The Law and Practice of Arbitrator Appointment under Section 11 of the Indian Arbitration and Conciliation Act, 1996

The Law and Practice of Arbitrator Appointment under Section 11 of the Indian Arbitration and Conciliation Act, 1996

Introduction

Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter "the Act") stands as a cornerstone of the arbitral process in India, delineating the mechanism for the appointment of arbitrators. This provision empowers the Supreme Court (for international commercial arbitrations) and the High Courts (for domestic arbitrations) to intervene and appoint arbitrators when parties fail to do so in accordance with their agreed procedure, or where no procedure is agreed upon. The interpretation and application of Section 11 have undergone significant evolution, particularly following the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter "2015 Amendment"), which aimed to curtail judicial intervention and expedite the appointment process. This article critically analyzes the jurisprudence surrounding Section 11, drawing upon key judicial pronouncements and statutory provisions to elucidate its current scope and operational dynamics.

Evolution of Judicial Interpretation of Section 11

Pre-2015 Amendment Era: The Nature and Scope of Judicial Power

Prior to the 2015 Amendment, considerable judicial debate centered on the nature of the power exercised by the Chief Justice (or their designate) under Section 11. The Supreme Court in Konkan Railway Corporation Ltd. And Another v. Rani Construction Pvt. Ltd. (2002 SCC 2 388) initially held that the function was administrative. However, this position was overturned by a larger bench in Sbp & Co. v. Patel Engineering Ltd. And Another (2005 SCC 8 618), which declared the power to be judicial. This meant that the court could delve into preliminary issues, including the existence and validity of the arbitration agreement, the arbitrability of the dispute, and whether the claims were live or stale. In National Insurance Company Limited v. Boghara Polyfab Private Limited (2009 SCC 1 267), the Supreme Court categorized issues that the Chief Justice or their designate could decide: (i) issues that must be decided (e.g., whether the party making the application has approached the appropriate High Court); (ii) issues that they may choose to decide (e.g., existence of a valid arbitration agreement, whether claims are time-barred); and (iii) issues that should be left to the arbitral tribunal (e.g., merits of the claim, specific defenses). This expansive scope often led to protracted litigation at the appointment stage, undermining the objective of speedy dispute resolution.

The 2015 Amendment and Section 11(6A): A Paradigm Shift

The 2015 Amendment introduced sub-section (6A) to Section 11, which fundamentally altered the scope of judicial inquiry. Section 11(6A) mandated that the Supreme Court or the High Court, while considering an application under sub-section (4), (5), or (6), "shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement." This legislative intervention aimed to minimize judicial interference at the referral stage. The Supreme Court in Duro Felguera, S.A v. Gangavaram Port Limited (2017 SCC 9 729) affirmed this limited scope, holding that post-amendment, the court's role is restricted to determining whether a valid arbitration agreement exists between the parties. This principle was reiterated in cases like Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman (2019 SCC ONLINE SC 1155, affirming the Calcutta High Court's decision in 2019 SCC ONLINE CAL 334 on this point, though the primary issue in Mayavati was termination) and Sh.Tilak Raj, v. M/s Alphaprime Engineering P (Madras High Court, 2023), and India Pistons Limited v. Ganapathi Chandrasekar (Madras High Court, 2021), all emphasizing that the court should "nothing more, nothing less" than examine the existence of the arbitration agreement. The legislative policy is to ensure that the arbitral tribunal, under the principle of Kompetenz-Kompetenz (enshrined in Section 16 of the Act), decides all other preliminary issues.

Key Procedural Aspects and Pre-requisites for Invoking Section 11

Failure of Agreed Procedure and Invocation

Section 11(2) grants parties the autonomy to agree on a procedure for appointing arbitrators. Judicial intervention under sub-sections (4), (5), and (6) is triggered when this agreed procedure fails, or if no procedure is agreed upon. For instance, Section 11(4) applies if a party fails to appoint an arbitrator within thirty days of a request in a three-arbitrator setup, or if the two appointed arbitrators fail to agree on the presiding arbitrator. Section 11(5) applies to sole arbitrator appointments where parties fail to agree within thirty days of a request. Section 11(6) is a broader provision covering scenarios where a party, or an institution, fails to perform any function entrusted to it under the agreed appointment procedure.

