Do Courts Comply with S. 11(8) While Appointing Arbitrators?

 Section 11(8) of the Arbitration and Conciliation Act, 1996 ("Act"), as it exists now, reads:

"(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—

(a) any qualifications required for the arbitrator by the agreement of the parties; and

(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator."

This provision contemplates that before appointing a person as arbitrator, the Supreme Court or the High Court should seek a disclosure in writing in terms of S. 12(1) of the Act and have due regard to qualifications requirement for the arbitrator under the arbitration agreement and the contents of the disclosure and other conditions which are likely to secure and independent and impartial arbitrator.

This provision was introduced through the 2015 amendments and is effective from 23.10.2015. However, rarely does the Supreme Court or the High Courts mention compliance of S. 11 in their orders appointing arbitrator under Section 11. See, for instance, the order of the SC dt. 02.02.2026 in OT Technology Inc. v. HDFC Bank Ltd., Arb. Pet. 8/2026, which makes no mention of S. 11(8) explicitly or impliedly. 

Likewise, see this Order dt. 03.02.2026 of the Delhi High Court in Paramjit Singh v. FITTJEE Limited, Arb. Pet. 2/2026, which also does not make any reference to S. 11(8) nor complies with it. Worse, the High Court appoints the arbitrator and postpones compliance with S. 11(8) to after the appointment. It also states: 

"13... iv) The Sole Arbitrator is requested to furnish a declaration in terms of Section 12 of the Arbitration Act prior to entering into the reference. In the event of any impediment to the Arbitrator’s appointment on that count, the parties are given liberty to file an appropriate application before this Court."

The effect of this is to cast the burden on the parties for non-compliance by the High Court of the statutory mandate provided in S. 11(8)! That is not the correct approach. 

Contrarily, a perusal of the recent orders of the MP High Court, reveals compliance by the High Court of the mandate under S. 11(8). For instance, in JVS Foods Pvt. Ltd. v. MP State Agro Industries Development Corporation Ltd., 2026:MPHC-JBP:42122, the High Court observes in its Order dt. 17.06.2026:

"19. Considering the list of empanelled Arbitrators issued by the M.P. Arbitration Centre, Jabalpur, following order is passed : (i) Shri Alok Verma, Former Judge, High Court of M.P., AddressAkar, HIG, 1/463, Arvind Vihar, Baghmogaliya, Bhopal (MP)-462043, Mobile No. 79748-54407, 94250-07479, Tel. No.0755-4930600, Email - alokver55@gmail.com, who has consented in terms of Section 11(8) of the Act of 1996, is appointed as sole Arbitrator to resolve the dispute between the parties in the case." (emphasis added).

Whether this amounts to a complete compliance of S. 11(8) is not apparent from the aforesaid observations. However, the attempt to comply with the statutory mandate is at least clear from this Order, in contrast with the orders of the Supreme Court and the Delhi High Court.

Readers may throw more light on whether High Courts and the Supreme Court complies with the statutory mandate under S. 11(8).

Vidya Drolia v DTC: Part II: Interesting Aspects- Contradiction between Patel Engineering & Booz Allen

Para 17-19 of Vidya Drolia v Durga Trading Corporation is the next interesting aspect we take up in this post. We had discussed the nature of an arbitration agreement and its relation to the law of contracts in the previous post on this subject. In this post, we will discuss the contradiction between Booz Allen and Patel Engineering on whether subject-matter arbitrability is to be decided by a court under Section 8 and11.

In Vidya Drolia, the Supreme Court observed:

" When public policy mandates and states that a case or a dispute is non-arbitrable, the court would not allow an application under Section 8 (or even Section 11 as observed supra) even if the parties have agreed upon arbitration as the mechanism for settlement of such disputes." (Para 19, P. 24).

Justice Ramana's opinion also touches on this topic in many places but does not explicitly note the contradiction between the approaches in these judgments (Patel Engineering &  Booz Allen) noted above. So what exactly is the issue?

The issue relates to whether power exercised under Sections 8 and 11 are similar. What turns on this question is the point whether a court hearing a petition under these sections has to decide subject-matter arbitrability.

In Patel Engineering, the SC held that Sections 8 and 11 were complementary in that the judicial authority under Section 8 or 11 has to decide the jurisdictional issues raised before it. This would logically include questions as to arbitrability of the subject-matter as well. In Booz Allen, however, a two-judge Bench of the Supreme Court held that the nature and scope of issues that arise for consideration in a Section 11 application were narrower than those under Section 8. The court held that arbitrability was not to be determined by the court under Section 11. It is this contradiction that the court in Vidya Drolia highlighted and held: 

"We are clearly bound by the dictum of the Constitutional Bench judgment in Patel Engineering Ltd. that the scope and ambit of court’s jurisdiction under Section 8 or 11 of the Arbitration Act is similar." (Para 17, p. 20).

We invite readers to access this post in this blog written almost a decade back where we argued that given the decision of the larger Bench in Patel Engineering, Booz Allen's approach as regards arbitrability question under Section 11 (that the same has to be decided by the arbitrator) was not consistent with Patel Engineering:

"The pertinent question for the purposes of this post would be whether Patel Engineering gives an indication of whether a decision under Section 11 included a decision on issues of Arbitrability. This blawgger’s view is that it would. Two reasons: (1) In line with the Patel Engg approach, Arbitrability of the dispute would be a jurisdictional fact/ condition precedent for the Chief Justice to exercise jurisdiction; (2) Supreme Court’s concern was for the party who had not agreed to an arbitration agreement but had to go through the entire process of arbitration (because the Act did not permit a court to interfere unless provided so in the Act) and could only challenge the award under Section 34. The same situation applies to Arbitrability as well. In a petition under Section 11, if the contention is that the dispute was not arbitrable, and if the court mechanically refers the parties to arbitration, the party which raised such a contention will be unnecessarily put to the trouble of going through the entire arbitration process...

Therefore, this blawgger is of the view that the obiter dicta of the Supreme Court in Booz Allen ought to be placed below the decision of the Seven Bench Supreme Court in Patel Engineering in terms of binding force."

However, this "contradiction" is a virtually an academic issue, given that Sections 8 and 11 have been amended. We will address Vidya Drolia on the implication of these amendments in another post. But we will conclude this post summarising the concluding observations in Vidya Drolia on this question:

• Judicial review and court's jurisdiction u/ss 8 and 11 are identical but extremely limited [Para 96(b)]
• Patel Engineering is no more good law in view of the 2015 and 2019 amendments to the 1996 Act. [96(a)]
• By virtue of separability and competence principles, arbitral tribunal is the "preferred first authority" to decide all aspects of non-arbitrability and courts can have a second look in terms of Sections 34(2)(a)(i), (ii), or (iv) or 34(2)(b)(i) of the 1996 Act. [96(c)]
• But courts can exercise its jurisdiction where the subject-matter of the dispute is "manifestly and ex facie" non-arbitrable. [96(d)].

