CLINICAL COURSE-I: ALTERNATE DISPUTE RESOLUTION DISSERTATION

FACULTY OF LAW, JAMIA MILLIA ISLAMIA

ARBITRATION AGREEMENT,
COMPOSITION AND CONDUCT OF
ARBITRAL TRIBUNAL

SAMEEKSHA KASHYAP
B.A.-LLB (Hons.)
Self-Finance
Roll No.: 16BLW021
JAMIA MILLIA ISLAMIA

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NEW DELHI- 25

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 CONTENTS

PART I: ARBITRATION AGREEMENT…………………………………………….. P.06

1. MEANING AND ENFORCEMENT OF ARBIRATION AGREEMENT

DEFINITION: ARBITRATION AGREEMENT, ARBITRATION CLAUSE AND SUBMISSION

AGREEMENT…………………………………………………...………………………….. P.06

ENFORECEMNT OF AN ARBITRATION AGREEMENT……….……………………….P.06

ENFORECEMNT OF AN ARBITRATION AGREEMENT UNDER UNCITRAL MODEL AND

NEW YORK CONVENTION………………………………….…………………………….P.09

2. THE LAW APPLICABLE TO THE ARBITRATION AGREEMENT……...…….P.10

CRITERIA FOR DETERMINING THE SAME………………………….…………………..P.10

THE MODEL LAW…………………………………………………………………….……..P.11

THE NEW YORK CONVENTION…………………………………………………….…….P.11

3. REQUIREMENTS FOR THE ARBITRATION AGREEMENT…………………..P.13

IT MUST ARISE OUT OF CONSENT…………………………………………….….……P.13

THE PARTIES MUST BE LEGAL PARTIES……………………………………………...P.13

THE AGREEMENT MUST BE MADE IN WRITING………………………...…………..P.16

IT MUST ARISE OUT OF A DEFINED LEGAL RELATIONSHIP………...…………….P.19

IT MUST BE CAPABLE OF BEING ASCERTAINED……………………………………P.20

4. TERMINATION OF ARBITRATION AGREEMENT…………………………….P.22

DOCTRINE OF FRUSTATION………………………………………………….……..…..P.22

GROUNDS FOR TERMINATION OF AGREEMENT………………………..…….…..…P.24

WHAT CANNOT BE A GROUND FOR TERMINATION OF AN AGREEMENT…….…P.25

.
5. SPECIAL CHARACTERISTICS OF ARBITRATION AGREEMENT………...…P.28
.
SEPERABILITY AND AUTONOMY OF ARBITRATION AGREEMENT……………….P.28

SURVIVAL OF THE ARBITRATION AGREEMENT……………………………………..P.31

GOVERNEMENT CONTRACTS AND ARBITRATION CLAUSE……………………….P.32

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PART II: COMPOSITION OF ARBITRATION TRIBUNAL……………………….P.33

1. NUMBER OF ARBITRATORS…….……………………………………P.33

2. APPOINTMENT OF ARBITRATORS…………………………………..P.35

3. GROUNDS OF CHALLENGE…………………………………………..P.40

4. CHALLENGE PROCEDURE…………………………………………...P.42

5. FAILURE OR IMPOSSIBILITY TO ACT…...………………………....P.43

6. TERMINATION OF MANDATE AND SUBSTITUTION OF

ARBITRATION……………………………………………………..…..P.45

PART III: CONDUCT OF ARBITRAL TRIBUNAL…………………………….…..P.47

1. EQUAL TREATMENT OF PARTIES……………………….………...P.47

2. DETERMINATION OF RULES OF PROCEDURE………………….P.48

3. PLACE OF ARBITRATION………………………………….……….P.49

4. COMMENCEMENT OF ARBITRAL PROCEEDINGS……………...P.49

5. LANGUAGE…………………………………………………………..P.49

6. STATEMENT OF CLAIM AND DEFENCE…………………………P.50

7. HEARING AND WRITTEN PROCEEDINGS……………………….P.52

8. DEFAULT OF A PARTY……………………………………………..P.53

9. EXPERT APPOINTMENT BY ARBITRAL TRIBUNAL……………P.54

10. COURT ASSISTANCE IN TAKING EVIDENCE…………………...P.55

CONCLUSION……………………………………………………………………………P.57

BIBLIOGRAPHY…………………………………………………………………………P.60

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 RESEARCH METHODOLOGY

The methodology used in the assignment is Doctrinal Method of Research, and

the material is collected from statutes, textbook, published articles, internet
information and other sources which are specified in the Bibliography page.

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 ACKNOWLEDGEMENT

I owe my profound gratitude to our CLINICAL COURSE- I Professor Mr. Sukesh Kumar
Mishra, who took keen interest in my research work and guided me all along, till the
completion of my project.

I am thankful and fortunate enough to get constant encouragement, support and guidance
from all the teaching staff of Faculty of Law, Jamia Millia Islamia which helped me
successfully complete my research work. Also, I would like to express my sincere regards to
all the non-teaching staff of Faculty of Law, Jamia Millia Islamia.

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 PART I: ARBITRATION AGREEMENT

MEANING AND ENFORCEMENT OF ARBIRATION AGREEMENT

 Definition: Arbitration agreement, arbitration clause and submission agreement

In general, the arbitration agreement provides the basis for arbitration. Section 2(a) of the
Arbitration act of 1940 defined ‘arbitration agreement’, the same has been defined in sec 7 of
Arbitration and conciliation act, 1996, which is very much identical to Art II(1) of the New
York convention as an agreement by the parties to submit to arbitrator all or certain disputes
which have arisen or which may arise between them in respect of a defined legal relationship,
whether contractual or not.

It is an agreement to present or future disputes to arbitration. Thus, this generic concept

comprises two basic types:
(a) A clause in a contract, by which the parties to a contract undertake to submit to
arbitration the disputes that may arise in relation to that contract (arbitration clause);or

(b) An agreement by which the parties to a dispute, that has already arisen, submit the
dispute to arbitration (submission agreement).

The arbitration clause therefore refers to disputes not existing when the agreement is
executed. Such disputes, it must be noted, might never arise. That is why the parties may
define the subject matter of the arbitration by reference to the relationship out of which it
derives.

On the other hand, the submission agreement refers to conflicts that have already arisen.
Hence, it can include an accurate description of the subject matters to be arbitrated.

Some national laws require the execution of a submission agreement regardless of the
existence of a previous arbitration clause. In such cases, one of the purposes of the
submission agreement is to complement the generic reference to disputes by a detailed
description of the issues to be resolved.

 Enforcement of an arbitration agreement

By entering into an arbitration agreement, the parties commit to submit certain matters to the
arbitrators’ decision rather than have them resolved by law courts.
Thus, the parties:

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a) Waive their right to have those matters resolved by a court; and
b) Grant jurisdictional powers to private individuals (the arbitrators).
These two main effects of the agreement may be referred as “negative” and “positive”,
respectively.

1. Negative enforcement: Lack of jurisdiction

An arbitration agreement precludes judges from resolving the conflicts that the parties have
agreed to submit to arbitration. If one of the parties files a lawsuit in relation to those matters,
the other may challenge the court’s jurisdiction on the grounds that the jurisdiction of the
courts has been waived.

The judge’s lack of jurisdiction is not automatic, nor can it be declared ex officio. Instead, it
must be raised by the defendant no later than when filing the answer to the complaint. That is
so because arbitral jurisdiction is waivable, and the waiver would be presumed if the plaintiff
filed a complaint and the defendant failed to challenge the court’s jurisdiction.

To sum up, once a conflict has arisen over any of the subjects included in the arbitration
agreement, the courts will have no jurisdiction to resolve it unless both parties expressly or
tacitly agree to waive the arbitration agreement.

2. Positive enforcement: the “submission agreement”

The arbitration agreement grants jurisdiction to arbitrators. By “jurisdiction” we mean the

powers conferred on arbitrators to enable them to resolve the matters submitted to them by
rendering a binding decision.

The negative enforcement of the arbitration agreement is universally accepted and does not
depend on the kind of agreement. Conversely, the positive enforcement is inextricably linked
to the applicable law. That is so because some local arbitration laws still do not grant the
arbitration clause an autonomous status. In fact, some traditional laws require that, even when
there is a previous arbitration clause, the parties execute a new agreement called “submission
agreement”, which must contain the names of the arbitrators and clearly identify the matters
submitted to them.1

When a submission agreement is required, the arbitration clause becomes insufficient. Once
there are concrete issues in dispute, the parties must enter into an agreement, whether or not
they have previously signed an arbitration clause. Under those laws, the arbitration clause at
1
This is the case of Argentine and Brazilian laws.

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best compels the parties to sign the submission agreement. However, since this obligation is
not always complied with voluntarily, such laws provide for a court’s intervention to enforce
the arbitration clause. The judge must supplement the content of the submission agreement,
and his judgment – which replaces the will of the party who has refused to sign it – is treated
as a submission agreement. Lack of cooperation by one of the parties in the execution of the
submission agreement or insuperable differences between the parties as to what should go
into it are settled by a court.2

The legal requirement of the submission agreement as a condition to arbitrate has been
considered one of the main obstacles to arbitration, even in the cases in which it could be
supplied by a court. In fact, if one of the parties resists arbitration, the refusal to execute the
submission agreement allows it to obstruct the constitution of the tribunal and delay the
arbitration itself. This forces the opposite party to enter into a judicial process to obtain the
submission agreement. Arbitration is therefore deprived of one its main comparative
advantages, i.e. expeditiousness.

That is why, taking the concept from the Geneva Protocol on Arbitration Clauses,3 the New
York Convention and the new arbitration laws, modelled upon the Model Law, do not require
a submission agreement and grant full and immediate enforcement to the arbitration
agreement, regardless of whether or not it refers to future or present controversies. The
arbitration laws that still require the submission agreement are deemed to be outmoded and
should be revised in order to make their provisions congruent with the modern trends on
international arbitration.

 Enforcement of an arbitration agreement under the UNCITRAL Model Law and

the New York Convention

The Model Law defines the arbitration agreement as: “An agreement by the parties to submit
to arbitration all or certain disputes which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not”.4

2
As an example, Article 7 of Arbitration Law of Brazil states: “There being an arbitration clause and reluctance
to submit to arbitration, the interested party may request that the other party be summoned to appear before a
court in order to conclude the submission agreement, to which effect the judge shall set a special hearing. The
judgment granting the request shall be treated as a submission agreement”.
3
Article 1 of the 1923 Geneva Protocol on Arbitration Clauses establishes that each of the Contracting States
recognises the validity of an agreement whether relating to existing or future differences.
4
Article 7.1 of the Model Law

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According to the New York Convention, “Each Contracting State shall recognize an
agreement in writing under which the parties undertake to submit to arbitration all or any
differences which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractua1 or not, concerning a subject matter capable of settlement by
arbitration”5

Concerning the enforcement of an arbitration agreement, the Model Law establishes that6:

(1) A court before which an action is brought in a matter which is the subject of an arbitration
agreement shall, if a party so requests not later than when submitting his first statement on
the substance of the dispute, refer the parties to arbitration unless it finds that the agreement
is null and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral
proceedings may nevertheless be commenced or continued, and an award may be made,
while the issue is pending before the court.

Article 8.1 of the Model Law mostly follows the text of Article II.3 of the New York
Convention.7 However, the provision of the Model Law is more specific, since it establishes
that the request must be made “not later than when submitting his first statement on the
substance of the dispute”.

THE LAW APPLICABLE TO ARBITRATION AGREEMENT

 Criteria for determining the law applicable to the arbitration agreement

The law applicable to the arbitration agreement governs the formation, validity, enforcement
and termination of the arbitration agreement. It deals with such aspects as the formal
requirements of the arbitration agreement, the arbitrability of its subject matter, its autonomy
in relation to the contract in which it is contained, the arbitrators’ capacity to rule on their
own jurisdiction and the extent to which judicial review is admissible. The applicable law
also determines whether or not the submission agreement is required.

5
Article II.1 The New York Convention
6
Article 8 of The Model Law
7
“The court of a Contracting State, when seized of an action in a matter in respect of which the parties have
made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties
to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being
performed.”

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There are different criteria for determining the law applicable to the arbitration agreement.
The most common ones are:

• The law chosen by the parties: Some laws allow the parties to choose the law applicable
to the arbitration agreement, irrespective of the law governing other question relating to the
arbitration.

• The law applicable to the contract: Some authors claim that the law applicable to the
arbitration agreement is usually the law applicable to the contract that contains the clause. 8
These authors nevertheless admit that the law applicable to the agreement could be different,
since the arbitration agreement is separable from the main contract.

• The procedural law applicable to the arbitration: Another criterion consists of applying
to the arbitration agreement the procedural law that governs the arbitration. In the absence of
an agreement the procedural law is in principle the law of the place of arbitration. Although
rare in practice, the parties have the right to choose a procedural law other than the law of the
place of arbitration.

• The law of the place of the arbitration: Parties seldom indicate either a special law
applicable to the arbitration agreement or a specific procedural law. Consequently, the place
of arbitration becomes important because it will then determine the law applicable to the
arbitration agreement.

 The Model Law

In this connection, the Model Law does not contain rules of choice of law to determine the
law applicable to the arbitration agreement. When adopted by any country, the issue of the
applicable law is solved, because the Model Law sets forth the validity requirements for an
arbitration agreement providing for international commercial arbitration in that State.

 The New York Convention

The New York Convention adopts, to a greater extent than does the Model Law, the principle
that the parties are free to determine a law different from the law of the place of arbitration as
the law applicable to the arbitration agreement.

8
SUTTON, David St. John, KENDALL, John & GILL, Judith, “Russel on Arbitration”, 25th edition,Sweet &
Maxwell, London, 1997, p. 71.

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The question of the existence and validity of the arbitration agreement may arise in two
different situations:

a) Initially, when one of the parties requests a court to recognize the arbitration agreement
(for instance, by requesting the court to decline its jurisdiction or to appoint an arbitrator); or

b) At the end of the arbitration, when it is raised as a defence to challenge recognition or

enforcement of the arbitral award.

The New York Convention provides rules of conflicts of law for this last situation, but is
silent about the first case.

When a dispute regarding the existence or validity of the arbitration agreement arises at the
stage of enforcing an award, Article V.1 provides that recognition and enforcement of the
award may be refused, at the request of the party against whom it is invoked, only if that
party furnishes to the competent authority where the recognition and enforcement is sought,
proof that: (a) The parties to the agreement referred to in Article II were, under the law
applicable to them, under some incapacity, or the said agreement is not valid under the law to
which the parties have subjected it or, failing any indication thereon, under the law of the
country where the award was made.

Under this provision, the parties are free to determine the rules to which they submit the
validity and scope of the arbitration agreement. The parties’ free will in this sense, however,
is not unlimited, since it is generally required that the rule of law chosen must have some
connection with some of the elements (the legal transaction or the controversy). If nothing
has been agreed upon by the parties, the Convention refers to the local rules of the country
where the award was made. Thus, the determination of the place of arbitration becomes
particularly important inasmuch as the award is considered made at that place.

For the situation described in a) above, Article II.3 of the Convention establishes: “The court
of a Contracting State, when seized of an action in a matter in respect of which the parties
have made an agreement within the meaning of this Article, shall, at the request of one of the
parties, refer the parties to arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed”

Article II.3 of the Convention establishes: “The court of a Contracting State, when seized of
an action in a matter in respect of which the parties have made an agreement within the
meaning of this Article, shall, at the request of one of the parties, refer the parties to

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arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of
being performed”.

As Article II does not contain any choice-of-law directive, as does article V.1.a, opinions by
commentators on the Convention vary:

 For some, the choice of the rule that govern at the award enforcement stage under
Article V should apply at the earlier agreement enforcement stage under Art II.9
 For others, an autonomous interpretation of Article II is possible
 The formal requirements for the validity of an arbitration agreement, laid down in
Article II.2, should supersede national law.10
 As the applicable law is not indicated, courts may under this wording be allowed
some latitude: they may find an agreement incapable of performance if it offends the
law or the public policy of the forum.11
 The standards that the Convention intends to establish for determining enforcement
or arbitral agreements are international standards.12

REQUIREMENTS FOR ARBITRATION AGREEMENT

In order to determine the validity requirements for an arbitration agreement, account should
be taken of the specific conditions required by the applicable law. This is important, as the
invalidity of an arbitration agreement is one of the grounds for requesting the setting aside of
an arbitral award or challenging its enforcement. Notwithstanding other specific requirements
laid down by specific legislation, the most common are the ones described in this section.

9
VAN DEN BERG, Albert J.: The New York Arbitration Convention of 1958, Kluwer Law and Taxation
Publishers, 1981, p. 126
10
SANDERS, Pieter: “A twenty-year’s review of the Convention on the recognition and enforcement of foreign
arbitral awards”, The International Lawyer, Vol. 13, No. 2, 1979.
11
HAIGHT, George: “Convention on the recognition and enforcement of foreign awards: summary analysis of
record of United Nations Conference” cited by FRIEDLAND, Paul D. and HORNICK, Robert N.: “The
relevance of international standards in the enforcement of arbitration agreements under the New York
Convention”, The American Review of International Arbitration, The Parker School of Foreign and
Comparative Law, Columbia University, New York, 1995, Vol. 6, No. 2.
12
FRIEDLAND, Paul D. and HORNICK, Robert N.: “The relevance of international standards in the
enforcement of arbitration agreements under the New York Convention”, The American Review of International
Arbitration, The Parker School of Foreign and Comparative Law, Columbia University, New York, 1995, Vol.
6, No. 2.

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 It must arise out of mutual consent.

The parties’ consent is the basic requirement for the arbitration agreement. Their intention to
submit to arbitration must unequivocally arise from the agreement. The New York
Convention (article II.1) requires that in their agreement the parties “undertake to submit to
arbitration” their disputes. This expression means that:

 The agreement must contain a mandatory, rather than permissive, undertaking, and
 The agreement must provide for arbitration, rather than another process of dispute
resolution.

The agreement must have originated from the parties’ free will. Therefore, if one of them has
acted induced by error or as a consequence of fraud, coercion or undue influence, there has
been no real consent and the agreement to arbitrate is not valid.

 The Parties Must Have Legal Capacity

1. Consequences of lack of capacity

The parties’ lack of capacity to submit to arbitration entails the invalidity of the arbitration
agreement. Broadly speaking, the manifestation of will by a party who is not legally entitled
to assume obligations has no legal effects. Capacity is one of the general requirements to
enter into any agreement. The arbitration agreement is subjected to the same rules applicable
to the validity of contracts in general, which means that the lack of capacity usually makes
the whole act void. If the arbitration agreement is invalid or null and void, this could be
declared in the following stages:

 When discussing the enforceability of the arbitration agreement:

Article 8.1, Model Law: “A court before which an action is brought in a matter which is the
subject of an arbitration agreement shall, if a party so requests not later than when submitting
his first statement on the substance of the dispute, refer the parties to arbitration unless it
finds that the agreement is null and void, inoperative or incapable of being performed”.

Article II.3, New York Convention: “The court of a Contracting State, when seized of an
action in a matter in respect of which the parties have made an agreement within the meaning
of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless
it finds that the said agreement is null and void, inoperative or incapable of being performed”.

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  When the arbitral award is challenged by a party in set aside proceedings:

Article 34(2), Model Law: “An arbitral award may be set aside by the court specified in
article 6 only if: (a) the party making the application furnishes proof that: (i) a party to the
arbitration agreement referred to in article 7 was under some incapacity; or the said
agreement is not valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of this State.”

 When the enforceability or recognition of the arbitral award is claimed by a party:

Article 36(1), Model Law: “Recognition or enforcement of an arbitral award, irrespective of

the country in which it was made, may be refused only: (a) at the request of the party against
whom it is invoked, if that party furnishes to the competent court where recognition or
enforcement is sought proof that: (i) a party to the arbitration agreement referred to in article
7 was under some incapacity; or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of the country where
the award was made.”

Article V, New York Convention: “Recognition and enforcement of the award may be
refused, at the request of the party against whom it is invoked, only if that party furnishes to
the competent authority where the recognition and enforcement is sought, proof that: (a) The
parties to the agreement referred to in article II were, under the law applicable to them, under
some incapacity, or the said agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law of the country where the award
was made.”

2. Law applicable to the legal capacity.

The New York Convention establishes that the parties’ capacity is governed by the “the law
applicable to them.13” This concept does not appear in the Model Law.

There is no uniform understanding concerning the law applicable to the legal capacity of
individuals. It will depend on the system of conflicts of law of the forum called to consider
the arbitration agreement. The prevailing criterion is that legal capacity should be governed

13
Article V.I.a

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by the personal law of each party. 14 This, in turn, opens a new range of possibilities since that
“personal law” may be the one governing either the parties’ nationality or their domicile.15

3. The legal capacity to enter into an Arbitration Agreement.

Laws usually contain specific provisions on the capacity of the parties to an arbitration
agreement. In domestic arbitration, the question has to do with the capacity of the parties to
carry out business transactions16; or to compromise17; or to dispose of assets. 18 In international
arbitration the most common problems related to the issue of legal capacity are those referred
to the ability to act on behalf of legal entities (usually corporations or governments) by the
persons who execute the arbitration agreement. The provisions of the laws vary: some require
that the signatory agent be entrusted with special proxy to submit to arbitration 19; while in
others the arbitration agreement is subject to the same requirements as those to enter into the
agreement that is the subject matter of the arbitration.20

 The Agreement must be made in writing

Both the Model Law and the New York Convention require that the agreement be made “in
writing”. However, the notion of “in writing” is broad and includes situations in which the
agreement has not been printed on paper and signed by the parties.

The New York Convention provides that “The term ‘agreement in writing’ shall include an
arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in
an exchange of letters or telegrams”.21

The Model Law is even more precise: “An agreement is in writing if it is contained in a
document signed by the parties or in an exchange of letters, telex, telegrams or other means
of telecommunication which provide a record of the agreement, or in an exchange of
statements of claim and defence in which the existence of an agreement is alleged by one

14
The Spanish Arbitration Law (No.36, 1988) states: “The capacity of the parties to enter into an arbitration
agreement shall be the same as the one required by their own personal law to dispose of in the controverted
subject matter (article 60).
15
Argentina, for example, provides in articles 6 and 7 of the Civil Code that the capacity or incapacity of
individuals is strictly ruled by the domicile, regardless of their nationality and the place in which those acts are
performed
16
Argentina: article738, Procedural Code; Ecuador: article 4, Arbitration Law of 1997.
17
Belgium: article 1676, Judicial Code, amended 1998.
18
France: article 2059, Civil Code.
19
Argentina: article 1882, Civil Code.
20
Belgium, article 1676, Judicial Code.
21
Article II.2

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party and not denied by another. The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement provided that the contract is in writing
and the reference is such as to make that clause part of the contract.”22

1. Must the agreement be contained in the same document?

According to the New York Convention, the term “agreement in writing” shall include an
arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in
an exchange of letters or telegrams.23

Following a similar rule, the Model Law defines that “An agreement is in writing if it is
contained in a document signed by the parties or in an exchange of letters, telex, telegrams or
other means of telecommunication which provide a record of the agreement.”24

2. Are signatures necessary for the validity of the Arbitration Agreement?

The Model Law and the New York Convention require that the agreement be signed. Some
commentators have considered this circumstance as a disadvantage in relation to more
modern laws that do not consider the signature a validity requirement. For example, the
English Arbitration Act (1996) states that there is an agreement in writing if the agreement is
made in writing, whether or not it is signed by the parties. 25 Without the signature, however,
it may be more difficult to prove that the party against whom it is invoked consented to it.

The Model Law provision was nevertheless understood as having a wide meaning.

In High Court of Hong Kong, July 30, 1992, Pacific International Lines (PTE) Ltd. &
Another v. Tsinlien Metals and Minerals Co. Ltd.26 It was held that article 7 of the Model
Law requiring a written agreement to arbitrate had been complied with and gave the
defendant seven days to appoint a second arbitrator; otherwise the court would appoint him.

Moreover, the signature requirement is not as obsolete as it may seem if it is interpreted

together with others set forth by UNCITRAL. Specifically, what is being referred to is the
UNCITRAL Model Law on Electronic Signatures (2001). Its Article 6 states:

22
Article 7.2
23
Supra 20.
24
Supra 20
25
Section 5.2.a
26
Published in English: 1992, Hong Kong Law Digest, G5; excerpts of judgement in The Arbitration and
Dispute Resolution Law Journal, Part 4, December 1992, 240

17
1. Where the law requires a signature of a person, that requirement is met in relation to a data
message if an electronic signature is used that is as reliable as was appropriate for the purpose
for which the data message was generated or communicated, in the light of all the
circumstances, including any relevant agreement.

2. Paragraph 1 applies whether the requirement referred to therein is in the form of an

obligation or whether the law simply provides consequences for the absence of a signature.

3. An electronic signature is considered to be reliable for the purpose of satisfying the

requirement referred to in paragraph 1 if:

(a) The signature creation data are, within the context in which they are used, linked
to the signatory and to no other person;

(b) The signature creation data were, at the time of signing, under the control of the
signatory and of no other person;

(c) Any alteration to the electronic signature, made after the time of signing, is
detectable; and

(d) Where a purpose of the legal requirement for a signature is to provide assurance as
to the integrity of the information to which it relates, any alteration made to that
information after the time of signing is detectable.

4. Paragraph 3 does not limit the ability of any person:

(a) To establish in any other way, for the purpose of satisfying the requirement
referred to in paragraph 1, the reliability of an electronic signature; or

(b) To adduce evidence of the non-reliability of an electronic signature.

Article 2 defines “Electronic signature” as data in electronic form in, affixed to or logically
associated with, a data message, which may be used to identify the signatory in relation to the
data message and to indicate the signatory’s approval of the information contained in the data
message.

Accordingly, then, even though the Model Law on Arbitration sets out the signature
requirement, its interpretation in the context of the UNCITRAL model provisions makes it
possible to significantly broaden the concept of “signature” for the purposes of the arbitration
agreement.

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It is important to point out that the Working Group II of UNCITRAL has been working to
update this rule. There is general agreement that the writing requirement as it is currently
drafted in the Model Law, but more importantly in the New York Convention, reflects a
distrust of arbitration that was common in 1958 when the New York Convention was adopted
that is no longer appropriate at a time when international commercial arbitration has become
the preferred mode of international dispute resolution. There is, however, lack of consensus
as to how far it would be appropriate to go in admitting various techniques for showing that
an agreement to arbitrate had been concluded. A more difficult problem is whether the Model
Law should recognize arbitration agreements that would probably not qualify as written
arbitration agreements under the most widely accepted interpretations of the New York
Convention. As a result of these conceptual and practical difficulties, at its Thirty-fifth
session the Commission considered that time should be given for consultations before the
matter was taken up again. As of the time of writing, the Working Group has not been able to
return to the subject.27

3. Is tacit consent to Arbitration Valid?

There is also general consensus that the arbitration agreement arises from the exchange of
statements of claim and defence in which the existence of an agreement is alleged by one
party and not denied by the other. This principle, expressly recognized in some laws, is based
on the general legal principle whereby consent can be validly assumed when a party “does
what he would not have done, or does not do what he would have done if he did not intend to
accept the proposal.” The plaintiff’s decision to submit the case to arbitration, consented to
by the defendant, may validly be considered a tacit agreement to arbitrate.

The Model Law mentions, as equivalent to “written agreement”, an exchange of statements

of claim and defence in which the existence of an agreement is alleged by one party and is
not denied by another. This is not the position under the New York Convention. Such
omission makes it doubtful whether awards made in arbitration proceedings born in this way
could be recognized under the New York Convention, since they do not strictly comply with
the requirements set out by article II of the Convention.

27
Report of the United Nations Commission on the work of its Thirty-fifth Session, 17-28 June 2002
(A/57/17).

19
 4. Can Arbitration be agreed upon “by reference”?

The Model Law admits a third form equivalent to a written arbitration agreement: the
reference in a contract to a document containing an arbitration clause, provided that the
contract is in writing and the reference is such as to make that clause part of the contract. The
provision does not require the existence of a specific reference to the arbitration clause. If the
other two requirements are fulfilled (i.e., the contract has been made in writing and the
reference unequivocally states that the clause is part of it), it is enough for the clause to make
a general reference to the document.

 It must arise out of a defined legal relationship

Both the New York Convention 28 and the Model Law29 establish that the arbitration
agreement must refer to differences which have arisen or which may arise between them in
respect of a defined legal relationship, whether or not contractual.

In addition to those generic requirements, the arbitration agreement must refer to a concrete
and specific legal relationship between the parties. The parties must have a legal link, which
has given or may give rise to the controversies submitted to arbitration. Although this legal
relationship will most frequently be of a contractual nature, it may well be non-contractual,
provided that it can be identified and delimited.

An arbitration agreement written in terms too ambiguous or generic, which does not restrict
its scope to the disputes arising from a particular juridical relation, would not be acceptable.
For instance, the parties could not agree to submit to arbitration “any dispute that could arise
between them.” Such clause could be questionable, as it would entail waiving the court’s
jurisdiction in too generic and indiscriminate terms.

 Arbitration Agreement should be capable of being ascertained

The law requires that arbitration agreement must not be uncertain and it should be capable of
being ascertained. However, in case there is any uncertainty in the agreement, it is curable
and therefore, it does not render the agreement void ipso facto. In other words, there should
be certainty as to the (1) dispute, (2) consent of parties and (3) identity of the arbitral tribunal
and its composition in the arbitration agreement.

28
Article II.1.
29
Article 7.1.

20
 1. Certainty of existence of a dispute or difference

The agreement must clearly indicate as to what disputes or differences are to be referred to
and resolved through arbitration. Like disputes, difference may also be referred to arbitration.
The term ‘differences’ has a much wider connotation as compared with the word ‘dispute’.
Parties to transaction may have difference of opinion as to the interpretation of a particular
clause in the contract. Therefore, the matter may be resolved by reference to an arbitration
tribunal.30

It must be stated that although existence of a dispute present or future, is an essential

requirement for an arbitration agreement, the subject-matter of the dispute must be lawful.
Where the subject matter of the dispute is unlawful, it is not referable to arbitration. Thus
where the main contract itself is void ab initio or non-existent, the plaintiff could not be
compelled to refer the case to arbitration. 31 Likewise, where a contract became incapable of
performance due to Act of God32(Vis Major), or some fraud33 or bias is alleged or the contract
relates to purely criminal matters, the arbitration clause contained in contracts cannot be
enforced. Again, where the arbitration appears to be collusive 34 to defeat or delay the claims
of the creditor, the Court may refuse to enforce such an award.

It must, however, be noted that in case of a contract becoming incapable of performance due
to repudiation or frustration, the validity of that plea and the consequential question of claim
of damages or breach shall still constitute the dispute covered by the arbitration clause which
still survives even after the end of the original contract.35

2. Certainty as to consent of the parties to an arbitration agreement.

Another essential requisite of an arbitration agreement is that the parties should intend to
make a reference to arbitration in case of any dispute or difference relating to the terms of the
contract. Thus they agree to accept whatever decision the arbitrators may pronounce on the
difference or dispute referred to them or resolution.

It needs to be pointed out that mutuality being the sine qua non of the validity of a contract, it
would equally apply to an arbitration clause as well. A reference to arbitration requires the

30
Gulam Qadir Baksh v. State of J& K, AIR 1972 J& K 44.
31
I.T.C Ltd. v. G.J. Fernandez, AIR 1989 SC 839.
32
Heyman v. Darwins, (1942) AC 356.
33
U.P. Cooperative Federation v. Sunder Das, AIR 1967 SC 245.
34
Akram-un-nissa Bibi v. M. Bibi, ILR (1929) 51 All 395.
35
Union of India v. Kishori Lal, AIR 1974 SC 158.

21
assent of both of the parties. The arbitration clause should be so worded as to give bilateral
rights of reference to the parties. That is, either party should have right of reference to
arbitration in the event of any dispute or difference arising between them. 36 Thus there should
be mutuality with regard to initiation of arbitral proceedings as also the bindingness of the
award between the parties.

It is permissible for the parties to stipulate in the arbitration clause that in the event of a future
dispute arising on a specified issue, it is only the privileged party who will have right to make
a reference.37 But the privileged party can also render the arbitration agreement infructuous
by not exercising its option. Thus, the privileged party can alone can refer the dispute
provided there is a clause to this effect in the arbitration agreement and since this unilateral
right to make a reference flows from advanced consent by the other party and agreed terms in
the contract, such an arbitration agreement would be perfectly valid and enforceable.

3. Certainty about arbitral tribunal and its composition

The arbitration agreement to be valid must spell out the arbitral forum to which disputes,
differences, questions or claims relating to the agreement will be submitted for redressal.
Thus ‘forum selection clause’ constitutes one of the essential elements of the arbitration
agreement. Any of the following modes may be adopted for the appointment of arbitrator:

(1) An arbitrator may be named in the arbitration agreement.

(2) He may be a person who would hold, at the relevant time, a certain office or
appointment (i.e. by designation).
(3) The parties may agree that the reference for appointment of an arbitrator shall be
made to a person designated in the agreement.
(4) The parties may agree for an Institutional Arbitration under which arbitrators are
appointed by a permanent institution.

In case the arbitration clause empowers a public body or authority to appoint an arbitrator to
determine any future disputes of the parties, such designated officer or body owes his
authority to the parties and therefore he is expected to exercise his power, “bona fide,
reasonably and honestly.”

36
Baron v. Sunderland Corporation, (1966) 2 QBD 56.
37
Russell on Arbitration, (20th ed), p.39

22
If there is any ambiguity or uncertainty in the agreement regarding arbitrator, such an
arbitration agreement shall be void. Thus, where the arbitration agreement stated that the
disputes will be referred to either A or B, such an agreement was held void for uncertainty.

TERMINATION OF ARBITRATION AGREEMENT

An arbitration agreement is separate and severable from the substantive contract in which it
is engrafted, so that termination of the latter will not amount to termination of the former.
There must, therefore, be a distinct agreement to terminate the agreement to arbitrate.38 A
valid agreement to terminate an arbitration agreement prevents either party from
commencing fresh arbitration proceedings on the issues in question. Any agreement to
terminate an arbitration agreement is subject to the same vitiating factors as other
agreements. Thus, if a party is induced to agree to terminate the arbitration agreement by
fraud, duress or misrepresentation, or there is a fundamental mistake affecting the parties,
the termination agreement may be set aside.

 Doctrine of Frustration

The doctrine of frustration applies to the arbitration agreement inasmuch as it applies to the
underlying contract. However, the arbitration agreement has to be terminated by a separate
and distinct agreement of the parties. An arbitration agreement could be frustrated either by
mutual default of both parties or repudiatory breach by one party to refer the dispute to
arbitration if the delay caused by the mutual default or the conduct of one party was such
char a fair arbitration was impossible. 39 The decision of the Privy Council in Hirji Mulji v
Yue Steamship Co40 is the leading authority on the application of the doctrine of frustration
to an arbitration agreement. Here, a vessel due to be chartered under a charter-party was
requisitioned by government action before the commencement of the charter-party. The
arbitrators held that the owners were in breach of contract, and awarded damages to the
charterers. However, in appeal, the Privy Council overturned the award on the ground that
the charter-party had been frustrated by the requisition, with the effect that the charter-party
as a whole-including the arbitration clause ceased to have effect and the award, therefore,
was void.

38
Robert Merkin, Arbitration Law, edn 2004, p 568, para 5.69.
39
Andre et Cie SA v. Marine Transport Ltd., The Splendid Sun [1981] 2 All ER 993 (CA).
40
[1926] AC 497.

23
This decision, however, predates the affirmation of the principle of severability of the
arbitration clause and its survival even after the annulment of the substantive contract in
which it is embedded, as adumbrated by the House of Lords in Heyman v Darwins Lt412
Here, the House of Lords assumed that frustration of the underlying contract did not
automatically put an end to the arbitration clause. Subsequent cases have proceeded on
the basis that allegations of frustration and consequential issues are capable of being
arbitrated.42 This principle has now been given statutory recognition in s 16(1) of the
Arbitration and Conciliation Act 1996.

No doubt, the established position of the present law is that an arbitration clause is
severable from the underlying contract and also survives it. That is, the frustration of the
underlying contract will not frustrate the arbitration clause. Nevertheless, if on account
of intervening circumstances beyond the control of the parties, the performance of the
arbitration agreement itself becomes impossible, the arbitration agreement will be
frustrated. A typical illustration of this principle is the decision of the Punjab High Court
in Gian Chand Valaiti Ram v Kishart Chand 43. Here, the arbitration agreement provided
that venue of the arbitration agreement will be Okara and the award will he filed in the
court in Montgomery. The performance of the arbitration agreement became impossible
after the partition of the country because both Okara and Montgomery fell in Pakistan
and the agreement was frustrated. Likewise, an award became void on account of
impossibility of performance due to four hundred percent increase in the prices.

 Grounds for Termination of the Arbitration Agreement

1. Mutual consent

Section 32(2)(a) provides that if the claimant withdraws his claim and the respondent does
not object, the arbitral tribunal shall order termination of the arbitral proceedings because
the parties, by a tacit agreement, have terminated the arbitration agreement. If, however, the
respondent objects to such order, the tribunal may refuse to make the order, if it recognizes
a legitimate interest on the part of the respondent in obtaining a final settlement of the
dispute. Section 32(2)(b) further provides that the parties, by agreement, may terminate the
arbitration agreement and consequently the arbitral tribunal shall order the termination of
the arbitration proceedings.
41
[1942] AC 356.
42
Kruse v Questier and Co. Ltd., [1953] 1 QB 669.
43
AIR 1951 Simla (Punj) 231.

