"ARBITRAL TRIBUNAL AND ITS COMPOSITION, CHALLENGES"

1. Introduction

2. Composition of Arbitral Tribunal.

3. Who is an Arbitrator?

4. Appointment of Arbitrator/Arbitrators.

5. Grounds for Challenge to an Arbitrator.

6. Challenge procedure.

7. Failure and Impossibility to Act as an Arbitrator.

8. Termination of Mandate and Substitution of an Arbitrator.

9. Competence of arbitral tribunal to rule on its own jurisdiction.

10. Conclusion

11. References

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 "ARBITRAL TRIBUNAL AND ITS COMPOSITION, CHALLENGES"

INTRODUCTION

Chapter III (Sections 10-15) of the Arbitration & Conciliation Act, 1996 and
Rules 22-27 of the Rules of Arbitration, lays down provisions for the
Composition of an Arbitral Tribunal.

The term 'Arbitration tribunal' is defined u/s 2(1)(d) of Arbitration &

Conciliation Act, 1996. It sates, Arbitration tribunal means a sole arbitrator or a
panel of arbitrators.

The Apex Court in Engineering Mazdoor Sabha v. Hind Cycles Ltd. 1 said that
an arbitration tribunal though discharges the functions of quasi-judicial nature, yet
it is not a court of law in technical sense.

The term ‘Court’ has been defined u/s. 2(1)(e) of the Act,1996. This said section
doesn’t include an Arbitral tribunal. As per this section, 'Court' means the
principal Civil Court of original jurisdiction in a district but, does not include any
Civil Court of a grade inferior to such principal Civil Court or any court of small
cause court and includes the High Court in exercise of its ordinary original civil
jurisdiction.

COMPOSITION OF ARBITRAL TRIBUNAL

NUMBER OF ARBITRATORS (SEC 10) –

Sub-sec(1) provides the freedom to the parties to determine the number of

arbitrators and it is an obligation given by the Act to the parties that, number of
arbitrators shall not be an even number.

1
AIR 1963 SC 874.

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Sub-sec(2) ensures that, if the parties could not arrive into the agreement in respect
of number of arbitrators, it will not be the cause to vitiate the arbitration
proceeding. And in such case, the arbitral tribunal shall consist of a sole arbitrator.

In Group Chimique Tunisien v. Southern Petrochemical Industries

Corporation Ltd.2 in this case, the arbitration clause provides that, the dispute
shall be referred to 2 arbitrators. The court ruled that, section 10 of Act provides
that number of arbitrator shall not be even. So, the court asked the parties to
appoint 3rd arbitrator instead of holding the agreement invalid.

In M.M.T.C Ltd. v. Sterile Industries (India) Ltd. (1996), The Apex court has
held that an arbitration agreement specifying an even number of arbitrators cannot
be a ground to render the arbitration agreement invalid.

In Com. Products Co. (India) Ltd. v. Ayaz Ghadiya, 3 Where in arbitration

agreement does not make a provision for the number of arbitrators and the mode of
their appointment. It is to be presumed that, the reference was intended to a single
arbitrator. In such circumstances, the mode of appointment is by consent of the
parties and if the parties don’t conquer on the same, the court will make that
appointment.

Rule 22 of the Rules of Arbitration provides that if the value of the claim made
under arbitration is One Crore or less, a single arbitrator can resolve the dispute if
the parties agree to it. In cases where the claim to the dispute exceeds one Crore,
the arbitral tribunal shall be composed of three arbitrators with the agreement of
the parties.

2
AIR 2006 SC 2422.
3
AIR 1997 Bom. 33.

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In Narayan Prasad Lohia vs, Nikunj Kumar Lohia, the Supreme Court
observed that if two arbitrators are appointed for an Arbitral Tribunal instead of
three, and they give an award through common opinion, there will be no frustration
of proceedings.

WHO IS AN ARBITRATOR?