[Note that Para 96(d) of the court's view confers very limited jurisdiction on the courts in respect of non-existence or invalidity of agreements as well but we did not deal with these aspects in this post.] 

De Jure ineligibility of Arbitral Tribunal after 2015: SCI Clarifies

Post the TRF decision [TRF Ltd. v. EnergoEngineering Projects Ltd., (2017) 8 SCC 377] of the Supreme Court, there was a doubt as regards the appropriate forum to approach in case of appointment of an arbitrator whose appointment is void at the inception owing to the reason that the proposed arbitrator fell within one of the items in Schedule VII. The Supreme Court has now clarified in the decision of Bharat Broadband Network Ltd. v. United Telecoms Ltd. that since the appointment of such an arbitrator falls foul of Section 12(5), the appropriate forum to challenge such an appointment is not before the arbitrator but before the court under Section 14(2). 

The court was of the view that when such a person is appointed, his mandate terminates automatically (Para 17). The Supreme Court further clarified that two questions are to be decided in a petition under Section 14(2) in the above facts: (1) whether the appointee comes within the purview of Schedule VII; (2) if so, whether there has been a waiver?

The court also distinguished between waiver in terms of Section 4 and Section 12(5). The court stated that the threshold for waiver in Section 12(5) is much higher than Section 4 in that 12(5) required that the waiver should be through an express written agreement. The court also held that the 12(5) threshold is much higher than the "writing" requirement for an arbitration agreement as provided in Section 7 of the Act.

Do read the interesting decision. It compensates for the lack of depth in the TRF decision, where the Supreme Court missed the bus by not citing or analysing the international arbitration jurisprudence regarding the role of appointing authorities and non-conflation of the role of appointing authority and arbitral tribunal.  

Former Employee as Arbitrator: The Supreme Court Decides!

Appointment of former employees of a party has been a controversial topic and it was expected that the 2015 amendments would settle the issue once and for all. However, recent developments have titled in favour of allowing former employees to act as arbitrators. A few days back, the Supreme Court of India held in —The Government of Haryana PWD Haryana (B and R) Branch v. M/s. G.F. Toll Road Pvt. Ltd. & Ors., that there is no bar under the Arbitration and Conciliation Act, 1996, even after the 2015 amendments, barring former employees of a party from acting as arbitrator. This 14 slide presentation addresses the decision of the Supreme Court. 

The presentation notes that the decision does not cite an important decision on similar lines: Offshore Infrastructure Limited v. Bharat Heavy Electricals Limited (2018). —In Offshore, a Section 11 application was filed in the Madras High Court since a former employee was appointed by BHEL as arbitrator. —The High Court along held the same lines as the Supreme Court- Item 1 of V Schedule does not include former employee but cited Item 31 of the same schedule (“The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner.”) and held that a former employee could be appointed provided he retired three years before the appointment. 

—In the Pre-2015 amendments regime, only government entities could appoint former employees as arbitrators. Now, with decisions like Offshore Infrastructure & the present case, there is no bar on private parties retaining the right to appoint arbitrators to appoint their former employees as arbitrators.

In order to be recognised as an important centre for international arbitration, it is important for India to have an independent panel of arbitrators with rigorous training and excellent credentials. —A larger Bench should revisit these two decisions.

Consortium & Determination of "International"​ Character of Arbitration in India

Larsen and Toubro Limited Scomi Engineering BHD v. Mumbai Metropolitan Region Development Authority, MANU/SC/1151/2018

Case Details: Arbitration Petition (C) No. 28 of 2017

Date: 03.10.2018

Bench: Rohinton Fali Nariman and Navin Sinha, JJ.

Description

Disputes arose between the parties under the monorail contract and the petitioners filed the application under Section 11 of the 1996 Act. The Contractor was the unincorporated consortium consisting of Larsen and Toubro Ltd. (L&T), was an Indian company, and Scomi Engineering Bhd (Scomi), a Malaysian company. The L&T and Scomi were jointly and severally liable under the contract with the Mumbai Metropolitan Region Development Authority (MMRDA). The consortium had its office in Mumbai.

Questions

• Whether the arbitration was an “international commercial arbitration” and consequently whether the Supreme Court had jurisdiction to entertain the petition?

• Whether an unincorporated consortium was an association of persons for the purposes of Section 2(1)(f) of the 1996 Act (as amended)?

• When would an arbitration be an “international commercial arbitration” where the dispute is invoked by the contractor consortium, in which one of the members is a foreign company?

Some of the disputes that arose under the same contract were previously referred to arbitration. One of the preliminary issues was whether L & T and Scomi could file independent claims against MMRDA. The arbitrator negative the contention and held that they could only do so as a consortium because they bid for the project as a consortium an the contract treated them as such. This interim Award was questioned in the Bombay High Court where the High Court held upheld the interim award and negative the contentions of the petitioners, L&T and Scomi. The petitioners did not appeal against the decision and therefore the same attained finality.

Relevant legal Provisions

Section 2(1)(f), which defined the phrase “international commercial arbitration”, was amended by virtue of the Arbitration and Conciliation (Amendment) Act, 2015 and the amended provision read:

“"international commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country;”

Decision

The court rejected the petitioner’s contention that this was an “international commercial arbitration wherein the Supreme Court had the power to appoint the arbitrator and held on facts that the central management of the consortium was in India and therefore the arbitration was not an “international commercial arbitration. The Supreme Court’s decision is summarised below:

• In view of the final decision of the Bombay High Court, L&T and Scomi could only raise disputes as a single entity. Therefore, Section 2(1)(f)(ii) will not be applicable and Section 2(1)(f)(iii) will be applicable.

• Section 2(1)(f)(iii) speaks of “association” or “body” of persons. This is akin to the definition of “person” under Section 2(31) of the Income Tax Act, 1961, which includes an association of persons, whether incorporated or not. As such “association of persons” forms a separate category and is distinct from “body of persons”.

• The Indian company, L&T, is the lead partner in the consortium as per the consortium agreement and the supervisory board constituted as per the consortium agreement empowers L&T to have the lead voice in the appointment of the chairman of the said board. The consortium agreement provides that the lead partner shall lead the arbitration proceedings. The office of the consortium is in Mumbai. All these factors point out that the central management and consortium are in India

Outcome

The court concluded that the arbitration was not an “international commercial arbitration and dismissed the petition

Implications and Critique

The decision is significant because it explains the determination of an international commercial arbitration when one of the parties to the arbitration proceedings is a consortium and where one of the members of the consortium is an Indian party. The decision clarifies that a consortium is really an association of persons and provides guidance on the factors determinative of determining whether the central management and control is in India.