24
Just as arbitration arises out of an agreement, the parties may terminate it by mutual consent.

This new agreement can be express or tacit. It is express when the new agreement between
the parties is executed in accordance with the provisions previously agreed upon. Implied
waiver operates when one of the parties files a lawsuit about matters contained in the
arbitration agreement, and the other does not timely object to the court’s lack of jurisdiction.

As an example, the Spanish arbitration law provides that the arbitration agreement shall be
deemed discharged if a complaint is filed and the defendant does not raise lack of jurisdiction
as a defence.44

2. Resolution of dispute by Settlement

In Union of India v Kishorilal Gupta and Bros45, there were three contracts between the parties
for supply of military stores. Each one of the contracts contained an 'arbitration clause’.
Subsequently, some disputes, which arose between the parties, were resolved by a
comprehensive settlement. In this situation, the Supreme Court held that the settlement
abrogated all the earlier three contracts along with the arbitration clauses in them. Hence,
there was no dispute that could be referred to arbitration on the basis of the arbitration clause
in any one of the original contracts. This holding was followed by a single Judge of the Delhi
High Court in MP Jain v Bennett Colman and Co Ltd.46 Here, the parries entered into a
supplementary agreement which contained not only the arbitration clause but also other terms
of the contract similar to the original contract, and the original contract had neither been
rescinded nor suspended. The court held that the parties did not intend to substitute or rescind
the earlier contract.

 What cannot be a ground for termination of Arbitration Agreement?

1. Unilateral Abrogation by a party

(A) Repudiation

Section 39 of the Indian Contract Act 1872 provides that 'when a party to a contract has
refused to perform, or disabled himself from performing his promise in its entirety, the
promisee may put an end to the contract, unless he has signified, by words or conduct, his
acquiescence in its continuance'. The crux of the concept of repudiation is that a party to the
contract makes it plain to the other party that he has no intention to perform his part of the

44
Art. 11.2.
45
AIR 1959 SC 1362, 1370.
46
1997 (2) Arb LR 94, 99 (Del).

25
contract. However, mere failure to make one of a series of payments will not generally, in the
absence of a prospective refusal, discharge the other party from proceeding with the contract.

In New Bihar Bin Leaves Co v State of Bihar, 47 the Supreme Court stated that 'if a person of
his own accord, accepts a contract on certain terms and works out the contract, he cannot later
be allowed to rely on some other terms of the contract which are advantageous to him and
repudiate the terms of the same contract which might be disadvantageous to him. This is
based on the legal maxim qui approbat non reprobate (one who approbates cannot
reprobate). In other words, a party to an instrument or transaction cannot take advantage of
one part of a document or transaction and reject the rest. That is to say, no party can accept
and reject the same instrument or transaction.

(B) Rescission

Section 64 of the Indian Contract Act 1872 provides: 'When a person at whose option a
contract is voidable rescinds it, the other party thereto need not perform any promise
therein contained in which he is promisor. The party rescinding avoidable contract shall,
if he had received any benefit thereunder from another party to such contract, restore such
benefit, so far as may be, to the person from whom it was received.’

A contract is voidable at the option of a party whose consent has been obtained by
coercion, undue influence, fraud or misrepresentation. When such party rescinds the
contract, the other party to the contract is absolved of the liability to perform his part of
the contract.

If however, the party rescinding the contract has received any benefit under it from
another party to such contract, he shall be liable to restore such benefit, so far as may be,
to the person from whom he has received it48 and a person rightfully rescinding a contract
is entitled to compensation for any damage which he has suffered through non-fulfillment
of the contract.49

It is to be noted that an unjustified recession does not always amount to repudiation and
when deciding the question, the court has to consider the conduct of the party as a whole.
That is, erroneous or unsuccessful rescission does not amount to repudiation.

47
(1981) 1 SCC 537.
48
The Indian Contract Act, 1872, s 64.
49
Ibid, s 75.

26
It is evident that both ‘repudiation’ and ‘rescission’ of a contract are unilateral acts of a party, but
an arbitration agreement cannot be unilaterally abrogated by a party. It cannot be abrogated,
because the remedy for breach of the arbitration agreement is not damages, but is its
enforcement. The arbitration clause can be specifically enforced by the machinery of the
Arbitration Act. It survives for the purpose of measuring the claims arising out of the
breach, and the arbitration clause survives for determining the mode of their settlement. The
purposes of the contract have failed, but the arbitration clause is not one of the purposes of
the contract. Therefore, it is not open to a party to an arbitration agreement to repudiate or
rescind the arbitration clause in a contract.

2. Death

The death of one of the parties does not, as a rule, cause the termination of the arbitration
agreement. Under legal systems that adopt the principle of universal succession, the mortis
causae successor to a person inherits all the rights and duties of the deceased, except those
that could have only been exercised or performed personally (intuitu personae). However,
this is a question to be solved under the applicable law:

Prior to the year 2000, the Paraguayan Procedural Code (article 793) provided that if one of
the parties died before the rendering of the award, the arbitration proceeding would be
terminated and the parties or their successors could go to court.50

By contrast, Section 8 of the English Arbitration Act states:

(1)Unless otherwise agreed by the parties, an arbitration agreement is not discharged by the
death of a party and may be enforced by or against the personal representatives of that party.

(2)Subsection (1) does not affect the operation of any enactment or rule of law by virtue of
which a substantive right or obligation is extinguished by death.”

‘An arbitration agreement shall not be discharged by the death of any party thereto either as
respects the deceased or as respects any other party, but shall in such event be enforceable by
or against the legal representative of the deceased.’51 Furthermore, 'the mandate of an
arbitrator shall not be terminated by the death of any party by whom he was appointed’.52
However, these provisions shall not affect the operation of any law by virtue of which any

50
This provision was abolished by the new Arbitration Law No.1,879 of 2002.
51
The Indian Contract Act, 1872, s 40(1).
52
Ibid, s 40(2).

27
right of action is extinguished by the death of a person’.53 On the death of a person, any cause
of action which survives a death and which vests in his heirs and legal representatives, may
be referred by them to arbitration even in the absence of an arbitration clause in the original
agreement.

3. Insolvency

If a contract to which an insolvent is a party, provides a term that any dispute arising
thereof or in connection therewith shall be submitted to arbitration, the term shall, if the
receiver adopts the contract, be enforceable by or against him so far as it relates to any
such decision.54 However, where a person who has been adjudged as an insolvent had,
before the commencement of the insolvency proceedings, become a party to an
arbitration agreement, and any matter to which the agreement applies is required to be
determined in connection with, or for the purposes of, the insolvency proceedings, then,
if the case is one to which s 41(1) does not apply, any other party or the receiver may
apply to the judicial authority having jurisdiction in the insolvency proceedings for an
order directing that the matter in question shall be submitted to arbitration in accordance
with the arbitration agreement, and the judicial authority may, if it is of the opinion that,
having regard to all the circumstances of the case the matter ought to be determined by
arbitration, make an order accordingly.

In English law, the bankruptcy of a person who had earlier entered into an arbitration
agreement does not have an automatic discharging effect upon the contract to which the
arbitration agreement relates or upon the arbitration agreement itself. However, a trustee
in bankruptcy has a general power to disclaim unprofitable contracts55 and his decision to
affirm or to disclaim a contract to which an arbitration clause relates will generally
determine the fate of that clause. Section 349A (2) of the Insolvency Act 1986 56 applies
where the trustee in bankruptcy chooses to affirm the contract.57

53
Ibid, s 40(3).
54
Ibid, s 41(1).
55
Robert Merkin, Arbitration Law, ed 2004, p 87, para 3.30.
56
Inserted by the Arbitration Act 1996 Sch 3, para 46.
57
Supra 55.

28
 SPECIAL CHARACTERISTICS OF THE ARBITRATION AGREEMENT

 Separability and autonomy of the Arbitration Agreement

The concepts of “separability of the arbitration agreement” and “Kompetenz-Kompetenz” can

be described and compared in the following manner.

1. The Problem and its solution

Historically, it was held that an arbitration agreement contained in a contract was accessory
to the main contract and that the invalidity of the contract also entailed the invalidity of the
arbitration agreement. On the basis of that interpretation, arbitral jurisdiction was frequently
restricted by challenges to the validity of the contract, since those challenges involved the
arbitrators’ jurisdiction as well.

The argumentative line was as follows:

 If the main contract is null and void, so is the arbitration agreement that is accessory
to it;
 If the arbitration agreement is considered null and void, arbitrators lack jurisdiction to
solve any of the question relating to such contract, including whether the contract is
invalid or not;
 As the validity of the arbitration agreement is being questioned, arbitrators must not
intervene until a court decides the matter.

In this way, the mere filing of such a defence would entail an obstacle to arbitration.

In order to avoid that situation, most laws and regulations on arbitration have included two
very important principles:

 “Separability”, “autonomy” or “independence” of the arbitration clause; and

 “Kompetenz-Kompetenz” or “compétence de la compétence”.

The two principles mentioned refer to different situations. The “Kompetenz -Kompetenz”
principle aims at giving arbitrators the possibility to examine and decide in first instance on
any objection to their jurisdiction. According to the principle of “separability of the
arbitration clause”, if the arbitrators decide, within the scope of their jurisdiction, that the
contract containing the arbitration clause is null and void, that does not entail the loss of their
jurisdiction. In practice, however, the two principles complement one another, since the

29
contentions are usually made at the same time. The invalidity of the contract, the invalidity of
the arbitration agreement and the consequent lack of jurisdiction of arbitrators are often part
of a common defence strategy.

The principles described have been upheld by the authors, accepted in case law and
recognized by statutes. Their purpose is to enable arbitrators to retain jurisdiction and solve
the disputes, even those related to the validity or invalidity of the contract. Otherwise, the
mere contention of invalidity of the contract would imply neutralizing the effects of the
arbitration agreement. This would, in turn, mean invalidating the method chosen by the
parties to settle the conflict.

The ultimate argument of these provisions is that the arbitration clause is not just another
clause within a contract. Its special purpose –to confer jurisdiction upon those who must
solve the differences arising under the contract– entails empowering arbitrators to rule on all
questions related to the contract, even those relating to their own jurisdiction.

There are also other reasons behind these rules. The possibility of removing the arbitrators by
just raising a plea that the contract is invalid would constitute a simple way of avoiding
arbitration. If the matter of the arbitrator’s jurisdiction was dependant on a previous court
decision on the validity of the contract, arbitrators’ intervention could easily be avoided. This
would entail disregarding the original common intention of the parties to submit conflicts
arising out of the contract to arbitration.

Although these principles are widely accepted, recourse to the courts is usually provided to
review the arbitrator´s ruling on competence, either through a direct right to review (when the
issue of competence was subject to a previous partial award) or at the stage of setting aside
the award (when the issue was part of the final award).

2. The UNCITRAL Model Law

Article 16 of the Model Law upholds these two principles when it says:

(1)The arbitral tribunal may rule on its own jurisdiction, including any objections with
respect to the existence or validity of the arbitration agreement. For that purpose, an
arbitration clause which forms part of a contract shall be treated as an agreement independent
of the other terms of the contract. A decision by the arbitral tribunal that the contract is null
and void shall not entail ipso jure the invalidity of the arbitration clause.

30
 (2)A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence. A party is not precluded from raising such a plea by
the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that
the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

(3)The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as
a preliminary question or in an award on the merits. If the arbitral tribunal rules as a
preliminary question that it has jurisdiction, any party may request, within thirty days after
having received notice of that ruling, the court specified in article 6 to decide the matter,
which decision shall be subject to no appeal; while such a request is pending, the arbitral
tribunal may continue the arbitral proceedings and make an award.”

As can be seen, this rule does not confer upon arbitrators full powers to rule on the contention
of lack of jurisdiction. They are allowed to decide this matter initially, as a way of preventing
the mere raising of the plea from causing their removal. By examining the background to the
case, the arbitral tribunal may decide to what an extent the defences raised by the parties are
legally effective. In the meantime, however, the arbitration clause must be considered valid in
order to allow arbitrators to rule on its existence, validity or duration.

In Ontario Superior Court of Justice, July 29, 1999, NetSys Technology Group AB v. Open
Text Corp.58 the court concluded that the adoption of the Model Law in Ontario signalled a
significant trend to circumscribe judicial intervention in arbitral proceedings. The Court thus
ordered a stay of judicial proceedings to remain in force until the final disposition of the
jurisdictional issue by the arbitral tribunal, whether as a preliminary decision or in the final
award.

