PROJECT

WORK
Of
ALTERNATIVE DISPUTE RESOLUTION [ADR]

TOPIC: APPOINTMENT OF ARBITRATORS

SUBMITTED BY: Syed Renoba Nisar

SUBMITTED TO: Asst. Prof. Abhijit Anand

Reg. no.:
GU17R0389
Semester: 6th

GLOCAL LAW SCHOOOL

INDEX
Page
1
1. INTRODUCTION
2. 2015 AMENDMENT ACT TO APPOINT OF ARBITRATORS
3. LEGAL FRAMEWORK FOR APPOINTMENT OF ARBITRATORS
4. QUALIFICATION OF ARBITRATOR
5. APPOINTMENT F ARBITRATOR THROUGH COURT ASSISTANCE
6. PROCEDURE FOR APPOINTMENT
7. EFFECTS OF 2015 AMMENTMENT ON APPOINTMENT OF
ARBITRATORS
8. CONCLUSION
9. BIBLIOGRAPHY

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 CASES

1. SBP & Co. v Patel Engineering & Co.

2. Nandan Biomatrix Ltd. V D1 Oils Ltd.
3. Union Of India v Dinkar Nath Bhalla
4. Deutsche Post Bank Home Finance Ltd. V Taduri Sridhar
5. Iron & Steel Co. Ltd. V Tiwari Road Lines
6. Grid Corporation of Orissa Ltd. V AES Corporation
7. Citation Infowares Ltd. V Equinox Corporation
8. Shree Ram Mills Ltd. V Utility Premises (P) Ltd.
9. State of West Bengal v Associated Contractor.

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  INTRODUCTION

The Arbitration and Conciliation (Amendment) Act, 2015 grants the liberty to the
parties to appoint an arbitrator mutually.
The Act provides that the parties are free to determine the number of arbitrators,
provided that such number shall not be an even number. However, if the parties fail to
do so, the arbitral tribunal shall consist of a sole arbitrator.
The procedure in relation to appointment of arbitrator(s) is provided under Section 11
of the Act. A person of any nationality may be an arbitrator, unless otherwise agreed
by the parties. The aforesaid section also deals with the contingency wherein the
parties fail to appoint an arbitrator mutually. In such a situation, the appointment shall
be made, upon request of a party, by the Supreme Court or any person or institution
designated by such Court, in the case of an International Commercial arbitration or by
High Court or any person or institution designated by such Court, in case of a
domestic arbitration.
Before the appointment of arbitrator is made, the concerned Court or the person or
institution designated by such Court is required to seek a disclosure in writing from
the prospective arbitrator in terms of Section 12(1) of the Act and also give due regard
to any qualifications required for the arbitrator by the agreement of the parties and the
contents of the disclosure and other considerations as are likely to secure the
appointment of an independent and impartial arbitrator.

 AMENDMENT TO SECTION 11 BY 2015 AMENDMENT ACT

Appointment of an arbitrator shall mow be made by the supreme-court or the High

Court, as the case may be, instead of the Chief Justice Of India or the Chief Justice of
the High Court. An application for appointment of arbitrator(s) shall be disposed of as
expeditiously as possible and an endeavour shall be made to dispose of the matter
within a period of 60 days from the date of service of notice on the opposite party.
The High Court is empowered to frame rules for the purpose of determination of fees
of the arbitral tribunal and the manner of such payment. Thus, the appointment of
arbitration is expedited by 2015 amendment.

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  LEGAL FRAMEWORK FOR APPONTMENT OF ARBITRATORS

Parties generally agree to one or three arbitrators to resolve their disputes. [SBP & Co
v Patel Engineering & Co, the designate can appoint a person or an institution to
select the arbitrator, but this has rarely occurred in India, except when parties have
expressly designated a person or an institution for that purpose.] 1 Where the parties
fail to act as per procedure specified in the agreement for selection of arbitrators, or if
the appointment procedure fails, the Designate is empowered under Section 11 of the
Act to appoint the arbitrator or take the appropriate steps to do so.

