COMMENCEMENT OF

ARBITRAL PROCEEDINGS
Commencement of Arbitral Proceedings

Learning objectives:
1. How to initiate arbitration proceedings?
2. What is the importance of the notice of commencement in arbitral proceedings?
3. What are the components required in a notice invoking arbitration?
4. How to draft a notice of commencement of arbitration?

Introduction
Arbitral proceedings are said to commence when a reference is made by one party to the
other party that disputes between the parties be referred to arbitration. The party who
intends to refer the disputes to arbitration will do so by sending a written notice expressing
its intent to do so. The starting point of an arbitral proceeding is thus, the notice of
invocation or the notice of commencement. An arbitrator can be appointed only once the
arbitration is initiated by issuing a notice. Section 21 of the Arbitration and Conciliation Act
clearly states that arbitral proceedings commence when such a request for reference of
disputes is made by one party to the other party. The compliance with Section 21 of the Act
is mandatory in nature and cannot be dispensed with.

How to send a notice to the other side to initiate

arbitration? What if the other party chooses to approach
the court instead?
Unless a notice is served on the opposite party calling upon it to appoint an arbitrator in
terms of the arbitration agreement, the opposite party cannot be expected to know that
the party is desirous of getting the disputes resolved through arbitration. A notice to the
opposite side for the purpose of initiating an arbitration has to highlight the existence of a
dispute and the invocation of the arbitration agreement by the aggrieved party. Normally,
such a notice will also nominate an arbitrator or would include a request to appoint an
arbitrator, depending on the nature of the arbitration clause/agreement, to adjudicate
upon the disputes between the parties. If there is no specific procedure provided in the
arbitration clause, then the institutional rules (if chosen) have to be taken into
consideration. If the arbitration is an ad-hoc arbitration, then the Arbitration & Conciliation
Act, 1996 shall apply and hence the procedure laid down in the Act is to be followed.

An arbitration clause may envisage appointment of an arbitral tribunal or a sole arbitrator.

In case of an arbitral tribunal each party nominates one arbitrator each and they appoint
the presiding arbitrator. If the parties have agreed to a sole arbitrator then they may
appoint the same with consensus of both parties. In case of appointment of an arbitral
tribunal, once a notice of invocation is received from one party, the opposite party will
thereafter proceed to appoint an arbitrator. It is a well-settled principle that once a party
has invoked arbitration and referred the disputes to arbitration, an arbitrator has to be
nominated/appointed by the opposite party within a period of 30 days or such other period
as parties may have agreed.

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Commencement of Arbitral Proceedings

Despite there being an arbitration agreement between the parties, if a party chooses to go
to court instead of resolving the disputes by way of arbitration, it is open to the opposite
party to file an application under Section 8 of the Arbitration and Conciliation Act. Section 8
of the Arbitration and Conciliation Act obligates a judicial authority to refer the dispute to
arbitration in case there is a valid arbitration agreement. A Section 8 application is to be
filed before the judicial authority in the relevant jurisdiction that the party has approached.
This judicial authority/court shall be situated in the relevant jurisdiction which the parties
have chosen that will have the exclusive right to hear any disputes under the arbitration
agreement or an arbitration clause in an agreement.

The opposite party has to file the application at the first instance. For example, if one party
to the arbitration agreement has filed a suit before the court and the defendant wishes to
have the disputes resolved by way of arbitration, along with the written statement, the
defendant will have to file an application under Section 8 of the Arbitration and Conciliation
Act. Thus, the application must be made before submitting the first statement on the
substance of the dispute.

What to do if no arbitrator has been appointed?

The opposite party has to nominate or appoint its arbitrator within the stipulated period
once it receives a notice invoking arbitration. On the failure of the party to appoint an
arbitrator, the other party can file an application under Section 11 of the Act seeking
appointment of Arbitrator/Arbitral Tribunal. The Act provides that in the event that the
arbitral tribunal has not been constituted i.e. the arbitrators have not been appointed as
per the agreement, an application can be made to the relevant judicial authority under
section 8, combined with a S. 11 (appointment of arbitrator) application to seek the
assistance of the High Court in constituting the tribunal to resolve the disputes.

