The laws regarding arbitration in India has come a long way but the main aim
of the Arbitration Act,1966, which is to expedite the arbitration process and
curtail judiciarys intrusion, has considerably failed to achieve its object as
there are more than one hundred pending cases of the Supreme Court which relate
to appointment of arbitrator under section 11(4), (5) and (6) of the Arbitration
Act, 1996. Section 11 of the Arbitration Act provides for a variety of
conditions where the parties are unable or unwilling to constitute an arbitral
tribunal. The apparent purpose of this section is to safeguard that any
difficulty in constituting the arbitral tribunal does not stay the commencement
of the envisioned arbitral proceedings. This provision has been a cause of
conjecture and myriad interpretations by various high courts across the country.
The present article attempts to analyse and determine the permissible extent of
judicial intervention in the arbitral process and the implications of the
principle of kompetenz-kompetenz on the various contracting judgments of the
Indian Courts. It traces the present position of law through a line of cases
beginning from Ador Samia v. Peekay Holdings Limited
(1999) and concluding
with United India Insurance Co. Ltd. & Anr. v. Hyundai Engineering and
Construction Co. Ltd
The very first legislation governing arbitration in India was the Arbitration
Act of 1899. Later, the Arbitration Act 1940 was enacted in India and it was
further replaced by the Arbitration and Consolidation Act of 1966. The act is
largely based upon the UNCITRAL Model Law of Arbitration of 1835 and its basic
object is to limit the scope of judicial interference with arbitral
proceeding. Under the provisions of the Arbitration Act, parties are free to
determine the number of arbitrators, provided it is not an even number, as
well as the procedure for appointing them.
However, the parties may recourse to a proper remedy under Section 11 of the
Arbitration Act, which provides detailed machinery for appointment of
arbitrators through judicial interference, if they are unable to agree on the
said procedure, or constitute the arbitral tribunal to their mutual
satisfaction. Section 11 of the Arbitration Act originally empowered the Chief
Justice, or any person designated by it, to appoint arbitrators under the
circumstances specified therein.
The said provision corresponds to Article 11 of the UNCITRAL Model Law (MLA).
Nevertheless, fascinatingly, Article 11, MLA, confers the power to appoint an
arbitrator on a court, or any other authority specified in Article 6 of the
MLA, and not chiefly the Chief Justice.
Analytical Commentary to the MLA states that Court designated under Article 6
can also refer to the president of a court or the presiding judge of a chamber
for those purposes, which are of a more administrative nature. In India, the
credit for deviating from the principles established under the MLA, can be
attributed to the 176th Report of the Law Commission of India on The
Arbitration (Amendment) Bill, 2001.
Law Commission proposed to makes it incumbent upon the Supreme Court or the High
Court or person designated by them to dispose the proceeding initiated under
section 11 of the Act, within 60 days from the date of service of notice on the
opposite party. This proposal was eventually brought into force by
However, The Amendment Act, 2015, failed to recognise
the importance of institutional arbitrations at a period when institutions like
the International Chamber of Commerce (ICC) Paris, the London Court of
International Arbitration, the Singapore International Arbitration Centre are
setting up offices in India and offering their services locally. Hence, The
Lok Sabha has passed the Arbitration (Amendment) Bill,2018, that proposes
appointment of arbitrators by designated arbitral institutions.
However, before these amendments were brought into picture, a major conundrum in
section 11 of the act was regarding the nature of the function performed by the
Chief Justice in appointing an arbitrator. The legal issue was whether the
function was administrative or judicial. In other words, whether the Chief
Justice was not required to go into the merits of the case or whether the
function being judicial in nature imposed a duty on the Chief Justice to
determine the validity of the arbitration agreement. This caused several
challenges, one of them being the legal issue of maintainability of a review
petition passed under Section 11 of the 1996 Act. This article will thus
look into the various jurisprudential aspects of section 11 of the arbitration
and conciliation act, 1966 and its implications on the mechanics of the ADR
Initial Interpretation : Administrative Nature of Order
The very first time when the issue regarding the nature of order of the Chief
Justice came up for consideration was in the case of Ador Samia Private
Limited v. Peekay Holdings Limited and Ors
. A Special Leave Petition
under article 136 of the India Constitution was moved by the petitioner
challenging an order of the Chief Justice of the Bombay High Court, given by him
under Section 11(6) of the Arbitration and Conciliation Act, 1996. The issue of
law which was involved was that whether an appeal lay under Article 136 of the
Constitution from the order made by the chief justice of the High Court
appointing an arbitrator.
The two judge Supreme Court bench relied on a case of Sundaram Finance Ltd.
v. NEPC India Ltd
, where the orders under Section 11 of the Act were
held as non-judicial orders. Hence, it was established that orders passed by
the learned Chief Justice under Section 11(6) of the Act cannot be challenged
under Article 136 of the Constitution of India because of the administrative
nature of the order.
