What is the procedure for the appointment of an Arbitral Tribunal?

Introduction

The appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act of 1996 is critical in resolving disputes through arbitration, especially when the parties cannot agree on the selection of an arbitrator. Section 11 of the Act establishes a process for appointing an arbitrator or a panel of arbitrators when one of the parties is unable to do so alone. The Chief Justice's role in the appointment of an arbitrator is critical under Section 11 of the Arbitration and Conciliation Act of 1996, as the Chief Justice (or their designated delegate) has the authority to intervene when the parties involved in the dispute fail to appoint an arbitrator themselves.

Section 11 of the 1996 Arbitration and Conciliation Act was summarized by the Apex Court in S.B.P. and Co. v. Patel Engineering Ltd.[1]. The other party petitions the Chief Justice under Section 11 of the Act to appoint an arbitrator when one of the parties has not acted in accordance with the provisions of the arbitration agreement. Without any restrictions in the Act, the judicial authority must determine whether a valid arbitration agreement exists and whether the dispute that is sought to be raised before it is covered by the arbitration when the defendant in a case before a judicial authority raises the plea that there is an arbitration agreement and the subject matter of the claim is covered by the agreement and the plaintiff or the person who has approached the judicial authority for relief disputes the same.

Key Elements

Here is a comprehensive look at the Chief Justice’s role in appointment of an arbitrator:

1. Appointment of Arbitrators Where Parties Cannot Agree[2]

The Chief Justice (or their delegate)'s primary responsibility under Section 11 is to appoint an arbitrator or a panel of arbitrators when the parties cannot reach an agreement on the appointment.

• When an Agreement Exists: If the parties fail to follow the procedure for appointing an arbitrator specified in their agreement, the Chief Justice may step in to make the appointment.
• When the Agreement is Silent: If the arbitration agreement is silent on how an arbitrator should be appointed, or if the process indicated fails, the Chief Justice will make the appointment.

2. Power to appoint a single or more arbitrators 

Under Section 11 of the Act, the Chief Justice may appoint:

• If the agreement or circumstances call for it, a single arbitrator will be appointed[3].
• If the agreement or circumstances need it, a panel of arbitrators (usually three) will be appointed[4].

The Chief Justice is responsible for ensuring that the arbitral tribunal is established in accordance with the parties’ agreement or in a manner consistent with arbitral principles if the agreement does not specify otherwise.

3. Delegation of Authority to Appoint Arbitrators[5]

• The Chief Justice may delegate the authority to designate the arbitrator to an individual or an entity. This is frequently done when it is more convenient or suitable for a certain body (such as a High Court or a professional arbitration institution) to make the appointment.
• The Chief Justice may assign this responsibility to a designated arbitral institution or even to a court officer.

 4. Independence and impartiality of the arbitrator[6]

• The Chief Justice (or their delegate) must ensure that the arbitrators appointed are independent and unbiased.
• The individual designated as an arbitrator must have no conflict of interest in the dispute being resolved. The Chief Justice has a responsibility to ensure that the arbitrator's independence is maintained.

5. Appointment timeframe[7]

• The Chief Justice must make the appointment within a specific time range. Section 11(4) requires that the appointment be made within 30 days of a request to the Chief Justice or their delegate.
• This time limit ensures that arbitration proceedings begin without undue delay, promoting efficiency in conflict settlement.

 6. Resolution of deadlocks or disagreements[8]

• Deadlocks can occur when the parties are unable to agree on the method of appointing an arbitrator or when they dispute the identity of the arbitrators.
• In such cases, the Chief Justice can intervene to resolve the deadlock and make the selection of an arbitrator in a fair and impartial manner.

7. Chief Justice's Discretionary Powers in Appointment

• The Chief Justice has wide latitude in determining how to resolve issues involving the nomination of an arbitrator. While the Section 11 process is not intended to be adversarial, the Chief Justice must consider a number of issues, including the applicable regulations, the parties’ intentions, and the requirement for impartiality.
• The Chief Justice will normally review the contents of the arbitration agreement and designate an arbitrator appropriately. However, if the agreement is unclear or does not specify a procedure, the Chief Justice has the authority to decide how the appointment will be made, which may include selecting an appropriate arbitrator or tribunal.

8. Judicial Review of Appointment[9]

• The Chief Justice's decision to appoint an arbitrator is subject to limited judicial review. If a party is dissatisfied with the appointment, it has the option of filing an appeal with the Supreme Court if the appointment was made by the Chief Justice of the Supreme Court or the relevant High Court.
• However, the Supreme Court has emphasized that the appointment process under Section 11 should not be adversarial, and that the court should only intervene in exceptional cases where there is a clear error in the process.

 9. Role in Ensuring Expeditious Appointment[10]

• The Chief Justice is responsible for ensuring that the arbitration procedure begins as soon as possible. For instance, if a party seeks interim measures before the arbitral tribunal is constituted, the Chief Justice can take action to preserve the status quo until the tribunal is established.
• Section 11(6A) empowers the Chief Justice to take interim measures to prevent harm or maintain the status quo until the arbitration proceedings commence.

Requirements for valid appointment of an Arbitrator

The following conditions must be met in an arbitration for arbitrators to be legally appointed:

1. The opposite party or parties must be properly notified by the party designating the arbitrator's appointment. The arbitral tribunal's appointment and the award that results from it will be deemed void if the party designating the arbitrator fails to notify the opposing party of the appointment.
2. The individual who will serve as the arbitrator must be made aware of his selection. This is required because he must decide whether to accept the appointment before consenting.
3. Before being appointed, the individual who will serve as the arbitrator must give his or her approval to serve in that capacity. Before accepting the appointment, he must go through every detail.

Overview of the Chief Justice’s role as per Arbitration Act

1. Appointing Arbitrators: The Chief Justice appoints one or more arbitrators in the event that the parties are unable to agree on an arbitrator.
2. Power Delegation: The Chief Justice may assign the appointment authority to a certain organization or body.
3. Ensuring Impartiality: The Chief Justice makes sure the arbitrator or arbitrators are independent and unbiased.
4. Appointment on Time: Within 30 days of receiving the request, the Chief Justice must schedule the appointment.
5. Resolving Conflicts: If there are disagreements between the parties on the appointment procedure, the Chief Justice intervenes to settle them.
6. Judicial Review: The Supreme Court or High Court may examine the Chief Justice's ruling.

Judicial Pronouncements

1. When an arbitrator is appointed, a plea that the claims that will be referred to the arbitrator are covered by exempted topics or are barred by limitation will not be considered. When the arbitrator is chosen, he will take into account whether the claims are protected by exempted matters or are barred by limitation. Such an issue is not for the court to decide at the time of the arbitrator's appointment[11].
2. Without an arbitration agreement between the parties, no arbitrator will be appointed. Prior to issuing an order for the appointment of an arbitrator, the court must determine whether the arbitration agreement is rejected[12].
3. The respondent nominated an arbitrator in Dharma Prathishthanam v. Madhok Construction Pvt. Ltd.[13],and the appellant was not notified of the appointment. After that, the respondent sent certain disagreements to the arbitrator, who heard the case and rendered a decision. However, the appellant refrained from taking part in the arbitration process. The appellant objected to the respondent's application to the court to make the award the rule of the court after the arbitrator's decision was made. The Supreme Court ruled that the contested award was void and might be overturned.
4. The arbitration clause in P. Kumaran v. Executive Engineer[14], stated that the matter could not be referred to arbitration at all of the Chief Engineer or Administrative Head of Goa, Daman, and Diu P.W.D. could not appoint a third party to serve as an arbitrator. There is no obstacle to granting the application for the appointment of an arbitrator because it was decided that this word was in conflict with section 11(6)(c) of the Arbitration and Conciliation Act, 1996. An arbitrator was appointed after the application for an arbitrator's appointment was approved.
5. The arbitration provision in National Research Development Corporation of India v. Synthetic Industrial Chemicals Pvt. Ltd.[15],stipulated that the Chairman of the National Research Development Corporation or his designee would arbitrate any disputes between the parties. Mr. G.S. Sidhu, the NRDC Chairman, approved the reference and started the arbitration. He was transferred in the meantime, and as a result, he no longer served as Chairman. One of the parties objected that his authority as an arbitrator had ended since he no longer held the position of Chairman. But disregarding the objection, he proceeded with arbitration and awarded an award. The Delhi High Court ruled that the remark was made at a vital moment. The Chairman at the time of the reference was Dr. Sidhu. He was legitimately referred to as an arbitrator and was the only one qualified to proceed with the arbitration and bring it to a logical conclusion by rendering the award after he had legitimately entered upon the reference. Even though Dr. Sidhu resigned as Chairman after accepting the reference, he was nonetheless qualified to participate in the arbitration process under the current circumstances.

Conclusion

Section 11 of the Arbitration and Conciliation Act of 1996 establishes a legal framework to ensure that disputes are handled through arbitration when the parties cannot agree on an arbitrator. The Chief Justice or their delegate's involvement ensures that the procedure remains impartial and expeditious. The courts have emphasized efficiency and justice in the appointment procedure, and any delay or inability to designate an arbitrator may result in judicial action.

Because of his expertise in the subject matter at hand, the arbitrator should be carefully selected. He should be able to maintain a calm atmosphere at the tribunal, be free of forensic eloquence, and ensure that the evidence is presented in the way typical in a court of law and equity. He must pay close attention to the facts in dispute before making a conclusion that is practical, unbiased, and in the best interests of justice, good conscience, and equity.

[1] (2005) 6 SCC 288.

[2] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.11(1).

[3] Id. at s. 11(5).

[4] Id. at s. 11(3).

[5] Id. at s. 11(4).

[6] Id. at s. 11(8).

[7] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.11(4).

[8] The Arbitration and Conciliation Act, 1996 (Act 26 of 1996), s.11(6).

[9] Id. at s. 11(7).

[10] Id. at s. 11(6A).

[11] Wazir Chand Mahajan v. Union of India, AIR 1967 SC 990.

[12] Chhogalal v. N.G. Finance and Co., AIR 1966 Raj 181.

[13] 2005 (9) SCC 686.

[14] 1999 (3) Arb LR 98.

[15] 1998 (1) Arb LR 114.

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