Given that classifying the Indian seated arbitration as “international commercial arbitration” and otherwise has implications on many aspects, including, especially the scope of interference into the arbitral award, the determination of the international character of the arbitration is of utmost importance.

Case comments on the decision have not evoked adverse critique or have cited past decisions. Even the Bombay High Court seems to have cited past decisions on the subject. Perhaps, the High Court need not have as the issue before it was slightly different. But the very same question in respect of a consortium of parties was raised before the Supreme Court in Reliance Industries Limited v. Union of India. The court passed three crucial orders, viz., orders dt. 31.03.2014, 02.04.2014 and 29.04.2014 in the matter. Of these, the last two orders merely modify the operative portion relating to the identity of the arbitrator. The order dt. 31.03.2014, reported in 'MANU/SC/0257/2014, is virtually on the same question where the SS Nijjar, J., acting as the designate of the Chief Justice, reached the opposite result, that the arbitration invoked by the consortium through its operator was an international commercial arbitration for the purposes of Section 2(1)(f). Similarities between the two cases are striking and are listed below:

• Both related to a consortium, named as “contractor” in the contract, and some of the members of the consortium were Indian companies and some were non-Indian.
• In both, the lead member (or the operator) who was empowered to act on behalf of the consortium was the Indian company.
• The benefit of success or failure in the arbitration would have been to all the members of the consortium.

Of course, some would argue that Section 11 decisions pre-2015 amendments were not binding precedents. But then, is it really true? There are umpteen number of decisions have considered Section 11 determinations pre-23.10.2015 to be de facto binding. Even the Supreme Court in this very case (dt. 03.10.2018) stated: “This was for the reason that the judgment of this Court, in TDM Infrastructure Private Ltd. v. UE Development India Private Ltd.” (emphasis supplied). The Delhi High Court. in GMR Energy Limited vs. Doosan Power Systems India Private Limited and Ors. (14.11.2017 - DELHC) : MANU/DE/3689/2017 and the Madhya Pradesh High Court in Sasan Power Limited vs. North American Coal Corporation India Private Limited have held that the observations in TDM Infrastructure (para 36) that the observations of the court were in order to determine the court’s jurisdiction and not for other purpose meant that the decision was not a binding precedent. The High Courts are wrong. The observation in TDM does not mean that the decision should not be cited as precedent; rather, it means that the observations cannot be treated as observations on the merits of the case before the arbitrator or otherwise. This is pretty standard in Section 11 petitions and such observations are pretty common even in the decisions by the High Court designates. The Delhi High Court and the Madhya Pradesh High Court in the aforesaid cases seem to have misconstrued this observation in TDM Infrastructure.

Therefore we have two sets of decisions on whether an Indian seated arbitration invoked by a contractor-consortium consisting of a foreign party against an Indian party would be an international commercial arbitration. L&T mentions the “office of the consortium” as if to signify that distinct from the offices of the individual members of the consortium, the consortium had a separate office. This, coupled with the final decision of the Bombay High Court in L&T could be construed by future courts to be determinative factors in choosing from among the two opposite views of the Supreme Court.

New Delhi International Arbitration Centre Bill, 2018 in the Winter Session of Lok Sabha

The Winter Session of the Parliament is beginning from today (11.12.2018). The New Delhi International Arbitration Centre Bill, 2018 is listed in the List of Business in the Lok Sabha for today. The broad aims of the Bill are to:

establishment and incorporation of New Delhi International Arbitration Centre for the purpose of creating an independent and autonomous regime for institutionalised arbitration and for acquisition and transfer of undertakings of the International Centre for Alternative Dispute Resolution and to vest such undertakings in the New Delhi International Arbitration Centre for the better management of arbitration so as to make it a hub for institutional arbitration and to declare the New Delhi International Arbitration Centre to be an institution of national importance and for matters connected therewith or incidental thereto, be taken into consideration. 

• establish and incorporate the New Delhi International Arbitration Centre (NDIAC);
• create NDIAC as an independent and autonomous institution for institutionalised arbitration;
• acquisition and transfer of undertakings of the ICADR- International Centre for ADR and to vest such undertakings in the NDIAC for better management of arbitration so as to make it a hub of institutional arbitration; and
• to declare NDIAC as an institution of national importance.

We had discussed the Bill in a previous post in the form of a presentation. Do have a look at it. With the election results being announced in a few states today and the current political climate, this blogger is not sure if the Parliament is going to discuss Bills today. Most likely the legislative bills would be taken after Wednesday. We'll keep the readers posted on further developments. 

Opportunity of Hearing to Arbitrators? Arbitration & Conciliation (Amendment) Bill 2018

We had done several posts (see here, here, here, and here) critiquing various aspects of the Arbitration & Conciliation(Amendment) Bill, 2018 (2018 Bill) that is to be taken up by the Rajya Sabha in the coming winter session.In this relatively short post, we discuss a proposed amendment that requires reconsideration.

Section 6(b) of the 2018 Bill proposes two provisos to Section 29A(4) of the Arbitration and Conciliation Act, 1996 (1996 Act), one of which is the focus of this post. This proviso grants an opportunity of hearing to the arbitrator/ arbitral tribunal in the reduction of fee. It reads: “Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.”

To provide a brief background, the 1996 Act was amended in 2015 wherein Section 29A was introduced. Section 29A(1) fixed a period of twelve months from the date the tribunal enters upon reference to pass the arbitral award. Section 29A(3) provides for extension of up to six months based on agreement between the parties. Section 29A(4) provides that in case the award is not made within twelve months or the extended period, the court can order the termination of the arbitrator’s mandate.

Proviso to Section 29A(4) states that in extending the period, if the court finds that the tribunal was responsible for the delay, the court could reduce the fee of the tribunal. It is in respect of this proviso that the further provisos are sought to be added.  The 2018 Bill in adding a proviso seeks to grant the arbitrator/ tribunal an opportunity of hearing while considering whether to reduce the fee or not. 

This provision has been made pursuant to the recommendations of the Hon’ble Mr. Justice (Retd.) Srikrishna Committee. The relevant portion of the Report reads:

“The Committee is also of the view that the power of the court in the provisos to section 29(4) and (6) to substitute the arbitrator(s) or order a reduction in the fees of the arbitrators when hearing an application for extension under section 29(5) is rather peculiar. These provisions ought to be modified, as the arbitrator is not being heard before he / she is penalised, as only the parties to the arbitration are before the court. Even if such an opportunity were to be afforded, practically, it would lead to problems affecting the integrity of the arbitral process. Arbitrators would be wary of being foisted with a reduction in fees and have a perverse incentive to rush through proceedings to render the award within the stipulated time period. Further, if an application for reduction of fees of the arbitral tribunal were to be denied and an extension granted, it would strain relations between the tribunal and the party applying for the same. The punitive nature of these provisions may also act as a deterrent for reputed arbitrators from accepting domestic arbitrations...  There also exist no provisions empowering the court to order a reduction of the fees of the arbitrator… A new sub-section should be inserted in section 29A providing that where the court seeks to reduce the fees of the arbitrator(s), sufficient opportunity should be given to such arbitrator(s) to be heard.”