The question of reconsideration of the decision in Ador Samias case was brought
up in the case of Konkan Railways v. Mehuls Construction Ltd
. A three
judge bench of the Supreme Court held that the order passed by the Chief Justice
under Section 11(6) is administrative in nature and intervention by a court is
possible in a case where the Chief Justice or his nominee wrongly refuses to
make an appointment. The court observed that an analysis of different
sub-sections of Section 11 indicates that use of the expression Chief Justice in
preference to a Court, points out towards the administrative capacity of the
Chief Justice so as to enable him to is act quickly. Hence, the court
acknowledged the Judgement in Ador Samias case and concluded that the power
under section 11(6) was administrative in nature.
The decision of this three judge bench was then confirmed by a five Judge Bench
(Konkan Railway Corporation v. Rani Construction)
. The court therefore
held that the only function exercised by the Chief Justice is a gap filling
one, where the parties fail to agree upon the arbitrator. It also implied that
orders under Section 11 could not be subjected to the petitions for leave to
appeal under Article 136 of the Constitution, as under Article 136, an appeal
lies to the apex Court only from adjudications of Courts and Tribunals.
In all these cases, the decisions by Indian judiciary was in consistency with
the mandate of the arbitration act to curtail the interference of judiciary in
arbitral proceedings. The judgments were in consonance with the
international arbitration doctrine of Kompetenz - Kompetenz which
confers upon an arbitral tribunal the power to rule on its jurisdiction.
The kompetenz - kompetenz principle is a concept about the distribution of
jurisdictional competence between arbitral tribunals and national Courts and to
rules concerning the nature of judicial deliberation of challenges to an
arbitral tribunals jurisdiction.However, regrettably, this state of affairs
was not to last.
Change in Course: Judicial Nature of Order
A series of civil appeals questioning the judgments in the Konkan Railway cases
paved way for the Supreme Court to constitute a seven judge bench in the case of
S.B.P & Co. v. Patel Engineering and Anr
. The court noticed that
section 11(7) of the Act made the decision of the Chief Justice final and he
cannot exercise his power of appointment unless there exists a valid arbitration
agreement. Also, when a statue creates an authority and vest in it the power
to adjudicate upon a matter, and makes its decision final, the decision could
not be said to be as purely administrative in nature.
These observations by the court led to the conclusion that the functions of the
chief Justice was judicial in nature. It was also held that section 16 of the
Act which basically gives recognition of the principle of Kompetenz is an
enabling provision and it would take effect only when section11(6) has not been
resorted to. It was also held that an appeal will lie against that order of
Chief Justice only under Article 136 of the Constitution of India and not under
section 11(6) of the Act.
Nevertheless, On the basis of the well-recognized
distinction between substantive and procedural review, the Allahabad High Court,
in Manish Engineering Enterprises v. The Managing Director
, has held
that Section 11 Order is amenable to review on grounds of procedural infirmities
but cannot be reviewed on substantive grounds. This is because the right to
appeal from the decision of a court is not a matter of right but is a privilege
granted by statute.
The said conclusions regarding the judicial nature of the order had been
subsequently interpreted and adopted in 2008, by a two-judge bench of the
Supreme Court in National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.
the decision in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction
 was overruled. The judgment in the Patel Engineering case was
subject to a lot of criticism because it ignored the objectives which the Act
sought to achieve. But still the law laid down in this case continues to
hold force for the arbitrations governed by the un-amended Act.
The criticisms in the earlier arbitration regime paved way for the Law
Commission of India to submit a report recommending several changes to the
Arbitration Act. In so far as section 11, appointment of arbitrators is
concerned, the new law inserted sub section 6(A)which confined the intervention
of the judicial authority to the examination of the existence of the arbitration
agreement. As per the Arbitration Amendment Act,2016, the expression Chief
Justice of India and Chief Justice of High Court used in earlier provision
have been replaced with Supreme Court or as the case may be, High Court,
respectively and their decision has been made final.
The effects of these amendment in the section 11 of the act was discussed at
length by the Supreme Court in the case of Duro Felguera, S.A. Vs. Gangavaram
. The bench observed that all that the Courts need to see is
whether an arbitration agreement exists - nothing more or less. The legislative
policy and purpose is to diminish the judicial interference in the appointment
of arbitrator and this intention as incorporated in Section 11(6A) of the
Act must be obeyed.