However, as is laid down in paragraph 3, this arbitrators’ decision is subject to judicial

review. In this connection –the commentators of the Model Law explain– the issue is not the
finality of the arbitrator’s decision on their jurisdiction and the consequent ouster of the
jurisdiction of the courts, but rather when and the conditions under which the courts may play
their role as the final authority on the question of arbitral jurisdiction. The basic problem is
how to reconcile the realization of the objectives of commercial arbitration, which would be
defeated if an arbitral tribunal would have to suspend or cease its proceedings every time a
58
[1999] O.J. No. 3134 (Ont. S.C.J.).

31
party pleaded invalidity of the arbitration agreement, with an effective measure of court
supervision to ensure that the arbitral tribunal does not finally confer on itself a jurisdiction
that by reason of the contractual nature of arbitration can only derive from the parties’
agreement.59

 Survival of the Arbitration Agreement

In most of the cases, arbitration agreements are part of main contract containing terms and
conditions dealing with other matters. Many a times the parties continue their relationship
even after the expiry of the duration of the contract. The question, therefore, arises whether
arbitration clause would also be deemed to be surviving in such cases or it terminates with the
expiry of the original contract.

This issue came up for consideration before the Supreme Court in Bharat Petroleum Ltd v.
The Great Eastern Trading Co.60 which involved maritime arbitration. The BPLCL hired
certain number of vessels owned by Great Eastern Co. for a period of two years. The Charter
party contained an arbitration clause to resolve disputes arising under it. Even after the expiry
of the specified period of two years, the ships were continued to be used by the hirer (BPCL),
but no fresh agreement was entered into despite several requests from Great Eastern Trading
Co. Dispute arose between the parties on payment of hire charges during the extended period
of two years. Great Eastern Trading Co. demanded payment of hire charges only at the
revised rate. Therefore, the matter was referred to an Arbitration Tribunal which made an
award holding that it had no jurisdiction to decide the dispute as the arbitration clause under
the original contract had already expired. The respondent (Eastern Trading) challenge the
said award holding that Arbitration Tribunal had the jurisdiction to adjudicate as the vessels
were continued to be hired by BPCL even after the expiry of two years. The appellant BPCL
went in appeal against this order of the High Court. The Supreme Court took note of the
conduct of BPCL in not responding to specific letters from Great Eastern Co. on the issue of
hire charges for the extended period, applied the principle of sub silentio and disallowed the
appeal holding that BPCL’s conduct amounted to acceptance of proposal of Great Eastern to
continue application of the terms and conditions of the original contract until it was renewed.

59
BROCHES, Aron, Commentary on the UNCITRAL Model Law.
60
2007 (12) SCALE 247.

32
 Government Contracts and Arbitration clause

It has been generally seen that in case of govt. contracts, an employee is entrusted with the
duty of certifying the quality or performance of the works and it is often written that his
decision shall be ‘final’. Difficulty that arises whether to interpret such a clause as
‘arbitration’ or it should be treated as mere certification as an administrative act. The
available case law on the point favours the view that such matters should be excluded from
arbitration, that is such contracts are non-arbitrable.

In Food Corporation of India v. Surendra,61the contract stipulated that decision of the

Principal Officer shall be final in matters relating to quality and quantity of works and
pursuant to that stipulation, the Officer adjudicated upon a dispute. The Supreme Court held
that the same could no longer be arbitrated in absence of the agreement clause in the contract.

Where the agreement clause contained that “in the event of a dispute, the decision of the
Superintending Engineer of the Circle shall be final,” such unilateral condition could not be
imposed through an arbitration clause.62 Likewise, in K. Shashidharan v. Kerala State
Corporation,63 the Supreme Court declined to order arbitration under the Arbitration Act as it
found that the subject-matter was excluded from the arbitration clause.

In M/S GAIL (India) Ltd. v. Nagarjuna Cerachem Pvt. Ltd.,64 the contract for supply of gas
itself provided for a mode of settlement of disputes arising from contract by reference to
arbitration and arbitrators were authorised to decide both questions of fact and questions of
law. Therefore, the Andhra Pradesh High Court held that there was no reason why the parties
should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High
Court under Art.226 of the Constitution. The existence of an effective alternative remedy in
the contract itself was a valid ground for the Court to decline exercise of its jurisdiction under
Art.226 and the prayer for issuance of a writ of mandamus was wholly misconceived in this
case. The writ petition was therefore not maintainable.65

PART II: COMPOSITION OF THE ARBITRAL TRIBUNAL

61
AIR 1988 SC 734.
62
Prabartak Commercial Corporation v. Chief Administrator, Dandokaranya Project, AIR 1991 SC 957.
63
AIR 1994 SC 2534.
64
AIR 2005 AP 151.
65
State of U.P. v. Bridge & Roof Co. (India) Ltd. AIR 1996 SC 3515.

33
 NUMBER OF ARBITRATORS

The parties are free to determine the number of arbitrators, provided that such number shall
not be an even number. Failing the determination, the arbitral tribunal shall consist of a sole
arbitrator.

Section 10 of Arbitration & Conciliation Act, 1996 provides for the appointment of a sole
arbitrator or more than one arbitrator but such arbitrators shall not be even in number. The
provision relating to appointment of Umpire as existed in the old Arbitration Act 66 of 1940
has been dropped in the new Act of 1996. But where the number of arbitrator is three, the
third arbitrator will be appointed by the two arbitrators nominated by one each of the two
parties. The 'third arbitrator' shall act, not as an Umpire but as 'Presiding Arbitrator 67." The
two arbitrators will appoint the third arbitrator called the Presiding Arbitrator within a period
of thirty days from the date of their appointment. The three arbitrators will participate is the
decision making process of the tribunal and the award of majority shall prevail. The Supreme
Court has held that an arbitration agreement specifying even number of arbitrators cannot be
a sole ground to render arbitration agreement invalid68.

The High Court of Bombay in Atul R. Shah v. M/s. V. Vrij Lal Lallobhai & Co and
Another69, has observed that the fact that an Arbitral Tribunal is not properly constituted and
objection has not been raised by the petitioner before the Arbitral Tribunal, cannot justify
exercise of its jurisdiction if its constitution was in contravention of Section 10 of the
Arbitration and Conciliation Act, 1996, The Court further clarified that just as courts cannot
confer jurisdiction on themselves, by consent of the parties, and clothe themselves with
jurisdiction, the same is also true of Arbitral Tribunal and the award has to be set aside by
that court alone. It may, therefore, be concluded that like the Court, the Arbitral Tribunal
which has no jurisdiction cannot assume jurisdiction in itself merely because no objection in
this regard was raised by the parties. It must be stated that arbitration being a creation of an
agreement, there can be no arbitration unless there is an arbitration agreement in writing
between the parties. The provision contained in Section 10 that the number of arbitrators shall
not be an even number is a derogable provision. Therefore, any agreement which permits

66
Section 10, Para 2 of the 111,4 Schedule of the old Arbitration Act, 1940.
67
Section 11 (3) Arbitration & Conciliation Act, 1996.
68
M. M. T. C. Ltd.v Sterlite Industries (India) Ltd., AIR 1997 SC 605.
69
AIR 1999 Born 67.

34
parties to appoint an even number of arbitrators would not be contrary to provision of Section
10 and such an agreement would not be invalid and void. 'Where the parties agreed upon an
even number of arbitrators and objection as to the composition of Arbitral Tribunal is not
taken before the Tribunal itself or within the prescribed time limit under Section 16 (2) of the
Act, it will be deemed as a waiver of objection under Section 4 and consequently the award
so passed by the Arbitral Tribunal cannot be set aside under Section 34 (2) (a)(v) because the
composition of tribunal was in accordance with agreement between the parties.

In Narayan Prasad & Others v. Nikunj Kumar Lohia 70 the Supreme Court has inter-alia
observed that even as a matter of public policy it cannot be said that Section 10 compulsorily
preclude the appointment of an even number of arbitrators. Where the parties agree to even
number of arbitrators and the composition of the Arbitral Tribunal or the arbitration
procedure are in accordance with the agreement of the parties, they cannot allowed to resile
the award if it is not to their liking.

In Head, National Jute Manufacturers Corporation Ltd. v. Saraoj Agarwal 71 there was no
mention of the number of arbitrators to be appointed, nor was any procedure for appointment
of arbitrator was provided. Director (Personnel) of the Corporation was not willing to act as
an arbitrator. In such a situation, Sub-Judge himself had appointed the arbitrators. The
validity of such appointment was challenged before the High Court. The Court held that there
was nothing on record to show that the Sub-Judge was designated by Chief Justice to appoint
arbitrators. Therefore, the appointment was patently illegal and liable to be set aside.

In Citibank N. A. v. TLC Marketing PLC 72arbitration clause imported in itself all disputes
arising between the parties. The appellants asserted certain claims against the respondents by
writing letters and notices to them which were not denied or rejected by the respondents at
any point of time. Since the parties failed to determine the number of arbitrators to be
appointed as per Section 10 (1) of the Arbitration & Conciliation Act, 1996, the Court
appointed a sole arbitrator to resolve the disputes between parties as required under clause (2)
of Section 10 which the Supreme Court held to be justified in accordance with the law of
arbitration.

70
AIR 2002 SC 1139.
71
AIR 2008 Pat 25.
72
AIR 2008 SC 118.
35
In Sime Darby Engineering S.D.N. v. Engineering India Ltd 73 the Supreme Court held that
where arbitration clause in the agreement is silent as to the number of arbitrators to be
appointed, the provision of sub-clause (21 of Section 10 would apply and only one arbitrator
should be appointed and reference to expression 'arbitrators' in some other clause in the
agreement would not affect the intention of parties as expressed by them in the arbitration
clause.

APPOINTMENT OF ARBITRATORS

A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. The
parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Although
failing any such agreement in arbitration with three arbitrators, each party shall appoint one
arbitrator, and the two appointed arbitrators shall appoint the third arbitrator and he shall act
as the presiding arbitrator. If a party fails to appoint an arbitrator within thirty days from the
receipt of a request to do so from the other party or the two appointed arbitrators fail to agree
on the third arbitrator within thirty days from the date of their appointment, the appointment
shall be made, upon request of a party, by the Chief Justice or any person or institution
designated by him.

Failing any agreement, in arbitration with a sole arbitrator, if the parties fail to agree on the
arbitrator within thirty days from receipt of a request by one party from the other party to so
agree the appointment shall be made, upon request of a party, by the Chief Justice or any
person or institution designated by him.

Where, under an appointment procedure agreed upon by the parties:

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of
them under that procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or
it under that procedure, a party may request the Chief Justice or any person or
institution designated by him to take the necessary measure, unless the agreement on
the appointment procedure provides other means for securing the appointment.

73
AIR 2009 SC 3158.

36
A decision on the above matters by Chief Justice or the person or institution designated by
him shall be final. Although the Chief Justice or the person or institution designated by him,
in appointing an arbitrator, shall have due regard to :

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

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

In the case of appointment of sole or third arbitrator in an international commercial

arbitration, the Chief Justice of India or the person or institution designated by him may
appoint an arbitrator of a nationality other than the nationalities of the parties where the
parties belong to different nationalities.

The Chief Justice may make such scheme as he may deem appropriate for dealing with
matters entrusted to him. Where more than one request has been made to the Chief Justice of
different High Courts or their designates the Chief Justice or his designate, to whom the
request has been first made under the relevant sub-section shall alone be competent to decide
on the request.

 In case of International Commercial Arbitration.

Where the matters arise in an international commercial arbitration, the reference to "Chief
Justice" shall be construed as a reference to the "Chief Justice of India".

 In case of any other arbitration.

Where the matters arise in any other arbitration, the reference to 'Chief Justice" shall be
construed as a reference to the Chief Justice of the High Court within whose local limits the
principal Civil Court referred to in clause (e) of sub-section (1) of Section 2 is situate and,
where the High Court itself is the Court referred to in that clause, to the Chief Justice of that
High Court.

The right of parties to choose their own arbitrator is recognised as one of the pillars of the
principle of 'party autonomy' as envisaged by the UNITRAL model law and incorporated
under Section 11 of the Arbitration and Conciliation Act, 1996. Where the parties fail to
adhere to the terms of their agreement in appointing the arbitrator, the approval of arbitrator
may be made by the Chief Justice or any person or institution designated by him upon the
request of a party to the arbitration agreement as contemplated by sub-sections (5) & (6) of

37
Section 11 of the Act. Arbitrator/arbitrators are appointed in pursuance of the arbitration
agreement. The appointment of arbitrator/arbitrators may be made

1. by the parties, or
2. by designated authority, or
3. Arbitral Institution.

