Arbitration is a form of Alternate Dispute Resolution (ADR). It refers to amicably settling disputes between two or more parties instead of going into litigation.
It is a process in which an independent person who is appointed as an arbitrator to make an official decision that ends a legal disagreement between parties without the need for it tobe dragged into court.
In India, the process of Arbitration is regulated under the Arbitration and Conciliation Act, 1996. It is based on the UNCITRAL model law to ensure uniformity. It was enacted by the Parliament of India in 1996 and was recently amended by introducing the Arbitration and Conciliation (Amendment) Bill, 2015.
Provisions under the Arbitration and Conciliation Act, 1996:
Chapter IV of the Act contains Sections 16 and 17 that deal with the jurisdiction of an arbitral tribunal. Section 16 of the Act deals with Competence of arbitral tribunal to rule on its own jurisdiction and conveys that the arbitral tribunal has the independence of choosing its own jurisdiction and freedom from the interference of courts regarding any matter related to arbitration.
Section 16– Competence of arbitral tribunal to rule on its jurisdiction:
The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement and for this purpose,
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract when it’s validity is challenged before the tribunal.
(b) a decision by the arbitral tribunal that the contract is null and void shall not mean that the arbitration clause invalid.
If there is a plea that the arbitral tribunal does not have jurisdiction, it cannot be raised after the submission of the statement of defence. Even an arbitrator may raise such a plea. However, if there is any delay and if such a delay is justified, the arbitral tribunal may admit a later plea according to sub section 4 of section 16 of the Act.
A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal shall decide on a plea referred to above and, where the arbitral tribunal takes a decision rejecting the plea, it shall continue with the arbitral proceedings and make an arbitral award. A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34 of the Act which deals with ‘Application for setting aside arbitral award’.
In the case of Union of India vs. M/s. East Coast Boat Builders & Engineers Ltd[i], it was held that,
“From the scheme of the Act it is apparent that the legislature did not provide appeal against the order under section 16(5) where the arbitral tribunal takes a decision rejecting the plea that the arbitral tribunal has no jurisdiction. The intention appears to be that in such case, the arbitral tribunal shall continue with the arbitral proceedings and make an award without delay and without being interfered in the arbitral process at that stage by any court in their supervisory role.”
In the case of Saurashtra Chemicals Ltd. vs Hon’Ble Mr. Justice K[ii], the party aggrieved by an arbitral award filed a writ petition under Article 226 of the Indian Constitution, the Court held as follows;
“Considering the statement and object of the Arbitration Act of 1996 and Section 16 of the Arbitration Act of 1996 when the Arbitral Tribunal has decided about its own jurisdiction in an application under Section 16 of the Act, in that case the Arbitral Tribunal has to proceed further with the arbitral proceedings and to declare the award which can be challenged only at the stage of Section 34 of the Arbitration Act of 1996, and therefore the petition under Article 226 of the Constitution of India against the order passed by the Arbitral Tribunal under Section 16 of the Act is not required to be entertained and the party has to wait up to conclusion of proceedings under Section 34 of the Arbitration Act”
Section 17– Interim measures ordered by arbitral tribunal:
A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced apply to the arbitral tribunal for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings or as an interim measure of protection in any of the following matters;
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the arbitral tribunal to be just and convenient.
The arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.
Under sub-section 2 of the section, if there are any orders passed in an appeal under section 37 of the Act titled ‘Appealable orders’, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 in the same manner as if it were an order of the Court.
The arbitral tribunal is competent and has the independence of choosing its own jurisdiction and freedom from the interference of courts regarding any matter related to arbitration. It is up to the Arbitral tribunal to accept or reject a plea and the proceedings will continue and it will be considered as an arbitral award. If any party is aggrieved by an arbitral award, they may file an application under section 34 of the Arbitration and Conciliation Act, 1996.
“The views of the authors are personal“
[i]Union of India vs. m/s. East Coast Boat Builders and Engineers Ltd. 76 (1998) DLT 958
[ii]Saurashtra Chemicals Ltd. vs Hon’Ble Mr. Justice K