Amendment Bill 2018: Relieving the Courts Burden
According to National Judicial Data Grid (NJDG), the backlog of cases clogging
the High Courts and Supreme Court (SC) is 43 lakh and 57,987 cases, respectively
and a great number of cases are reported on arbitration and especially
appointment of arbitrator under Sections 11(4), (5) and (6) of the Arbitration
Act, 1996. Thus in August 2017, a high-Level Committee was constituted by
the Central Government under the Chairmanship of Justice B. N. Srikrishna to
examine measures to strengthen arbitral institutions in India and suggest ways
to reduce the dependency on the Indian Courts for Justice. The
recommendations of this committee is implemented in the Arbitration and
Conciliation (Amendment) Bill, 2018 appears to not focus on the
administrative-judicial debate initiated in the judicial corridors of India, but
on limiting the scope of intervention under Section11. The Bill endorses the
establishment of an independent statutory body called the Arbitration Council of
India (the ACI) in Part 1A of the Act.
This institution will be delegated with the accountability of grading arbitral
institutions and identifying institutions that provide authorization for
arbitrators across India. Under the amended section 11 of the act, the parties
will have to approach arbitral institutions for the appointment of arbitrator
without having to approach the Court in this regard. This is in line with the
kompetence - kompetence principle of an arbitral tribunal itself determining its
own jurisdiction. The Courts shall elect such institutions, based on their
evaluation by the ACI. The bill also proposes to delete the sub sections 6(A)
and 7 of the section 11 of the Act. However, the bill is passed only in the Lok
Sabha and awaits clearance from the Rajya Sabha to become an Act.
In August 2018, Supreme Court in the case of United India Insurance Co. Ltd.
& Anr. vs. Hyundai Engineering and Construction Co. Ltd. & Ors
the matter regarding appointment of arbitrator , acting contrary to the section
11(6A) and thus practically restored the law as it was prior to the amendment to
Section 11 of the Arbitration and Conciliation Act, 1996 (Act) by overturning a
judgment of the Madras High Court appointing an arbitrator. The issue before the
High Court was with respect to a contract of insurance. In the contract,
arbitration was permissible only where the insurer had not disputed the
liability meaning thereby that the only reference could be with respect to
quantum and other such issues which did not involve liability.
Therefore, where liability was not accepted, no reference could be made of such
dispute to arbitration. This was a specific defence taken by the insurer in the
proceedings before the Madras High Court. The High Court, however, concluded
that with the determination on the existence of arbitration clause, an
arbitrator would have to be appointed leaving open all questions including
arbitrability to the arbitrator .Hence they appointed an arbitrator. But the
Supreme Court opined that an arbitration clause needs to be interpreted strictly
and the matter shall not be referred to arbitration for a claim which the
parties did not intent to arbitrate.
The Court delved into the issue of arbitrability a matter which even in Patel Engineering (as interpreted in Boghara
Polyfab) was an issue not to be considered by the Chief Justice .The power of
the High Court stands enlarged to what the Supreme Court held in the Patel
Engineering case. This is precisely what sub-section 6A intended to avert. The
UIIC case being a judgment of a three-judge bench binds all Courts throughout
the country and will automatically result in huge delays in the appointment of
arbitrators. The judgment of this case opens with the statement The conundrum
in this appeal but in real sense it can be considered as the conundrum in the
law because unless section 11(6A) is declared unconstitutional , the question
of acting contrary to it should not arise.
The Indian arbitration scenario had always been abysmal and a number of
contrasting judgments has further more added confusion in the mechanism of
arbitration.The conferment of the power to appoint arbitrator(s) on the Chief
Justice, or its designate, under the un-amended Arbitration Act posed several
questions that continuously troubled the Indian judiciary. It took the Supreme
Court of India almost a decade, and four separate benches of varying strengths,
to finally determine that the proceedings under Section 11 of the Arbitration
Act are judicial in nature.
While the proposed bill is intended towards filling
the gaps created by the previous amendment, the extent of it effectively
plugging all the loopholes is still debatable. Relevantly, the question of
redundancy of section 11 of the Act arises because of the establishment of an
institution like ACI, for securing speedy appointment of the arbitrator.
Further, there is no fixed course of action to be adopted in a case where the
party objects to the validity of the arbitration agreement itself because of the
However, the genesis of the amendments reflect the international best practices
approach being adopted by our legal regime. After all, empowering an arbitral
tribunal to address the questions as to its own jurisdiction appreciates the
principle of kompetenz - kompetenz in its entirety. Also, any transition
from this principle can endanger the very characterization of commercial
arbitration as an efficient method of alternate dispute resolution.
- 1999 SC 3246 (India Sup. Ct.)
