High Court having original jurisdiction can entertain questions involving
arbitration.

The question then arises is can a Supreme Court be construed within the definition
of "court"?
It was held in State of West Bengal v Associated Contractors5, in no circumstances
can the Supreme Court be "court" for the purposes of Section 2(1)(e) and whether the
Supreme Court does or does not retain seisin after appointing  an arbitrator,
application will follow the first application made before either the High Court
having original jurisdiction in the State or a Principal Civil Court having original
jurisdiction in the district, as the case may be.

Thus, the Act, contains a narrow definition of the Court. By virtue thereof, the hierarchy that
is otherwise required to be followed in normal suits by any party which eventually gets
prolonged to litigation is not applicable in arbitration.

This article considers the areas where the involvement of courts of law is mandated
under the Act. It is pertinent to note that the courts of law themselves are the
delimiters for defining the extent to which they shall act or intervene. The legislature
has maintained a fine balance while engrafting the role of judiciary in the fabric of
alternate dispute resolution mechanism. 

Section 5 - Extent of judicial intervention

Notwithstanding anything contained in any other law for the time being in force, in matters
governed by this Part, no judicial authority shall intervene except where so provided in this
Part.

An arbitration agreement is a contractual undertaking by which the parties agree to

settle certain disputes by way of arbitration rather than by proceedings in court.
When a dispute arises however, one of the parties may nevertheless commence court
proceedings either because he challenges the existence of validity of the arbitration
agreement or because he means to breach it. 6

Now judicial authority has not been defined under the Act. However, under Black`s
Law Dictionary Judicial authority means "the power and authority appertaining to
the office of a judge; jurisdiction; the official right to hear and determine questions in
controversy."7
The aforesaid provision bars the jurisdiction of courts to interfere or to intervene in
arbitration proceedings except to the extent provided in Part I. Part I provides for
intervention of Courts in the following cases:

i. Section 8- Making reference in a pending suit;

ii. Section 9- Passing interim orders;
iii. Section 11- Appointment of Arbitrators;
iv. Section 14(2)- Terminating mandate of arbitrator;
v. Section 27- Court assistance in taking evidence;
vi. Section 29A-Time-limit for arbitral award.
vii. Section 34- Setting aside an award;
viii. Section 37- Entertaining appeals against certain orders and
ix. Section 39(2)- Directing delivery of award.

Section 8 - Power to refer parties to arbitration where there is an arbitration

agreement

1. A judicial authority, before which an action is brought in a matter which is the

subject of an arbitration agreement shall, if a party to the arbitration agreement or
any person claiming through or under him, so applies not later than the date of
submitting his first statement on the substance of the dispute, then, notwithstanding
any judgment, decree or order of the Supreme Court or any Court, refer the parties to
arbitration unless it finds that prima facie no valid arbitration agreement exists.
2. The application referred to in sub-section (1) shall not be entertained unless it is
accompanied by the original arbitration agreement or a duly certified copy thereof.

[Provided that where the original arbitration agreement or a certified copy thereof is
not available with the party applying for reference to arbitration under sub-section
(1), and the said agreement or certified copy is retained by the other party to that
agreement, then, the party so applying shall file such application along with a copy of
the arbitration agreement and a petition praying the Court to call upon the other
party to produce the original arbitration agreement or its duly certified copy before
that Court.]
 3. Notwithstanding that an application has been made under sub-section (1) and that
the issue is pending before the judicial authority, an arbitration may be commenced or
continued and an arbitral award made.

There is no power under the section to pass an order restraining arbitral

proceedings. There is no question of the court acting under Section 8 restraining
arbitration from commencing or continuing. The aforesaid section is intended to
achieve converse result.8

However, the arbitration agreement does not oust the jurisdiction of the courts by
itself. Where no party comes forward to object to the suit, the arbitration agreement
becomes ousted. A suit would have no effect on the arbitration proceeding if it is
pending, or even commenced. Such proceedings can be continued and an award
made. At the same time the initiation of arbitration proceedings during the
pendency of a civil suit is not barred. The civil court cannot restrain such
proceedings.

Section 8 is a facilitative provision in the Act. The aforesaid section enables the Court to refer
the parties to arbitration and encourage them to settle their disputes through the modes
covered under this Act.