Section 11 of the Act deals with the appointment of the arbitral tribunal when a party to the
arbitration agreement fails to fulfil its obligations to complete the constitution of the
arbitral tribunal i.e. nominating arbitrators or confirming nominated individuals as
arbitrators. The authority to appoint an arbitrator vests with the concerned High Court in
case of domestic arbitration and with the Supreme Court in case of international
commercial arbitration.

It is interesting to note that once the stipulated period has expired, the party who fails to
fulfil its obligation, loses its right to appoint an arbitrator or to confirm an arbitrator. For
example, once a party invokes arbitration and appoints its nominee and the other party
fails to appoint an arbitrator within 30 days of receipt of the notice of invocation, even if the
other party nominates an arbitrator after the 30 day period has lapsed, such appointment
will not be regular and the Court can appoint an arbitrator under Section 11.

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Commencement of Arbitral Proceedings

How are the arbitrators appointed?

The regular modes for appointment of an arbitrator in India are:

1. ad-hoc appointment;
2. court appointed;
3. institutional.

The ad-hoc method of appointment as envisaged under section 11(2) of the Act is quite
prominent. As most parties have the freedom to appoint an arbitrator of their choice, it
becomes the most preferred method.

The Court-appointed method of arbitration involves a party approaching the Court to

appoint the tribunal when a party has failed to fulfil its obligations for constitution of the
arbitral tribunal as agreed to, under the arbitration agreement.

The institutional method of appointment is when the arbitration agreement has named an
arbitral institution to govern the dispute. The appointment of the tribunal will be as per the
rules of the institution.

When a sole arbitrator is specified in the arbitration clause, such an arbitrator must be
jointly appointed by the parties. At best, pre-established criteria or qualifications can be
identified for the arbitrator to be eligible so that he has the requisite experience and
knowledge of the relevant subject matter. However, if the parties fail to agree, they will
have to approach the court to appoint an arbitrator. In that case, the court will give an
option to parties to propose a set of arbitrators and if there is a common arbitrator whom
they agree on, the court will appoint such arbitrator. Failing such agreement, the court may
itself appoint an arbitrator, which is typically a retired judicial officer.

This procedure has now been amended as per the Arbitration Amendment Act of 2019 and
the Arbitration Council of India has been introduced. A new Act called the New Delhi
Arbitration Centre Act for the commencement of the New Delhi Arbitration Centre has also
come into place. However, the Arbitration Council of India, though theoretically approved,
has not been established practically as an institute yet. The amendment to Section 11 has
been covered under the 2019 Amendments chapter. To know more about the process,
please refer to the same.

How to minimize disputes over the appointment of an

arbitrator?
The prominent method of reducing the chance of differences in the appointment of an
arbitrator are:

(i) To select an odd number of arbitrators;

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Commencement of Arbitral Proceedings

(ii) To provide a list of acceptable nominations of arbitrators and appoint the tribunal
from amongst the nominations.

When selecting an odd number of arbitrators, in the 1st method the parties to the
arbitration agreement appoint an equal number of arbitrators; the selected arbitrators will
appoint the presiding arbitrator. As a result, there will be an odd number of appointees in
the tribunal with the least resistance. It is compulsory to have an odd number of arbitrators
on the Tribunal; as per Section 10 of the Act.

The second method, of providing a list of nominations is utilized by directing the opposing
party to appoint the tribunal from a list of mutually acceptable candidates [who can be
appointed as arbitrators]. This method assists in reducing disputes over appointment, as
both parties are able to consent up to a certain degree over the constitution of the arbitral
tribunal. The list of choices can be predetermined. However, this is not usually done to
avoid any future conflicts of interest which could render a member of the list ineligible.

What is the eligibility criteria for appointment of an

arbitrator? How can the appointment of an arbitrator be
challenged?
Section 12 of the Act provides the criteria for ineligibility for appointment as an arbitrator.
The appointment of an arbitrator may be challenged if circumstances exist, which give rise
to justifiable doubts or if the arbitrator does not possess qualifications agreed to by the
parties.

The seventh schedule to the act lays down the circumstances which would render the
appointment of an arbitrator ineligible. These include existing or prior professional
relationships as being the employee/consultant/representative/lawyer/director or
manager/advisor to any of the parties. It also includes personal relationships such as the
arbitrator being a close family member or having a family relationship with any of the
parties or persons managing or controlling any of the parties. It also includes cases where
the arbitrator has a financial stake or interest in any of the parties being a company.
Besides being interested in the parties, an interest in the dispute, such as having a
significant financial interest in the outcome of the dispute can also disqualify the arbitrator.