The recommendation seeks to protect the interest of the arbitrator/ tribunal when it comes to reduction of fee. 

It is submitted that if this amendment is implemented, it would only lower the position of the arbitrator/ arbitral tribunal to the level of a party to the arbitral proceedings. Section 36 of the 1996 Act treats an award almost equivalent to the decree of a civil court. Although the arbitrator is a creation of the contract, the jurisdiction exercised is nearly the same as that of a District Court or of the original side of a Chartered High Court. The arbitrator/ tribunal is not even a necessary or a proper party in the proceedings relating to setting aside awards: it is sufficient if the record of the tribunal is handed over to the court. Given all these aspects, it is not correct to lower the position of the arbitral tribunal to that of a party in the proceedings. Therefore, it is not in the right spirit of the law to make the arbitrator a party to the proceedings. For the same reasons, it is not correct for the court to reduce the fee of the arbitrator. Would the court reduce the salary of judges if the proceedings drag on due to repeated adjournments?

If proceedings are pending before courts under Section 29A, parties would rarely seek reduction by withholding certain documents evidencing delay on their part since the other side would be likely to use such suppression of documents against the first party in the court or in the arbitral proceedings. If the arbitrator considers such reduction to be unreasonable, she could very well stop acting as the arbitrator. Hence, by the very nature of the proceedings, the arbitrator's interests are duly protected.  

In view of the above, the following can be done:

• The proviso to Section 29A(4) can be deleted.
• Instead, the Council to be established under Part IA of the 1996 Act could frame rules to the effect that grading of arbitrators should be on the basis of whether the arbitrators are able to strictly comply with the time limits provided in Section 29A.
• If the amendments are passed without considering these aspects, courts should construe this proviso to provide an opportunity of hearing to arbitrators only in exceptional cases. 

More on the 2018 Amendments in another post.

Union of India v Hardy Exploration & Production (2018: SCI): A Critique

We had a guest post in this blog providing a descriptive comment on the decision of the two judge Bench in Union of India v Hardy Exploration & Production (India) Inc (2018: SCI)("Hardy I") referring the matter to a larger Bench of the Supreme Court. Thereafter, a three judge Bench of the Supreme Court consisting of Dipak Misra, CJI, AM Khanwailkar & Dr DY Chandrachud, JJ. have decided the issue ("Hardy II") on 25.09.2018 (see here for the decision). This post discusses the decision.

Agreement Concerned:

The agreement between Union of India ("UOI") and Hardy Exploration & Production (India) Inc ("HEPI") provided, among other things:

"32.1 This contract shall be governed and interpreted in accordance with the laws of India.

32.2 Nothing in this contract shall entitle the contractor to exercise the rights, privileges and powers conferred upon it by this contract in a manner which will contravene the laws of India.

33.2 Matters which, by the terms of this Contract, the Parties have agreed to refer to a sole expert and any other matters which the Parties may agree to so refer shall be submitted to an independent and impartial person of international standing with relevant qualifications and experience appointed by agreement between the Parties. Any sole expert appointed shall be acting as an expert and not as an arbitrator and the decision of the sole expert on matters referred to him shall be final and binding on the Parties and not subject to arbitration.

If the Parties fail to agree on the sole expert, then the sole expert shall be appointed, upon request by one of the Parties, by the Secretary General of the Permanent Court of Arbitration at the Hague, from amongst persons who are not nationals of the countries of any of the countries of any of the Parties.

33.3 Subject to the provisions herein, the Parties hereby agree that any unresolved dispute, difference or claim which cannot be settled amicably within a reasonable time may, except for those referred to in Article 33.2 be submitted to an arbitral tribunal for final decision as hereinafter provided.

33.5 Any Party(ies) may, after appointing an arbitrator request the other Party(ies) in writing to appoint the second arbitrator. If such other Party(ies) fails to appoint an arbitrator within forty five (45) days of receipt of the written request to do so, such arbitrator may, at the request of the first Party(ies), be appointed by the Secretary General of Permanent Court of Arbitration at Hague, within forty five (45) days of receipt of such request, from amongst persons who are not nationals of the country of any of the parties to the arbitration proceedings.

33.6 If the two arbitrators appointed by the Parties fail to agree on the appointment of the third arbitrator within thirty(30) days of the appointment of the second arbitrator and if the Parties do not otherwise agree the Secretary General of Permanent Court of Arbitration at Hague may at the request of either Party and in consultation with both, appoint the third arbitrator who shall not be a national of the country of any Party.

33.9 Arbitration proceedings shall be conducted in accordance with the UNCITRAL Model Law on International Commercial Arbitration of 1985 except that in the event of any conflict between the rules and the provisions of this Article 33, the provisions of this Article 33 shall govern.

33.10 Notwithstanding anything to the contrary contained in Article 30, the right to arbitrate disputes and claims under this Contract shall survive the termination of this Contract.

33.12 The venue of conciliation or arbitration proceedings pursuant to this Article unless the parties otherwise agree, shall be Kuala Lumpur and shall be conducted in English language. Insofar as practicable the parties shall continue to implement the terms of this contract notwithstanding the initiation of arbitration proceedings and any pending claim or dispute."

The agreement related to the Pre-BALCO period and therefore the law as stated in Bhatia International applied to it, that is, Part I of the Arbitration & Conciliation Act, 1996 (1996 Act) applied even to foreign arbitrations, unless excluded expressly or impliedly. 

Disputes arose between the parties and the same was referred to arbitration. The arbitral proceedings were held in Kuala Lumpur and the award was made and signed at Kuala Lumpur and was against the Union of India. The Union of India challenged the award u/s 34 of the Indian Arbitration & Conciliation Act, 1996 (1996 Act), which was dismissed as Part I, including S. 34, was not applicable since the place of arbitration was Kuala Lumpur. A review petition filed against the dismissal was also rejected. On appeal to a Division Bench of the Delhi High Court, the matter was dismissed. The Court's reasoning is quoted below:

"The said contract does not specifically mention the place or seat of arbitration. But, it is clear that the award was made at Kuala Lumpur. It is also clear that the UNCITRAL Model Law, 1985 is applicable. As already indicated above, Article 20(1) of the UNCITRAL Model Law, 1985 makes it clear that the parties are free to agree on the place of arbitration, failing which, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. There is no express determination of the place of arbitration by the arbitral tribunal. However, the arbitration proceedings were conducted at Kuala Lumpur and the award has been made and signed at Kuala Lumpur. Because of Article 31.3 of the UNCITRAL Model Law, 1985, the date of making the award and the place of arbitration as determined in accordance with Article 20(1) is required to be stated in the award. Since there is no mention of any dispute with regard to the place of arbitration in the award made by the Arbitral Tribunal, it can safely be presumed that the award having been made at Kuala Lumpur, the place of arbitration as distinct from the venue of the arbitration, would also be Kuala Lumpur."

On facts, the court found that Part I of the 1996 Act was impliedly excluded, and therefore dismissed the appeal. Union of India appealed to the Supreme Court, whose decision is summarised below:

• The decision in Sumitomo Heavy Industries was applicable in the context of the Arbitration Act, 1940 and would have no application in respect of the 1996 Act (Para 8).
• The arbitration clause has to be properly construed to find out if the arbitration clause determines the seat or not (para 17). 
• As a matter of principle, Part I could be excluded if, on facts, the juridical seat is outside India or the law governing the arbitration agreement is a law other than Indian law , as was held in Union of India v. Reliance Industries Ltd. (2015) 10 SCC 213 (Reliance II)(Para 18).
• In IMAX Corporation (2017) 5 SCC 331, the Supreme Court held that the parties chose ICC arbitration and left the choice of seat to the ICC, which consulted the parties and chose ICC as the seat. The relevant awards were made in London. Therefore, the court concluded that Part I was excluded (Para 20).
• In Roger Shashoua (2017) 14 SCC 722,  the Supreme Court held that where the parties had chosen a venue and there was something else the court has to determine whether these can be interpreted to mean a choice of juridical seat. In that case, since London was also the choice of the parties of the courts, London was decided to be the jurisdiction (Para 21).
• The arbitration clause has to be read in a holistic manner to determine the jurisdiction of the court (Para 23).
• If there is a mention of venue and something else is appended thereto, depending on the nature of the prescription the court can come to a conclusion as to the implied exclusion of Part I (Para 23).
• UNCITRAL Model Law on International Commercial Arbitration 1985 which is applicable as per the agreement provides that the place of arbitration is to be determined by the arbitral tribunal (Para 27). Further Article 31(3) requires the tribunal to state in the award the date and place of the arbitration as determined under Article 20(1)(Para 29)
• The parties had not chosen the seat and the arbitral tribunal was therefore required to determine the arbitral tribunal considering the convenience of the parties and the tribunal is clearly obligated to state the same in the award (Para 31).
• Determination requires a positive act but the arbitrator held the meeting at Kuala Lumpur and passed the award. This does not amount to determination. The sittings held at various places are relatable to the venue and cannot be equated with the seat. (Para 32).
• When the place is stated it is equivalent to seat "[b]ut if a condition precedent is attached to 'place', the condition precedent has to be satisfied so that the place can become equivalent to seat. In the instant case, as there are two distinct and disjunct riders, either of them have to be satisfied to become a place." (Para 33).
• There is no determination here as determination signifies expressive opinion, as per Law Lexicon and Black's Law Dictionary.  (Para 33).
• A venue can become a seat if one of the conditions precedent is satisfied and does not assume the status of seat. In the present case therefore Kuala Lumpur is not the seat of or place of arbitration and the interchangeable use cannot apply (Para 33). 

On the basis of the aforesaid reasoning, the Supreme Court held that Part I applied and Indian courts had jurisdiction. Consequently, the Supreme Court set aside the Delhi High Court's decision and remanded back the matter to the Delhi High Court to decide the Section 34 petition.

Comments

It is submitted that the reasoning and the eventual conclusion of the three Judge Bench of the Supreme Court consisting of Dipak Mistra, CJI, AM Khanwilkar & Dr. DY Chandrachud, JJ. are not correct. At the outset, this decision cannot be and should not be read as a general proposition regarding the rules of choice of seat in the absence of an expression determination thereof  in the BALCO regime. This should have a restricted application only regarding pre-BALCO regime: the ratio is only regarding an arbitration clause to which BALCO did not apply. Why? BALCO (2012) applied only prospectively.

Before we go into the detailed reasoning, we wish to draw the attention of the readers to these observations in the judgement:  

"When a 'place' is agreed upon, it gets the status of seat which means the juridical seat. We have already noted that the terms 'place' and 'seat' are used interchangeably. When only the term 'place' is stated or mentioned and no other condition is postulated, it is equivalent to 'seat' and that finalises the facet of jurisdiction. But if a condition precedent is attached to the term 'place', the said condition has to be satisfied so that the place can become equivalent to seat. In the instant case, as there are two distinct and disjunct riders, either of them have to be satisfied to become a place... The said test clearly means that the expression of determination signifies an expressive opinion. In the instant case, there has been no adjudication and expression of an opinion. Thus, the word 'place' cannot be used as seat. To elaborate, a venue can become a seat if something else is added to it as a concomitant. But a place unlike seat, at least as is seen in the contract, can become a seat if one of the conditions precedent is satisfied. It does not ipso facto assume the status of seat."

The above observation treats the term 'seat' and 'place' as two different concepts. Seat is place. Period. [see, Gary Born, International Commercial Arbitration 20152 (2014)- "it is important to distinguish between the “seat” of the arbitration (sometimes referred to as the “place” of the arbitration)".] UNCITRAL has a tradition of using the term 'place' to signify seat. Nothing more nothing less. Therefore, the observations in the first few sentences quoted above regarding conditions precedents and place are completely wrong and have been rendered without considering the evolution of international commercial arbitration and the UNCITRAL instruments, including the UNCITRAL Model Law based on which Section 21 of the 1996 Act is based. See, this link and the links provided under the head "Seat of Arbitration for a discussion regarding the use of the term "place" in UNCITRAL instruments.

At the cost of making this post lengthier, we quote some of the discussions held in the UNCITRAL during the revision of its Arbitration Rules. The then prevailing UNCITRAL Arbitration Rules, 1976, like our 1996 Act, employed the term 'place' to signify the arbitral seat. In its 45th Session, the Working Group discussed whether the  term should be substituted with "seat':

"88. A proposal was made to replace the words “place of arbitration” in article 16, paragraphs (1) and (4) with words such as “the seat of arbitration” or “the juridical seat of arbitration”. Reservations were expressed as to whether the proposed words would in fact improve the understanding of the provision. It was observed that users were often unaware of the legal consequences attached to the term “place of arbitration”. It was suggested that a reference to the “seat of arbitration” could signal the legal implications of that notion and could differ from the physical place where certain elements of the arbitral procedure were carried out or where an arbitrator might sign the award." Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session A/CN.9/614. 

Ultimately the proposal to change the terminology was not retained as the usage of 'seat' was inconsistent with other UNCITRAL instruments such as the Model Law. Report of the Working Group on Arbitration and Conciliation on the work of its forty-fifth session A/CN.9/614. That being the history of the use of the term 'place', the observations quoted in Para 33 of the judgement relating to 'place' are wholly wrong. 