The Mandate of Notice

A crucial pre-requisite for invoking Section 11(6) is the issuance of a formal notice to the other party, requesting them to act as per the agreed procedure or to concur in an appointment. The Delhi High Court in Kailash Prajapati Petitioner v. Citicorp Finance(I) Ltd. (2012 SCC ONLINE DEL 834) underscored that not only is notice mandatory, but the party must also wait for the stipulated thirty-day period before approaching the court. The contents of the notice must be clear and unambiguous.

Forfeiture of Right to Appoint

If a party fails to appoint an arbitrator within the notice period and before the other party files a Section 11 application, they forfeit their right to make the appointment. The Supreme Court in cases like Datar Switchgears Ltd. v. Tata Finance Ltd. (2000) 8 SCC 151, and reaffirmed in Bhagwan Dass And Others v. Union Of India And Others (Punjab & Haryana High Court, 2009), held that once an application under Section 11(6) is filed, the appointing authority's power is lost. This ensures that parties cannot delay proceedings by belatedly making appointments after court intervention is sought.

Limitation for Section 11 Applications

The Supreme Court in Bharat Sanchar Nigam Ltd. And Another v. Nortel Networks India Pvt. Ltd. (2021 SCC ONLINE SC 207) clarified that the limitation period for filing an application under Section 11 is governed by Article 137 of the Limitation Act, 1963, which prescribes a three-year period from when the right to apply accrues. The right to apply typically accrues when a party fails to respond to a notice invoking arbitration within the stipulated time. The Court also held that while the primary inquiry is the existence of the arbitration agreement, courts may refuse reference if the claims are *ex facie* time-barred and demonstrate no subsisting dispute. Further, in HPCL BIO-FUELS LTD. v. SHAHAJI BHANUDAS BHAD (Supreme Court Of India, 2024), citing Deepdharshan Builders Pvt. Ltd. v. Saroj (2018 SCC OnLine Bom 4885), it was noted that Section 5 of the Limitation Act (condonation of delay) would apply to applications under Section 11(6).

Scope of Inquiry under Section 11(6A)

Examination of "Existence of an Arbitration Agreement"

The core mandate of Section 11(6A) is the examination of the "existence" of an arbitration agreement. This involves ascertaining if there is a formally valid agreement containing an arbitration clause. The Supreme Court in Vidya Drolia And Others v. Durga Trading Corporation (2020 SCC ONLINE SC 1018), while primarily dealing with arbitrability, laid down a four-fold test for when a subject matter cannot be arbitrated. The Court clarified that the "existence" and "validity" of an arbitration agreement are intertwined. At the referral stage under Section 11, the court performs a prima facie review. If the validity or existence is in doubt, the matter is referred to the arbitral tribunal. However, if the arbitration agreement is patently non-existent or invalid, the court may refuse reference. The termination of the main contract does not necessarily extinguish the arbitration clause, which is considered a separate agreement. However, as seen in Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman (2019 SCC ONLINE CAL 334), if a mutual declaration signifies full compliance and termination of all obligations under the parent contract without reservation, the arbitration agreement might also be considered extinguished if it is not independent of the main contract's complete performance.

The issue of whether an arbitration agreement exists can also arise in the context of unsigned or unstamped agreements. While the stamping issue has seen legislative and judicial flux, the general trend post-Section 11(6A) is to leave complex issues of validity (beyond prima facie existence) to the arbitrator.

Multiple Agreements and Composite References

In complex transactions involving multiple contracts, the question of whether a single arbitral tribunal can adjudicate disputes arising from all contracts is pertinent. In Duro Felguera, S.A v. Gangavaram Port Limited (2017 SCC 9 729), the Supreme Court held that if there are distinct contracts with separate arbitration clauses, multiple tribunals would generally be necessary unless the agreements themselves provide for consolidation or a composite reference, or if the arbitration clauses are incorporated by specific reference as per Section 7(5) of the Act.

Appointment by the Court: Ensuring Impartiality and Independence

Unilateral Appointments and Neutrality

A significant aspect of Section 11 jurisprudence concerns the unilateral right of one party to appoint a sole arbitrator. The Supreme Court in Perkins Eastman Architects Dpc v. Hscc (India) Ltd. (2019 SCC ONLINE SC 1517) held that a person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. Such clauses are invalid, and the court will appoint an independent and impartial arbitrator. This principle was extended in CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION v. M/S ECI SPIC SMO MCML (JV) A JOINT VENTURE COMPANY (Supreme Court Of India, 2024), where the Court, invoking Section 11(8) read with Section 12 and the Fifth and Seventh Schedules of the Act, emphasized its power to appoint an arbitrator *de hors* the agreed procedure if necessary to secure an independent and impartial tribunal. This aligns with the challenge raised in B.k. Consortium Engineers Private Limited v. Indian Institute Of Management (2023 SCC ONLINE CAL 124), where a procedure empowering one party's director to appoint the sole arbitrator was contested.

