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Results: 4 Answers
International Arbitration
8.
The tribunal
8.1
How is the tribunal appointed?
 
India
The Arbitration Act grants full liberty to the parties to appoint the arbitrators mutually, subject to compliance with Section 12(5), Schedule V and Schedule VII of the Arbitration Act. Section 10(1) provides that the parties are free to determine the number of arbitrators, provided that this number is odd. This section also provides that if the parties fail to agree on the number of arbitrators, the tribunal shall consist of a sole arbitrator.

The procedure in relation to the appointment of the tribunal is set out in Section 11 of the Arbitration Act. As per Section 11(2), the parties are free to agree on a procedure for appointing the tribunal, subject to the requirements set out in Section 11(6). If the parties fail to agree on a procedure for appointing the tribunal, then as per Section 11(3):

  • 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; and
  • in an arbitration with a sole arbitrator, depending on the nature of agreement, the parties can mutually appoint the arbitrator.

Furthermore, if the parties, by mutual consent, have agreed on institutional arbitration, the appointment will also be governed by the rules of that particular institution.

Before the tribunal is appointed, the court - or a person or institution designated by such court - is required to seek a disclosure in writing from the prospective arbitrators in terms of Section 12(1) of the Arbitration Act. Under this section, each prospective arbitrator is obliged to make an express disclosure on:

  • any circumstances which are likely to give rise to justifiable doubts regarding his or her independence or impartiality; or
  • any grounds which may affect his or her ability to complete the arbitration within 12 months.

The purpose of this provision is to secure the appointment of an unbiased and impartial arbitrator. Schedule V to the Arbitration Act contains a list of grounds giving rise to justifiable doubts as to the independence or impartiality of an arbitrator. Schedule VII lays out the grounds which make a person ipso facto ineligible for appointment as an arbitrator.

In addition, the Supreme Court of India (in the case of international commercial arbitration) and the high courts (in any other arbitration) are empowered to appoint arbitrators under Sections 11(4), 11(5) and 11(6) of the Arbitration Act.

For more information about this answer please contact: Manoj Singh from Singh & Associates
8.2
Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
 
India
The requirements as to the number of the arbitrators are set out under Section 10 of the Arbitration Act. Pursuant to this section, the parties are free to determine the number of arbitrators, provided that this is odd. If the parties fail to determine the number of arbitrators, the tribunal shall consist of a sole arbitrator.

Further, under the act, there is no requirement as to the qualifications of arbitrators. The parties are free to decide upon the qualifications and nationality of the arbitrators as per the arbitration agreement. In this regard, Section 11(1) of the Arbitration Act provides that persons of any nationality may serve as arbitrators, unless otherwise agreed by the parties.

For more information about this answer please contact: Manoj Singh from Singh & Associates
8.3
Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
 
India
The duty to adjudicate disputes independently and impartially is the cornerstone on which a successful arbitration is based. This requirement has become increasingly relevant in today’s complex arbitrations. It is in view of this that Section 12 of the Arbitration Act was amended along with the insertion of Schedules V, VI and VII. As per Section 12(3), an arbitrator may be challenged only if:

  • circumstances exist that give rise to justifiable doubts as to his or her independence or impartiality, as per Schedules V of the Act; or
  • he or she does not possess the qualifications agreed by the parties.

As per Section 12(4), a party may challenge an arbitrator it has appointed, or in whose appointment it has participated, only for reasons of which it becomes aware after the appointment has been made.

Section 12(5) provides that, notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel, or with the subject matter of the dispute, falls under any of the categories specified in Schedule VII shall be ineligible for appointment as an arbitrator. At the same time, the statute has also empowered the parties to waive this condition by an express agreement in writing. The parties are free to agree on a procedure for challenging an arbitrator under Section 13 of the Arbitration Act.

The circumstances that can give rise to justifiable doubts are set out in Schedule V. Schedule VII lays down a list of circumstances which are more serious. If a person falls under any of the provisions in Schedule VII, he or she shall be disqualified from the position of arbitrator. This is in contrast to Schedule V, as a person who falls under the provisions of this schedule will not necessarily be disqualified from the position of arbitrator.

The interpretation of these schedules and the procedure for challenging an arbitrator, as mentioned in Sections 12, 13 and 14 of the Arbitration Act, were presented before the Supreme Court of India in HRD Corporation v GAIL (India) Limited (SLP (C) 20679 of 2017). In West Haryana Highways Project Private Limited v NHAI (OMP (T) (COMM) 28/2017, decided on 15 May 2017), while adjudicating a petition filed under Section 14 of the Arbitration Act, 1996, the Delhi High Court terminated the mandate of one arbitrator nominated by NHAI, applying the principles of Schedule VII, as that person was advising NHAI on other projects.