Another error that the judgement suffers from is importing the requirement into the Model Law that place of arbitration has to be expressly determined. It need not be expressly stated or expressly determined. To support its conclusion that 'determination' signified 'expressive opinion', the Supreme Court cited Ramanatha Aiyer's Law Lexicon and Black's Law Dictionary. Both these works cited court decisions in totally different contexts. 

Aiyer's Law Lexicon cited the decision of the Supreme Court in Jaswant Sugar Mills Ltd. v. Lakshmi Chand AIR 1963 SC 677, which dealt with the meaning of the term "determination" in the context of Article 136 of the Constitution of India and had nothing to do with arbitration, let alone the interpretation of the term in the context of UNCITRAL instruments. Black's Law Dictionary cited the decision Dyken Joint Venture v. Van Dyken 279 N.W.2d 459. Nowhere in the decision does the Wisconsin Supreme Court define "determination". Even the use of the term in the judgement was in the context of interpreting a statute and this had nothing to do with "determination" in the context of international commercial arbitration, much less the UNCITRAL instruments. 

For the time being let us assume that the arbitration tribunal did not decide on the seat. What happens if neither the parties chose the seat nor the tribunal determined it? UNCITRAL's Digest on the Model Law states the following:

"Article 20 does not provide for the situation where an arbitral tribunal fails to make such a determination. If the place of arbitration is neither agreed upon by the parties, nor determined by the arbitral tribunal, the courts might have to determine the place of arbitration. In such a case, it was found that the effective place of arbitration, i.e. the place where all relevant actions in the arbitration have taken place or, if this cannot be determined, the place of the last oral hearing, should be the place of arbitration."

One would notice that not a single prominent work  on international commercial arbitration was cited in the Supreme Court's judgement, which is surprising considering Supreme Court's previous practice of citing from many major commentaries on the subject. Had it looked for such authorities, it would have found the the Model Law Digest cited the decision of the German Court (CLOUT case No. 374-also reproduced under CLOUT case No. 408) [Oberlandesgericht Düsseldorf, Germany, 6 Sch 02/99, 23 March 2000-link]. The decision partially supports the decision of the Supreme Court in the instant case but goes on to reach the opposite result based on another reasoning. The relevant portion of the decision is quoted here: 

"If the parties have not agreed on a place of arbitration, such place is determined by the arbitral tribunal.The mere mentioning of a geographical place in the arbitral award can not be understood as a determination. If neither the party nor the arbitral tribunal has determined the place of arbitration, search place is fixed by reference to the "effective place of arbitration" or, by reference to the place of arbitration the last oral hearing."

Note that in this decision the court holds that the "mere mentioning of a geographical place in the arbitral award" cannot be understood as a determination but then goes on to hold that if  neither the party nor the tribunal has determined the place of arbitration, the place is fixed by reference to the effective place of arbitration or by reference to the place of the last oral hearing. It appears on facts that the hearings were held in Kuala Lumpur and therefore even by this judgement, the effective place of arbitration and the place of the last oral hearing were in Kuala Lumpur, the seat should have been Kuala Lumpur. 

It is submitted that the German judgement is erroneous in its decision that mentioning of the geographical place cannot be a determination. So is the Supreme Court in reaching the same conclusion. Let us see why. 

Section 20(1) states: "The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties." Section 20(1) provides that in case parties do not agree on the place, the tribunal shall determine the place having regard to the circumstances of the case, including the convenience of the parties. In the instant case, there was no express choice by the parties. It appears that the hearings were held in Kuala Lumpur. It also appears that the tribunal did not expressly determine the place. But is this necessary? In other words, does Section 20(1) or any other provision in the Model Law require the tribunal to decide the place expressly? Ideally, it should. But what if not? 

Nowhere does the Model Law require the tribunal to decide expressly the place. It cannot be presumed that the absence of such express determination could mean that the tribunal did not determine the place. Even assuming that the tribunal committed a procedural error by not determining the place, would it not amount to a waiver of the right to object later as provided in Article 4 of the Model Law? (Article 4 reads: "A party who knows that any provision of this Law from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided therefor, within such period of time, shall be deemed to have waived his right to object."). It appears that the parties did not object to the purported non-express designation of the seat.

Article 31(3) of the Model Law provides: "The award shall state its date and the place of arbitration as determined in accordance with article 20 (1). The award shall be deemed to have been made at that place." Note that Article 31(3) talks of "determination in accordance with article 20 (1)" and 20(1) does not talk about express determination. Given Article 4 and the lack of any objection and the fact that the parties are deemed to have known about the mandatory requirement regarding place in Article 31(3), would it not be reasonable to suggest that the parties were completely agreeable to the tribunal expressly stating (and perhaps determining) the seat in the arbitral award? Interestingly, in Para 19 of the decision of the Delhi High Court in the instant case, the Division Bench makes a similar point: "Since there is no mention of any dispute with regard to the place of  arbitration in the award made by the Arbitral Tribunal, it can safely be presumed that the award having been made at Kuala Lumpur, the place of arbitration as distinct from the venue of the arbitration, would also be Kuala Lumpur."

The purpose of Article 31(3) can be culled out from the Travaux Preparatoires of the Model Law, especially, A/40/17 - Report of the United Nations Commission on International Trade Law on the work of its eighteenth session: "254... there was a basic difference between the place stated on the award being deemed to be the place of the award and the date stated on the award being deemed to be the date of the award. The former is an irrebuttable presumption to assure the territorial link between the award and the place of arbitration. The latter must be rebuttable, since the arbitrators, as well as the parties, might have reasons for stating the date of the award to be earlier or later than the date it was actually rendered." 

Thus the effect of the insertion of the place as Kuala Lumpur in the award assured a territorial link between the award and Kuala Lumpur. Therefore, coming back to the German case, in view of the above Report, the decision of the German court is wrong and so is the decision of the Supreme Court.

Let us now look at the ex post implications of the Supreme Court's decision. For one, in the instant case, the Supreme Court has concluded that the designation by the tribunal of Kuala Lumpur was not a determination regarding the place of arbitration. This means that the Supreme Court has already concluded that the arbitral award is defective in that it has not complied with the mandatory requirement in Article 21(1) read with Article 31(3) relating to expressly declaring the place of arbitration. Would this alone be a ground to set the award aside would have to be decided by the Delhi High Court.