 In case of arbitrator named by parties, the arbitrator so appointed may enter on the
reference forthwith and proceed with the arbitration proceedings. A person of any
nationality may be appointed as arbitrator but where the dispute involves an international
commercial transaction,

In Patitapazvan Mahapatra v. S. E. Eastern Circle 74 the High Court of Orissa observed that
expression 'arbitration agreement' need not be specifically mentioned in arbitration clause.
The term arbitration agreement has been given wide import in its definition and therefore, it
could be in one single document or could be gathered from several documents. It could also
be gathered from correspondence in the form of letters, fax messages, telegrams and even
telex messages. Any clause in the agreement/document which mentions about resolution of
dispute only, could be interpreted as an arbitration clause for the purpose of application of the
provisions of the Arbitration Act.

In Bharat Sanchar Nigam Ltd. & another v. Motorola India Ltd 75 there was arbitration clause
in the agreement providing for excepted matters, i.e., those matters the decision to which is
specifically provided in agreement. The appellant claimed liquidated damages from the
respondent for delay in supply of goods and services whereupon the respondent revoked
arbitration clause on ground that there was no delay on its part. The appointing authority
having tailed to appoint an arbitrator within the prescribed period under the Arbitration Act,
the respondent filed petition under Section 11 before the High Court of Kerala at Ernakulam.
Appellant thus lost the right to appoint any arbitrator for settling disputes specified in the
arbitration agreement. In response to the petition, the High Court appointed an arbitrator, to
which the appellant raised his objection only in the first arbitration hearing. The Supreme
Court held that appellant having failed to raise objection prior to first arbitral hearing he is
deemed to have waived his right to object to such appointment. Dismissing the appeal, the
Apex Court further noted that a clause in the agreement giving unilateral right to determine
74
AIR 2008 Ori 80.
75
AIR 2009 SC 357.

38
liquidated damages to purchaser (i.e., appellant) and providing that quantification of said
liquidated damages shall be final and cannot be challenged by the Supplier (i.e respondent),
was clearly in restraint of legal proceedings under Section 28 of the Contract Act, 1872 and
therefore, contrary to law.

 Vacancy of Arbitrator due to death or withdrawal of consent.—A situation may arise

where the parties may have appointed the arbitrator or arbitrators by consent but
subsequently a vacancy may occur due to death of the arbitrator or withdrawal of consent
by him. In such a contingency the provisions of Section 14 of the Act would apply.

In M. Subramanya v. Dr. Chandra Sekhar 76 the arbitrator, who was appointed one of the
parties, withdrew his consent in mid-proceedings when several witnesses and documents had
already been examined during three years of the proceedings. The Court held that the
arbitrator could not be allowed to withdraw at that stage.

In Himmat Lal v. Keshav La177 one of the two arbitrators appointed by the parties died before
filing the award. The Court held that unless the arbitration agreement does not show that the
vacancy so caused should not be filled, the party appointing the deceased arbitrator may serve
a written notice on the other party or the arbitrators to concur in the appointment of new
arbitrator to fill up the vacancy

 Scope of Court's Power under Section 11 of the Act

Section 11 of the Act enables the parties to approach the Chief Justice of the concerned High
Court in the case of domestic arbitration and the Chief Justice of India (CJI) in case of
international commercial arbitration for appointment of arbitrators when there is a
disagreement on constitution of the Arbitral Tribunal between the parties. The power which
the CJ or CJI, as the case may be, exercises invokes controversy many a times which the
Supreme Court is often called upon to decide.

In Konkan Railway Corporation Ltd. v. M/s. Mehul Construction Co 78 the Supreme court held
that Section 11 (6) aims at removing any dead-lock or undue delay in the process of
appointment of arbitrator. Therefore, it is reasonable to hold that while discharging the
functions under section 11(6) by Chief Justice or his nominee will be acting in his
administrative capacity. The nature of the function performed by the Chief Justice being

76
AIR 1995 Kar. 115.
77
(1994). 1 Arb. LR 59 (Guj).
78
AIR 2000 SC 2821.

39
essentially to aid the constitution of Arbitral Tribunal immediately and the Legislature having
consciously chosen to confer the power on Chief Justice and not a Court, it is apparent that
the order passed by the Chief Justice or his nominee is an administrative order. This being the
position, even an order refusing to appoint an arbitrator would not be amenable to the
jurisdiction of the Supreme Court under Article 136 of the Constitution. However, it being an
act of non-performance of a duty, mandamus would lie.

In Konkan Railway Corporation v. Rani Construction (Pvt.) Ltd 79 the Supreme Court has
clarified that the order of the Chief Justice or his designate under section 11 nominating an
arbitrator is not an adjudicatory order and the chief justice or his designate is not a tribunal.
Sub-sections (3) to (6) of section 11 prescribe the events when a party may request the chief
justice or his designate to nominate an arbitrator and his decisions in this regard will final.
The section does not contemplate a notice to be served by the party making such request to
the other party nor does it contemplate decision by the chief justice or his designate on any
controversy that the other party may raise. In short, the decision to nominate the an
arbitrator/arbitrators by the chief justice or his designate is not adjudicatory but is purely
administrative in nature. However, while making an appointment of arbitrator the chief
justice or his designate shall take into account the qualifications required of the arbitrator and
other such considerations which may ensure nomination of an - independent and impartial
person as an arbitrator.

In SBP & Co. v. Patel Engineering Ltd 80 the seven-Judge Constitution Bench of the Supreme
Court settled the law in regard to appointment of Arbitrator by Chief Justice of High Court or
CJI, as the case may be, in this case. The Court in this case held that the power exercised by
Chief Justice of High Court or Chief Justice of India is judicial powers and not merely
administrative power, but this decision would have prospective application so as not to
disturb the earlier decisions in this regard. Thus the Supreme Court overruled the earlier
decision by a five-Judge Bench given in Konkan Railway Co. Ltd. v. Rani Constructions.

GROUNDS FOR CHALLENGE

When a person is approached in connection with his possible appointment as an arbitrator, he

shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his

79
AIR 2002 SC 778.
80
(2005) 8 SCC 618.

40
independence o impartiality. An arbitrator, from the time of his appointment and throughout
the proceeding, shall, without delay, disclose to the parties, in writing, any circumstances
referred to in sub sections (1) unless they have already been informed of them by him.

An arbitrator may be challenged only if:

a. Circumstances exists that give rise to justifiable doubts as to his impartiality and
independence,
b. He does not pass the qualifications agreed to by the parties.

A party may challenge an an arbitrator appointed by him, or in whose appointment he has

participated, only for reasons of which he becomes aware after the appointment has been
made.

This section enumerates the grounds on which the appointment of arbitrator can be
challenged by a party or parties whereas the succeeding section i.e, Section 13 prescribes the
procedure to be adopted for challenging the appointment of an arbitrator. Both the sections
are therefore cognate sections. Sub-sections (1) and (2) of Section 12 enjoin a duty upon the
arbitrator to disclose at the time of his appointment or after appointment throughout the
arbitral proceedings, any circumstances which are likely to give rise e reasonable
apprehension as to his impartiality or independence.

Sub-section (3) lays down vet another ground, namely, lack of qualifications on which th:
appointment of an arbitrator may he challenged by a party to arbitration dispute.

Sub-section (4) of the section enables a party who has participated in the appointment of the
arbitrator or appointed an arbitrator to challenge such appointment if he becomes aware of
any reason which may have rendered the arbitrator disqualified to act as such, any time
during the arbitration proceedings. The object of the provisions of this section obviously is to
cast a duty upon the parties to make sure that the person or persons whom they propose to
appoint as arbitrator/arbitrators are willing to be so appointed and do not suffer from any
disqualification or position which is likely to impair their independent and impartial decision
in the dispute under arbitration. The section, however, does not contemplate any written
consent or approval by the arbitrator.

In Keshav Singh v. Indian Engineering Corporation81 the Supreme Court has affirmed that
the process of appointment of an arbitrator is complete as soon as the appointment is made.
81
AIR 1972 SC 1528.

41
Thus where both the parties have named their arbitrator, the persons so appointed would be
deemed to be arbitrators even before they have accepted the office and formally
communicated their consent to the parties concerned.

 Refusal to act as Arbitrator: After an appointment as arbitrator is offered to a person, he

can decline the offer by express or implied refusal Explaining the meaning of the term
'refusal' the Supreme Court in State of West Bengal v. National Builders 82 observed,
"refusal to act means denial to do something which one is obliged to do under law".
Obviously, a reluctant arbitrator cannot be forced to act. Therefore, where the arbitrator
refused to extend time and closed the arbitration proceedings and leaves parties to decide
their future course of action, it would be reasonable to presume that he has refused to
continue as arbitrator any further.83

The section makes it obligatory for the arbitrator to disclose in writing any circumstances
likely to give rise to justifiable doubts as to his inability or circumstances which are likely to
affect his independence or impartiality unless the parties are already aware of the
circumstances. The law expects utmost honesty, impartiality and confidentiality from the
arbitrators.84

CHALLENGE PROCEDURE

The parties are free to agree on a procedure for challenging an arbitrator. Failing any such
agreement, a party who intends to challenge an arbitrator shall within fifteen days after
becoming aware of the constitution of the arbitral tribunal or after becoming aware of any
circumstances referred to in sub-section (3) of Section 12, send a written statement of the
reasons for the challenge to the arbitral tribunal85.

Unless the arbitrator challenged withdraws from his office or the other party agrees to the
challenge, the arbitral tribunal shall decide on the challenge86.

The freedom of the parties is subject to the following condition:

82
AIR 1994 SC 200.
83
State of U.P. v Sardul Singh, AIR 1985 All. 67.
84
Nandyal co-operative spinning mills v K. V. Mohan Rao, (1993) 2 SCC 654.
85
Section 13(2)
86
Section 13(3)

42
  If a challenge under any procedure agreed upon by the parties or under the procedure
under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award.87
 Where an arbitral award is made under sub-section (4), the party challenging the
arbitrator may make an application for setting aside such an arbitral award in
accordance with Section 34.88
 Where an arbitral award is set aside on an application made under sub-section (5), the
Court may decide as to whether the arbitrator who is challenged is entitled to any
fees.89

This section provides that the parties are free to agree on a procedure for challenging an
arbitrator. In case the parties have not prescribed any procedure, the provision of sub-section
(2) would be attracted and the party challenging the appointment of arbitrator shall send to
the arbitral tribunal a written statement of reasons within 15 days after becoming aware of the
circumstances or after becoming aware of the constitution of the arbitral tribunal. After the
expiry of 15 days, the right to challenge would be deemed to have been waived by the party.
On receipt of the written statement from the party as referred to in sub-section (2) the arbitral
tribunal will decide the challenge unless the arbitrator so challenged himself withdraws from
his office or the other party also agrees to the challenge in which case the arbitrator has no
option but to relinquish the office.

In case of sole arbitrator, where one party has challenged his appointment and the other party
also joins it, the sole arbitrator will have to vacate the office. But where the arbitral tribunal
consists of more than one arbitrators and one of the arbitrator's appointment is challenged by
a party and the tribunal has rejected the plea of challenge, there is no option for the
challenging party but to accept the decision of the arbitral tribunal because there is no
provision in this section for review by the court.

Sub-section (4) provides that if the challenge is rejected, the arbitral tribunal shall continue
the arbitral proceedings and make the award. There is no provision for appeal against
rejection of challenge by the arbitral tribunal. Sub-section (5), however, permits the
challenging party to make an application to the court for setting aside the award under
Section 34 of the Act. Where the court has set aside the award, it also has the power to decide

87
Section 13(4)
88
Section 13(5)
89
Section 13(6)

43
whether the arbitrator whose appointment was under challenge is entitled to any fees or not
[Section 13 (6)].

A reading of the various clauses of Section 13 would make it clear that in cases where the
arbitral tribunal consists of one sole arbitrator and only one of the two parties have
challenged his appointment and the other has not agreed with the challenge, the arbitrator
becomes a judge in his own cause' and decides his own fate. This is rather unfortunate and
contrary to accepted principles of natural justice. In such a situation if the sole arbitrator
decides to withdraw, no problem would arise but in case he decides otherwise and rejects the
challenge, then he would continue the arbitral proceedings and make the award which would
be binding on the parties including the one who had objected to his appointment. This creates
a rather unhappy situation, which the framers of the 1996 Act should have taken into
consideration. The only remedy available to the aggrieved party in such a situation is to make
art application to the court to set aside the arbitrator's award under Sections 34 and 37 of the
Act.

FAILURE OR IMPOSSIBILTY TO ACT (SECTION 14)

According to Section 14(1)90 the mandate of an arbitrator shall terminate if:

(a) he becomes de jure or de facto unable to perform his functions or for other reasons
fails to act without undue delay, and
(b) he withdraws from his office or a the parties agree to the termination of his mandate.

If a controversy remains concerning any of the grounds referred above, a party may, unless
otherwise agreed by the parties, apply to the court to decide on the termination of the
mandate.

If, under section or sub-section (3) of section 13, an arbitrator withdraws from his office or a
party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance
of the validity of any ground referred to in this section or sub section (3) of section 12.

