A COMPLETE UNDERSTANDING OF APPOINTMENT OF ARBITRATOR: SECTION 11 OF ARBITRATION ACT
I. INTRODUCTION
The Arbitration and Conciliation Act, 1996 (hereinafter 'Arbitration Act') confer absolute authority to the parties to determine the procedure for appointing the arbitrator/arbitrators. In the event of default, 'the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court will come into play. In 2015, the parliament has amended and transferred the power u/s. 11 from Chief Justice of India and Chief Justice of High Court to Supreme Court and High Court respectively. This entire process of appointment of arbitrator/arbitrator, either by parties or by court comes under the purview of Section 11 of the Arbitration Act.
1The court u/s. 11 means Supreme Court for International Commercial Arbitration and the High Court for Domestic Arbitration.
SECTION 11. APPOINTMENT OF ARBITRATOR
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1The court u/s. 11 means Supreme Court for International Commercial Arbitration and the High Court for Domestic Arbitration.
II. APPOINTMENT OF ARBITRATOR BY PARTIES
Sub-sections (2) and (3) of section 11 grants freedom to parties to appoint an arbitrator. Before knocking the doors of court, the parties should refer to the arbitration agreement or mutually decide the procedure for appointing the arbitrator/arbitrators. It is always advised to adopt feasible model according to the parties need for appointing an arbitrator. Otherwise, the appointment of the arbitrator will be through the judicial process u/s. 11 of the Arbitration Act.
b. Arbitrator/arbitrators should be an odd number.
c. He/she can be of any nationality, unless specified in the arbitration agreement. (See Sec. 11(1) of the Arbitration Act)
d. Ensure the neutrality of arbitrator.
e. In case of the arbitral tribunal with 3 arbitrators: Appointment of one arbitrator by each party and appointed arbitrator shall appoint the third arbitrator as presiding arbitrator. [Note: Sub-section (3) - (5) of section 11 of the Arbitration Act is only applicable when there is no agreement on a procedure for appointing the arbitrator/arbitrators as stated in section 11(2) of the Arbitration Act]
f. The requirement of a valid appointment: (i) Informing the other party (ii) Obtaining consent of the arbitrator to act.
a. There must be an arbitration agreement [See Deutche Post bank Home Finance Ltd. v. Taduri Sridhar, (2011) 11 SCC 375]
b. The only party to the arbitration agreement can invoke section 11 of the Arbitration Agreement. (Hence, the third party cannot invoke/implead section 11 of the Arbitration Agreement)
c. Party should be at appropriate jurisdiction [See Indowind Energy Ltd. v. Wescare (India) ltd. (2010) 5 SCC 306]
d. In the case when the arbitrator is named in the arbitration agreement, the Court cannot interfere with appointment u/s. 11 of the Arbitration Act.
e. Section 11(6A) of the Arbitration Act confines the consideration for an application to the existence of an arbitration agremment only. This sub-section 6A was brought by 2015 amendment to minimize the judicial intervention at an application stage u/s. 11. However, three-judges bench in case of United India Insurance Co Ltd. v Hyundai Engineering and Construction, 2018 (10) SCALE 72, has read down Sec. 11(6A) and made it redundant. After perusing this judicial pronouncement, point 'a - d' is still to be followed as a requisite for invoking section 11 of the Arbitration Act.
[Note: After satisfying condition precedent, three preliminary issues which can be raised under section 11 petition are stated in National Insurance Co. v. Boghara Polyfab, (2009) 1 SCC 267. In addition to that, even issue regarding territorial jurisdiction is decided by section 11 application, Telephone Cable Ltd. v. Chief General Manager (Telecom), (2005) 10 SCC 294.]
What parties can do?
a. Arbitration notice u/s. 21 of the Arbitration Act.b. Arbitrator/arbitrators should be an odd number.
c. He/she can be of any nationality, unless specified in the arbitration agreement. (See Sec. 11(1) of the Arbitration Act)
d. Ensure the neutrality of arbitrator.
e. In case of the arbitral tribunal with 3 arbitrators: Appointment of one arbitrator by each party and appointed arbitrator shall appoint the third arbitrator as presiding arbitrator. [Note: Sub-section (3) - (5) of section 11 of the Arbitration Act is only applicable when there is no agreement on a procedure for appointing the arbitrator/arbitrators as stated in section 11(2) of the Arbitration Act]
f. The requirement of a valid appointment: (i) Informing the other party (ii) Obtaining consent of the arbitrator to act.
III. APPOINTMENT OF ARBITRATOR BY COURT
In case parties fail to appoint the arbitrator according to the above stated 'Appointment of Arbitrator by Parties' then appointment power is vested with the Court under sub-sections (4), (5) and (6) of section 11 of the Arbitration Act read with section 11(8) of the Arbitration Act. The appointment of an arbitrator by the court is not an ex-officio power and can only be invoked by the request of the party.1. Requisite for invoking section 11 of the Arbitration Act (Conditions Precedent)
The party filing the application has to effectuate the necessary prerequisite for appointing an arbitrator through Court. These vital prerequisite are enumerated as under:a. There must be an arbitration agreement [See Deutche Post bank Home Finance Ltd. v. Taduri Sridhar, (2011) 11 SCC 375]
b. The only party to the arbitration agreement can invoke section 11 of the Arbitration Agreement. (Hence, the third party cannot invoke/implead section 11 of the Arbitration Agreement)
c. Party should be at appropriate jurisdiction [See Indowind Energy Ltd. v. Wescare (India) ltd. (2010) 5 SCC 306]
d. In the case when the arbitrator is named in the arbitration agreement, the Court cannot interfere with appointment u/s. 11 of the Arbitration Act.
e. Section 11(6A) of the Arbitration Act confines the consideration for an application to the existence of an arbitration agremment only. This sub-section 6A was brought by 2015 amendment to minimize the judicial intervention at an application stage u/s. 11. However, three-judges bench in case of United India Insurance Co Ltd. v Hyundai Engineering and Construction, 2018 (10) SCALE 72, has read down Sec. 11(6A) and made it redundant. After perusing this judicial pronouncement, point 'a - d' is still to be followed as a requisite for invoking section 11 of the Arbitration Act.
[Note: After satisfying condition precedent, three preliminary issues which can be raised under section 11 petition are stated in National Insurance Co. v. Boghara Polyfab, (2009) 1 SCC 267. In addition to that, even issue regarding territorial jurisdiction is decided by section 11 application, Telephone Cable Ltd. v. Chief General Manager (Telecom), (2005) 10 SCC 294.]
2. Time Limit
The petition under section 11 can be filed under two conditions (i) the 30 day period from the receipt of a request expired mentioned under sub-section (4) and (5) of section 11 of the Arbitration Act and, (ii) Under sub-section (6) of section 11 there is no specific time limit mentioned. The party after exhausting other means, if any, for securing the appointment of an arbitrator can request the Court to take necessary measure [See Ansal Properties & Industries Ltd. v. Himachal Pradesh State Electricity Board, AIR 1997 Arb LR 1].3. Sub-sections (4), (5) and, (6) of section 11 of the Arbitration Act
With respect to all three sub-sections, the appointment of the arbitrator shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court. An application under sub-section (4) is filed when the party or the arbitrator fails to appoint an arbitrator (pursuant to sub-section (3)). The application can only be filed after the expiry of 30 day period from the receipt of the request made to appoint the arbitrator. Even in sub-section (5) if the party fails to appoint a sole arbitrator, the other party may approach the court after 30 day period from the receipt of the request made to appoint the arbitrator.
An application Sub-section (6) can be filed when (i) party; or (ii) arbitrator; or (iii) a person, including an institution, fails to discharge any function enstruted to them according to the sub-section (2). An application under sub-section (6) is different from sub-sections (4) and (5). The sub-section (6) germinate from the procedure mutually agreed by the party for appointing an arbitrator (s) and on the other hand sub-sections (4) and (5) does not come from an agreement enunciated under sub-section (2).
IV. OTHER IMPORTANT POINTS UNDER SECTION 11 OF ARBITRATION ACT
1. Sub-sections (4), (5) and, (6) of section 11 of the Arbitration Act is read with requisites of appointment (Section 11(8)). It is incumbent on the court to have due regard to (i) Disclosure by an arbitrator under section 12(1), (ii) Should look into qualification required for arbitrator mentioned under arbitration agreement and, (iii) Appointment of the independent and impartial arbitrator.2. International Commercial Arbitration- In a case when the party belongs to a different nationality, the Supreme Court/Delegated appoint an arbitrator of a nationality other than the nationality of parties. [Section 11(9) of the Arbitration Act]
3. A scheme can be framed by Supreme Court/High Court for dealing with sub-section (4), (5) and, (6) of section 11. [Section 11(10)]
4. If the subject-matter of arbitration agreement falls within two different High Courts. Then the High Court in which the request has first been made under sub-sections (4), (5), and, (6) of section 11 of the Arbitration Act shall alone have the jurisdiction to adjudicate the application. [Section 11(11)]
5. The application shall be disposed of expeditiously within 60 days from the date of service of notice on the opposite party. [Section 11(13)]
Section 11 of the Arbitration Act
11. Appointment of arbitrators.- (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court;
(5) Failing any agreement referred to in sub-section (2), in an 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.”
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(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court;
(5) Failing any agreement referred to in sub-section (2), in an 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “High Court” within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.”
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