In this article, Shikhar Shrivastava discusses the remedies available if a party fails to appoint an arbitrator within stipulated time.
Arbitration
Arbitration is a dispute settlement process where parties to an arbitration agreement submit their disputes before one or more Arbitrators, instead of a court of law, for resolution of their legal rights and liabilities. The award/ decision made by that Arbitrator/s is a valid binding decision having force of law on the parties to that arbitration agreement.
International Commercial Arbitration (ICA) means a legal relationship which must be considered commercial, where either of the parties is a foreign national or resident or is a foreign body corporate or is a company, association or body of individuals whose central management or control is in foreign hands.[1]
Role of an Arbitrator And his/her Appointment
An Arbitrator can be any person from any country agreed by the parties and does not require any certifications or qualifications but, generally, is a retired judges or legal expert or business field expert because they are equipped with good hearing, excellent analytical and reasoning skills, good writing skills, and an ability to quickly learn complex matters.
Appointment of an Arbitrator or Arbitration Tribunal is done in accordance of the arbitration agreement. The source of the jurisdiction of the arbitrator is the arbitration clause/ agreement.
Number of Arbitrators
It is preferable to always have an odd number of arbitrators like one or three etc., so that an award can be made by a majority in case of a divided opinion. Failing any determination by the parties, the arbitral tribunal shall consist of a sole arbitrator.[2]
Objection Against Composition of Tribunal
A party has a right to object to the composition of the arbitral tribunal within prescribed period of time,[3] if such composition is not in accordance with the agreement. Later, it will not be open to the parties to challenge the composition or the award after it has been passed by that arbitral tribunal.
Remedies available to the parties when they fail to appoint an Arbitrator
If one of the parties does not appoint an arbitrator within 30 days, or if two appointed arbitrators do not appoint third arbitrator within 30 days, the party can request the Supreme Court or relevant High Court to appoint an arbitrator.[4]
A party would forfeit its right to appoint an arbitrator in terms of arbitration clause after the party wishing to exercise such right fails to do so within statutory period of 30 days and the other party makes an application to the court seeking appointment; the court may appoint an arbitrator.
The party can request Chief Justice of India (“CJI”) to appoint an Arbitrator in case of international commercial arbitrations[5] and in case of domestic arbitrations, application has to be made to Chief Justice of respective High Court within whose jurisdiction the parties are situated.[6] The Supreme Court/ High Court can authorize any person or institution to appoint an arbitrator.[7]
Judicial Act or Administrative Act
This appointment of arbitrator would not amount to delegation of judicial power and is to be treated as an exercise of administrative power by the courts. A Constitution Bench of the Supreme Court in Konkan Railway Corporation v Rani Construction Pvt Ltd,[8] unanimously held that the function of appointment is administrative in nature and not judicial. It held that one of the objects of the law is to have the arbitral tribunal constituted as expeditiously as possible.
Duty of Higher Courts While Appointing Arbitrator
The Supreme Court in an ICA, where seat of arbitration is India, and High Courts in domestic arbitrations have to examine the existence of an arbitration agreement at the time of making such appointment.[9] The arbitrability of the issue would be decided by the arbitral tribunal and not the courts.
The Delhi High Court in Picasso Digital Media Pvt. Ltd. v. Pick-A-Cent Consultancy Service Pvt. Ltd.,[10] has emphasized that the courts, while deciding an application for appointment of an arbitrator must confine their enquiry to the existence of an arbitration agreement.
The Amendment to the Arbitration Act, 2015 seeks to introduce a timeline for the appointment so that application for appointment of the arbitrator before the Supreme Court or High Court, as the case may be, can be disposed of as expeditiously as possible and an endeavour shall be made to do so within a period of 60 days.
Qualification of Arbitrators
Clause (a) of Sub-section (8) of section 11 of the Act wherein it is specifically provided that the Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to any qualifications required of the arbitrator by the agreement of the parties.[11]
Nationality of the arbitrator
Parties are free to agree to the nationality of the arbitrator. It is not mandatory that the arbitrator should be of a nationality other than the nationalities of the parties to the agreement.
Named Person or Authority as Arbitrator
Where the agreement itself specifies and names the arbitrator, it is obligatory upon the court, to refer the dispute to the arbitrator specified in the agreement. Only in cases where the arbitrator specified and named in the agreement refuses or fails to act or where the agreement does not specify the arbitrator and the parties cannot also agree upon an arbitrator, does the court get the jurisdiction to appoint an arbitrator.[12]
Challenge To The Appointment Of An Arbitrator
It can be challenged only if
- there is justifiable doubts as to his independence or impartiality; or,
- he does not possess the qualifications agreed upon by the parties.[13]
Such challenge has to be brought within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of the circumstance that he does not possess the necessary qualification.[14] Further, the challenge to appointment has to be decided by the arbitrator himself and if he does not accept the challenge then the proceedings would continue and the arbitrator can make the arbitral award.
If the challenge is not successful the tribunal shall continue with the arbitral proceedings and render the award, which can then be challenged by an aggrieved party at that stage. However, application for setting aside the arbitral award can be made to the Court under Section 34 of the Act and if the court agrees to the challenge, the arbitral award can be set aside.[15]
Conclusion
Section 11 is based on Article 11 of the UNCITRAL Model Law, 1985 which envisages the Chief Justice to perform an administrative function similar to the appointing role that arbitral institutions plays. The Court should not play any active role by deciding the arbitrability of the agreement or decide the matter on merits but it must direct the case to arbitration giving effect to the arbitration agreement between the parties. However, if the Court finds that that the arbitration agreement is null and void, inoperative or incapable of being performed then it may refuse to direct the matter to arbitration.[16]
Therefore, on the request of a party for appointment of the arbitrator, the Chief Justice or his designate can appoint Arbitrator as per the arbitration agreement or may, for reasons to be recorded ignore the designated arbitrator and appoint someone else on justifiable doubts as to the independence and impartiality of the person nominated.
References
Acts:
- The Arbitration And Conciliation (Amendment) Act, 2015
- The Arbitration And Conciliation Act, 1996
- UNCITRAL Model Law, 1985
Articles:
- International Commercial Arbitration, Law and Recent Developments in India, March 2017, Nishith Desai Associates
- Law Of And Procedure For Appointment Of Arbitrator(S), Ginny J. Rautray and Saurendra Rautray
- The Arbitration Law Of India: A Critical Analysis, Sumeet Kachwaha, Asia International Arbitrational Journal, Volume 1, Number 2, Pages 105-126
[1] Section 2(1)(f) of the Indian Arbitration Act, 1996 (hereinafter to be referred as “Act”)
[2] Section 10(2)
[3] Section 16
[4] Section 11(6) of the Act
[5] Section 11(4) of the Act
[6] Section 11(12) of the Act
[7] Section 11 (6)(b) of the Act
[8] 2002 (2) SCC 388.
[9] Section 11 (6)(a) of the Act
[10] ARB.P. 635/2016
[11] Iron & Steel Co. Ltd. v. Tiwari Road Lines, (2007) 5 SCC 703.
[12] S. Rajan v. State of Kerala, (1992) 3 SCC 608; Rite Approach Group Ltd. v. Rosoboronexport, (2006) 1 SCC 206; Iron& Steel Co. Ltd. v. Tiwari Road Lines, (2007) 5 SCC 703.
[13] Section 12(3) of the Act
[14] Section 13 (2) of the Act
[15] Section 13(6) of the Act
[16] 2005 (3) ArbLR 1