The Supreme Court concluded that the mere choice of foreign venue is not sufficient for presuming a foreign seat/ place. Three comments are worth noting here: 

(1) The present case was not simply a case of mere choice of foreign venue. There were many more things to the arbitration clause: Parties had agreed to choose a set of non-national arbitration rules in the form of the UNCITRAL Model Law. The appointing authority was to be the Secretary General of the Permanent Court of Arbitration. Weren't these choices sufficient to reach a conclusion of implied exclusion (Mere choice of a foreign appointing authority as opposed to Indian meant that Indian courts as the appointing authority under Section 11 of the 1996 Act was impliedly excluded.).

(2) In the context of post-BALCO decisions, the conclusion reached on the same facts would be different because Part I would not apply in foreign arbitrations. Considering the factors mentioned in point (1) above along with the choice of foreign venue, the arbitration in the BALCO regime would be foreign. 

(3) Many times, parties to the contract are either ignorant of cutting edge distinctions between seat and venue. Often they do not obtain legal advice and even if they do, some are not conversant with the implications of the usage of venue instead of seat especially if the native language of the parties is not English. Sometimes, the parties postpone the agreement on particular clauses such as the seat to after disputes have arisen because they are not able to agree on the place. Contract negotiations take place in a dynamic environment and courts should be conscious of these aspects while construing arbitration clauses and should not adopt an overly technical approach.

Lastly, the first para of the Supreme Court's decision states that the Single Judge who heard the Section 34 petition dismissed the same vide judgement dt. 09.07.2015 for the reason that "in view of the terms of the agreement and the precedents holding the field, the Indian courts have no jurisdiction to entertain the application." This is factually untrue. OMP No. 693/2013 was filed by Union of India challenging the arbitral award. The matter was heard and the court vide its judgement dt. 09.07.2015 did not accept any preliminary objection nor did it hold that Indian courts did not have any jurisdiction. The petition was in fact withdrawn. Thereafter a Review Petition was filed by the Union of India and the review petition was dismissed since the petition under Section 34 was withdrawn. Even at this stage, the Single Judge did not pass any order on merits. It was only the Division Bench that decided that Indian courts could not exercise jurisdiction since Part I was impliedly excluded. Consequently, Para 2 of the decision of the Supreme Court is also factually erroneous in that the Division Bench did not concur with the Single Judge's view on jurisdiction and applicability of Part I because no view was expressed by the Single Judge!

All said and done, the case is an apt example as to why arbitration agreements should be drafted precisely and should include the choice of seat or place of the arbitration.

Tribunal Secretaries & the Proposed Amendments to the Indian Arbitration Law

The Arbitration and Conciliation (Amendment) Bill, 2018 has been passed in the Lok Sabha and is likely to be discussed in the Rajya Sabha in the forthcoming Parliamentary session. The amendments seek to establish India as a robust centre for international arbitration. Of the many aspects that the Bill has missed out, one of the crucial aspects of international arbitration that the Bill has failed to address is the issue relating to tribunal secretaries. 

Tribunal secretaries are considered as an integral part of international arbitrations, especially with high stakes and complexities involved.  They have been regarded as the fourth arbitrator and yet the appointment, functioning and other aspects relating to tribunal secretaries are hardly addressed by the amendment. Given that the role and functioning of tribunal secretaries is a grey area, it would do well for India to address this statutorily. Hence, the following amendments are suggested (sincere thanks to Dr Shaswat Bajpai for his comments on the topic)

Inclusion of Fee to Tribunal Secretaries in Costs of Arbitration

The definition of "costs" in Section 31A should include the fees to tribunal secretaries as well. This would mean that the arbitral tribunal will have a lien over the award under Section 39(1) if the fee of the tribunal secretaries remain unpaid. The following amendments are suggested in Section 31A:

Explanation to Section 31A(1) which defines costs should include fees and expenses of tribunal secretaries also.  Accordingly, the phrase "tribunal secretaries" is sought to be added to clause (i) of the explanation as below:

"Explanation: For the purpose of this subsection, "costs" means reasonable costs relating to
i) the fees and expenses of the arbitrators, tribunal secretaries, Courts and witnesses;
(ii) legal fees and expenses;
(iii) any administration fees of the institution supervising the arbitration; and
(iv) any other expenses incurred in connection with the arbitral or Court proceedings and the arbitral award."

Immunity to Arbitrators to Extend to Tribunal Secretaries

The 2018 Amendment Bill proposes to introduce a provision on immunity of the arbitrators in the firm of Section 42B. This immunity should be extended to tribunal secretaries as well. It is suggested that the phrase “or the tribunal secretary” is added after “the arbitrator” in the proposed Section 42B.

An amended Section 42B as per the above suggestion would read as below:

”No suit or other legal proceedings shall lie against the arbitrator or the tribunal secretary for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder."

Arbitration Promotion Council to Take Steps to Recognise Professional Institutes Providing Accreditation of Tribunal Secretaries

Section 43D proposed to be introduced vide the 2018 Amendment Bill lays down the functions of the Arbitration Promotion Council of India. It does not deal with tribunal secretaries. While conducting training programmes for tribunal secretaries could be covered under Section 43D(2)(i), Section 43D is silent on tribunal secretaries. From a perusal of Section 43D, it appears that the Arbitration Promotion Council of India is not tasked with directly accrediting arbitrators. Section 43D(2)(b) provides for recognition of professional institutes which accredit arbitrators. The Council, then, should also recognize professional institutes accrediting tribunal secretaries. To this end, the phrase “and tribunal secretaries” should be added after “arbitrators” in Section 43D(2)(b).

The proposed Section 43D(2)(b) would read as below:

“(2) For the purposes of performing the duties and discharging the functions under this Act, the Council may—

(b) recognise professional institutes providing accreditation of arbitrators “and tribunal secretaries”;

General Norms Applicable to Arbitrators in Eighth Schedule Should Apply Mutatis Mutandis to Tribunal Secretaries

Section 43G of the 2018 Bill provides that the qualifications, experience and norms for accreditation of arbitrators shall be as specified in the Eighth Schedule. Eighth Schedule sought to be introduced by the 2018 Bill lays down the qualifications, experience and norms for accreditation of arbitrators. The norms should apply to tribunal secretaries also.

Although it may be unreasonable to provide for experience requirements for tribunal secretaries, it is imperative that appointment of trained tribunal secretaries is encouraged. To that end, a tribunal secretary to be eligible for appointment must have at least undergone training from recognized institutions.

Following amendments are suggested:

The phrase “and tribunal secretaries” should be added after “of arbitrators” in Section 43G. Section 43G would then read:

“The qualifications, experience and norms for accreditation of arbitrators and tribunal secretaries shall be such as specified in the Eighth Schedule:

Provided that the Central Government may, after consultation with the Council, by notification in the Official Gazette, amend the Eighth Schedule and thereupon, the Eighth Schedule shall be deemed to have been amended accordingly.”

At the end of the Eighth Schedule, the following are to be added:

“Qualifications of Tribunal Secretary

A person shall not be qualified to be a tribunal secretary unless he is trained and certified as such by a professional institute recognised by the Arbitration Promotion Council of India.

