Composition of the Arbitral Tribunal

A. Part I - Deals with arbitration in India (Section 2

to 43);
B. Part II - Deals with Enforcement of Certain
Foreign Awards
(Section 44 to 60);
C. Part III - Deals with Conciliation (Section 61 to
81); and
D. Part IV - Deals with Supplementary
Provisions(Section 82 to 86).
 CONSTITUTION OF THE
ARBITRAL TRIBUNAL

The parties to an arbitration agreement are free to determine the number of
arbitrators; however arbitrators can not be appointed in even number to form the
arbitral tribunal. If parties fail to determine the number of arbitrators, the arbitral
tribunal shall consist of one arbitrator ( Sec 10).

M.M. T.C v. Sterlite Industries

The validity of an arbitration agreement was challenged before the Supreme Court in
the case of MMTC Ltd. v. Sterlite Industries (India) Ltd. on the grounds that
arbitration clause could not be resorted to and invalid in the light of section 10 of the
Act which provides that the parties are free to determine the number of arbitrators
provided that such number shall not be even [Link] Supreme Court rejected the
plea and held that the relevant provision to determine the validity of the arbitration
agreement in section, which contains the writing requirement, and that there is no
reference to number of arbitrators within this provision, that the validity of the
arbitration clause does not depend on the number of arbitrators specified therein, and
that the arbitration clause was valid.
 Appointment of Arbitrators Sec.11
Appointment of arbitrators. —
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the
parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing
the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), 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.
(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 the third arbitrator within thirty days from
the date of their appointment, the appointment shall be made, upon request of a party, by
the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration 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 the appointment shall be made,
upon request of a party, by the Chief Justice or any person or institution designated by
him.
(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 Chief Justice or any person or institution designated by him to take the necessary measure, unless
the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the
person or institution designated by him is final.
(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard
to—
(a) any qualifications required of the arbitrator by the agreement of the parties; and
(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Chief Justice of
India or the person or institution designated by him may appoint an arbitrator of a nationality other than the
nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme 1 as he may deem appropriate for dealing with matters entrusted by
sub-section (4) or sub-section (5) or sub-section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the
Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has
been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international
commercial arbitration, the reference to ‘‘Chief Justice'' in those sub-sections shall be construed as a reference to the
‘‘Chief Justice of India''.
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the
reference to “Chief Justice” in those sub-sections shall be construed as a reference to the Chief Justice of the High
Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate
and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High High Court
itself is the Court referred to in that clause, to the Chief Justice of that High Court.

In the matters of international commercial arbitrations, the Supreme Court or any person or
institution designated by him shall be competent to consider and appoint arbitrator.

Amendment to Section 11 (Appointment of Arbitrators): In so far as section 11, "appointment of
arbitrators" is concerned, the new law makes it incumbent upon the Supreme Court or the High
Court or person designated by them to dispute of the application for appointment of arbitrators
within 60 days fromthe date of service of notice on the opposite party.

As per the new Act, the expression 'Chief Justice of India' and 'Chief Justice of High Court' used
in earlier provision have been replaced with Supreme Court or as the case may be, High Court,
respectively. The decision made by the Supreme Court or the High Court or person designated by
them have been made final and only an appeal to Supreme Court by way of Special Leave
Petition can lie from such an order for appointment of arbitrator. The new law also attempts to fix
limits on the fee payable to the arbitrator and empowers the high court to frame such rule as may
be necessary considering the rates specified in Fourth Schedule.

Explanation to section 14.- exception to International arbitration/ arbitral Institutions

The scope of existing Section 11(6A)

Since the decision in SBP vs. Patel Engineering AIR 2006 SC 450, it was within the powers of the court to
preliminarily decide its own jurisdiction to entertain the arbitration petition and also the existence of a live claim
i.e. one not hit by limitation. Distinct categories of issues, which are within the domain and competence of the
Court while exercising powers under Section 11, were discerned by the Supreme Court (the SC) in the
subsequent case of National Insurance Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC
267, vis-à-vis (i) issues which the Chief Justice or his designate is bound to decide i.e. decisions on the
jurisdiction and existence of a valid arbitration agreement; (ii) issues which he can also decide i.e. whether the
claims made by the parties are tenable., and (iii) issues which should be left to the Arbitral Tribunal to decide.

SBP V PATEL ENGINEERING

DATAR SWITCHGEARS V TATA FINANCE LTD.
Datar Switchgears v. Tata Finance
Ltd.
 
