Arbitration is a method of resolving disputes outside the traditional court
system. It is a form of alternative dispute resolution in which a neutral third
party (the arbitrator) is appointed to resolve a dispute between two or more
parties. In India, the Arbitration and Conciliation Act, 1996 (hereinafter the
act) governs the laws relating to arbitration.
The Act provides a framework for
the resolution of disputes through arbitration and aims to encourage the use of
arbitration as an alternative to litigation. The growth of the Indian economy,
the increasing complexity of commercial disputes and the increasing number of
cross-border disputes have all contributed to the increasing popularity of
arbitration in India.
Under this act, arbitration is a voluntary process where
parties to a dispute agree to resolve their differences through an arbitrator
instead of going to court. The decision of the arbitrator is binding on both
parties, and the award can be enforced through the court. Arbitration is
considered a speedy and cost-effective method of dispute resolution and is
widely used in India, especially in the fields of construction, infrastructure,
and commercial contracts.
Arbitration in India can be either ad-hoc or institutional. Ad-hoc arbitration
refers to arbitration where the parties agree on the appointment of the
arbitrator, the procedure to be followed, and the place of arbitration.
Institutional arbitration refers to arbitration where the parties agree to refer
their dispute to an arbitral institution, such as the Indian Council of
Arbitration or the International Chamber of Commerce.
The act provides for the
appointment of a single arbitrator or a panel of arbitrators and also lays down
the procedure for conducting arbitration proceedings. In situations when the
parties are unable to agree on the appointment of an arbitrator, the Act
provides for the court to appoint arbitrators.
Section 11 of the Act empowers
the Chief Justice or his designate to appoint an arbitrator in case the parties
are unable to agree on the appointment of an arbitrator. When discussing the
appointment of an arbitrator, it is critical to understand the concept of arbitrability of a dispute, which is the determination of whether or not a
dispute may be settled by arbitration.
The Arbitrability Of A Dispute
Arbitrability of a dispute refers to the ability of a dispute to be resolved
through arbitration. In other words, it refers to the eligibility of a dispute
to be arbitrated as opposed to being resolved through traditional litigation.
The concept of arbitrability is of utmost importance in the field of
arbitration, as it determines the jurisdiction of the arbitral tribunal to hear
and decide a dispute.
In different contexts, the term "arbitrability" has distinct connotations.
The following are three aspects of arbitrability related to the arbitral
- whether the disputes, given their nature, are capable of adjudication and
settlement by arbitration;
- whether the disputes are discussed by the arbitration agreement or fall
under the 'excepted matters' eliminated from the scope of arbitration; and
- if the parties voluntarily agreed to have their dispute arbitrated.
Non-arbitrable disputes include those arising from criminal offences,
matrimonial disputes, testamentary matters, and tenancy matters governed by
special laws where tenants have statutory protection. The above examples are of
actions in rem. In general, all conflicts concerning rights in personam are
arbitrable. On the contrary, any conflicts concerning rights in rem are resolved
by public fora such as courts or tribunals.
Therefore, it can be claimed that a dispute must meet specified criteria in
order to be declared arbitrable. For instance, there must be a business dispute
between the parties, which means that there must be a commercial relationship or
transaction involved, no unlawful activity or violation of public policy may be
involved in the dispute, and the dispute cannot be one that can only be settled
in court, such as in any criminal case, which is not subject to arbitration.
The Arbitrability Of Dispute Is A Pre-Condition For An Order Under Section 11 Of The Arbitration And Conciliation Act, 1996 Or Not.
The question of whether arbitrability is a pre-condition for an order under
section 11 of the arbitration and conciliation act 1996 has been a matter of
debate for a long time. Some scholars argue that arbitrability is not a
pre-condition for an order under section 11 of the act.
While others believe that it is a pre-condition for such an order. According to
those who contend that the arbitrability of the issue must be determined before
it can be referred to arbitration in order for an order to be valid under
Section 11, this step must be completed by the court at the initial stage
itself. They contend that before the case is sent to arbitration, the issue of
arbitrability must be resolved as a threshold matter.