Disclosure Requirements

Section 11(8) mandates that the court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of Section 12(1) and have due regard to any qualifications required by the agreement and the considerations of impartiality and independence. This ensures transparency and trust in the appointed arbitrator.

Special Considerations

Interaction with Special Statutes

Where a special statute provides a specific mechanism for dispute resolution, including arbitration by a designated authority, Section 11 of the Act may be excluded. In Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd. (2008 SCC 4 755), concerning the Electricity Act, 2003, the Supreme Court applied the principle of *generalia specialibus non derogant* (general laws do not prevail over special laws), holding that the State Commission or its nominee had exclusive jurisdiction to arbitrate disputes between licensees and generating companies under that Act, ousting the High Court's power under Section 11 of the Arbitration Act.

Substitute Arbitrators (Section 15)

Section 15(2) of the Act provides that where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. If parties fail to appoint a substitute, the court can be approached. The Delhi High Court in ENGINEERING DEVELOPMENT CORPORATION v. NORTH MUNICIPAL CORPORATION OF DELHI (Delhi High Court, 2017) discussed the procedure when a party fails to appoint a substitute arbitrator despite a request, leading to court intervention.

Applicability to Pre-1996 Act Agreements

The Delhi High Court in J.B Dadachanji & Ors v. Ravinder Narain & Anr. (Delhi High Court, 2002), citing Thyssen Stahlunion Gmbh v. Steel Authority Of India Ltd. (1999) 9 SCC 334, held that an application under Section 11 of the 1996 Act is maintainable for appointment of arbitrators even if the arbitration agreement was entered into under the old Arbitration Act, 1940, in the absence of a further agreement stipulating otherwise.

Counterclaims and Limitation

In State Of Goa v. Praveen Enterprises (Supreme Court Of India, 2011), the Supreme Court addressed the issue of counterclaims. It held that if a respondent, against whom a claim is made and who has also made a claim and sought arbitration via notice, raises that claim as a counterclaim in proceedings initiated by the claimant (instead of a separate Section 11 application), the limitation for such counterclaim is computed from the date of service of notice of such claim on the claimant, not the date of filing the counterclaim.

Finality and Non-Appealability of Section 11 Orders

Section 11(7) of the Act, as amended, stipulates that an order made under sub-section (4), (5), or (6) by the Supreme Court or the High Court, or a person or institution designated by them, shall be final and no appeal, including a Letters Patent Appeal, shall lie against such an order. This was highlighted in Duro Felguera, S.A v. Gangavaram Port Limited (Supreme Court Of India, 2017), reinforcing the legislative intent to expedite the constitution of the arbitral tribunal without appellate delays.

Section 11 and Jurisdictional Issues (Section 42)

Section 42 of the Act provides that where any application under Part I has been made to a "court", that court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement. However, the Calcutta High Court in Tapas Kumar Bhunia v. Jagadish Patra (Calcutta High Court, 2018), referencing Supreme Court precedents, noted that Section 42 is not applicable to Section 11 proceedings. This is because an application under Section 11 is made to the "Supreme Court" or the "High Court" (or their designates), which, for the purpose of Section 11, are not necessarily the "court" as defined in Section 2(1)(e) of the Act (which refers to the principal Civil Court of original jurisdiction). Thus, filing a Section 11 application does not fix jurisdiction under Section 42.

Conclusion

Section 11 of the Arbitration and Conciliation Act, 1996, as refined by the 2015 Amendment and judicial interpretation, plays a critical role in facilitating the arbitral process in India. The legislative shift towards minimal judicial intervention at the appointment stage, confining the court's inquiry primarily to the existence of an arbitration agreement, has significantly streamlined the process. Landmark judgments have clarified procedural prerequisites, the scope of inquiry, the imperative of arbitrator impartiality, and the finality of appointment orders. While the courts retain a crucial role in ensuring the integrity of the appointment process, particularly in safeguarding against biased appointments and dealing with *ex facie* untenable claims, the overarching philosophy is to empower arbitral tribunals to decide on their own jurisdiction and other preliminary matters. This framework endeavors to make arbitration a more efficient, autonomous, and effective dispute resolution mechanism in India, aligning with global best practices.