Except for Section 11(8), the Act does not indicate the manner of appointment by the
Designate. Even Section 11(8) merely provides that the Designate shall have due
regard to the qualifications required by the arbitration agreement and other
considerations that are likely to secure the appointment of an independent and
impartial arbitrator. Section 11(10) empowers the Chief Justice of India or of the
relevant high court, as the case may be, to make appropriate schemes for appointment.

Accordingly, schemes have been made for the purposes of Section 11(For instance,
the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 and the
Scheme for Appointment of Arbitrators by the Chief Justice of Allahabad High Court,
1996). The schemes made under Section 11(10) of the Act chiefly deal with the
procedural aspects of applying to the Chief Justice for appointment of arbitrator and
the procedure to be followed by the Chief Justice, the person or the institution
designated by him, as the case may be, on receipt of such application. Even these
schemes do not provide guidelines on who shall be appointed as arbitrator by the
Designate, or the mode of selection of a particular person over another.

Section 82 of the 1996 Act empowers the high court to make rules relating to the
proceedings under the 1996 Act before the courts. These include proceedings under
Sections 8, 9, 14, 27, 34, 39 and 43, apart from Section 11. Several high courts have
framed rules under these provisions. Although most of these rules do not deal with the
proceedings under Section 11, as there is already a separate scheme framed by the

1
2005 (3) Arb LR 285 (SC).

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relevant court, some of these rules deal with aspects pertaining to Section 11 as well
6. Nevertheless, even these rules do not deal with the question as to who shall be

 QUALIFICATION OF ARBITRATORS

The parties should ideally follow an agreed procedure for appointing the arbitrators.
However if that fails and an application is filed in court for appointment, the Chief
Justice or the person or institution designated by him, in appointing an arbitrator, shall
have due regard to any qualifications required of the arbitrator by the agreement of the
parties. [Section 11 (8) (a)]
A clause in the agreement, which provides for settling the dispute by arbitration
through arbitrators having certain qualifications or in certain agreed manner is
ordinarily followed by the courts and not derogated from unless there are strong
grounds for doing so. The appointment of an arbitrator can be challenged within 15
days after he learns of the constitution of the arbitral tribunal or after becoming aware
of the circumstance that he does not possess the necessary qualification.
It is not open to a party, especially in government contracts, to contend that
appointment of only one arbitrator only by one of the parties to the dispute will
violate the principle that no man can be a judge in his own cause if that party had
voluntarily entered into the contract with knowledge of this fact and had thus accepted
the terms and conditions of the contract. The question of its maintainability before the
arbitral tribunal stating that the arbitration clause in the contract between the parties is
void and unenforceable law cannot be accepted. [Nandan Biomatrix Ltd. v. D1 Oils
Ltd]2

2
(2009) 4 SCC 495

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  APPOINTMENT OF ARBITRATOR THROUGH COURT
ASSISTANCE

An arbitration agreement as defined under Section 7 of the Act is a condition

precedent in order to exercise the power to appoint an arbitrator or an Arbitral
Tribunal, according to Section 11 of the Act by the Chief Justice or his designate.

The Supreme Court has identified the duties of the chief justice or his designate. 3First
they identified and separated the preliminary issues that arise from the application
under Section 11 of the Act into three categories, that is:

(i) Issues that the Chief Justice or his designate must decide

(ii) Issues which the Chief Justice or his designate choose to decide

(iii) Issues that have to be left to the Arbitral Tribunal to decide.

Section 11 of the Act provides for the procedure to appoint an arbitrator or arbitrators
with court assistance. The primary objective of seeking court interference under the
Act is so that securing the constitution of the arbitral tribunal can happen
expeditiously. Parties can agree upon a procedure for appointment of a sole arbitrator
or arbitrators as under sub-section (2) of section 11 and can approach the court in the
event they don’t have a procedure. The court’s jurisdiction and the nature of its power
as per section 11 have been quoted directly from the judgment.4

Section 11 of the Arbitration and Conciliation Act, 1996, provides for the
appointment of the arbitrator on the failure of the parties-agreed procedure or the lack
of the consensus between the parties regarding the arbitrators.

3
S.B.P.& Co. v. Patel Engineering 2005 8 SCC 618
4
S.B.P.& Co. v. Patel Engineering2005 8 SCC 618

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 While appointing an arbitrator under Section 11 of the Arbitrator and
conciliation Act, 1996, two things must be kept in mind.

(i) That there exists a dispute between the parties to the agreement and that the dispute
is alive.

(ii) Secondly, an arbitrator must be appointed as per the terms and conditions of the
agreement and as per the need of the dispute.[Union of India v. Dinkar Nath
Bhalla5]

The existence of an arbitrator agreement between the parties to the petition under
section 11 of the Act and existence of dispute(s) to be referred to arbitration is
conditions precedent for appointing and arbitrator under section 11 of the Act. A
dispute can be said to arise only when one party to the arbitration agreement makes or
assert a claim/demand against the other party to the arbitration agreement and the
other party refuses/denies such claim or demand. If a person who is not a party to the
arbitration agreement is impleaded as a party to the petition under section 11 of the
Act, the court should either delete such party from the array of parties, or when
appointing an arbitrator make it clear that the arbitrator is appointed only to decide the
disputes between the parties to the arbitration agreement. [Deutsche Post Bank Home
Finance Ltd. V. Taduri Sridhar6]

 Arbitration agreement providing for three arbitrators [Section 11 (3) and

[Section 11(4)]

The parties are given the freedom under the Act to select the arbitration of their own
choice, but if the parties fail to do so, then in arbitration with three arbitrators, each
party shall appoint one arbitrator, and the two appointed arbitrator shall appoint the
third arbitrator, who shall act as the presiding arbitrator. [Section 11(3)]

But if one of the parties fails to appoint its arbitrator or the appointed arbitrator fails to
appoint third or presiding arbitrator within thirty days from their appointment, then
one of the parties may approach the Supreme Court of the High Court or any person
or institution designated by such Court for the appointment of the arbitrator or

5
(2009) 7 SCC 350
6
(2011) 1 SCC 375

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presiding arbitrator as the case may be; thereafter the Supreme Court or the High
Court or any person or institution designated by such Court shall make the
appointment. [Section 11(4)]

In Iron and Steel Co. Ltd. V. Tiwari Road Lines 7, the Supreme Court held that the
opening part of the sub-section (5) of section 11 of the Act use the expression ‘’failing
any agreement referred to in sub-section (2)’’. Therefore, sub-section (5) of section 11
will come into play only when there is no agreement between the parties as is as is
referred to in sub-section (2) of the section 11 of the Act, viz., that the parties have not
agreed on a procedure for appointing arbitrator or arbitrators, sub-section (5) of the
section 11 of the Act can have no application.

In Grid Corporation of Orissa Ltd. V. AES Co-operation 8, the Supreme Court held
that the procedure for appointment of third (presiding) arbitrator is described in sub-
section (3) of section 11. After each party has appointed its arbitrator, the two
arbitrators so appointed have to appoint a third (Presiding) arbitration. It is not
necessary that the appointment of third arbitrator by sitting together and in writing.
The requirement of the law is that there should be an appointment and the
appointment should be by the two appointed arbitrators. The statute does not
contemplate that such appointment should be made in writing.

The provision of the Act also does not provide that the appointment of third arbitrator
cannot be agreed upon orally or through mutual discussion. It is also not necessary
that the two arbitrator appointed by each of the parties must sit at one place, deliberate
jointly and take a decision in the presence of each other in regard to the appointment
of the third arbitrator. All that need to be done is that they have actually consulted or
conferred will each other and both or one of them has informed the parties that the
presiding or the third arbitrator has been appointed by them after joint deliberation. In
other words, all that the two arbitrators need to do to satisfy the provision of statute,
while making the appointment is to:

(i) Actually make the appointment

7
(2007) 5 SCC 703
8
2002 (3) Arb. LR 486 SC

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 (ii) Appointment should be made after consultation with each other, and

(iii) Such appointment is communicated to the parties.