This is due to the fact that if the dispute cannot be resolved through
arbitration, the arbitration agreement will be void and the award will
ultimately be revoked by the court in accordance with Section 34(2)(b)(i) and
Section 48(2) of the Act. As a result, it can turn out to be a waste of time and
On the other hand, those who contend that the arbitrability of a dispute is not
a requirement for an order under Section 11 argue that the arbitral tribunal,
rather than the court, should decide whether or not a dispute is arbitrable.
They contend that the court should be more concerned with the arbitration
agreement's legality and enforceability than with whether the dispute can
actually be arbitrated.
The Supreme Court of India has also considered this question and has delivered
several conflicting judgments on the issue. In some of the decisions, the SC has
held that arbitrability is a pre-condition for an order under section 11, while
others have held that it is not.
Arbitrability is a pre-condition for an order under section 11:
The argument in favor of arbitrability being a pre-condition for an order under
Section 11 of the Arbitration and Conciliation Act, 1996 can be made on several
grounds. The determination of arbitrability is a crucial step in ensuring the
efficacy of the arbitration process. If a dispute is not arbitrable, the
appointment of an arbitrator would be meaningless and the time, resources, and
efforts invested in the arbitration process would be wasted. Therefore, the
determination of arbitrability must be made before the appointment of an
arbitrator to ensure the efficacy of the arbitration process.
The appointment of an arbitrator under Section 11 of the Act is a judicial act.
The court must appoint an arbitrator, and that appointment must be made in
conformity with the Act's provisions. If the dispute is not arbitrable, the
appointment of an arbitrator would be in violation of the provisions of the Act,
and the appointment would be void. The jurisdiction of the arbitrator is
dependent on the arbitrability of the dispute.
If a dispute is not arbitrable, the arbitrator would not have the jurisdiction
to resolve the dispute. To ensure the legitimacy and enforcement of the ruling,
the arbitrator's jurisdiction must be specified and clearly defined. It is
essential to ascertain whether the issue may be arbitrated in order to assure
the efficiency, legitimacy, and fairness of the arbitration process as well as
the arbitrator's impartiality. The appointment of an arbitrator and the
determination of the arbitrator's jurisdiction are conditions precedent to the
appointment of an arbitrator and the validity and enforceability of the arbitral
In the Vidya Drolia vs. Durga Trading Corporation
5 case, it was decided
that in order to determine the extent of the Court's authority under Sections 8
and 11, it must first conduct a primary first review to filter out "manifestly
ex facie non-existent and invalid arbitration agreements, or non-arbitrable
The purpose of the prima facie review at the reference stage is to eliminate
deadwood in cases where dismissal is blatantly obvious and when, according to
the facts and the law, the litigation must end at the preliminary stage. Only
where the Court is certain that there is no valid arbitration agreement in
effect or that arbitration cannot settle the dispute may it refuse to refer the
matter to arbitration.
The Supreme Court ruled in S. B.P. & Co. vs. Patel Engineering Ltd
the court must decide whether the dispute can be arbitrated before sending it to
arbitration. In order for the arbitration agreement to be enforceable and for
the arbitral tribunal to have jurisdiction to hear and consider the dispute, the
court held that the issue of arbitrability must be resolved as a threshold
The Supreme Court again stated that arbitrability is a prerequisite for an order
under section 11 of the Act in Booz Allen and Hamilton Inc. vs. SBI Home Finance
Ltd. 7 another significant decision. The court ruled that before referring a
case to arbitration, the court must assess whether it can be arbitrated. The
arbitral tribunal will not have jurisdiction to hear the case and render a
decision if the arbitration agreement is unenforceable, the court further held.
Arbitrability is not a pre-condition for an order under section 11:
The argument against arbitrability being a pre-condition for an order under
section 11 of the act is based on the principle that the determination of
arbitrability of a dispute is the function of the arbitral tribunal, not the
court. It is argued that the Chief Justice or his designate should not make a
determination on the arbitrability of a dispute because this would be beyond
Arbitrability is not a pre-condition for an order under Section 11 of the Act is
that the provision is intended to be a facilitative one. The purpose of Section
11 is to ensure that the appointment of an arbitrator is not delayed in case the
parties are unable to agree on the appointment.
