Appointment of Arbitrator under the Act and trends with the recent judgments

Introduction:

Amongst all, arbitration has become the most preferred way to resolve disputes. The reasons include timely decision making, flexible procedures, low chances of the uncertain outcome as compared to the national courts, which is the traditional approach and demands too much procedural requirements and rigidity. It has all the characteristics of the National Court but only with the positives involved. The Article will analyze the recent trends for the appointment of Arbitrator and the intervention of the judiciary in the appointment of the arbitrator as performing its administrative role.

Court as the Appointor of Arbitrator: 

The readers of this article must want to know why the intervention of the judiciary is required for the appointment of the arbitrator. Section 11 of the The Arbitration and Conciliation Act, 1996 defines the Appointment of the Arbitrator. At the first instance, the Arbitrator is appointed by the free will of the parties and where the parties fail to appoint the arbitrator, the party may in that case by preferring petition under section 11 to either Supreme Court or High Court or any such institution designated by the court.

The following judgments from the Supreme Court starting from the judgment of Konkan Railways till the recent judgments and also the amendment of 2015 will be the highlight of this article.

Judicial Trends:

1. Konkan Railways vs Rani Construction

The Constitution Bench in this held that the power to court in the appointment of the arbitrator is largely the administrative function and the court must restrict itself to the following duties i.e. Chief justice to decide his own jurisdiction, to decide whether the case has any live claim or not and the last one, whether the arbitration agreement is the one which can be acted upon.

2. SBP & Co vs. Patel Engineering

 The court in this judgment overruled the judgment of the Konkan Railways and held that if the statute confers power to the authority and makes it a body to take the final decision, in that scenario the power conferred cannot be said to be administrative in nature. Further, it went on to say that since the only function of the court was to appoint the arbitrator, it cannot be said that the function of the court was only administrative in nature. Since section 11 petition involved adjudication upon the rights of the parties and hence it is a judicial power rather than administrative.

2015 Amendment and Thereafter:

The parliament brought an amendment to the The Arbitration and Conciliation Act, 1996 and with this an amendment to Section 11 was also brought. Now as per the latest amendment, the section is now read as-Section 11(5): Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by 1[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court].

1. M/S Duro Felguera S.A vs M/S. Gangavaram Port Limited

The Hon’ble Supreme Court while adjudicating the petition under section 11 under the 1996 Act held that post 2015 Amendment, the court is only required to get involved into the existence of the Arbitration Agreement. Also the court directed to form the six tribunals to adjudicate the matter.

2. M/s Uttarakhand Purv Sainik Sanstha vs. Northern Coal Field Limited

The Supreme Court in this case held that post 2015 Amendment, the court is not required to delve into the question whether the claim is alive or not. It is only required to look into the existence of the Arbitration Agreement or clause.

3. Oriental Insurance Company vs. Dicitex Furnishing Ltd.

The Court in this case held that the court is only required to examine the existence of the arbitration and if the answer is in positive, parties are referred to the arbitration.

Conclusion:

From the above series of case laws, it is clear that Section 11 has evolved so far. The intention of the legislature was to always make the court interfere with the arbitration and hence allowed the administrative interference of the court in the appointment of the arbitrators. Arbitration is one of the friendly features in the Litigation environment which can actually attract the investment in the country.