Further, in view of Sections 14 and 15 of the act, the courts have the power to terminate the mandate of an arbitrator if he or she becomes de jure or de facto unable to perform his or her duties, and to appoint a replacement arbitrator accordingly.

For more information about this answer please contact: Manoj Singh from Singh & Associates
8.4
If a challenge is successful, how is the arbitrator replaced?
 
India
The process for replacing an arbitrator after a successful challenge is set out in Section 15 of the Arbitration Act. If the challenge is successful, a replacement arbitrator can be appointed by either of the parties through an application under Section 15 of the Arbitration Act. Section 15(2) clarifies the procedure, stating that a replacement arbitrator shall be appointed according to the rules that applied to the appointment of his or her predecessor.

This was reiterated by the Supreme Court of India in Shailesh Dhairyawan v Mohan Balkrishna Lulla (2016) 3 SCC 619), in which it held that the replacement arbitrator shall be appointed according to the provisions of Section 15(2) of the Arbitration Act, and that the word ‘rules’ as used in this section is not limited to statutory rules, but also includes the terms of the agreement between the parties. The court further observed that Section 15(2) must be given a liberal interpretation which encompasses all possible circumstances under which an arbitrator’s mandate may be terminated.

For more information about this answer please contact: Manoj Singh from Singh & Associates
8.5
What duties are imposed on arbitrators? Are these all imposed by legislation?
 
India
As per the Arbitration Act, a tribunal has the following duties:

  • to disclose circumstances that could give rise to justifiable doubts as to an arbitrator’s independence and impartiality (Section 12(1));
  • to act within its jurisdiction (Section 16);
  • to treat the parties equally (Section 18);
  • to act judicially and follow the rules of justice, equity and good conscience (Section 28);
  • to take into account the terms of the contract and trade customs while making an award (Section 28(3));
  • to encourage settlement of the dispute (Section 30);
  • to issue the arbitral award in writing and sign the award (Section 31(1));
  • to hear arbitrable disputes only (Section 34(2)(a)(iv));
  • to follow the provisions of the Arbitration Act (Section 34(2)(a)(v)); and
  • to render accounts (Section 38).

In addition, an arbitrator has the following duties:

  • to observe public policy;
  • to deliver the award in a timely manner;
  • to provide a reasoned award in accordance with the act;
  • to follow the principles of natural justice;
  • not to act beyond his or her jurisdiction;
  • not to commit fraud or misconduct;
  • to act together with his or her fellow arbitrators;
  • not to accept hospitality; and
  • a duty of finality and reasonableness
For more information about this answer please contact: Manoj Singh from Singh & Associates
8.6
What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
 
India
(a) Procedure, including evidence?

Insofar as the procedure pertaining to the recording of evidence is concerned, as per Section 19 of the Arbitration Act, the tribunal is not bound by the rules of the Indian Evidence Act, 1872 and the Code of Civil Procedure, 1908, and the parties are free to agree on the procedure, failing which the tribunal is empowered to determine the procedure. Further, Section 19(4) provides that the power of the tribunal includes the power to determine the admissibility, relevance, materiality and weight of evidence. This does not prohibit the tribunal from drawing sustenance from the fundamental principles underlying the Code of Civil Procedure or the Indian Evidence Act, but frees the tribunal from being bound, as would a civil court. However, it is settled law that the broad principles of the Indian Evidence Act and the Code of Civil Procedure, will be applicable in arbitration. Further, the tribunal may seek assistance from the court in obtaining evidence under Section 27 of the Arbitration Act. Under Section 27(5) of the Arbitration Act, the tribunal can also refer to the court to penalise or put to such disadvantage anyone who fails to attend or refuse to give evidence or makes any other default or is guilty of any contempt to the tribunal during the conduct of arbitration proceedings.

(b) Interim relief?

Under the amended Section 17 of the Arbitration Act, the tribunal has powers to grant interim measures which are similar to those of a court. An order passed by the tribunal under Section 17 is deemed to be an order of a court for all purposes and is enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of a court. The tribunal has the power to grant the following interim measures under Section 17:

  • appoint a guardian for a minor or a person of unsound mind for the purpose of the arbitration;
  • grant interim measures for the preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement;
  • grant interim measures to secure the amount in dispute in the arbitration;
  • grant interim measures to detain, preserve or inspect any property or thing which is the subject matter of the dispute in arbitration;
  • grant interim injunctions or appoint a receiver; and
  • grant such other interim measures as may appear to be just and convenient.

