UNIVERSITY OF PETROLEUM & ENERGY STUDIES

SCHOOL OF LAW

BA LLB (HONS.), ENERGY LAW BATCH: 2

SEMESTER – III

ACADEMIC YEAR: 2018 -19

PROJECT OF ARBITRATION AND

CONCILIATION & ADRM.

ON THE TOPIC:

COMPOSITION AND JURISDICTION OF ARBITRAL TRIBUNAL

UNDER THE SUPERVISION OF:

MS.HUMA MEHFOOZ

SUBMITTED BY: PINTU RAM, RISHAB KUMAR, WAQAS

TANVIR

SAP ID:500060941,500060365,500060593

ROLL NO. - R450217075, R450217095,R4502170136

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TABLE OF CONTENTS

1. Composition of arbitral tribunal.............................................................................

1.1 Appointment of arbitrators.........................................................................................
1.2 Grounds for challenge..............................................................................................
1.3 Challenge procedure.................................................................................................
1.4 Failure or impossibility to act.....................................................................................
1.5 Termination of mandate and substitution of arbitrator…...............................................
2 Jurisdiction of arbitral tribunal………………………………………………………..
2.1 Challenges to the competency of the tribunal……………………………
2.2 Disputes Involving a mix of arbitrable and non-arbitrable issues……………………….
2.3 Power of arbitral tribunal to order interim measures…………………………………

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 COMPOSITION OF ARBITRAL TRIBUNAL
Chapter 3 of arbitration and conciliation act defines the composition of arbitral tribunal

According to the section 10 of the arbitration and conciliation act 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
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 1 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 2." 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 invalid3.

The High Court of Bombay in Atul R. Shah v. M/s. V. Vrij Lal Lallobhai & Co and
Another4, 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
1
Section 10, Para 2 of the 111,4 Schedule of the old Arbitration Act, 1940.
2
Section 11 (3) Arbitration & Conciliation Act, 1996.
3
M. M. T. C. Ltd.v Sterlite Industries (India) Ltd., AIR 1997 SC 605.
4
AIR 1999 Born 67
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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
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.

Case law’s-

1. Narayan Prasad & Others v. Nikunj Kumar Lohia5

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.

2. Head, National Jute Manufacturers Corporation Ltd. v. Saraoj Agarwal6

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.

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
arbitrinator, and the two appointed arbitrators shall appoint the third arbitrator and he shall
5
AIR 2002 SC 1139.
6
AIR 2008 Pat 25
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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.

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

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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".

Relevant case: Patitapazvan Mahapatra v. S. E. Eastern Circle7

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.

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.

Relevant case: M. Subramanya v. Dr. Chandra Sekhar 8- 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.

7
AIR 2008 Ori 80
8
AIR 1995 Kar. 115.

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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
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 passes 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

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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 Corporation9,

The Supreme Court has affirmed that the process of appointment of an arbitrator is complete
as soon as the appointment is made. 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.

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 tribunal10.

Unless the arbitrator challenged withdraws from his office or the other party agrees to the
challenge, the arbitral tribunal shall decide on the challenge11.

FAILURE OR IMPOSSIBILTY TO ACT

The mandate of an arbitrator shall terminate if: he becomes de jure or de facto unable to
perform his fuctions or for other reasons fails to act without undue delay, and 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 terminate of the mandate.

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 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.

9
AIR 1972 SC 1528
10
Section 13(2)
11
Section 13(3)

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 TERMINATION OF MANDATE AND SUBSTITUTION OF ARBITRATOR

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.

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

In Budhraja Mining & Construction Ltd., Bhubneswar v. Union of India12

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.

12
AIR 2008 Ori 98

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In M/s. Eastern Mineral and Trading Agency v. Steel Authority of India Ltd.13,

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.

JURISDICTION OF ARBITRAL TRIBUNAL

Chapter 4 of arbitration and conciliation act defines the jurisdiction of arbitral tribunal.

Competency of arbitral tribunal-

Article 16 of arbitration and conciliation act defines that the arbitral tribunal may rule on its
own jurisdiction, including any objections with respect to the existence or validity of the
arbitration agreement.

Judicial Determination of Issue of Existence of Validity of Arbitration Agreement

It is the existence of a valid arbitration agreement binding between the parties that give an
arbitral tribunal the jurisdiction to hear and decide the dispute between them.

The challenge to the jurisdiction of an arbitral tribunal often concerns at the threshold the
issue of existence, validity and enforceability of the arbitration agreement.

Determination by Arbitral Tribunal of its Jurisdiction

The thrust of the challenge to a tribunal’s jurisdiction is that the arbitral tribunal is not
competent to resolve a dispute that concerns the issue of existence, validity or enforceability
of an arbitration agreement upon which the jurisdiction of the arbitral tribunal depends.

In determining the jurisdiction of an arbitral tribunal, the arbitration agreement or

arbitration clause should be as an independent and separate agreement from the container
agreement, and hence, the invalidity of the latter does not automatically result in the nullity of
the former. It is only in the event that the arbitration agreement or clause is itself void,
inexistent, inoperative that the arbitral tribunal’s jurisdiction may be questioned.