The Arbitration and Conciliation Act, 1996 doesn't define the term 'arbitrator'.
However, in the common parlance, Arbitrator means a person/persons to whom a
particular matter or issue in dispute is referred, with a view to settle on the basis
of submission made by the conflicting parties.

APPOINTMENT OF ARBITRATORS (SEC 11) –

Sec 11 is the lengthiest section of the Act, 1996.

Sub-sec(1) provides freedom to the parties to appoint a person of any nationality as

an arbitrator, however, the parties may restrict themselves to certain nationalities of
the states to be appointed as an arbitrator. Therefore, a foreign national maybe
appointed as an arbitrator.

Sub-sec(2) prescribes procedure appointing the arbitrators & the parties have been
given freedom to lay down procedure, subject to sub-sec (6).

Sub-sec(3) would come into operation when the parties fail to reach agreement on
an appointment procedure. An arbitration agreement with 3 arbitrators, if failed,
each party is given authority to appoint one arbitrator and these 2 appointed
arbitrators shall appoint the 3rd arbitrator, who shall be the presiding arbitrator in
the arbitration.

Sub-sec (4) deals with circumstances;

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 (a) When a party fails to appoint an arbitrator within 30 days even after the
receipt of request relating to appointment of arbitrator from the other party,
or

(b) When 2 appointed arbitrators fails to agree on the appointment of 3 rd

arbitrator within 30 days from the date of their appointment,

In such circumstances, the Chief Justice of India or Chief Justice of a High Court
or any institution designated by them, is authorized to make an appointment upon
request of a party. And these functionaries aren’t required to consul the parties or
the arbitrators while making such appointment.

Sub-sec(5) provides that failing any agreement referred in sub-sec(2) in an

arbitration with a sole arbitrator, if the parties fails to agree on the arbitrator within
30 days from the date of receipt of a request by one party from the other party to
do so, in such circumstances, the Chief Justice or any person or institution
designated by the Chief Justice should make an appointment.

In Manoranjan Mandal v. UOI,4 Failure to appoint Arbitrator empowers other

party to seek remedy for appointment of arbitrator.

Sub-sec(6) is a mandatory provision. It provides that, when the parties or 2

appointed arbitrators failed to appoint a 3rd arbitrator, a person including an
institution has failed to perform a function entrusted to him under that agreed
procedure, then 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.

4
AIR 1999 Cal. 117.

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Sub-sec(7) states that there is no appeal and a decision is final, on a matter
entrusted by sub-sec (4), (5), (6) to Chief Justice or the person or an institution
designated by the Chief Justice.

Sub-sec(8) provides guidelines in the matter of appointment of an arbitrator by the

Chief Justice or the person or institution designated by him, shall have due regards
to;

1. Any qualifications required of the arbitrator by the agreement of the parties,

and

2. Other considerations as are likely to secure the appointment of an

independent and impartial arbitrator.

Sub-sec(9) provides guidelines to functionaries i.e., the Chief Justice or the person
or institution designated by him, in that matter of appointment of sole arbitrator or
3rd Arbitrator in an International Commercial Arbitration, should appoint an
arbitrator of a nationality other than the nationalities of the parties, in case the
parties belong to different nationalities. Logic behind this section is to eliminate
scope of partiality by arbitrator.

Sub-sec(10) provides power to Chief Justice to make an appropriate scheme in

respect of the matters entrusted to him, by sub-sec (4), (5), (6).

Sub-sec(11) provides solution to the problem when different parties approach

different Chief Justice of High Courts or Chief Justice of India or their designates
under sub-sec (4), (5), (6). The Chief Justice or his designates to whom the request
has been 1st made under relevant sub-sec shall alone be competent to decide on the
request.

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Sub-sec(12) explains that in case of International commercial arbitration, reference
is to be made to the Chief Justice of India and in case of Domestic arbitration,
reference is to be made to the Chief Justice of High Court with in whose
jurisdiction local limit, the principal Court is situated.

The Rules of Arbitration also provide the manner of the appointment of a sole
arbitrator or three arbitrators under Rule 23. 

In Golden Chariot Recreations Pvt. Ltd. v Mukesh Panika & Anr. the Supreme
Court held that a party to the dispute can file an application for the appointment of
an arbitrator by the Court only after the expiry of 30 days.

GROUNDS FOR CHALLENGE TO AN ARBITRATOR (SEC 12)

Sub-sec(1) contains an expectation of an honest willful disclosure from a

prospective arbitrator to make in writing, such disclosures which is likely to cause
doubt as to his independence or impartiality as an arbitrator.

Sub-sec(2) lays down duty of an arbitrator since he has been appointed as an

arbitrator, throughout the arbitral proceedings if any circumstances mentioned in
sub-sec(1) arise, to be disclosed in writing to the parties, unless the parties have
already been informed by an arbitrator.

Sub-sec(3) provides grounds for challenging the arbitrator when:

1. the circumstances present cause justifiable doubt to his independence or

impartiality, or

2. found not qualified as per the agreement between the parties.

Sub-sec(4) provides estoppel against a party to challenge, who had knowledge of

any ground mentioned in sub-sec(3) before the appointment of an arbitrator, if this

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is not so, a party may challenge an arbitrator appointment by him and it does not
matter if he has participated in appointment, but he could know only after the
appointment.

In Antrix Corp. Ltd. v Devas Multimedia Pvt. Ltd the Court held that if any
party to the dispute disagrees or is dissatisfied with the composition of the arbitral
tribunal, it can approach the Court to challenge the appointment of the arbitrator by
way of application.

CHALLENGE PROCEDURE (SEC 13)

Sub-sec(1) provides freedom to the parties to agree on a procedure for challenging

the arbitrator.

Sub-sec(2) states failing any agreement referred to in sub-sec(1), a party who has
intention to challenge an arbitrator after such failure on agreement of challenging
procedure, within 15 days from the day he became aware of the constitution of the
arbitral tribunal or any circumstances contained in Sec12(3), a party has to send a
written statement containing reasons for such challenge to the arbitral tribunal,
then the arbitral tribunal would decide the matter.

Under Sec 13(3) it is mandatory to decide upon the challenge by the arbitral
tribunal, whether there is a sole arbitrator or more arbitrators in the arbitral
tribunal. This sub-sec(3) provides that, unless the arbitrator challenged under sub-
sec(2) withdraws from his office or the party agrees to challenge, sub-sec(3) cannot
be invoked.

Under Sub-sec(4), though the arbitral tribunal turned down the challenge yet its
decision is not final, however in the event of failure of challenge, the arbitral

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tribunal shall continue the arbitral proceedings and can also make an arbitral
award.

Under Sub-sec(5), where an arbitral award in is made under sub-sec(4), the party
who had challenged the arbitrator is permitted to make an application for setting
aside such an arbitral award, as provided under section 34 of the Act, 1996.

Under Sub-sec(6), when the arbitral award is set aside under sub-sec(5), on the
ground that the challenge application was incorrectly turned down, in such a
situation, the court while setting aside the arbitral award may decide on the subject,
whether the arbitrator who is challenged is entitled to any fees or not. Under this
sub-sec(6) it is the discretionary power of the court which shall depend upon the
circumstances and facts of each case to be finally decided by the Court. Thus, an
arbitrator’s entitlement to receive any remuneration for his services, when he is
challenged is at the discretion of the court.

PROBLEM WITH SECTION 13-This provision under section 13 is unfortunate

and contrary to the well settled principle of natural justice. God may save the
challenging party. Section 13 further provides that if the challenged arbitrator
overrules the objection, the party aggrieved by the decision cannot approach to the
Court, but has to wait till final arbitral award is made and then take recourse to the
court under Section 34 of the Act by making application for setting aside the
arbitral award.

FAILURE OR IMPOSSIBILITY TO ACT (SEC 14)

Section 14 provides for the circumstances in which the mandate of an arbitrator

fails or becomes impossible to act and in such situation mandate of an arbitrator
shall be terminated or an arbitrator's authorities shall be terminated.

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 In Kalicharan Sharma v. State of U. P 5., the court said that, if an arbitrator fails
to reviews all reasonable dispatch in the conduct of the arbitral proceedings, his
mandate is liable to be terminated.

Sub-sec(1) provides that, the mandate of an arbitrator shall also be terminated, if

1. he becomes de jure or de facto unable to act or unable to act without undue

delay; and

2. when he withdraws from his office or the parties agree to termination of his
mandate.

Sec-sec(2) enumerates if some controversy come into existence relating to the

grounds provided in section 14(1) (a) mandate of the arbitrator shall be terminated,
however, a party may apply to the court for determination of the controversy and
the court shall decided upon the consensual character of arbitration.

Sec-sec(3) states that, if the arbitrator withdraws as aforesaid from his office or a
party agrees to such termination of the arbitrator’s mandate or authority, it shall not
imply acceptance of the validity of any ground mentioned in Sec12(3) and
Sec14(1).

Vinod Bhaiyalal Jain v. Wadhwani Parmeshwari Cold Storage Pvt. Co ., Ltd.

When the Supreme Court challenged arbitrators on the grounds of possible
prejudice, it held that there should be no bias towards arbitrators.
The aggrieved party opposed the independence of the arbitrator because the
arbitrator had served as a lawyer for one of the parties to the dispute. This fact
has also attracted the attention of the referee many times. The Supreme Court
held that the injured party had reasonable prejudice against the arbitrator and his

5
AIR 1985 Del 389.

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ability to make an independent and impartial award. Therefore, the award should
be cancelled.

Notes: (a) de jure impossibility means factors personal to an arbitrator to act, i.e.,
insanity, acquires some interest in subject matter, death, etc.

(c) de facto impossibility means factors beyond the control of an arbitrator i.e.,
physical incapacity, goes abroad, his office abrogated, withdrawal from his
office, imprisonment, war, etc.

TERMINATION OF MANDATE AND SUBSTITUTION OF ARBITRATOR

(SECTION 15)

Sub-sec(1) provides for additional grounds for termination of arbitrator’s

authority. These grounds are-

(1) that the arbitrator has withdrawn himself from office for any reason, or

(2) that the parties have consented to each other to terminate arbitrator’s
authority.

Under sub-sec(1) the parties have freedom to remove an incompetent arbitrator

who is not able to perform by reasons whatsoever, by their consent. It too
recognizes the freedom of the parties to agree and prescribe conduct of their
arbitrator.

Sub-sec(2) provides answer to question that, how a substitute arbitrator should be

appointed. So, 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.

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Sub-sec(3) provides discretionary power to the substituted arbitrator who may
begin with the proceedings from the initial stage or from the stage where the
former arbitrators stop the proceedings.

Sub-sec(4) provides despite change in composition of the arbitral tribunal the

proceedings held prior to appointment of another arbitrator shall not be invalid
solely on the ground that the composition of arbitral tribunal has been changed.
Although, freedom given to the parties under sub-sec(4) that they may agree that
the arbitral tribunal may again commence proceedings from initial stage.

Rule 27 of the Rules of Arbitration also states that an arbitrator can be

terminated from his mandate on account of his resignation or death, if he is
negligent in performing his duties or fails to act in an expeditious manner, and does
not declare the arbitral award within a prescribed time.

In National Highways Authority of India vs Gammon Engineers and Contract

the Delhi High Court held that the Arbitral Tribunal is bound by the Arbitration
agreement between parties. The Arbitration agreement cannot be rewritten and
neither can the tribunal accept an appointment in part.

KEY SECTION OF THE ACT

Part III (Section 16) provides Competence of arbitral tribunal to rule on its
own jurisdiction.