- United India Insurance Co. Ltd. & Anr. vs. Hyundai Engineering and
Construction Co. Ltd , CIVIL APPEAL NO. 8146 OF 2018, https://www.sci.gov.in/supremecourt/2018/4141/4141_2018_Judgement_21-Aug-2018.pdf
- Konkan 2000
- The Arbitration & Conciliation Act, 1996, No. 26 of 1996 , Section
10(1). However, the said provision has been held to not be mandatory in
nature by a three-judge-bench of the Supreme Court of India in Narayan Prasad Lohia v.
Nikunj Kumar Lohia & Ors., (2002) 3 S.C.C. 572 (India).
- Id at Section 11(2)
- P. C. Markanda Et Al., Law Relating To Arbitration And Conciliation 11 (8th
- Model Law on International Commercial Arbitration of the United Nations
Commission on International Trade Law, G.A. Res. 40/72, U.N. Doc. A/RES/40/72,
art. 11(3) & (4) (Dec. 11, 1985).
- United Nations Commission on International Trade Law, Analytical
Commentary on Draft Text of a Model Law on International Commercial
Arbitration, U.N. Doc.A/CN.9/264
- Harshad Pathak , On The Maintainability Of Review Against A Section 11
Order, IJAL Volume 4 Issue 2
- Law Commission of India, 176th Report on the Arbitration and
Conciliation (Amendment) Bill, 2001,77 (2001) available at http://lawcommissionofindia.nic.in/arb.pdf.
- The Arbitration & Conciliation (Amendment) Act, 2015, No. 3 of 2015
- Arbitral Institutions & Procedural Rules , International Commercial
Arbitration Research Guide, Gorgetown Law, http://guides.ll.georgetown.edu/c.php?g=363504&p=2455947
- The Arbitration And Conciliation (Amendment) Bill, 2018, Bill No. 100-C
of 2018, https://www.arbitrationindia.com/pdf/acbill2018.pdf
- Gautam Bhatia, Section 11 of the Arbitration and Conciliation Act of
1996: The Jurisprudence of the Supreme Court and Implications for the
Jurisdiction of an Arbitral Tribunal, National Law School of India Review
Vol. 21, No. 2 (2009), pp. 65-75 , https://www.jstor.org/stable/44283804?read-now=1&seq=11#page_scan_tab_contents
- Badrinath Srinivasan, Appeal Against The Order Of The Chief Justice Under
11 Of The Arbitration And Conciliation Act, 1996: An Empirical Analysis, IJAL
Volume 1 Issue 1
- Supra note 1
-  2 SCC 479
- Vishal P. Bhat , Appointment of Arbitrator under Sections 11(4), (5) and
(6) of the Arbitration Act: A never ending saga , (2011) PL May S-25, http://www.supremecourtcases.com/index2.php?option=com_content&itemid=1&do_pdf=1&id=21219
- (2000) 7 SCC 201
- (2000) 8 SCC 159
- Jaswant Sugar Mills Ltd. v. Lakshmichand & Ors., (1963) Supp. (1) S.C.R.
- Section 5 of the Act
- Brown v. Genossenschaft Osterreichischer Waldbesitzer  1 Q..B. 8
- GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION 852 (2010).
- (2002) 2 SCC 388
- The Arbitration and Conciliation Act, 1996, Section 11(7)
- The Arbitration and Conciliation Act, 1996, Section 16
- The Arbitration and Conciliation Act, 1996, Section 11(6)
- Manish Engineering Enterprises v. The Managing Director, Indian Farmers
Fertilizer Cooperative Ltd., A.I.R. 2008 All. 56 (India)
- Purshotam Das Goyal v. Honble Mr. Justice BM Dhillon, A.I.R. 1978 S.C.
- (2009) 1 S.C.C. 267.
- Supra note 20
- See Ministry of Law and Justice, Government of India, Proposed
Amendments to the Arbitration & Conciliation Act, 1996: A Consultation
Paper, vii-viii (Apr., 2010), http://lawmin.nic.in/la/consultationpaper.pdf
- (2017) 9 SCC 729
- The Arbitration & Conciliation (Amendment) Act, 2015, No. 3 of 2015,
- Harish Nair ,3.3 crore backlog cases in courts, pendency figure at highest:
CJI Dipak Misra, India Today (Jun 28,2018), https://www.indiatoday.in/india/story/3-3-crore-backlog-cases-in-courts-pendency-figure-at-highest-cji-dipak-misra-1271752-2018-06-28
- High Level Committee on Making India Hub of Arbitration Submits Report ,
Ministry Of Law & Justice, (Aug 4, 2017) , http://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1498552
- Amokura Kawharu, Arbitral Jurisdiction, 23 N.Z.UNIV. L. REV., 238, 243
- Supra note 13
- Supra note 2
- Alan Redfern Et. Al., Law And Practice Of International Commercial
Arbitration, 346 (5th Ed., 2009).