PROCEDURE FOR APPOINTMENT OF ARBITRATORS: PROVISIONS AND CASES

Authored By – HERAMBH BHATIA, GITRATTAN INTERNATIONAL BUSINESS SCHOOL AFFILIATED WITH GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

A) INTRODUCTION

Arbitration is the most widely preferred Alternative Dispute Resolution (ADR) method, especially among corporate entities. It is a user-friendly mechanism for dispute resolution that ensures speedy justice for parties efficiently, thereby reducing costs in the process. A crucial aspect of arbitration is the appointment of arbitrators, as it determines the smooth conduct of proceedings.

The Arbitration and Conciliation Act, 1996, under Section 11, governs the appointment of arbitrators. Arbitrators act as decision-makers in arbitration proceedings and are appointed based on the mutual consent of the disputing parties.

Keywords: Arbitration; Arbitration and Conciliation Act, 1996; Panel of Arbitrators; Alternative Dispute Resolution; Appointment of Arbitrators

B) MEANING, DEFINITION, AND EXPLANATION

Meaning of Arbitration

According to the World Intellectual Property Organization (WIPO), arbitration is a procedure for resolving disputes in which parties, by mutual agreement, submit their dispute to one or more arbitrators, whose decision is binding. While several ADR methods exist, arbitration is unique as it is a formal yet cost-efficient and expeditious process that results in an arbitral award—a decision as binding as a court decree.

Essence of an Arbitrator

The most vital aspect of arbitration is the appointment of an arbitrator. An arbitrator is a neutral third-party decision-maker, privately engaged by the disputing parties, to render a binding decision known as the arbitral award. This award holds the same value as a court decree. Arbitrators are obligated to maintain fairness, ensure neutrality, and uphold the sanctity of the arbitration process.

Powers of an Arbitrator

An arbitrator is vested with significant powers, which include:

  1. Jurisdictional Authority – The power to determine their own jurisdiction and the validity of the arbitration agreement.
  2. Granting Interim Measures – Empowered under Section 17 of the Arbitration and Conciliation Act, 1996, arbitrators can issue interim measures.
  3. Regulating Proceedings – Under Section 19, arbitrators can decide the procedure to be followed, ensuring an efficient dispute resolution process.
  4. Appointing Experts – As per Section 26, arbitrators can appoint experts for professional opinions on matters in dispute.

Obligations of an Arbitrator

  1. Administering Oaths – Ensuring all witnesses and parties take an oath before testifying.
  2. Assessing Evidence – Determining the admissibility and weight of evidence presented during proceedings.
  3. Cost Determination – Calculating and allocating costs incurred in arbitration.
  4. Enforcing the Award – Under Section 33, arbitrators are responsible for overseeing the interpretation and implementation of the arbitral award.

C) LEGAL FRAMEWORK

Legal Framework Governing Arbitration

The Arbitration and Conciliation Act, 1996, based on the UNCITRAL Model Law on International Commercial Arbitration (1985), provides a comprehensive legal framework for arbitration in India. This Act lays down provisions governing each stage of arbitration proceedings.

Procedure for Appointment of Arbitrators

The appointment of arbitrators follows a structured process under Section 11 of the Arbitration and Conciliation Act, 1996:

  1. Notice of Appointment – The party seeking arbitration must notify the other party regarding the appointment of an arbitrator.
  2. Consent of the Arbitrator – The individual appointed as an arbitrator must be informed and must consent to the appointment.
  3. Three-Member Arbitration Panel – If parties fail to agree, each party appoints one arbitrator, and these two arbitrators jointly appoint a third presiding arbitrator.
  4. Time Limit for Appointment – Parties have 30 days to appoint an arbitrator; failure to do so allows the Chief Justice of the High Court or a designated person to make the appointment.
  5. Appointment of a Sole Arbitrator – If a single arbitrator is required but parties fail to agree, the Supreme Court or High Court can appoint one.
  6. Finality of Decision – If the appointment is made by the Supreme Court or High Court, it is final and cannot be appealed.