The Act nowhere provides that the parties need to be consulted, involved or informed
prior to the appointment of the presiding arbitrator. [Grid Corporation of Orissa Ltd.
v. AES Corporation]

 Where the agreement provides for arbitration by a sole arbitrator and the
parties fail to comply with the agreement under section 11(2) as to the
appointment of a sole arbitrator, within 30 days from the request by the other
party, the Supreme Court or the High Court or any person or institution
designated by such Court can appoint a sole arbitrator upon the request by the
party. [Section 11(5)]

In Iron and Steel Co. Ltd. v. Tiwari Road Lines9, the Supreme Court held that the
opening part of sub-section (5) of section 11 of the Act use the expression ‘’ failing
any agreement referred to in sub-section (2)’’. Therefore, sub-section (5) of section 11
will come into play only when there is no agreement on between the parties as is
referred to in sub-section (2) of section 11 of the Act, viz, that the parties have not
agreed on a procedure for appointing the arbitrator or arbitration. If the parties have
agreed on a procedure for appointing arbitrator or arbitration sub-section (5) of
section 11 of the Act can have no application.

In Citation Infowares Limited v. Equinox Corporation10, Equinox Corporation was a

company Incorporated in the USA. It entered into an outstanding agreement with
Citation Software, a company incorporated in India. The agreement provided that in
case of nay dispute, the dispute would be referred to a mutually acceptable arbitrator
and the contract would be governed by Californian law. However, parties did not
specify the seat of Arbitration. In pursuance of the said agreement Citation Infowares
Ltd. created some infrastructure in Gurgaon for Equinox’s business. Later dispute
arose between the parties and Equinox terminated the contract prematurely, due to
which Citation Infowares Ltd. Incurred huge loss, so, it claimed damages, along with
its outsourcing payment from Equinox Corporation. Further Citation Infowares issued
9
(2007) 5 SCC 703
10
2009(6) SCALE 430

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a notice to arbitrate to invoke the dispute resolution clause and sought appointment of
a sole arbitrator under the final agreement.

However, the parties could not mutually agree upon a sole arbitrator to adjudicate
upon the dispute. Then, of the Citation Infowares field an application under section
11(5) of the Arbitration and Conciliation Act, 1996 before the Chief Justice of India
in order to appoint the sole arbitrator. It was resisted by Equinox Corporation.

Issues:

(1) Whether Chief Justice of India had jurisdiction to entertain an application for
appointment in an agreement wherein the parties had agreed that Californian law
would be the governing law of contract.

(2) Whether Part 1 of the Arbitration and Conciliation Act, which applies to
arbitration that seat of which is in India and contains Section 11 was applicable where
there, is no agreement on the place of arbitration.

Decision; Supreme Court held that Part 1 of the Arbitration and Conciliation Act
would apply in this case, even in request of agreements governed by the laws of
another country, where the seat is not specified in the agreement itself.

In this case, one of the contracting party was incorporated in India, the obligation
were also to be completed in India and about the nature of the contract it can be s said
that there was no implied exclusion of Part 1 of the 1996 Act. Therefore, court held
that notwithstanding the language of section 2(2) of the 1996 Act indicating that Part I
would apply where the place of arbitration is in India, the parties would be entitled to
invoke the provision of Part I, even in respect of international commercial agreement
which is to be governed by the laws of another country. Consequently, the application
made under section 11(5) in Part-I was maintainable. Accordingly, Supreme Court
appointed Justice R.C Lahoti (ex. CJI) as the sole arbitrator to arbitrate upon the
disputes which have arisen between the parties. However, the court held that the law
governing the contract in Arbitration would be the Californian Law.

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  PROCEDURE FOR APPOINTMENT [Section 11(6)]

Section 11 (6) the Act provides that where the appointment procedure has been agreed
between the parties and a party has failed to act in terms of the agreement like:

(a) a party fails to act as required under the appointment procedure agreed between
the parties; or

(b) the parties, or the two appointed arbitrator, 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 performance,

Then any party to the agreement may request the Supreme Court or High Court or any
person or institution designated by such Court to take the necessary measures, unless
the agreement on the appointment procedure provides other means for securing the
appointment.

Section 11(6) thus, sets cut the contingencies when a party may request the Supreme
Court or the High Court or any person or Constitution designated by such court to
take necessary measures unless the agreement or the appointment procedure provides
other means for securing the appointment.

In decided an application under section 11(6) of the Arbitration and Conciliation Act,
1996(‘’the Act’’) what the Supreme Court or the High Court the arbitration
proceeding in motion by appointing an arbitrator and it is due to that purpose that the
finding in given in respect of the existence of the arbitration clause, the territorial
jurisdiction, live issue and the limitation. Unless there is a finding given on these
issues, there would be no question of proceeding with the arbitration. [Shree Ram
Mills Ltd. v. Utility Premises (P) Ltd.,11]

11
(2007) 4 SCC 599

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  EFFECTS OF 2015 AMENDMENT ACT ON APPOINTMENT OF
ARBITRATORS

One of the main points of contention that arose under Section11 over the years is
whether the function of the Chief Justice under the said section is an administrative
function or a judicial function. An argument raised in S.B.P & Co. v. Patel
Engineering case12was that the Court interpreted Section 11 in such a way in to
confer wide powers on the Chief Justice in deciding the existence and validity of the
arbitration agreement. The Court held that the Chief Justice enjoyed the power to
decide on his own jurisdiction, to entertain the request, the existence of a valid
arbitration agreement, the existence or otherwise of alive claim, the existence of the
condition for the exercise of his power and on the qualifications of the arbitrator or
arbitrators’ and such decision was final. This resulted in excessive interference by
courts in subsequent cases, infringing upon the arbitrator’s right under the Act to
decide on his own jurisdiction and the scope of the arbitration agreement.

Recently, the issue arose once again in State of West Bengal v. Associated
Contractor13 where the Supreme Court held that since the Chief Justice is not a
“Court”, a decision under Section 11 is not a decision of the court and hence, will not
have a presidential value.

The 2015 amendment Act now finally laid this issue to rest by replacing ‘’Chief
Justice” with Supreme Court or High Court and provides that the Supreme Court or
High Court shall limit its examination only to the existence of the arbitration
agreement, and not on issues such as live claim, qualification, condition for existence
of power etc.

Further, Patel Engineering held that the Chief Justice can delegate his or her power of
appointment of arbitrator only to another judge of that court. The 2015 Amendment
Act now clearly provides that the Supreme Court or the High Court may designate

12
(2005) & SCC 618
13
AIR 2015 SC 260

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any other person or institution as the appointing authority, and further clarifies that
such designation will not be deemed a delegation of judicial power. This paves the
ways for courts to designate institutions or expert bodies as the appointing authority in
appropriate cases.

As aspect on which Patel Engineering stands reaffirmed is with regard to appeal

against a decision under Section 11. In Patel Engineering the majority held that no
appeal will lie against a decision under section 11 except under Article 136 of the
constitution. The amendment act reaffirmed this position by providing that the
decision of the Supreme Court or the High Court under sub-section 11 is final and no
appeal including Letters Patent Appeal shall lie against such a decision.

Thus, the Amendment Act of 2015 provided statutory status to the majority judgment
of Patel Engineering case.

 Jurisdiction of the court and the nature of power exercised by it when

acting pursuant to the provision contained in section 11 has been
summarized in S.B.P & CO. v. Patel Engineering14 as under:

(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of
India under section 11(6) of the Act is not an administrative power. It is a judicial
power.

(ii) The power exercised by the Chief Justice of the High Court or the Chief Justice
of India under section 11(6) of the Act, in its entirety, could be delegated, by the
Chief Justice of the High Court only to another Judge of that Court and by the Chief
Justice of India to another Judge of the Supreme Court.