Section 16(1) empowers the arbitral tribunal to make rule on its own jurisdiction
including any objections in respect of the evidence or validity of the arbitration
agreement, however, over such matters ultimate control is exercised by the courts
as provided under section 34 of the Act 1996.

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This is an important element in modern arbitration law refers to as ‘Competence
de law competence' means law is competent to rule in its own sphere.

Sub-sec(1) contains principle of autonomy and distinguishes arbitration clause

from other clauses in the agreement. Thus, an arbitration clause is independent of
the other terms of contract and the arbitral tribunal cannot invalidate an arbitration
clause while invalidating the other clauses of the agreement.

Sec 16(1) contains the expression 'the arbitral tribunal may rule'. That means it is
the discretionary power of an arbitral tribunal which it may exercise on its own
motion or at the request of a party. An arbitrator cannot be compelled to exercise
those powers.

Sub-sec(2) provides plea to raise objections to jurisdiction but no time limit is

prescribed. The arbitral tribunal itself may move motion relating to question of
jurisdiction however, the parties have also vested rights to raise objections to
jurisdiction but not 'later than the submission of the statement of defense'. A party
shall not be deprived of such right to raise objections to jurisdiction merely on the
ground that he has appointed or participated in the appointment of an arbitrator.
Thus, an aggrieved party has an opportunity to raise the jurisdictional plea before
an arbitral tribunal even after appointment of an arbitrator.

Sub-sec(3) states that as soon as an arbitral tribunal goes beyond the scope of his
authority, objections are to be raised while the arbitral proceedings are in progress
and in this context section 16(4) waives of the time limit, provided such delay is
justified and reasonable.

Sub-sec(5) states that the arbitral tribunal shall decide on a plea referred to in
section 16 (2) and (3) and where the arbitral tribunal takes decision rejecting the
plea, it shall continue with arbitral proceedings and makes an arbitral award. That

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means, if a plea of objection to jurisdiction made by a party before an arbitral
tribunal and an arbitral tribunal proceeds by rejecting such plea and also makes an
arbitral award, in such cases an aggrieved party may approach to the court for
setting aside such an arbitral award according to section 34 of the of the Act and as
this provision is available to an aggrieved party under Section 16(6) of the Act.

CONCLUSION

Sections 10-15 of this Act and Rules 22-27 of the Rules of Arbitration, lays down
provisions for the composition of an Arbitral Tribunal. This is of utmost concern in
the adoption of arbitration as a mechanism for dispute settlement. It is important
for the parties to choose the right arbitrator or arbitrators that constitute the arbitral
tribunal so that the award delivered by the tribunal is fair and just and free of any
discrimination or biasness. It also ensures that the dispute is resolved in an
effective and speedy manner.

REFRENCES

1. Dr. S. C. Tripathi, Arbitration and Conciliation Act, 1996 (Sixth Edition) 2012.

2. https://indianlegalsolution.com/composition-of-an-arbitration-tribunal/#:~:text=Section
%2010%20of%20the%20Act,part%20of%20the%20arbitral%20tribunal.&text=In
%20cases%20where%20the%20claim,the%20agreement%20of%20the%20parties..

3. https://www.google.com/url?
sa=t&source=web&rct=j&url=https://www.legalbites.in/jurisdiction-of-the-arbitral-
tribunal/&ved=2ahUKEwjMn_qG2IHzAhXZyzgGHW3HDuw4ChAWegQIBBAB&usg
=AOvVaw2Aaw-6gXrg4ZgRa7NP-Ogt

4. https://www.google.com/url?
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=AOvVaw3NP0Eg3tmCxPZAvfhpmtmw

5. https://www.google.com/url?
sa=t&source=web&rct=j&url=https://lovdata.no/dokument/NLE/lov/2004-05-14-
25/KAPITTEL_4%23%25C2%25A712&ved=2ahUKEwj5-
rqO04HzAhU17XMBHUXaAi8QFnoECDoQAQ&usg=AOvVaw2G2fOndKtU4ffadPri4
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