If arbitrability was a pre-condition for an order under Section 11, it would
defeat the purpose of the provision, which is to provide a quick and efficient
method of resolving disputes. The provision does not explicitly mention that the
dispute must be arbitrable before the Chief Justice or his designate can make
the appointment of an arbitrator.
However, the provision gives the Chief Justice or his designate the discretion
to decide the arbitrability of the dispute before making the appointment. It is
evident from the language of the provision that the Chief Justice or his
designate has the power to appoint an arbitrator even if the dispute is not
capable of being resolved through arbitration. This means that the Chief Justice
or his designate can appoint an arbitrator even if the dispute is not arbitrable.
The provision gives the court the discretion to decide the arbitrability of the
dispute before making the appointment of an arbitrator, and this discretion
should not be restricted.
The Supreme Court stated in Duro Felguera, S.A. vs. Gangavaram Port Limited
It is clearly obvious from a cursory reading of Section 11(6A) of the Act that
the Courts "should and need only examine one factor - the presence of an
arbitration agreement." In addition, the Supreme Court stated that in order to
make the aforementioned conclusion, "it needs to be examined if the agreement
contains a Clause which provides for arbitration relevant to the disputes which
have arisen between the parties to the agreement."
In the case of Vidya Drolia, which is post-insertion of Section 11(6A) of the
Arbitration Act, it was noted and held that the question of a dispute's non-arbitrability
is fundamental for arbitration because it relates to the very jurisdiction of
Arbitral Tribunal. In a recent case of Indian Oil Corporation Limited vs. NCC
the SC relied upon the decision in the Vidya Drolia case
ruled that even when it is observed that an issue with regard to 'accord and
' of claims may be considered by a court at the stage of
deciding a Section 11 application, it is always advisable and appropriate that
in cases of debatable and disputable facts or a reasonably good and arguable
case, the same should be left to the arbitral tribunal.
The SC further stated Limited that it is incorrect to imply that since the
addition of sub-section (6A) to Section 11 of the Arbitration Act (which was
later deleted via the 2019 Amendment Act), the courts' scope of inquiry in
Section 11 application has been limited to determining whether or not a binding
arbitration agreement exists qua the parties before it that is relevant to the
dispute at hand.
Even though the arbitral tribunal may have the jurisdiction and authority to
decide the disputes including the question of jurisdiction and non-arbitrability,
the same can also be considered by the courts at the stage of deciding a Section
11 application if the facts are clear and glaring and in view of the specific
clauses in the contract binding between the parties, whether the dispute is non-arbitrable
and/or falls within the excepted clause. The court may also prima facie consider
the aspect of 'accord and satisfaction' of claims at the stage of a Section 11
The concept of arbitrability is a crucial aspect of arbitration law in India and
has been the subject of much debate and judicial consideration. Given the
Supreme Court's consistent stance, it is evident that in the majority of
situations when it is ex-facie obvious whether the dispute is arbitrable or not,
arbitrability is a prerequisite for an order under section 11 of the Act.
This pre-condition ensures that disputes are referred to arbitration only if
they are capable of being resolved through this alternative dispute resolution
mechanism. Without a determination on arbitrability, the parties may submit
their dispute to arbitration only to learn later that it is not amenable to
arbitration and that the judgment delivered is unenforceable. This may result in
unnecessary delay, additional expenses, and less effective dispute resolution.
On the other hand, by leaving the decision of arbitrability to the arbitral
tribunal, the parties can settle their dispute more conveniently and
expeditiously without the needless delays caused by the Court's decision
regarding arbitrability. This enhances the effectiveness and efficiency of the
arbitration process in India and reinforces the importance of party autonomy in
the resolution of disputes.
According to various precedents, it is beneficial if the arbitrability of the
dispute is taken into account as a precondition for an order under section 11
since it preserves the interests of the parties and ensures that the dispute is
settled in a fair and impartial way. But unless the amendment to the provision
is passed, it will continue to be a topic of debate.