Number of Arbitrators

Under Section 10, parties have autonomy in deciding the number of arbitrators, subject to certain conditions:

  1. Odd-Numbered Panel – The number of arbitrators cannot be even.
  2. Sole Arbitrator in Absence of Agreement – If parties fail to decide the number of arbitrators, a single arbitrator is appointed.
  3. Fast-Track Arbitration – Under Section 29A, in fast-track arbitration, only one arbitrator must be appointed to expedite the process.

D) LANDMARK CASES

1) Apex Buildsys Limited vs. IRCON International Ltd. (March 15, 2024, Delhi High Court, ARB.P. 373 of 2023)

Facts

A petition under Section 11 of the Arbitration and Conciliation Act, 1996 was filed for the appointment of a sole arbitrator. The dispute arose from a tender for construction work, where the petitioner failed to complete the assigned task. The respondent claimed that it never received the arbitration notice.

Issue

Whether a party can appoint two-thirds of an arbitral tribunal.

Judgment

The Delhi High Court ruled that restricting a panel to only three arbitrators may limit broad representation. Additionally, allowing one party to appoint two-thirds of the arbitrators could compromise neutrality and fairness.

2) Techno Compact Builders vs. RailTel Corporation of India Limited (March 22, 2024, Delhi High Court, ARB.P. 1230 of 2023)

Facts

The agreement specified that if the dispute amount was below ₹10,00,000, a sole arbitrator would be appointed, whereas, for amounts exceeding ₹10,00,000, an arbitral council was required. The respondent proposed a panel of 23 retired government officials as potential arbitrators.

Issue

Whether a panel comprising only retired government officials meets the neutrality and diversity requirements.

Judgment

The Delhi High Court emphasized that while a large arbitration panel is acceptable, it must be diverse and impartial. If diversity is lacking, the court must step in to appoint an independent arbitral tribunal under Section 11.

3) Lease Plan India Pvt. Ltd. vs. Rudraksh Pharma Distributor (April 10, 2024, ARB.P. 1273 of 2023)

Facts

The petitioner sought appointment of an arbitrator under Section 11 for disputes regarding a lease agreement. The arbitration clause allowed arbitration in New Delhi under Delhi International Arbitration Centre Rules. The petitioner notified the respondent via WhatsApp and email, but no response was received.

Issue

Whether service of arbitration notice via WhatsApp and email is legally valid.

Judgment

The High Court upheld that digital service of arbitration notice (via WhatsApp and email) is valid, provided it aligns with the agreement. The court inferred proper service based on the petitioner’s affidavit and digital receipts.

E) CONCLUSION

The appointment of arbitrators is a crucial element of arbitration. An arbitrator acts as the presiding decision-maker, ensuring a fair, neutral, and efficient resolution. Sections 10 and 11 of the Arbitration and Conciliation Act, 1996 empower parties to choose arbitrators while complying with legal requirements.

With advancements in technology, arbitration procedures must adapt to remain efficient. Amendments addressing digital communication, virtual hearings, and procedural flexibility are necessary to enhance arbitration’s effectiveness in the evolving legal landscape.

F. REFERENCES

  1. Books / Commentaries / Journals Referred
  2. Online Articles / Sources Referred
  3. Cases Referred
  • Statutes Referred
    • Section 10 of the Arbitration and Conciliation Act, 1996
    • Section 11 of the Arbitration and Conciliation Act, 1996
    • Section 17 of the Arbitration and Conciliation Act, 1996
    • Section 19 of the Arbitration and Conciliation Act, 1996
    • Section 26 of the Arbitration and Conciliation Act, 1996
    • Section 29A of the Arbitration and Conciliation Act, 1996
    • Section 33 of the Arbitration and Conciliation Act, 1996
Share this :
Facebook
Twitter
LinkedIn
WhatsApp
Author picture