The mode of challenging an arbitrator is highlighted in section 13 of the Act. Under this
section, a challenge to the appointment of the tribunal is made by submitting a statement
highlighting the reasons for challenging the arbitral tribunal.

Sub-section (3) of section 13, states that unless the arbitrator who has been challenged
withdraws from the proceedings, the arbitral tribunal will hear challenges to the
appointment. If the challenge is unsuccessful, the arbitral tribunal shall continue the
arbitration proceedings and make the award.

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Commencement of Arbitral Proceedings

Schedule V of the Act talks about the grounds that give rise to justifiable doubts as to the
independence or impartiality of the arbitrators.

How should you deal with an arbitrator’s bias and conflict

of interest?
In the normal course of events, an arbitrator is to declare any conflict of interest or
information that would suggest the existence of a bias are to be disclosed under section 11
of the Act. Schedule VI of the Act provides a sample Disclosure that is mandatory for every
arbitrator to submit once they accept the mandate of the dispute.

Furthermore, as noted above, section 12 read with schedule VII of the Act highlights
situations wherein an arbitrator cannot be appointed.

In the event that an arbitrator has been appointed under these prohibited classes, an
application must be submitted to the tribunal intimating the same, thereby allowing the
Arbitrator an opportunity to recuse oneself. In the event, the Arbitrator does not recuse
himself/herself, an application should be made to the court directing the termination of the
mandate of the existing tribunal and the appointment of a new tribunal to hear the
proceedings.

In the event that the conflict is discovered later on, the appointment of the arbitrator will be
challenged and his' recusal/ withdrawal from the tribunal is sought.

The appointment of the Tribunal can also be one of the reasons why an award is challenged
and set aside eventually under Section 34.

The arbitral tribunal has been vested with the power to rule on its own jurisdiction of under
Section 16 of the Act. The section embodies elemental jurisprudential doctrine i.e.,
"Kompetenze - Kompetenze". As per this doctrine, the court or an arbitral tribunal has powers
to rule upon its 'own' jurisdiction, brought forth by one of the parties to the dispute. Section
16 (1) of the Act states that an arbitral tribunal may rule on its own jurisdiction, including
ruling on any objection with respect to the existence or validity of the arbitration
agreement. Thus a challenge to the tribunal can be under this section as well.

Who are emergency arbitrators and how are they

appointed?
Majority of the Institutional Arbitration centres provide for a mechanism to protect the
rights of the parties that have agreed to resolve their disputes under the aegis of the said
Institution. The most prominent mechanism is often by means of appointment of an
emergency arbitrator. An emergency arbitrator is appointed to hear any claims that may
require determination to maintain the status quo prior to the constitution of the arbitral
tribunal.

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Commencement of Arbitral Proceedings

An emergency arbitrator can provide reliefs akin to interim reliefs that will be decided
faster than those under section 9 of the Act, and the same will be utilized for the protection
of the reliefs.

The appointment of an emergency arbitrator would be through an application made to the

governing body of the concerned institution which will be empowered to pass any interim
order that a tribunal would be empowered to.

However, an emergency arbitrator cannot make a determination on the claims and rights
that have been made under an arbitration agreement other than the interim claims.

It must be noted that the power to appoint an emergency arbitrator is included in the rules
of the institution itself and would not be considered as another proceeding for obtaining
any relief.

Furthermore, while certain rules can be set aside by consent of the parties, a viable
alternative such as an appointment of an emergency arbitrator is rarely set aside.

However the A&C Act, 1996 does not provide for any emergency arbitration procedure.
Hence the parties under dire circumstances in ad-hoc arbitrations have to ask for reliefs
under Section 9 and 17 of the Act, itself. Under Section 9, the Court is empowered to pass
interim orders. This power is exercised by Courts mainly when the Tribunal has not been
constituted or is under some inability to perform at a particular instance. Section 17 vests
power to pass interim measures with the Tribunal. THe nature of powers exercised by the
Court and the Tribunal are of similar nature. With arbitrators becoming more
technologically friendly, it is easier to obtain quicker reliefs and interim awards even on
emails, on a brighter side.

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