An arbitrator who leaves India to settle abroad or an arbitrator appointed ex-officio but his
office having been abolished would be deemed to have become incapable of acting de facto
as arbitrator. De facto incapacity may also be caused due to withdrawal of arbitrator from the
arbitral tribunal or where he expresses inability to proceed with the arbitration after entering
upon the reference. It may be stated that death of the arbitrator should not be interpreted his
90
The Arbitration and Concilliation Act, 1996.

44
inability or incapacity to perform his function as arbitrator because it results into
impossibility of performance rather than inability to perform In case of death of arbitrator, a
substitute arbitrator shall be appointed under Section 15 (2).

Filling up vacancy caused due to retirement or withdrawal by Arbitrator:

The law provides for filling the vacancy caused due to resignation or withdrawal of the
previously appointed arbitrator. This section (i.e., Section 14) provides that mandate of the
arbitrator whether dead or alive shall terminate on his inability to act as arbitrator after he has
entered upon the reference. The vacancy might have been caused by whatever reason but the
same can be filled up by appointing another substitute arbitrator in his place.

In V. K. Constructions v. Army Welfare Organisation91 the arbitrator resigned soon after

entering upon the reference by giving notice to V. K. Constructions. The Army Welfare
Organisation appointed another person as arbitrator whose appointment was challenged by
the appellants. After hearing both the parties, the Court held that the appointment of arbitrator
by respondents Army Welfare Association to fill up the vacancy caused by resignation of the
previous arbitrator was in accordance with the provisions of Section 8 (1) of the Old Act (i.e.,
Arbitration Act 1940) which are now contained in Section 14 of the new Arbitration and
Conciliation Act, 1996. The Court further observed that the Court's power to supply the
vacancy caused on account of resignation of the previous arbitrator could only be invoked
where the party (Army Welfare Organisation in this case) failed or neglected to fill up the
vacancy.

Ex-officio arbitrator

Where an ex-officio is appointed as arbitrator because of the office which he holds, on his
transfer, retirement, resignation or death, his successor will be arbitrator who occupies that
office. But where a person holding an office is specifically appointed as arbitrator by name,
then barring his death, he will continue to act an arbitrator even after his transfer, resignation
or retirement i.e. even after he quits that office92.

91
(1995) 1 Arb. LR 184.
92
Construction India v. Secretary, Works Deptt, Orissa Government, AIR 1998 SC 717.

45
An award given by an ex-officio arbitrator after his quitting the office consequent to his
retirement from service was held to be void for want of jurisdiction as the said officer ceased
to exercise jurisdiction after his retirement from the office93.

TERMINATION OF MANDATE AND SUBSTITUTION OF ARBITRATOR

(SECTION 15)

In addition to the circumstances referred to in Section 13 or Section 14, the mandate of an

arbitrator shall terminate :

(a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties.

Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed

according to the rules that were applicable to the appointment of the arbitrator being replaced.

Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2),
any hearing previously held may be repeated at the discretion of the arbitral tribunal.

Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior
to the replacement of an arbitrator under this section shall not be invalid solely because there
has been a change in the composition of the arbitral tribunal.

This section is complimentary to preceding Sections 13 and 14 inasmuch as arbitrator

withdrawing from his office for any reason may be replaced unless otherwise agreed by the
parties. Sub-section (4) provides the procedure for appointment of the substitute arbitrator.
Though apparently the provisions contained in Section 14 (1) (b) and Section 15 (1) (a)
appear to be overlapping but in fact it is not so. While Section 14 (1) (b) provides for the
termination of the mandate of an arbitrator when he withdraws from his office, Section 15 (1)
(a) will apply when the reason of termination is any other than specified in Section 14 (1) (a)
i.e., de jure or de facto inability or neglect.

In M/s. Yashwith Constructions (P) Ltd. v. M/s. Simplex Concrete P. les India Ltd. &
another94 the Supreme Court made it clear that where the arbitrator originally appointed in
terms of the arbitration agreement withdrew for health reasons and the Managing Director of

93
Union of India v. Jagat Ram Tehran, AIR 1996 Del 191.
94
AIR 2006 SC 2798.

46
respondent company as authorised originally by the arbitration agreement, promptly
appointed a substitute arbitrator though in arbitration agreement there was no specific
provision authorising him to appoint a substitute arbitrator, such an omission in the
arbitration agreement would be said to have been made up by the specific provision of sub-
clause (2) of Section 15 of the Act and appointment of the substitute arbitration would be
valid. In such a case, the withdrawal of an arbitrator from the office for any reason has to be
treated as within the purview of Section 15 (1) (a) of the Act. The Court further observed that
the term 'Rules' used in Section 15 (2) obviously refers to the provision for appointment of
arbitrator as contained in the arbitration agreement or Rules y institution to which disputes
were referred for arbitration. The written petition challenging the validity of appointment of a
substitute arbitrator by the Managing Director of the respondents was, therefore, dismissed by
the Apex Court.

In Budhraja Mining & Construction Ltd., Bhubneswar v. Union of India 95 the Court held that
Arbitral Tribunal is competent to decide on question of its own jurisdiction. In this case, the
objection of jurisdiction was overruled by the arbitral tribunal and the award was passed. On
an application for setting aside the award could be permissible under Section 34 of the Act
and the Coin may set aside the award passed by the Arbitral Tribunal if the Tribunal lacked
jurisdiction or exceeded its jurisdiction.

In M/s. Eastern Mineral and Trading Agency v. Steel Authority of India Ltd.96 the Court held
that the arbitrator may go ahead with the proceedings and conclude it but will not sign the
award, which shall be subject to the order to be passed either in appeal which is pending.

 Court has no jurisdiction to remove arbitrator while arbitral proceedings are going on- In
the instant case, the petition was directed against the order of the Division Bench of the
Calcutta High Court dated 30th March, 2000 which had stayed operation of the interim
order passed by the learned Single Judge and directed - the arbitration proceedings to go
on. The Division Bench simultaneously referred the question to Full Bench, requiring
clarification whether under Section 15 of the Arbitration and Conciliation Act, 1996, the
Court has any jurisdiction to remove any arbitrator while arbitration proceedings are
going on. Answering in the negative, the Supreme Court in its decision held that it is not
appropriate to stay proceedings before arbitrator. He will conclude proceedings but will

95
AIR 2008 Ori 98
96
AIR 2000 SC 3579(1).

47
 not sign the award which shall be subject to order passed in appeal which is pending
before the Division Bench of the High Court.

PART III: CONDUCT OF ARBITRAL TRIBUNAL

(SS. 18 to 2797)

EQUAL TREATMENT OF PARTIES (SECTION 18)

The parties shall be treated with equality and each party shall be given a full opportunity to
present his case.

This section casts some duties on the Arbitral Tribunal:

 The Tribunal must be independent and impartial

 It must mete out equal treatment to each party.
 It must give each party a full opportunity to present their case

The Principle of natural justice i.e., nemo judex in causa sua and audi alteram partem must
also be followed by the Tribunal.

There was no specific provision in the Arbitration Act, 1940, corresponding to section 18.
This section is in pattern of A.18 of the Model Law.

DETERMINATION OF RULES OF PROCEDURE (SECTION 19)

19. Determination of rules of procedure.—

(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908)
or the Indian Evidence Act, 1872 (1 of 1872).

(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the
arbitral tribunal in conducting its proceedings.

(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to
this Part, conduct the proceedings in the manner it considers appropriate.
97
The Arbitration and Concilliation Act, 1996.

48
(4) The power of the arbitral tribunal under sub-section (3) includes the power to determine
the admissibility, relevance, materiality and weight of any evidence.

The provisions of CPC and Evidence Act must not be applied in arbitration proceedings
where mere procedure is likely to hinder speedy justice, but there should be no hesitation to
invoke them if they may be helpful in rendering justice.

Conditions under this section:

 Not bound by CPC or Evidence Act

 Freedom to parties to decide the procedure of Arbitral Tribunal
 In absence of any agreement between the parties, the Tribunal can decide its own
procedure.
 Power of tribunal- admissibility, relevance, materiality and weight of evidence.

PLACE OF ARBITRATION (SECTION 20)

Section 20 provides that the parties are free to agree on the place of arbitration.

Failing any agreement, the place of arbitration shall be determined by the tribunal. In doing
so the Tribunal has to give due consideration to the circumstances of the case and
convenience of the parties.

Unless otherwise agreed by the parties, the tribunal may meet at any appropriate place for:

 consultation among its members;

 hearing of witnesses;
 hearing of Experts or the parties; and
 inspection of documents, goods or other property.

In Shin Satellite Public Co. Ltd v. Jain Studios Ltd.98 one of the parties to the arbitration
submitted that the matter should be referred to arbitration either in London or Singapore
when other arbitrations were already in progress between the same parties. But the Court
pointed out that because the arbitration agreement provided Delhi as the venue and that part
of the agreement being enforceable, the power for reference at a place outside Delhi could not
be granted.

98
2006 2 SCC 628.

49
 COMMENCEMENT OF ARBITRAL PROCEEDINGS (SECTION 21)

21. Unless otherwise agreed by the parties, the arbitral proceedings, in respect of a
particular dispute commence on the date on which a request for that dispute to be referred to
arbitration is received by the respondent.

The date of commencement of arbitral proceedings does not relate to arbitrators entering on
the reference or having been called upon to act as arbitrator but on receipt of request by the
respondent that the dispute be referred to arbitration for settlement. Therefore, once the
request is received by the opposite party, it is immaterial whether he assents to the request for
arbitration or not.

The date of service of notice to appoint an arbitrator will not be the date of commencement of
the proceedings.

Particulars of all disputes taken together should be referred to arbitration. If some of the
disputes arising under the terms of agreement between the parties are omitted, they cannot be
raised subsequently through another reference.

LANGUAGE (SECTION 22)

It is open to the parties by agreement to decide what language or languages are to be used in
the proceedings. If there is no such agreement, the Tribunal shall determine the language or
languages to be used.

The language finalised shall be applicable to:

 Any written statement, including a claim and a defence by a party

 Any hearing
 Any arbitral award, decision or other communication by the tribunal.

All pleadings, all applications, all statements, all orders, etc would have to be in the language
agreed upon or determined.

STATEMENT OF CLAIM AND DEFENCE (SS. 23 to 27)

Sections 23 to 27 lays down the procedure to be followed in arbitration proceedings.

50
The claimant has to file his claim stating the facts supporting his claim, the point at issue and
the relief or remedy sought. The respondent, on receiving the claim papers, has to state his
defence in respect of the particulars enumerated in the claim. The parties may agree to any
other method of bringing the elements of the dispute to the notice of the tribunal. The time for
filing papers may be fixed under the agreement of the parties or by the tribunal.

CLAIM AND DEFENCE (SECTION 23)

(1)Within the period of time agreed upon by the parties or determined by the arbitral
tribunal, the claimant shall state the facts supporting his claim, the points at issue and the
relief or remedy sought, and the respondent shall state his defence in respect of these
particulars, unless the parties have otherwise agreed as to the required elements of those
statements.

(2) The parties may submit with their statements all documents they consider to be relevant
or may add a reference to the documents or other evidence they will submit.

(2A) The respondent, in support of his case, may also submit a counterclaim or plead a set-
off, which shall be adjudicated upon by the arbitral tribunal, if such counterclaim or set-off
falls within the scope of the arbitration agreement.

(3) Unless otherwise agreed by the parties, either party may amend or supplement his claim
or defence during the course of the arbitral proceedings, unless the arbitral tribunal
considers it inappropriate to allow the amendment or supplement having regard to the delay
in making it.

The claim and defence filed by the parties within the time agreed upon by the parties or fixed
by the tribunal.

In the absence of such agreement the claimant has to state:

 the facts supporting the claim;

 points at issue; and
 the relief or remedy sought.

The statement of defence has to state the defence in respect of these particulars.

Counter- claim

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 An arbitrator should receive a counter claim as a part of the pleadings of the parties and take
into account in deciding the dispute on its merits. He should not refuse to take the cc by
saying that it is outside the agreement.

Documentary evidence

Along with their statement of claim and defence, the parties may submit all relevant
documents. They may also add references to the documents and other evidence which would
be submitted later.

Amendment of statement

The parties, may, during the arbitral proceedings, amend or supplement their claim or defence
unless:

 The parties have agreed otherwise

 The tribunal considers it inappropriate to allow the amendment or supplement due to
the delay in making it.