(c) Parties which do not comply with its orders?

Orders of a tribunal are enforceable under Section 17(2) of the Arbitration Act as if they were an order of a court under the Code of Civil Procedure, 1908. In Alka Chandewar v Shamshul Ishrar Khan (Civil Appeal 8720/2017), the court held that the tribunal in an arbitration is empowered to make a representation to the appropriate court for any action of the parties amounting to contempt, to be tried under the Contempt of Courts Act, 1971, if the parties violate its orders, including any interim orders passed during the course of the proceedings under Section 27(5) of the Arbitration and Conciliation Act, 1996.

In Jindal ITF Limited v NTPC Limited (OMP [ENF][COMM] 55 of 2018), the Delhi High Court for the first time enforced an interim order passed by a tribunal under Section 17 and accordingly directed the other party to pay the sum ordered by the tribunal as interim relief.

However, a tribunal does not have the power to enforce its own orders or any other powers similar to those of a court under Order 39, Rule 2A of the Code of Civil Procedure in case of disobedience.

(d) Issuing partial final awards?

The Arbitration Act uses the phrase ‘interim award’ rather than ‘partial award’; however, in practice, it has the same meaning. Section 2(1)(c) provides that an ‘award’ includes an interim award. Further, under Section 31(6), the tribunal has the power to make an interim award at any time during the proceedings regarding any subject matter for which it is competent to make a final arbitral award.

Further, in Mcdormett International Inc v Burn Standard Co Ltd ((2006) 2 Arb 498) the Supreme Court of India held that the Arbitration Act uses the terms ‘interim award’ and ‘final award’ rather than ‘partial award’. An interim award is not one in respect of which a final award can be made; although it may be a final award on the matters covered therein, but made at an interim stage.

(e) The remedies it can grant in a final award?

The tribunal may grant such relief as is not in the exclusive domain of a public forum such as a court. For instance, it may award compensation or a buy-out or sell-out in a shareholder dispute, but cannot order the winding up of the company or appoint independent directors to the board. The tribunal can order:

  • specific performance and damages;
  • injunctions;
  • declarations;
  • recoveries;
  • costs; and
  • interest.

(f) Interest?

Section 31(7)(a) of the Arbitration Act provides that, unless otherwise agreed by the parties, the tribunal may provide in an arbitral award for the payment of interest at such rate it deems reasonable, on the whole or any part of the moneys awarded, for the whole or any part of the period from the date on which the cause of action arose until the date of the award. Further, as per Section 31(7)(b), unless the tribunal directs otherwise, any sums directed to be paid by the tribunal shall carry interest at a rate that is 2% higher than the current rate prevailing as on the date of the award, from the date of award until payment. In Union of India v M/s Ambica Constructions (Special Leave Petitions (C) 11114 and 17219/2009) the Supreme Court of India held that if a contract expressly bars the award of interest pendente lite, the same cannot be awarded by the arbitrator.

For more information about this answer please contact: Manoj Singh from Singh & Associates
8.7
How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
 
India
The tribunal has the power to proceed ex parte if any party fails to participate. As per Section 25(b) of the Arbitration Act, if the respondent fails to communicate its statement of defence in accordance with Section 23(1), the tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant, and has discretion to treat the right of the respondent to file such statement of defence as having been forfeited.

Further, Section 25(c) provides that where, without showing sufficient cause, a party fails to appear at an oral hearing or to produce documentary evidence, the tribunal may continue the proceedings and make the award on the evidence before it. However, Section 25 is not mandatory and the parties are free to agree otherwise.

For more information about this answer please contact: Manoj Singh from Singh & Associates
8.8
Are arbitrators immune from liability?
 
India
No section of the Arbitration Act provides any kind of immunity to the arbitrators. Rather, under Section 29A, an arbitrator’s fees may be reduced by up to 5% per month of delay for failure to make an award within 12 months of the tribunal entering the reference. Further, as per Section 13(6), if an award is set aside on the grounds of challenge to the appointment of an arbitrator, the courts are empowered to decide whether the arbitrator in question is entitled to any fees. However, the Arbitration and Conciliation (Amendment) Bill, 2018 proposes to insert a new Section 42B in the Arbitration Act which provides that no suit or other legal proceedings may be brought against the arbitrator for anything which was done or intended to be done in good faith under the act or the rules or regulations made thereunder.

For more information about this answer please contact: Manoj Singh from Singh & Associates