General Norms Applicable to Tribunal Secretary

The general norms applicable to arbitrator shall apply mutatis mutandis to tribunal secretary.”

Model Rules Applicable to Appointment and Functioning of Tribunal Secretaries

The current law is silent on the rules regarding the appointment and functioning of tribunal secretaries. Hence, it is proposed that a new Section 15A is added to provide detailed rules that would apply in default for appointment of tribunal secretaries unless parties agree otherwise. Detailed rules in this regard could be contained in a Ninth Schedule. Similar to Section 11A, the Central Government will be empowered with the right to amend the Ninth Schedule.

The provisions proposed will be as below:

“15A. Tribunal Secretaries.-

(1) The parties are free to agree on the number, qualifications, procedure for appointment and functions of tribunal secretaries to the arbitration proceedings.

(2) Failing any agreement referred to in sub-section (1), the Ninth Schedule shall guide the parties and the arbitral tribunal in the appointment and functioning of tribunal secretaries in the arbitration proceedings.

(3) If the Central Government is satisfied that it is necessary or expedient so to do, it may, by notification in the Official Gazette, amend the Ninth Schedule and thereupon the Ninth Schedule shall be deemed to have been amended accordingly.

(4) A copy of every notification proposed to be issued under sub-section (3), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by the both Houses of Parliament.”

The Government could come up with draft model rules addressing the topics of appointment, role and functions of tribunal secretaries. If India has to achieve the salutary aim of becoming a robust centre for international arbitration, the arbitration law should reflect the best practices in international arbitration. The need of the day is a comprehensive and enabling system of international arbitration. It would do well for the Government to explore the option of introducing these amendments in the current round of reforms.

Are the Supreme Court and the High Courts not Complying with Section 11(8) of the Amended Arbitration Law?

Section 11(8) of the amended Arbitration and Conciliation Act, 1996 as it now exists in the statute book was inserted through the Arbitration and Conciliation (Amendment) Act, 2015. Sub-section 8 reads:

“(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—

(a) any qualifications required for the arbitrator by the agreement of the parties; and

(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.” (emphasis supplied)

Section 11(8) provides that prior to appointing an arbitrator, the Supreme Court, the High Court or the designated institution should mandatorily seek a disclosure from the prospective arbitrator as mandated in Section 12(1) (disclosure per Schedule VI) and should have due regard to the qualifications of the arbitrators and importantly, the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrators.

It appears from a perusal of the decisions of the Supreme Court and the High Court that these are not being done post-2015. Take the case of National Collateral Management Services Ltd. v. Food Corporation of India, 2017(5) Arb LR 288 (Del.). The case was pertaining to reference to the CMD of one of the parties for resolution of disputes. The Delhi High Court held that since the CMD was an employee, he could not act as arbitrator owing to the bar in Section 12(5) r/w VII Schedule. Consequently, the High Court appointed an arbitrator with a statement that the arbitrator would decide his fees in consultation with the parties. The decision has nothing to state on whether Section 11(8) was complied or nor. Also, take the recent decision of the Supreme Court in Trans Asian Shipping Services (Pvt.) Ltd. v. Beacon Shipping Lines Ltd. MANU/SC/1014/2018, where the Supreme Court appointed the arbitrator and then directed the Registry to send a copy of the order to the arbitrator. 

With great respect, this procedure is in contravention of Section 11(8) of the 1996 Act as amended vide the 2015 Amendment Act. When the Parliament of India through the 2015 Amendments has laid down a procedure, it is for the High Courts and the Supreme Court to comply with the same in their letter and spirit. The judges of the Supreme Court and the High Court, even if they are acting in their judicial capacity, have to comply with the statute in full. The decision of the Supreme Court and the High Court noted above do not even disclose if the requirements in Section 11(8) were satisfied or not.

When a body is appointing an arbitrator, it is duty bound to ensure that the arbitrators appointed have the capability to decide a dispute and are independent and impartial as regards the dispute. Hence, such a power is endowed upon the Supreme Court and the High Court. The courts cannot shy away from such a duty.  

This blawgger has argued elsewhere:

"The question as to whether prior to appointing a person as arbitrator, consent from such person is taken by the Designate, was answered by six courts on merits. It appears that none of the courts obtain consent from the prospective arbitrator to be appointed in a particular dispute. It may be noted that the schemes made under Section 11(10) of the 1996 Act generally provide that the decision taken by the Designate to appoint an arbitrator shall be communicated to the arbitrator appointed pursuant to the request.This might lead to a few problems. 

One, it may lead to a conflict of interest situation involving the arbitrator and one of the parties. For instance, a person holding a substantial number of shares in a company may be appointed by the Designate as arbitrator in a dispute concerning the said company. Unless the Designate approaches a prospective arbitrator, it would not be possible for the arbitrator to disclose in writing such circumstances prior to appointment. In this regard, Section 12(1) of the Act mandates that when a person is approached in connection with his possible appointment as an arbitrator, he/she shall disclose in writing any circumstances likely to give rise to justifiable grounds as to his/ her independence or impartiality. Even if the arbitrator declines to proceed with the arbitration for that reason after the appointment is made by the Designate, the parties would be put in the same position as they were prior to the filing of the petition under Section 11, leading to delays of several months and, at times, several years (Srinivasan 2012: 27, 29).

Two, a person may make himself/herself available for being appointed as arbitrator. However, subsequently, at the time of appo intment by the Designate, the person might be unable or might not be ready to act as an arbitrator for reasons related to a particular dispute, or might not be ready to act as arbitrator in any dispute owing to illness or any other reason.

Hence, it would be prudent to seek consent prior to appointing a person as the arbitrator in a particular dispute." (See, Badrinath Srinivasan, Appointment of Arbitrators by the Designate under

the Arbitration and Conciliation Act: A Critique, vol xlix no 18, Economic & Political Weekly, p. 59-66- subscription required)

It would do well for the Supreme Court and the High Court to follow the below said procedure:

• Once the Court determines the prospective judge to be appointed depending on the requirements of the arbitration agreement and the nature of the dispute, the prospective candidate has to be informed by the court through the Registry.
• The Registry has to send a letter to the prospective candidate seeking the relevant declarations of independence, impartiality and availability.
• On receipt of the declarations, the High Court or the Supreme Court, as the case may be, should appoint the arbitrator.
• During this process, neither the Registry  nor the prospective arbitrator should interact with the parties or either party.

The Supreme Court and the High Courts should duly follow the law. If there is any difficulty in the above, the Registry could write to the Ministry expressing difficulties or problems with the law so that the same could be corrected. Already there is a Bill to amend the arbitration law pending in the Parliament. If the Ministry finds merit in the issue, it could very well amend the law.