§11 of the Arbitration & Conciliation Act 1996 (A&C Act) stipulates the procedure for appointment of arbitrators. While the objective of the A&C Act has always been to restrict the supervisory role of Courts in the arbitral process1, the procedure for appointment of arbitrators has never been free of judicial intervention. In fact, the Courts from time to time have continued to exercise some degree of judicial supervision over the process, which even extends to examining the validity of a dispute before appointing an arbitrator. The Arbitration & Conciliation (Amendment) Act 2019 (Amendment Act 2019) aims to address this by diminishing Court intervention in the appointment of an arbitral tribunal.
Position from 1996 – 2015
The A&C Act when incepted in 1996 owed its blueprint to the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL). The UNCITRAL Model Law has been incorporated by a number of countries into their own domestic legislations2, including India.
After the A&C Act came into force, the Courts initially took the view that their powers under §11 of the A&C Act were administrative3 in nature and limited to making appointments, but it was later clarified that this was a judicial power4 and the Courts could even look into whether a valid dispute existed between the parties. Judicial intervention in the appointment process increased when Courts carved out more judicial exceptions for Court interference with regard to an arbitral reference5. A few of these were in relation to a valid discharge voucher being executed between the insurer and the insured6.
In light of this interpretative maze, the Law Commission in its 246th Report of August 2014 proposed certain amendments to §11, primarily with a view to restrict judicial intervention and promote arbitration. With the Arbitration & Conciliation (Amendment) Act 2015, the proposed amendments were largely brought into force.
A new provision, §11(6A) was introduced, which provided that the Court's role7 was limited to examining only the existence of the arbitration agreement8.
A plain reading of this amendment was affirmed by the Supreme Court in Duro Felguera SA v Gangavaram Port Ltd (2017) 9 SCC 729 where it ruled that "after the amendment, all that the Courts need to see is whether an arbitration agreement exists – nothing more, nothing less." However, there has been some divergence. For example, the Supreme Court in Oriental Insurance Co v Narbheram Power and Steel (2018) 6 SCC 534 denied reference to arbitration by strictly construing an arbitration clause in an insurance policy which stipulated that arbitration could only be invoked if liability was admitted by the insurance company. A similar observation was made in United India Insurance v Hyundai Engineering AIR 2018 SC 3932.
In United India Insurance v Antique Art Exports AIR 2019 SC 3137, an arbitral reference was denied where a full and final discharge voucher had been executed. The Court here by its ruling effectively reversed the position to the pre-2015 position. The judgement in Antique Art Exports has recently been over-ruled by a three judge bench of the Supreme Court in Mayavti Trading v Pradyuat Deb Burman [Civil Appeal No 7023 of 2019], wherein the Court, while relying on Duro Felguera, gave a finding that the pre-2015 position had been overruled by the legislature and that the power of the Court is limited to only examining whether an arbitration agreement exists.
2019 – Drastic changes proposed
A High Level Committee (Committee) headed by Justice BN Srikrishna was appointed in December 2016 to inter alia look into the speedy appointment of arbitrators and promote institutionalised arbitration. The Committee's Report dated 30 July 2017, fructified into the recent Amendment Act 2019.
Amongst the changes suggested by the Committee, the most significant are in relation to §11. The amended provision now provides that that the appointment of an arbitrator has to be made directly by an arbitral institute, designated by the Supreme Court or the High Court, as the case may be9. This change is based on the Committee's recommendations which extensively looked into the position in Singapore and Hong Kong where the appointment of arbitrator is done directly by the Singapore International Arbitration Centre and Hong Kong International Arbitration Centre respectively.
The amended §11 is yet to be notified but once this eventuates, it may lead to an evolution of this provision from extensive Court interference to one of minimal interference.
1. Point 4(v) of the Statement of Objects and Reasons, A&C Act
3.Konkan Railway Corporation v Rani Construction (2002) 2 SCC 388
4. SBP & Co v Patel Engineering (2005) 8 SCC 618
5. National Insurance Co v Boghara Polyfab (2009) 1 SCC 267
6. Union of India v Master Construction (2011) 12 SCC 349; New India Assurance v Genus Power Infrastructure (2015) 2 SCC 424; ONGC Mangalore v ANS Constructions (2018) 3 SCC 373
7. The Supreme Court, in case of international commercial arbitration or the High Court, in case of other arbitrations.
8. §11(6A): "The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."
9. §11(4) of the Amendment Act, 2019 now stands:
"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, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of any arbitrations other than international commercial arbitration, as the case may be."
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