(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the
power that is exercised by the designated Judge would be that of the Chief Justice as
conferred by the statute.

(iv) The Chief Justice or the designated Judge will have the right to decide the
preliminary aspects as indicated in the earlier part of this judgment. These will be his

14
(2005) 8 SCC 618

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own jurisdiction to entertain the request, the existence of a valid arbitration
agreement, the existence or otherwise of a live claim, the existence of the condition
for the exercise of his power and on the qualification of the arbitrator or arbitrators.

The Chief Justice or the designated Judge would be entitled to seek the opinion of an
institution in the matter of nominating an arbitrator qualified in terms of section 11
(8) of the Act if the need arises, but the order appointing the arbitrator could only be
that of the Chief Justice or the designated Judge.

(v) Designation of a District Judge as the authority under section 11 (6) of the Act by
the Chief Justice of the High Court is not warranted on the scheme of the Act.

(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High
Court would not interfere with orders passed by the arbitrator or the Arbitral
Tribunal during the course of the arbitration proceedings and the parties could
approach the Court only in terms of section 37 of the Act or in terms of Section 34 of
the Act.

(vii) Since an order passed by the Chief Justice of the High Court or by the
designated Judge of that Court is a judicial order, an appeal will lie against that order
only under Article 136 of the Constitution to the Supreme Court.

(viii) There can be no appeal against an order of the Chief Justice of India or a Judge
of the Supreme Court designated by him while entertaining an application under
section 11(6) of the Act.

(ix) In a case where an Arbitral Tribunal has been constituted by the parties without
having recourse to section 11 (6) of the Act, the Arbitral Tribunal will have the
jurisdiction to decide all matters as contemplated by section 16 of the Act.

(x) Where District Judges had been designated by the Chief Justice of the High
Court under section 11 (6) of the Act, the appointment orders thus far made by them
will be treated as valid; but applications if nay pending before them as on this date
will stand transferred, to the dealt with by the Chief Justice of the High Court
concerned or a Judge of that Court designated by the Chief Justice.

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  CONCLUSION

The 1996 Act empowered the Chief Justice of India and of the High Court’s to
appoint arbitrators considering their stature. The chief justice was empowered to
delegate that function to an individual or an institution. The purpose of allowing
such delegation was to enable an individual or an institution to effectively perform
the function of choosing an appropriate arbitrator for a particular dispute.

Where there is a list of arbitrators with the court, the representation from technical,
financial and other relevant fields are almost non-existent. The arbitrators, whom the
courts appoint under Section 11, are predominantly retired judges and, in rare cases,
advocates. Further, retired judges by default become eligible for appointment as
arbitrators.

Lastly, no consent is obtained from the prospective arbitrator. This eliminates any
chance of declaration by the arbitrator of any past or present connection with a party
in the arbitration.

Thus, from the above, the following can be concluded: one, the judiciary has
virtually created a monopoly in the Indian arbitration market by institutionalizing
appointment of retired judges as arbitrators; two, courts have eliminated competition
from other potentially capable professionals for appointment as arbitrators; and
three, there is lack of transparency in the process of appointment of arbitrators by the
courts under Section 11 of the 1996 Act

Further, when a person is to be appointed as arbitrator, the Designate should have

due regard to the nature of the dispute and the expertise of the arbitrator. The
designate must also take into account the seat of arbitration so that he/she can appoint
an arbitrator who resides either in or near the seat of arbitration.

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BIBLIOGRAPHY

BOOK REFERED:

 SINGHAL’S ALTERNATIVE DISPUTE RESOLUTION, SINGHAL’S

LAW PUBLICATION

WEBSITES REFERED:

 http://lawtimesjournal.in/appointment-of-arbitrators
 https://singhania.in/selection-and-appointment-of-arbitrators-in-india
 https://www.mondaq.com/india/arbitration
 https://indiankanoon.org

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