A party who do not want to participate in the arbitration proceeding or who is not
nominating its arbitrator to prevent the constitution of arbitral tribunal and who filed further
a case before a court does not bar to enforce the laws under the Model Law concerning such
situation. The Model Law allows an appointing authority to appoint an arbitrator for the
recalcitrant party and authorizing the commencement or continuation of the arbitration even
while the issue of jurisdiction of an arbitral tribunal is before a court.

CHALLENGES TO THE COMPETENCY OF THE TRIBUNAL

A. In general
13
AIR 2000 SC 3579(1)

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 a. Non-existence or invalidity of the arbitration agreement
b. Upon the nullity of the contract the breach of which has resulted in the
dispute submitted to arbitration
c. Upon other grounds not specified in the articlei

This article allows the arbitral tribunal, on its own motion, to rule on the issue
of the existence or validity of the arbitration agreement even without objections from
either party if its own jurisdiction depends upon such determination.

B. Existence or Validity of the Agreement; the Governing Law of the agreement

C. Formal Validity of Arbitration Agreement
D. Lack of Legal Capacity to Enter into Agreement
E. Unenforceability of the Agreement
F. Non-Arbitrability of Dispute

DISPUTES INVOLVING A MIX OF ARBITRABLE AND NON-ARBITRABLE

ISSUES

In cases when parties request to refer disputes involving a mix of arbitrable and non-
arbitrable issues to arbitration, the courts have different opinion on whether arbitration should
proceed or not.

Under Section 25 of the ADR Act, the court shall refer to arbitration those parties who
are bound by the arbitration agreement although the civil action may continue as to those who
are not bound by such arbitration agreement. Additionally, Rule 4.7 of the Special ADR
Rules provides that the court shall not decline to refer some or all of the parties to arbitration
for any of the following reasons:

a. Not all of the disputes subject of the civil action may be referred to arbitration;
b. Not all of the parties to the civil action are bound by the arbitration agreement
and referral to arbitration would result in multiplicity of suits;
c. The issues raised in the civil action could be speedily and efficiently resolved
in its entirety by the court rather than in arbitration;
d. Referral to arbitration does not appear to be the most prudent action; or

The stay of the action would prejudice the rights of the parties to the civil action who are not
bound by the arbitration agreement.

POWER OF ARBITRAL TRIBUNAL TO ORDER INTERIM MEASURES

Complementation between arbitration and court action is best exemplified in the area
of interim measures. Interim measures are ancillary remedies intended for the protection of
the subject matter of the dispute. They include, but are not limited to, preliminary injunction,
appointment of receivers, detention of property, preservation of property, and inspection of
property subject of the dispute.

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 As a rule, interim measures are applied with and secured from the arbitral tribunal.
However, there are instances when it cannot grant the interim measure such as when the
arbitral tribunal is not yet constituted, or when the arbitral tribunal already constituted has no
power to act or is unable to act effectively. In these instances, a party may apply for interim
measures with a court which may grant them. The petition for this purpose shall be governed
by the Special ADR Rules.

A court cannot refuse to grant, implement or enforce a petition for an interim measure
on the sole ground that the petition is merely an ancillary relief and the principal action is
pending with the arbitral tribunal. While interim measures are categorized in the ADR Act
and the IRR as ancillary remedies, they are different from the provisional remedies under the
Rules of Court in that the application for interim measures filed before the regular courts can
stand by themselves despite the pendency of the arbitration of the principal action before the
arbitral tribunal.

The procedure for granting interim measures in International Commercial Arbitration

is as follows:

1. After the arbitral tribunal has been constituted, any party may request for
the grant of interim measures from the arbitral tribunal against the adverse party. This
request shall be in writing transmitted by reasonable means to the arbitral tribunal and
the adverse party, describing the precise relief in appropriate detail, the ground
therefor, and the evidence supporting the request.

2. The relief may be granted in order to:

a. prevent irreparable loss;

b. provide security for the performance of an obligation;
c. produce or preserve evidence; or
d. compel any other appropriate acts or omissions.

3. The grant of the interim measure may be conditioned upon the provision of
security or any act or omission specified in the order.

4. The order either granting or denying the request for interim measures shall
be binding upon the parties and either party may apply with the courts for assistance
in implementing or enforcing it.

5. A party who refuses to comply with the order for an interim measure shall
be liable for damages resulting from non-compliance, including all expenses and
reasonable attorney’s fees paid in obtaining the judicial enforcement thereof. The
party who refuses to comply with the court order compelling compliance with an
interim measure may be cited for indirect contempt of court.

6. Before the constitution of the arbitral tribunal, or to the extent that the
arbitral tribunal already constituted has no power to act effectively, the interim

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measure may be requested from the court in accordance with the Special Rules of
Court on Alternative Dispute Resolution.

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