Section 9 - Interim measures etc. by Court

(1) A party may, before, or during arbitral proceedings or at any time after the making of the
arbitral award but before it is enforced in accordance with section 36, apply to a court-

i. for the appointment of a guardian for a minor or person of unsound mind for the
purposes of arbitral proceedings; or
ii. for an interim measure or protection in respect of any of the following matters,
namely:-

a. the preservation, interim custody or sale of any goods which are the subject-
matter of the arbitration agreement;
 b. securing the amount in dispute in the arbitration;
c. the detention, preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration, or as to which any question may
arise therein and authorising for any of the aforesaid purposes any person to
enter upon any land or building in the possession of any party, or authorising
any samples to be taken or any observation to be made, or experiment to be
tried, which may be necessary or expedient for the purpose of obtaining full
information or evidence;
d. interim injunction or the appointment of a receiver;
e. such other interim measure of protection as may appear to the Court to be just
and convenient, and the Court shall have the same power for making orders as
it has for the purpose of, and in relation to, any proceedings before it.

[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for
any interim measure of protection under sub-section (1), the arbitral proceedings shall be
commenced within a period of ninety days from the date of such order or within such further
time as the Court may determine.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an
application under sub-section (1), unless the Court finds that circumstances exist which may
not render the remedy provided under section 17 efficacious.

The purpose of enacting the aforesaid provision is to protect the rights of the parties
under adjudication from being frustrated. Section 9 implies existence, subsistence or
manifestation of an arbitration agreement to give effect to "before or during arbitral
proceedings".

When should an application under Section 9 be admissible?

The Madras High Court in its decision in NEPC India Limited v Sundaram Finance
Limited9 held that an interim relief could not be availed of unless there was some
manner of proceeding pending under the Act. However, the aforesaid decision was
revered by the Apex Court on appeal stating that relief can be provided in such cases
though arbitral proceedings have not been commenced provided there is proof of
the fact that the party seeking relief means to commence arbitral proceedings. 

When should an application under Section 9 be not admissible?

Section 9 does not permit any or all applications. It only permits applications for
interim measures mentioned in clauses (i) and (ii) above. For instance, the provision
of section 9 was not allowed to be invoked to seek stay of arbitral proceedings. The
court said that such relief could have been obtained from the Tribunal itself and not
from the court.10 Interim relief can be obtained from the court to whose jurisdiction
the arbitration agreement is subject.11

The Act provides for intrusion of the Court in the circumstances referred to in Section 9,
which is but inevitable. It was impertinent for the legislature to supplement this provision
under the Act, since, the Courts have been given the power to provide the remedy which are
otherwise not available.

Appointment of the Arbitrator and Court (Sections 11, 14 and 17)

Circumstances in which the

Sr. No. Section Supreme Court/High Court Modality
come into picture
If the party fails to appoint an A party may request the

i. 11(4) arbitrator within 30 days Supreme Court or as the

(a) from the receipt of a request case maybe High Court
to do so from the other party or any person or
The two appointed arbitrators institution designated by
fail to agree on the third such court and dispose
ii. 11(4)
arbitrator within 30 days of the same within a
(b)
from the date of their period of 60 days from
appointment the date of the service of

iii. 11(5) Failing to agree on a notice on the opposite

procedure for appointing the
 arbitrator/arbitrators
Where, under an
appointment procedure
iv. 11(6)
agreed upon by the parties, a
(a)
party fails to act as required
under that procedure
Where, under an
appointment procedure
agreed upon by the parties,
v. 11(6)
the parties, or the two
(b)
appointed arbitrators, fail to party.
reach an agreement expected
of them under that procedure
Where, under an
appointment procedure
agreed upon by the parties, a
vi. 11(6)
person, including an
(c)
institution, fails to perform
any function entrusted to him
or it under that procedure
The Supreme Court or
the person or institution
designated by that court
In case of appointment of sole may appoint an

vii. or third arbitrator in arbitrator of a nationality

11(9)
international commercial other than the
arbitration nationalities of the
parties where the parties
belong to different
nationalities.
The Law Commission in its Report bearing No. 246 dated August, 2014 stated that
the arbitration proceedings are becoming replica of the Court proceedings despite
Chapter V of the Act which provides for adequate powers to the Arbitral Tribunal.
Hence, the legislature while amending the Act made provision to give power and
authority to the Arbitral Tribunals to deal with the issues and avoid delays.

Further, the new amendment makes a leeway for disclosures 12 that shall be sought
by the Supreme Court or the High Court or the person or institution designated by
such court, before appointing an arbitrator under Section 11(8).

An arbitration agreement existed between two foreign companies. A dispute

occurred between them. A former judge of the Supreme Court was appointed as a
sole arbitrator in terms of the agreement. 13

Under Section 14 of the Act, the mandate of an arbitrator shall terminate and he shall
be substituted by another arbitrator for the reasons mentioned therein. Further, if the
controversy remains concerning any of the grounds referred to in Section 14(1)(a),
party may unless otherwise agreed by the parties, apply to the Court to decide on
the termination of the mandate.

Section 17, party may during the arbitral proceedings or at anytime after the making
of the arbitral award but before it is enforced in accordance with Section 36 apply to
the arbitral tribunal for such reliefs as stated therein.

Section 27- Assistance of the Court in taking evidence

The Tribunal may by itself, or any party with the approval of the Tribunal, apply to
the court for assistance in taking evidence. The application has to specify the
particulars as stated in Section 27.

Under Sections 11, 14, 17 and 27, the Courts come into picture when the arbitral proceedings
are found difficult to commence or continue. The Courts under the play of section 11
reassures parties to continue with the mode of settlement of disputes through arbitration.    

Section 29-A- Time limit for arbitral award

The aforesaid section interalia provides that the award shall be made within a period
of 12 (twelve) months from the date the tribunal enters upon the reference. If the
award has been made within a period of 6 (six) months from the date the arbitral
tribunal shall be entitled to receive such amount of additional fees as the parties may
agree.14 The parties may, by consent, extend the period specified in sub-section (1) for
making award for further period not exceeding six months 15.  If the award is not
made within the period specified in sub-section (1) or the extended period specified
under sub-section (3), the mandate of the arbitrator (s) shall terminate unless the
Court has, either prior to or after the expiry of the period so specified, extended the
period. Provide that while extending the period under this sub-section, if the Court
finds that the proceedings have been delayed for the reasons attributable to the
arbitral tribunal, then, it may order reduction of fees or arbitrator(s) by not
exceeding 5% for each month of such delay.16

The insertion of Section 29-A pursuant to an amendment in 2015, gives the parties to
arbitration a leeway to seek an extension for the maximum period of 6 months after
the expiry of 12 months. However, the extension of period referred to in sub-section
(4) may be on the application of any of the parties and may be granted only for
sufficient cause and on such terms and conditions as may be imposed by the Court.
Further, it shall be open to the Court to impose actual or exemplary costs upon any
of the parties under this provision.

On the bare perusal of the newly inserted section 29-A, it is observed that the proceedings
initiated to settle the disputes through arbitration are not to be taken frivolously. The power
is given to the Courts to disable the parties from prolonging the arbitral proceedings and
assist the party filing the arbitration petition to acquire prompt result.

Section 31-A Regime for costs

The aforesaid provision enables the Court or arbitral tribunal in determining the
costs payable by the parties to arbitration in relation to any arbitral proceedings
under the provision of the Act.

Section 34- Setting aside an Award

Even though Section 34 provides a recourse to a court against the arbitral award that
may be made only by an application for setting aside the same in accordance with sub-
section (2) and sub-section (3) of Section 34, every award is nonetheless challenged
before the Court. However, there are limitations attached to the court with respect to
the extent in which it can decide matters of arbitration. The Court approached for
setting aside cannot sit as court of appeal and disturb the findings of fact recorded
by the arbitrator after considering all the materials or record. 17

On bare perusal of Section 34 it is observed that the Court can set aside the award in
the following circumstances: -

i. For the reasons mentioned in Section 34(2)(a)(i) to (v);

ii. For the reasons stated in Section 28(1)(a);
iii. For the reasons stated in Section 34(2)(b)(ii) on the ground of conflict with the
public policy of India, that is to say, if it is contrary to:

a. Fundamental policy of Indian law; or

b. The interest of India; or
c. Justice or morality; or
d. If it is patently illegal.
iv. For the reasons stated in Section 13(5) and 16(6).

The Supreme Court stated that the requirement that adjudication authority must
apply its mind can also be described as a fundamental policy of Indian law. The
arbitrators committed error resulting in miscarriage of justice. They failed to
appreciate and draw logical inference from proved facts. The award became liable to
be interfered with.18

There is hardly any award that the affected party would take as it is which shall result into
challenging the validity of the award thereby increasing litigation. However, in the hindsight
the purpose of involving the Court under the Act to discourage the proceedings from reaching
cul-de-sac.
Appeals (Sections 37 and 50)

The aforesaid section provides for an appeal that may lie in respect of the orders
passed by the Arbitral Tribunal.

Section 50 deals with orders which are appealable. Section 50(2) bars a second appeal
against the appellate order passed u/s 50. However, the right to appeal to the
Supreme Court is not affected.19

Jurisdiction vis-à-vis enforcement of Foreign Awards-Section 42

Notwithstanding anything contained elsewhere in this Part or in any other law for the time
being in force, where with respect to an arbitration agreement any application under this
Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral
proceedings and all subsequent applications arising out of that agreement and the arbitral
proceedings shall be made in that Court and in no other Court.

The context of section 42 starts with non-obstante clause which does away with
anything which may be inconsistent with the section either in Part I of the Act or any
other law for the time being in force. 20 The expression "with respect to an arbitration
agreement" widens the scope of section 42 to include all matters which directly or
indirectly pertain to an arbitration agreement. Further, the context of the aforesaid
Section is merely to see that one court alone shall have jurisdiction over all the
applications with respect to arbitration agreements, which context does not in any
manner enable the Supreme Court to become a "court" within the meaning of Section
42. It has been aptly stated that the rule of forum conveniens is expressly by Section
42.21

Comment

The Supreme Court in F.C.I v Joginderpal Mohinderpal22 at paragraph 7 observed-

"We should make the law of arbitration simple, less technical and more responsible
to the actual realities of the situation, but must be responsive to the canons of justice
and fair play and make the arbitrator adhere to such process and norms which will
create confidence, not only by doing justice between the parties, but by creating a
sense that justice appears to have been done."

The Law Commission in its Report bearing No. 246 dated August, 2014 highlighted
that the paradox of arbitration is that it seeks co-operation of the same public
authorities from which it wants to set itself free. Hence, when the amendment to the
Act was brought in the year 2015, a balance of the powers of the courts and arbitral
tribunal was sought. Whether the purpose of the legislation in passing the Act
(amendment of 2015) is served or defeated is a question that may be answered over a
period of time. There have been great many cases in making (some are made
already) and some more will be required to equal an award to the decree of the
Court and bring the matters in dispute to a necessary conclusion with the limited
intrusion of the Court.
Footnotes

1 The power of the arbitrator to determine his own competence in arbitrating the
dispute at hand.

2 [1994] 2 All E.R. 449

3 AIR 2011 Kar 38

4 Mohd Nasim Akhtar V Union of India, 2015 SCC OnLine Cal 10443: AIR 2015 Cal
64

5 (2015) 1 SCC 32: (2015) 1 SCC (Civ) 1

6 Russell on Arbitration

7 HENRY CAMPBELL BLACK, M. A., 4th Edition

8 Ardy International (P) Ltd v Inspiration Clothes & U, (2006) 1SCC 417

9 AIR 1999 Mad 29

10 Chennai Port Trust V Hindustan Construction Company Limited, AIR 2003 NOC
162 (Mad)

11 DLF Industries Limited v Standard Chartered Bank AIR 1999 Del 11

12 Section 12(1) of the Act

13 Mears Group Inc v Fernas Insaat AS, (2017) 2 SCC 429

14 Section 29-A (2)

15 Section 29-A (3)

16 Section 29-A(4)
17 Rajasthan SRTC V Indag Rubber Limited (2006) 7 SCC 700

18 ONGC Limited V Western Geco International Limited, (2014) 9 SCC 263

19 Fuerst Day Lawson Limited v Jindal Exports Limited, (2011) 8 SCC 333

20 Law of Arbitration and Conciliation-Avtar Singh (11th Edition), 2018

21 State of West Bengal v Associated Contractors, (2015) 1 SCC 32: (2015) 1 SCC (Civ)
1

22 (1989) 2 SCC 347