HEARING OR WRITTEN PROCEEDINGS (SECTION 24)

(1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold
oral hearings for the presentation of evidence or for oral argument, or whether the
proceedings shall be conducted on the basis of documents and other materials:
Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the
proceedings, on a request by a party, unless the parties have agreed that no oral hearing
shall be held

[Provided further that the arbitral tribunal shall, as far as possible, hold oral hearings for
the presentation of evidence or for oral argument on day-to-day basis, and not grant any
adjournments unless sufficient cause is made out, and may impose costs including exemplary
costs on the party seeking adjournment without any sufficient cause.]

(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of
the arbitral tribunal for the purposes of inspection of documents, goods or other property.

52
(3) All statements, documents or other information supplied to, or applications made to, the
arbitral tribunal by one party shall be communicated to the other party, and any expert
report or evidentiary document on which the arbitral tribunal may rely in making its decision
shall be communicated to the parties.

Oral hearing

It is open to the parties to agree whether any oral hearing should be held by the Arbitral
Tribunal or not. If there is no such agreement, it is for the tribunal to decide:

 Whether to hold oral hearings for the presentation of evidence or for oral arguments,
or
 Whether the proceedings shall be conducted on the basis of documents and other
materials.

If oral hearing has not been excluded by agreement the Tribunal has to hold oral hearings at
an appropriate stage if a request is made by the parties.

Notice to the parties

The tribunal must give to the parties sufficiently advance notice:

 Of any hearing
 Of any meetings of the tribunal for the purpose of inspection of documents, goods or
other property.

Supply of documents

An Arbitral tribunal can use only such material of which both the parties are aware and which
they have an opportunity to counter. In order to achieve this end, section 23(3) makes two
provisions;

 That the tribunal shall communicate to the other party all the materials, including
statements, documents, information and applications supplied to the tribunal by one
party
 That the tribunal shall communicate to all the parties any expert report or evidentiary
material on which it seeks to rely.

DEFAULT OF PARTY (SECTION 25)

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Unless otherwise agreed by the parties, where, without showing sufficient cause,—

(a) The claimant fails to communicate his statement of claim in accordance with sub-section
(1) of section 23; the arbitral tribunal shall terminate the proceedings;

(b) the respondent fails to communicate his statement of defence in accordance with sub-
section (1) of section 23, the arbitral tribunal shall continue the proceedings without treating
that failure in itself as an admission of the allegations by the claimant and shall have the
discretion to treat the right of the respondent to file such statement of defence as having been
forfeited;

(c) A party fails to appear at an oral hearing or to produce documentary evidence; the
arbitral tribunal may continue the proceedings and make the arbitral award on the evidence
before it.

Clause (a)- Failure to submit claim

If the claimant fails to submit the statement of his claim in accordance with the provision of
S.23 (1), the tribunal shall terminate the proceedings. The reference will be dismissed.

A decision under clause (a) is an order for termination of proceedings. The court
distinguished an order for an award. An order under this section is a termination of
proceedings without any decision on merits. An award is a termination after considering
merits of the matter under dispute.

Clause (b) - Failure to submit defence

If the respondent fails to submit the statement of defence in accordance with the requirements
of the section, the proceedings will be continued, and the award will be made on the material
and evidence before the tribunal, and the failure will not be treated as an admission of the
allegations made by the claimant.

Section 2(9) provides that a claim would include a counter-claim.

Clause (c)- Failure to appear

This clause empowers the tribunal to continue the proceedings and to give its award where a
party fails to appear at an oral hearing, or fails to produce documentary evidence.

EXPERT APPOINTED BY ARBITRAL TRIBUNAL (SECTION 26)

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(1) Unless otherwise agreed by the parties, the arbitral tribunal may—

(a) Appoint one or more experts to report to it on specific issues to be determined by the
arbitral tribunal, and

(b) Require a party to give the expert any relevant information or to produce, or to provide
access to, any relevant documents, goods or other property for his inspection.

(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal
considers it necessary, the expert shall, after delivery of his written or oral report,
participate in an oral hearing where the parties have the opportunity to put questions to him
and to present expert witnesses in order to testify on the points at issue.

(3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make
available to that party for examination all documents, goods or other property in the
possession of the expert with which he was provided in order to prepare his report.

Section 26 provides for appointment of experts by the arbitral tribunal for any specific issue.
In such a situation, a party may be required to give the expert any relevant information or
produce any relevant document, goods or property for inspection as may be required. It will
be open to a party (or to the arbitral tribunal) to require the expert, after delivery of his report,
to participate in an oral hearing where the parties would have an opportunity to put questions
to him.  

COURT ASSISTANCE IN TAKING EVIDENCE (SECTION 27)

(1) The arbitral tribunal, or a party with the approval of the arbitral tribunal, may apply to
the Court for assistance in taking evidence.

(2) The application shall specify—

(a) The names and addresses of the parties and the arbitrators.

(b) The general nature of the claim and the relief sought;

(c) The evidence to the obtained, in particular,—

(i) The name and address of any person to be heard as witness or expert
witness and a statement of the subject-matter of the testimony required;

(ii) The description of a document to be produced or property to be inspected.

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 (3) The Court may, within its competence and according to its rules on taking evidence,
execute the request by ordering that the evidence be provided directly to the arbitral tribunal.

(4) The Court may, while making or order under sub-section (3), issue the same processes to
witnesses as it may issue in suits tried before it.

(5) Persons failing to attend in accordance with such process, or making any other fault, or
refusing to give their evidence, or guilty of any contempt to the arbitral tribunal during the
conduct of arbitral proceedings, shall be subject to the like disadvantages, penalties and
punishments by order of the Court on the representation of the arbitral tribunal as they
would incur for the like offences in suits tried before the Court.

(6) In this section the expression “Processes” includes summonses and commissions for the
examination of witnesses and summonses to produce documents.

Under Section 27(1), the Arbitral Tribunal as well as any part with the approval of the
Arbitral Tribunal can apply to the court for assistance in taking evidence. Under Section 43 of
the old 1949 Act only the arbitrator or umpire could apply and not a party.

Orders of Court: The court may order that the evidence be provided directly to the Arbitral
Tribunal. It will issue to the witnesses the same processes as it issues in the suits before it.
The processes that may be issued include:

a) summons for the examination of witnesses,

b) commissions for the examination of witnesses, and

c) summons for the production of documents.

Disobedience of Orders: Persons who fail to attend as required, or make any other default;
or refuse to give evidence; or are guilty of contempt of the Arbitral Tribunal, shall be dealt
with by the Court on the representation of the Arbitral Tribunal in the same way as a person
who was guilty of like offences in suits before the court.

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 CONCLUSION
It is settled that getting resolution of a dispute by arbitration is a matter of contract between
the parties and so long as the contract does not vitiate any provision of the Arbitration Act,
there is nothing in law to prevent the arbitration agreement between the parties being given
effect in full. However, it is to be noted that where parties by an arbitration agreement agreed
that the arbitral proceedings would be conducted in accordance with the Rules of Indian
Council of Arbitration (ICA), it does not mean that the parties have not retained power of
appointment with themselves. In other words, parties were free to adopt procedure for
appointment of arbitrator and were not bound by the procedure of appointment of arbitrator
as laid down under ICA Rules that an arbitration clause in a contract should be distinguished
from an arbitration agreement.

While arbitration clause being a part of the contract, it is an agreement collateral to the main
contract and therefore it perishes with the termination of the contract. But an arbitration
agreement has a separate existence because it is separately executed. It, therefore, follows
that a separate existing agreement provides more strength and vitality to the validity of
arbitration proceedings and the arbitration award. Again, a separate arbitration agreement will
not be assignable being in the nature of a personal covenant, but as against this, an arbitration

57
clause in a contract, being collateral to the main contract, is transferred when the main
contract is assigned.
The arbitration agreement is an exception to the general principle that agreement in restraint
of legal proceeding is void. The Arbitration agreement in the Arbitration and Conciliation
Act, 1996 is different in many aspects from Arbitration Act, 1940 wherein it was not essential
that agreement shall be in writing. The word used in Arbitration Act, 1940 is ‘difference’
instead of ‘dispute’, which has larger ambit than that of the word ‘difference’. Hence, it can
be said that in some aspects, the new Act is development of the old one but it is very similar
to UNCITRAL Model Law and the New York Convention.

PART II

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. The
arbitration agreement shall be deemed to be independent of the contract containing the
arbitration clause, and invalidity of the contract shall not render the arbitration agreement
void. Hence, the arbitrators shall have jurisdiction even if the contract in which the arbitration
agreement is contained is vitiated by fraud and/or any other legal infirmity. Further, any
objection as to jurisdiction of the arbitrators should be raised by as party at the first instance,
i.e., either prior to or along with the filing of the statement of defence. If the plea of
jurisdiction is rejected, the arbitrators can proceed with the arbitration and make the arbitral
award. Any party aggrieved by such an award may apply for having it set aside under Section
34 of the Act. Hence, the scheme is that, in the first instance, the objections are to be taken up
by the arbitral tribunal and in the event of an adverse order, it is open to the aggrieved party
to challenge the award.

An arbitrator may be challenged only in two situations. First, if circumstances exists that give
rise to justifiable grounds as to his independence or impartiality; second, if he does not posses
the qualifications agreed to by the parties. A challenge is required to be made within 15 days
of the petitioner becoming aware of the constitution of the arbitral tribunal or of the
circumstances furnishing grounds for challenge. Further, subject to the parties agreement, it is
the arbitral tribunal (and not the court - unlike under the old Act of 1940) which shall decide
on the challenge. If the challenge is not successful the tribunal shall continue with the arbitral
proceedings and render the award, which can be challenged by an aggrieved party at that

58
stage. This is another significant departure from the Model Law, which envisages recourse to
a court of law in the event the arbitral tribunal rejects the challenge

Normally in any judicial system a first appeal against a Court Judgment is a right of the party
and hence the first appellate court needs to once again look into the merits of the case and
pass a reasoned judgment. This is because the parties never have the right to choose their
judge or their qualification or knowledge on particular filed of business. But in the arbitration
cases the parties choose their arbitrators, knowledge and qualification and hence there need
not be another appreciation of merits of the case. That is why the UNICITRAL model law as
well as Indian Arbitration & Conciliation Act, 1996 restrict the scope of the appeal against an
arbitral award. The objective of such a restriction is to avoid wastage of time by once again
looking into the merits of the case and re-appreciate the evidence and to ensure finality of an
arbitral award.

PART III

The arbitrators are masters of their own procedure and subject to parties agreement, may
conduct the proceedings “in the manner they consider appropriate.” This power includes-
“the power to determine the admissibility, relevance, materiality and weight of any
evidence”.99 The only restrain on them is that they shall treat the parties with equality and
each party shall be given a full opportunity to present his case, 100 which includes sufficient
advance notice of any hearing or meeting.101 Neither the Code of Civil Procedure nor the
Indian Evidence Act applies to arbitrations.102 Unless the parties agree otherwise, the tribunal
shall decide whether to hold oral hearings for the presentation of evidence or for arguments
or whether the proceedings shall be conducted on the basis of documents or other material
alone. However the arbitral tribunal shall hold oral hearings if a party so requests (unless the
parties have agreed that no oral hearing shall be held).103 Arbitrators have power to proceed
exparte where the respondent, without sufficient cause, fails to communicate his statement of
defence or appear for an oral hearing or produce evidence. However, in such situation the
tribunal shall not treat the failure as an admission of the allegations by the respondent and
shall decide the matter on the evidence, if any, before it. If the claimant fails to communicate

99
Section 19(3) & (4).
100
Section 18, 1996 Act.
101
Section 24(2).
102
Section 19 and Section 1.
103
Section 24.

59
his statement of the claim, the arbitral tribunal shall be entitled to terminate the
proceedings.104

BIBLIOGRAPHY

BOOKS

 SUTTON et al., RUSSEL ON ARBITRATION (25th ed, Sweet & Maxwell, London,
1997)
 D. CARON & L. CAPLAN, THE UNCITRAL ARBITRATION RULES: A
COMMENTARY (Oxford Commentaries on International Law 2013).
 P.K.BASU MAJUMDAR, LAW OF ARBITRATION (Universal Law Publishing
Co., 2011).
 N.V. PARANJAPE, LAW RELATING TO ARBITRATION AND CONCILIATION
IN INDIA (5th ed, Central Law Agency, 2013).
 AVTAR SINGH, LAW OF ARBITRATION AND CONCILIATION (11th ed, EBC
2018)

WEBSITES:
 www.wipo.int/amc/en/arbitration/egeda/recommended-agreement/
 https://www.arbfile.org/af-static/.../RulesAndAgreements/agreement-ir.pd
104
Section 25.

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  www.cfjblaw.com/kyle-whitehead-authors-article-discussing-arbitration-..
 https://www.scconline.com/

RESEARCH PAPERS:

 Sumeet Kachwaha, The Arbitration Law of India: A critical Analysis, 1 AIAJ, 1-17.

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