Jurisdiction of the arbitrator:


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.
In SBP & Co. v. Patel Engg Ltd.8 the Supreme Court of India (in a decision rendered by a Bench
of Seven Judges) held that the nature of power conferred on the Court under Section 11 of the
Act is judicial (and not administrative) in nature. Accordingly, if parties approach the Court for
appointment of arbitral tribunal (under Section 11) and the Chief Justice pronounces that he has
7 Section 11 of the Act.
8 (2005) 8 SCC 618
6
jurisdiction to appoint an arbitrator or that there is an arbitration agreement between the parties
or that there is a live and subsisting dispute to be referred to arbitration and the Court constitutes
the Tribunal as envisaged, this would be binding and cannot be re-agitated by the parties before
the arbitral tribunal.
In S.B.P & Co. case the Supreme Court has defined what exactly the Chief Justice, approached
with an application under Section 11 of the Act, is to decide at that stage. The Chief Justice has
the power to decide his own jurisdiction in the sense whether the party making the motion has
approached the right court. He has to decide whether there is an arbitration agreement, as defined
in the Act and whether the person who has made the request before him, is a party to such an
agreement. He can also decide the question whether the claim was a dead one; or a long-barred
claim that was sought to be resurrected and whether the parties have concluded the transaction
by recording satisfaction of their mutual rights and obligations or by receiving the final payment
without objection.
The Court in SBP & Co case, inter alia, concluded as follows:
(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 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.
7
(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 judgment. These will be, his 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
qualifications 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) The District Judge does not have the authority under Section 11(6) of the Act to make
appointment of an arbitrator.
(vi) The High Court cannot interfere with the 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 (appealable orders) or in terms of Section
34 of the Act (setting aside or arbitral award).
(vii) Since it is a judicial order, an appeal will lie against the order passed by the Chief Justice
of the High Court or by the designated Judge of that Court only under Article 136 of the
Constitution to the Supreme Court.
8
(viii) No appeal shall lie 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) 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.
Challenge to arbitrator:
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 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.9
The Indian courts have held that “the apprehension of bias must be judged from a healthy,
reasonable and average point of view and not on mere apprehension of any whimsical person.
9 Article 13 of Model Law
9
Vague suspicions of whimsical, capricious and unreasonable people are not our standard to
regulate our vision.”10

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: