This article is written by Preeti Pallavi Jena, from the school of law, KIIT University, Odisha. This article talks about the Arbitration Act, Section 16 impact under the act, case laws regarding it.  

Introduction 

The Arbitration and Conciliation Act, 1996 governs the arbitration of India which enacted the measures of increasing the autonomy of the party and reducing the court’s intervention. The resolution of the disputes is made under the Arbitration Act of 1940. In 1996, under Section 16, powers to an arbitral tribunal were granted to govern its own jurisdiction. This 1996 Act is brought from the UNCITRAL model and the doctrine of competence is there under section 16.

Under the Arbitration and Conciliation Act,1996 it says about the principle competence under section 16 which means that the arbitral tribunal is empowered under the act to challenge its jurisdiction which can be brought by the parties arising with the disputes among them.

When this provision is read with Section 5, it describes the civil court’s power to override the functions. There is an exception which is for limited avenues expressly mentioned under the act of the arbitration. The viewpoint of determination of jurisdiction with some restriction regarding the scope of determination by a court under Section 11 of the act as per the amendment Act of Arbitration, 2015.

The scope of Section 16 for determination by an arbitral tribunal includes limitations, satisfaction and accord. Section 16 is concerned with the adjudication which must be preliminary in nature and should be covered in any trial. The  2015 amendment said that the Court has the right to interfere. Section 16(5) says that,

The tribunal will decide on a plea, and the proceedings will continue. This concept makes a connection of the Arbitration and Conciliation Act, 1996, Section 16 with the Order 7 Rule 11 of the Code of Civil Procedure, 1908. The doctrine of kompetenz kompetenzThis is also called the doctrine of competence-competence. It means the tribunal can decide its competence. Here the arbitral tribunal has the power to make decisions regarding whether it has jurisdiction to adjudicate the dispute which is there under Section 16 of the Arbitration and Conciliation Act, 1996. Section 16 says about the power to rule in every jurisdictional issued by the arbitral tribunal.

The model law has preserved the formulation to the extent of the discussion. Many countries’ representatives including India stated that, if the issue of jurisdiction is not taken into account as a preliminary issue then the arbitrators will decide they have the jurisdiction or not, which leads to wastage of time and many expenses. But few other countries give an opinion that parties can also misuse the provision made to cause any unwarranted delays in the proceedings. Hence a balance between them needs to be created with the different opinions made and hence the formulation was made in such a way that the tribunal will have the final power to decide the matter regarding the jurisdiction.

There was an amendment made to the arbitration act in the year 2019, which omitted the section 11(6A). This was done deliberately for introducing the arbitral tribunals in the matters of arbitration but this amendment still yet to be notified. But in the case of M/s Mayawati Trading Pvt. Ltd v. Pradyot Deb Burman, the Supreme Court held that by amending, section 11(6A) was omitted which does not apply to the revival of law existing to insertion. Section 16 remains the resource for the jurisdictional objection against the tribunal. In the case of National Insurance Co. Ltd v. Boghara Polyfab (P) Ltd. The supreme court tried to again define the court’s power by extending the boundaries of the issues that need to be included by the courts with regards to the appointment of arbitrators.

Section 16 of The Arbitration and Conciliation Act

The primary idea behind the induction of Section 16 of the Arbitration and Conciliation Act of 1996 was to set down the timeline for raising a dispute or issue in the context of the authority of an arbitral tribunal. It also had the purpose of saving the time and money of parties that raised the dispute. However, the subsections 2,4 and 5 tend to create confusion by stating the fact that the arbitral tribunal has the choice to treat the issue of jurisdiction either as a preliminary issue or it is decided at the time of passing of the award. The act doesn’t state whether the issue of the jurisdiction is to be considered as a preliminary issue mandatorily or not. Section 16 further presents another ambiguity.

Section 16(2) makes a party challenge arbitral tribunal jurisdiction and it can settle the powers given upon it under section 16(1). When there is a dispute among parties, it raises a plea where the court either acknowledges the objection or rejects it. If he acknowledges it, then the other party can appeal as per Section 37 of the Arbitration Act and if it is being cancelled, then the other party may again apply for the objection under Section 34 of the Arbitration Act. Section 16 specifies the time for raising the issue of absence of jurisdiction of the tribunal, though it does not specifically mention that the tribunal can rule on such objections as an issue or not.

Therefore, the courts in India have had a diversified opinion on the jurisdictional challenge as a preliminary affair. 

Circumstances under which no objection will be made

Section 16 says that when a plea which is objecting the jurisdiction is raised is taken within a specific time period. The person or party who is making this plea is required to be there within this time limit and not exceed it in any way except if it is that much necessary then such delay can be made. If there is any such delay happened then the arbitral tribunal will take the plea beyond the limited time which is prescribed. If except these many other circumstances goes beyond this limit then it mandatorily prevents the parties from raising objections under Section 4 as means of waiver. Section 4 of the act states that the provision of waving the right object to any party who is having the knowledge of non-compliance with any contractual provisions and it will continue with the arbitration proceedings without any objection with regard to such non-compliance and will be deemed to waive the right to object.

Case laws

Maharshi Dayanand University vs. Anand Coop. L/C Society Ltd

In the case, the Supreme Court stated that the jurisdictional affairs are not required to be classified as a preliminary issue. It further said that the arbitrator may give its ruling on the challenge with the final award. It is visible that while judging the issue, the court didn’t take into consideration the ruling it gave on the previous case of McDermott International.

Kvaerner Cementation India Ltd vs. Bajranglal Agarwal

Again, in the case a three-judge bench of the Supreme court said that the tribunal would get on well in the disposition of the jurisdictional challenge if it is regarded as a preliminary issue and hence, it going into the scope of Arbitration proceedings was out of the picture. The court passed a contradictory judgement without even considering its previous ratio.

Thus, a question arises whether it is mandatory on behalf of a Tribunal to judge upon a jurisdictional objection raised in the context of Section 16 of the Arbitration and Conciliation Act at the beginning before the actual proceeding of the trial starts. To find an answer, we need to review certain cases where the tribunal had to choose between rendering a decision in the preliminary stages or not.

Glencore International AG vs. Indian Potash Ltd & Ors

In this case, the Delhi High Court observed that in the absence of a regulatory ordinance, there is no fundamental prerequisite under the Indian law that the Arbitral Tribunal had to mandatorily decide on the jurisdictional affairs in the preliminary stages. Before hearing the matter, the court further noted that the plea which was raised that a mistake had been committed as the Tribunal hadn’t ruled on the jurisdictional challenge at the threshold was misapprehended and the Arbitral Tribunal has the choice to rule on the challenge whether at the preliminary phases or at the time of the final award on the matter.

Roshan Lal Gupta vs. Shri Parasram Holdings Pvt. Ltd. & Ors 

In this case, the Delhi High Court rejected the claim that the Arbitral Tribunal was obliged to rule on a jurisdictional objection raised in the context of Section 16 of the Arbitration Act as a preliminary issue before proceeding further with the case. It stated that the Arbitral Tribunal needs to adjudicate the challenge made but there is no such rule that it needs to rule on it first and then proceed with the merits of the case. Hence, the court said that the arbitrator had done nothing illegal by not ruling on the challenge on a preliminary basis as expected by the petitioner.

Pankaj Arora vs. AVV Hospitality LLP & Ors.

This is another recent case in which the Delhi High Court recapitulated upon the choices available with an Arbitral Tribunal while ruling upon a challenge. It stated that as long as a decision has been made before the final arbitral award, no violation of the laws of Section 16 has been committed.

From the above-mentioned cases, another conclusion can be made that the Arbitral Tribunal doesn’t need to decide upon a challenge under the Section 16 of the Arbitration Act as the beginning, but it also can postpone the said judgement date to a later stage. This can be extended up to the time taken for the challenge to be dealt with and the ruling must be made before presenting the final award. 

For example, in the case Maharshi Dayanand University vs. Anand Coop. L/C Society Ltd. & Ors. case, it was stated that the arbitrator has to decide if the arbitration agreement, in terms with Section 7 of the Act, is established or not. It also has to decide if the claim made now comes in the scope of Clause 25A of the conditions in case it’s found within the scope of Section 7. While ruling only on these very aspects, the arbitrator can go into the merits of the challenge made. This doesn’t suggest that the tribunal doesn’t have a choice, rather it only states that the Arbitral tribunal has to rule on the challenge without fail before pronouncing the final award. 

Conclusion

Hence, all issues relating to the jurisdiction of the Arbitral Tribunal will be chosen simply by the Arbitral Tribunal whenever it has been compromised. The legal authorities are simply needed, in a restricted limit, either when the Arbitral Tribunal has not been at this point. The life structures of the arrangements encouraging the way toward bringing up criticism regarding the purview of the Arbitral Tribunal is characteristic of the supportive intervention approach of India and the craving to establish a viable Alternative Dispute Resolution apparatus without any missing part. Section 16, is one of the critical arrangements of the Arbitration and Conciliation Act, 1996, which facilitates the goal of making Arbitration a cycle which is portrayed without anyone else adequacy and negligible court mediation.

References 

• https://www.barandbench.com/columns/is-it-mandatory-for-a-tribunal-to-adjudicate-at-the-very-threshold-upon-a-jurisdictional-objection-raised-under-s16-of-arbitration-act#:~:text=Under%20Section%2016%20of%20the%20Act%20upon%20a%20challenge%20being,the%20merits%20of%20the%20claim.
• http://www.legalserviceindia.com/legal/article-3692-is-it-compulsory-for-an-arbitral-tribunal-to-decide-an-objection-to-its-jurisdiction-at-the-very-threshold-.html
• https://indiacorplaw.in/2019/10/section-16-arbitration-conciliation-act-1996-model-law-approach-india.html
• http://arbitrationblog.kluwerarbitration.com/2018/11/19/blowing-hot-cold-assessing-permissibility-fresh-jurisdictional-challenges-setting-aside-proceedings/
• https://singhania.in/arbitration-litigation-arbitration-conciliation-act-limitation-period/
• https://indiankanoon.org/doc/318136/

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: