The Evolving Jurisprudence on the Composition of Arbitral Tribunals in India

Introduction

The composition of an arbitral tribunal is a foundational element of the arbitration process, significantly impacting its legitimacy, fairness, and the enforceability of the resultant award. In India, the Arbitration and Conciliation Act, 1996 (hereinafter "the Act"), as amended from time to time, provides the legislative framework governing the constitution of arbitral tribunals. The Act seeks to balance party autonomy with the essential requirements of impartiality, independence, and procedural fairness. This article undertakes a comprehensive analysis of the legal principles governing the composition of arbitral tribunals in India, drawing upon statutory provisions and key judicial pronouncements. It examines the determination of the number of arbitrators, the appointment process, the critical standards of independence and impartiality, the implications of ineligibility, and the mechanisms for challenging the tribunal's composition.

I. Statutory Framework for Tribunal Composition under the 1996 Act

Part I of the Act lays down the provisions concerning the composition of arbitral tribunals for arbitrations seated in India. These provisions are designed to provide flexibility to the parties while ensuring that the tribunal is constituted in a manner that upholds the integrity of the arbitral process.

A. Determining the Number of Arbitrators: Section 10

Section 10 of the Act grants parties the freedom to determine the number of arbitrators, with the crucial proviso that such number "shall not be an even number" (Arbitration and Conciliation Act, 1996, S. 10(1)). If the parties fail to determine the number, the arbitral tribunal shall consist of a sole arbitrator (Arbitration and Conciliation Act, 1996, S. 10(2)). The Supreme Court, in Narayan Prasad Lohia v. Nikunj Kumar Lohia And Others (2002 SCC 3 572), held that the requirement in Section 10(1) for an odd number of arbitrators is a derogable provision. Parties can agree to an even number of arbitrators, and if they participate in the proceedings without raising a timely objection under Section 16 of the Act, they are deemed to have waived their right to challenge the award on this ground later under Section 34(2)(a)(v). However, courts have intervened where the composition manifestly flouted agreed procedures or statutory intent without clear waiver. For instance, in Haresh Chinnubhai Shah v. Rajesh Prabhakar Jhaveri And Another (2003 SCC ONLINE BOM 1009), an award by two arbitrators who failed to appoint a presiding arbitrator as directed was set aside. The Supreme Court in Groupe Chimique Tunisien Sa v. Southern Petrochemicals Industries Corpn. Ltd. (2006 SCC ONLINE SC 381) modified an arbitration clause providing for two arbitrators and an umpire (in case of disagreement) by constituting a three-member tribunal to align with Section 10.

B. The Appointment Process: Section 11

Party autonomy is the cornerstone of the appointment process under Section 11. Parties are free to agree on a procedure for appointing the arbitrator or arbitrators (Arbitration and Conciliation Act, 1996, S. 11(2)). The Act provides default mechanisms if parties fail to agree on a procedure or if the agreed procedure fails. For instance, in an arbitration with three arbitrators, each party appoints one arbitrator, and the two appointed arbitrators appoint the third, presiding arbitrator (Arbitration and Conciliation Act, 1996, S. 11(3)). Contractual clauses often detail these procedures, as seen in the materials relating to Reliance Industries Limited And Another v. Union Of India (Supreme Court Of India, 2014), which stipulated a three-arbitrator panel with specific timelines and a default appointing authority (Secretary General of the PCA). Similarly, the clause in Lufthansa German Airlines v. Airport Authority Of India (Supreme Court Of India, 2012) detailed appointment by parties or, in default, by the International Chamber of Commerce (ICC), including for multi-party scenarios.

Judicial intervention in appointments is provided under Sections 11(5) and 11(6). The nature of this power was clarified by a seven-judge bench in Sbp & Co. v. Patel Engineering Ltd. And Another (2005 SCC 8 618), which held it to be a judicial power, overruling earlier decisions that deemed it administrative. However, the Arbitration and Conciliation (Amendment) Act, 2015, introduced Section 11(6A), which significantly confined the scope of judicial inquiry at the appointment stage to the "existence of an arbitration agreement," as affirmed in Duro Felguera, S.A v. Gangavaram Port Limited (2017 SCC 9 729). The court, when appointing an arbitrator, must have due regard to any qualifications required by the agreement of the parties and other considerations likely to secure an independent and impartial arbitrator (Arbitration and Conciliation Act, 1996, S. 11(8)). In international commercial arbitrations, Section 11(9) allows parties to agree on the nationality of arbitrators; failing such agreement, a sole or third arbitrator shall not be of the same nationality as the parties.

C. Ensuring Neutrality: Independence and Impartiality under Section 12

The independence and impartiality of arbitrators are paramount. Section 12(1) mandates that a person approached in connection with their possible appointment as an arbitrator must disclose in writing any circumstances likely to give rise to justifiable doubts as to their independence or impartiality. The 2015 Amendment Act substantially strengthened these provisions by introducing the Fifth and Seventh Schedules, which are based on the IBA Guidelines on Conflicts of Interest. The Fifth Schedule lists grounds that may give rise to justifiable doubts, while the Seventh Schedule specifies categories that render a person ineligible to be an arbitrator (de jure ineligibility). Section 12(5) provides that, notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, counsel, or the subject-matter of the dispute falls under any of the categories in the Seventh Schedule shall be ineligible. This ineligibility can only be waived by an express agreement in writing by the parties after the dispute has arisen, as held in BHARAT BROADBAND NETWORK LIMITED v. UNITED TELECOMS LIMITED (2019 SCC 5 755).

Judicial decisions like Voestalpine Schienen Gmbh v. Delhi Metro Rail Corporation Limited (2017 SCC 4 665) have emphasized that while a panel predominantly comprising retired government officials is not automatically biased, the panel should be broad-based to enhance perceived neutrality. In Hrd Corporation (Marcus Oil And Chemical Division) v. Gail (India) Limited (2017 SCC ONLINE SC 1024), the Supreme Court clarified that mere prior involvement or expression of professional opinions does not automatically lead to ineligibility unless the stringent criteria in the Schedules are met.

II. Judicial Interpretation and Key Doctrines

The judiciary has played a crucial role in interpreting and applying the statutory provisions related to tribunal composition, leading to the development of significant legal doctrines.

A. Party Autonomy versus Statutory Mandates

While party autonomy is a guiding principle, it is not absolute and must yield to certain mandatory provisions of the Act aimed at ensuring fairness. The decision in Narayan Prasad Lohia (2002) illustrates this balance concerning the number of arbitrators. Pre-2015, cases like Indian Oil Corporation Limited And Others v. Raja Transport Private Limited (2009 SCC 8 520) upheld clauses allowing one party (often a government entity) to appoint its employee as an arbitrator, provided no actual bias was proven. However, the 2015 amendments, influenced by the Law Commission of India's 246th Report (as cited in Bharat Broadband Network Limited Petitioner v. United Telecoms Limited (Delhi High Court, 2017) and M/S. Mani Buildtech Private Limited Petitioner v. Magic Landbase Private Limited (Himachal Pradesh High Court, 2018)), significantly curtailed this by introducing stricter norms for impartiality, particularly through the Seventh Schedule, which often makes employee arbitrators ineligible.

B. The Imperative of Arbitrator Independence: Post-2015 Landscape

The 2015 amendments reflect a paradigm shift towards prioritizing arbitrator independence and impartiality. The Law Commission strongly advocated for reforms to address concerns about the neutrality of arbitrators, especially in contracts involving state entities. The courts have rigorously applied the standards set out in the Fifth and Seventh Schedules. Cases like Voestalpine and HRD Corp demonstrate a nuanced approach, where ineligibility is determined based on the specific facts measured against the statutory schedules, rather than broad assumptions. The principle that a party cannot unilaterally appoint a sole arbitrator, especially if that party or its officials might have an interest in the outcome, gained traction, drawing from the spirit of the amendments and the subsequent judicial interpretations.

C. The Doctrine of Ineligibility: Impact of TRF Ltd. and its Progeny

A significant development is the line of cases starting with Trf Limited v. Energo Engineering Projects Limited (2017 SCC 8 377). This case established that if a person is ineligible to act as an arbitrator under Section 12(5) read with the Seventh Schedule, they are also disqualified from nominating another person as an arbitrator. This is based on the legal maxim "qui facit per alium facit per se" (what one does through another is done by oneself). This principle was reaffirmed and applied in Perkins Eastman Architects Dpc v. Hscc (India) Ltd. (2019 SCC ONLINE SC 1517) and BHARAT BROADBAND NETWORK LIMITED v. UNITED TELECOMS LIMITED (2019 SCC 5 755). Consequently, an appointment made by an ineligible nominator is considered void ab initio. This has profound implications for arbitration clauses where a party's own Managing Director or a high-ranking official, who might be ineligible under the Seventh Schedule, is designated as the appointing authority or arbitrator.

D. Waiver of Objections to Composition

The Act provides for waiver of objections. Under Section 4, a party who knows that any provision of Part I from which the parties may derogate, or any requirement under the arbitration agreement, has not been complied with, and yet proceeds with the arbitration without stating its objection without undue delay, is deemed to have waived its right to so object. Section 16 empowers the arbitral tribunal to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or the composition of the tribunal. Such objections must be raised no later than the submission of the statement of defence. Narayan Prasad Lohia (2002) extensively discussed waiver in the context of an even-numbered tribunal. However, for ineligibility under Section 12(5) (Seventh Schedule), the proviso to Section 12(5) mandates an "express agreement in writing" by the parties, made *after* disputes have arisen, to waive such disqualification. Mere participation in proceedings does not constitute a waiver in such cases, as clarified in Bharat Broadband (2019).

III. Composition in Specific Arbitral Contexts

A. Multi-Contract and Multi-Party Scenarios

Complex disputes involving multiple contracts or multiple parties present unique challenges for tribunal composition. In Duro Felguera, S.A v. Gangavaram Port Limited (2017), the Supreme Court held that where multiple distinct contracts each contain their own arbitration clause, separate arbitral tribunals may be necessary unless the agreements provide for consolidation or a composite reference. Arbitration clauses sometimes anticipate multi-party situations, as illustrated by the agreement in Lufthansa German Airlines v. Airport Authority Of India (2012), which provided for joint appointment of two arbitrators by multiple parties, with the ICC making default appointments.

B. International Commercial Arbitration

For international commercial arbitrations, the Act contains specific provisions, such as Section 11(9) concerning the nationality of arbitrators. The objective is to ensure neutrality, often by requiring that a sole or presiding arbitrator not be of the same nationality as any of the parties, unless the parties agree otherwise. This principle is reflected in the contractual clauses in the Reliance Industries cases. The Supreme Court in Perkins Eastman Architects Dpc (2019) also dealt with an international commercial arbitration, emphasizing adherence to appointment procedures and the principles of impartiality and independence.

IV. Challenges to Tribunal Composition and Setting Aside of Awards

The Act provides mechanisms to challenge the appointment of an arbitrator under Section 13 if circumstances exist that give rise to justifiable doubts as to their independence or impartiality, or if they do not possess the qualifications agreed to by the parties. The arbitral tribunal itself decides on such a challenge. If the challenge is unsuccessful, the tribunal continues the proceedings and makes an award, which can then be challenged under Section 34.

Section 34(2)(a)(v) of the Act allows an arbitral award to be set aside if "the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part". This ground was central to the discussion in Narayan Prasad Lohia (2002) and Haresh Chinnubhai Shah (2003). The Supreme Court in Associate Builders v. Delhi Development Authority (2015 SCC 3 49) reiterated the limited grounds for judicial intervention under Section 34. The interpretation of "a provision of this Part from which the parties cannot derogate" is crucial; for instance, the core requirements of impartiality and independence are generally considered non-derogable, especially those covered by Section 12(5).

Conclusion

The legal framework governing the composition of arbitral tribunals in India, primarily enshrined in the Arbitration and Conciliation Act, 1996, has undergone significant evolution, particularly through judicial interpretations and the pivotal 2015 amendments. The jurisprudence reflects a consistent effort to balance party autonomy in choosing arbitrators and procedures with the non-negotiable tenets of arbitrator independence, impartiality, and fairness. The judiciary has progressively strengthened the neutrality requirements, especially through a strict application of Section 12 and the principles laid down in cases like TRF Ltd. and its successors, thereby limiting the ability of interested parties to influence tribunal appointments. While parties retain considerable freedom in structuring their arbitral process, this autonomy operates within a framework designed to ensure that the tribunal is, and is perceived to be, an unbiased adjudicatory body. This evolving landscape aims to bolster India's position as a jurisdiction that supports robust, fair, and effective arbitration.