Grounds for challenging the appointment of the Arbitrator


Section 12(1) of the Act, amended in 2015, compels a prospective arbitrator to provide a written
disclosure of certain circumstances which may give rise to suspicions to his independence or
impartiality. Whether a circumstance is suspicious to the independence of an arbitrator, is to be
decided by the arbitrator himself

Section 12(1)(a) states that the arbitrator should disclose if he has any direct, indirect, past or
present relationship to the parties, or if he has any financial, business, professional or any other
kind of interest in the subject-matter of the dispute, which would affect his impartiality in the case.

For example, Company X and Company Z while entering into a particular contract, add an
arbitration clause naming Mr. A as an arbitrator. Mr. A is the owner of Company C. A dispute
concerning payment of bills to Company X by Company Z arose and Mr. A was approached for
presiding as an arbitrator. Company Z is a client of Company C and forms a considerable part of
its income.

In such a scenario, Mr. A would have an interest in the dispute and that might give rise to doubts
to his impartiality.

Section 12(1)(b) similarly points to any circumstances that would affect an arbitrator’s capacity to devote enough time to finish
the arbitration within twelve months.

There are two explanations given under the sub-section. The first one states that the Fifth Schedule should be
referred to understand whether circumstances under Section 12(1)(a) exist. The second one states that such

Fifth Schedule

The fifth schedule deals with following types of relations which might give rise to reasonable doubts:



Arbitrator’s relationship with parties or counsel, Arbitrator’s relationship to the dispute Arbitrator’s interest in
the dispute, Arbitrator’s past involvementwith the dispute, Relationship of co-arbitrator’s, Relationship of the
arbitrator with parties and others in the dispute .
 Challenge Procedure


(1) Subject to sub-section (4), the parties are free to agree on a procedure for
challenging an arbitrator.
(2) Failing any agreement referred to in sub-section (1), a party who intends to challenge
an arbitrator shall, within fifteen .days after becoming aware of the constitution of the
arbitral tribunal or after becoming aware of any circumstances referred to in sub-section
(3) of section 12, send a written statement of the reasons for the challenge to the arbitral
tribunal.

(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or
the other party agrees to the challenge, the arbitral tribunal shall decide on the
challenge.

(4) If a challenge under any procedure agreed upon by the parties or under the
procedure under sub-section (2) is not successful, the arbitral tribunal shall continue
the arbitral proceedings and make an arbitral award.

(5) Where an arbitral award is made under sub-section (4), the party challenging the
arbitrator may make an application for setting aside such an arbitral award in
accordance with section 34.

(6) Where an arbitral award is set aside on an application made under sub-section
(5), the Court may decide as to whether the arbitrator who is challenged is entitled to
any fees.
 Failure or Impossibility to act


14. Failure or impossibility to act.—

(1) The mandate of an arbitrator shall terminate if—

(a) he becomes de jure or de facto unable to perform his functions or for
other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his
mandate.

(2) If a controversy remains concerning any of the grounds referred to
inclause (a) of sub-section (1), a party may, unless otherwise agreed by the
parties, apply to the Court to decide on the termination of the mandate.

(3) If, under this section or sub-section (3) of section 13, an arbitrator
withdraws from his office or a party agrees to the termination of the mandate
of an arbitrator, it shall not imply acceptance of the validity of any ground
referred to in this section or sub-section (3) of section 12.
 Termination of Mandate and Substitution of the Arbitrator


15. Termination of mandate and substitution of arbitrator.—

(1) In addition to the circumstances referred to in section 13 or section 14, the mandate of
an arbitrator shall terminate—

(a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be
appointed according to the rules that were applicable to the appointment of the arbitrator
being replaced.

(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-
section (2), any hearings previously held may be repeated at the discretion of the arbitral
tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made
prior to the replacement of an arbitrator under this section shall not be invalid solely
because there has been a change in the composition of the arbitral tribunal.
Ram Nath Sharma v. Somnath Sharma- The Court help that where the parties agreed before a
sub-judge that award of the Arbitral Tribunal be set aside and another arbitrator be appointed,
it amounts to termination of mandate pf an Arbitrator by the consent of the parties and such
order is not improper
 Chapter V: Jurisdiction of the Arbitral Tribunals


16. Competence of arbitral tribunal to rule on its jurisdiction.—

(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to
the existence or validity of the arbitration agreement, and for that purpose,—

(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the
other terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of
the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of
the statement of defence; however, a party shall not be precluded from raising such a plea merely because
that he has appointed, or participated in the appointment of, an arbitrator. - DDA v. Chandrakanta & Co.

(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section
(3), admit a later plea if it considers the delay justified.

(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where
the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and
make an arbitral award.

(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral
award in accordance with section 34 (1) (iv)

One of the fundamental principles of arbitration is “Kompetenze-Kompetenze”, which empowers the arbitral tribunal
to rule upon its jurisdiction and other related issues. Section 16 of the Arbitration and Conciliation Act, 1996, which has
been framed in accordance with article 16 of the UNCITRAL Model Law, recognises this important principle. Moreover,
section 16(2) empowers a party to challenge the jurisdiction of the arbitral tribunal, and the tribunal can decide upon it
according to powers conferred upon it under section 16(1). While section 16 stipulates the timeline for raising the issue
of lack of jurisdiction of the arbitral tribunal, it however does not specify whether the tribunal should rule on such
objection as a preliminary issue or in an award on merits.
 Interim Measures ordered by the Arbitral Tribunal


Section 17: Interim measures ordered by arbitral tribunal.



17. 1[(1) A party may, during the arbitral proceedings 2[***], apply to the arbitral tribunal—

(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 of 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 arbitral tribunal to be just and convenient,

and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in
relation to, any proceedings before it.

(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this
section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil
Procedure, 1908 (5 of 1908), in the same manner as if it were an order of the Court.]

Section 9 and Section 17:

Analysis of Section 9 and Section 17 would lead us to the following conclusions:-– The new arbitration Act
empowers the arbitral tribunal to pass orders for giving interim relief while such power is not vested under the
Old Act.

– Powers under Section 17 can be exercised only after the arbitral tribunal is constituted and it stats
functioning.

– Powers of court under section 9 are wide as the words “before, during or after indicate so. A party can
approach the court to seek interim measures of protection even before the arbitration commences.

– Court’s powers are wide and have supremacy in granting interim relief. However interference of court when
Section 31A of the 1996 Act (as amended in 2015)

• Based on the recommendation of the Law Commission and an ordinance, the Indian
Parliament enacted the Arbitration and Conciliation (Amendment) Act, 2015, and
the same was brought into force with effect from 23 October 2015.
• The amended Act contains detailed provisions on costs in Section 31A, which is similar
to Section 6A suggested by the Law Commission. Section 31A(1) empowers the court
or arbitral tribunal, as the case may be, to award costs in relation to any proceeding
under the 1996 Act. It reads:
• “In relation to any arbitration proceeding or a proceeding under any of the provisions of
this Act pertaining to the arbitration, the Court or arbitral tribunal, notwithstanding
anything contained in the Code of Civil Procedure,1908, shall have the discretion to
determine— (a) whether costs are payable by one party to another; (b) the amount of
such costs; and (c) when such costs are to be paid…”
• The wordings of Section 31A(1) is a cause for concern. The use of the word “discretion”
could be construed to mean that the Court or the tribunal has the option to choose not
to pass any order on costs.
• Similar is the case of Section 31A(2) as well. It reads:
• “If the Court or arbitral tribunal decides to make an order as to payment of costs,— (a) the general
rule is that the unsuccessful party shall be ordered to pay the costs of the successful party; or (b)
the Court or arbitral tribunal may make a different order for reasons to be recorded in writing.”
• This sub-section begins with the term “if” as if to suggest that making an order as to payment of
costs is a matter of choice of the Court or the arbitral tribunal, as the case may be. This
construction is incongruent to the purpose for which the new regime on costs was introduced, as
noted by the Law Commission.
• A perusal of the decisions in the post-2015 suggest that there has not been a change, especially
by the courts, in awarding of costs. This leads to the inference that the introduction of Section 31A
was a pointless exercise.
• The recent decision of Larsen and Toubro Limited Scomi
Engineering BHD vs. Mumbai Metropolitan Region Development Authority (03.10.2018 –
SC): MANU/SC/1151/2018 is a typical example where the court did not even deal with costs in a
petition for constituting the tribunal. The petition was ultimately dismissed on the ground that the
arbitration was not an international commercial arbitration warranting constitution of the arbitral
tribunal by the apex court rather than by the relevant High Court.
Termination of Proceedings
Correction, Interpretation and an
33. Correction and interpretation of award; additional award.—

Additional Award
• (1) Within thirty days from the receipt of the arbitral award, unless another period of time has been
agreed upon by the parties—(a) a party, with notice to the other party, may request the arbitral tribunal
to correct any computation errors, any clerical or typographical errors or any other errors of a similar
nature occurring in the award;
• (b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to
give an interpretation of a specific point or part of the award.
• (2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make
the correction or give the interpretation within thirty days from the receipt of the request and the
interpretation shall form part of the arbitral award.
• (3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on
its own initiative, within thirty days from the date of the arbitral award.
• (4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within
thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral
award as to claims presented in the arbitral proceedings but omitted from the arbitral award.
• (5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make
the additional arbitral award within sixty days from the receipt of such request.
• (6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a
correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-
section (5).
• (7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional
arbitral award made under this section.

• To be Explained with examples