Assignment On

ALTERNATIVE
DISPUTE RESOLUTION
DYUTI RAINA
Semester – VII, Section –A, Jamia Millia Islamia University (JMI),
New Delhi ( India )
 Acknowledgement

In performing this assignment, I had to take the help and guideline of some respected persons,
who deserve my greatest gratitude. The completion of this assignment gives me much pleasure. I
would like to expand my deepest gratitude to all those who have directly and indirectly guided
me in writing this assignment.
In addition, a thank you to who introduced me to the methodology of work, and whose passion
for the subject had a lasting effect..
Many people, especially my classmates, have made valuable comment suggestions on this
proposal which gave me an inspiration to improve my assignment. I thank all the people for
their help directly and indirectly who have helped in completing this assignment.
CONTENTS
INTRODUCTION
Appointment of arbitrators. —
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by
the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for
appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with
three arbitrators, each party shall appoint one arbitrator, and the two appointed
arbitrators shall appoint the third arbitrator who shall act as the presiding
arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a
request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty
days from the date of their appointment, the appointment shall be made, upon
request of a party, by the Chief Justice or any person or institution designated by
him.
(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 the Chief Justice or any person or
institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement
expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to
him or it under that procedure, a party may request the Chief Justice or any
person or institution designated by him to take the necessary measure, unless the
agreement on the appointment procedure provides other means for securing the
appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-
section (6) to the Chief Justice or the person or institution designated by him is
final.
(8) The Chief Justice or the person or institution designated by him, in
appointing an arbitrator, shall have due regard to—
(a) any qualifications required of the arbitrator by the agreement of the parties;
and
(b) other considerations as are likely to secure the appointment of an
independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international
commercial arbitration, the Chief Justice of India or the person or institution
designated by him may appoint an arbitrator of a nationality other than the
nationalities of the parties where the parties belong to different nationalities.
(10) The Chief Justice may make such scheme 1 as he may deem appropriate for
dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-
section (6) to him.
(11) Where more than one request has been made under sub-section (4) or sub-
section (5) or sub-section (6) to the Chief Justices of different High Courts or
their designates, the Chief Justice or his designate to whom the request has been
first made under the relevant sub-section shall alone be competent to decide on
the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and
(10) arise in an international commercial arbitration, the reference to ‘‘Chief
Justice'' in those sub-sections shall be construed as a reference to the ‘‘Chief
Justice of India''.
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10)
arise in any other arbitration, the reference to “Chief Justice” in those sub-
sections shall be construed as a reference to the Chief Justice of the High Court
within whose local limits the principal Civil Court referred to in clause (e) of
sub-section (1) of section 2 is situate and, where the High Court itself is the Court
referred to in that clause, to the Chief Justice of that High Court.
EXPLANATION
Section 11 of the Arbitration and conciliation Act, 1996 (the Act) deals with the
appointment of arbitrators. Section 11(2) of the 1996 Act provides that the
parties are free to agree on a procedure for appointing an arbitrator.Theoretically,
under Section 11(6) of the 1996 Act,a party does not have to approach a court
for appointment of an arbitrator, if the agreement provides for a mechanism to
deal with the failure of the other party to appoint the arbitrator. Thus, the parties
are given complete autonomy in choosing the fastest possible method of
appointing an arbitrator, and constituting a valid arbitral tribunal.

Where the procedure for appointment has been agreed upon between
the parties, the court's function is only to implement the agreed procedure.The
M.P. high court in Subhash Projects and Marketing Ltd. v. South Eastern
Coalfields Ltd. AIR 1998 MP 276 said, "Under section 11(6), where the
agreement lays down a procedure for appointment of arbitrator referable to sub-
section (2), the chief justice has merely to take necessary measures for enforcing
the procedure laid down in the agreement for arbitration. Under sub-section (6)
the chief justice or his designate has not to make any appointment but to enforce
or compel the party to make the appointment in accordance with the agreed
procedure. But the A.P. High Court in Deepak Galvanising & Engg Industries
Pvt Ltd v. Govt. of India , the Delhi High Court in Continental Construction Ltd.
v. NHPC Ltd. and the Bombay High Court in R.P.Souza & Co v. PWD took a
contrary view. There it was held that the court has to appoint an independent
arbitrator when the opposite party has failed to appoint the named arbitrator.

It is well settled that where an arbitrator is named in the arbitration

agreement, the provisions of section 11 of the Act are not attracted and the court
will not have jurisdiction to try and decide the petition filed by party for
appointment of another arbitrator. It was held by Madras High Court in Kamla
Solvent v. Manipal Finance Corporation Ltd. (AIR 2001 Mad 440).
In BSNL v. Motorola India Pvt Ltd. (2008(3) Arb LR 531) it was held that
once a minimum 30 days period has expired and a petition under section 11 is
filed, the appointing authority losses the right to make the appointment of
arbitrator.

The nature and scope of issues arising in a section 11 application for

appointment of arbitrators is far narrower than of those arising in a section 8
application. In a section 11 application, the issue of 'arbitrability' is left for
decision by the tribunal, whereas the Court must decide the same in a section 8
application.

In Reva Electric Car Co. P. Ltd. v. Green Mobil, decided by the Supreme
Court , was an application under sections 11(4) and (6) of the Arbitration and
Conciliation Act, 1996 (the "Act") for appointment of arbitrator by the Chief
Justice of India.The court held that although section 16 of the Act, incorporating
the principle of Competence-Competence, empowers the arbitral tribunal to
adjudicate on matters pertaining to its own jurisdiction, under Indian law it is
well-settled that when the Chief Justice is approached (whether for a domestic
or international arbitration) to appoint arbitrators, he holds the power of making
a preliminary determination of whether there exists an arbitration agreement at
all.

AMENDMENT TO SECTION 11 BY 2015 AMENDMENT ACT

The Union Cabinet recently issued a press release for the Arbitration and
Conciliation (Amendment) Bill, 2018 (“2018 Bill”). The amendments which,
when passed will apply to the Arbitration and Conciliation Act, 1996 (“Act”)
are pursuant to the Srikrishna Committee Report[1] released in July, 2017
(“Report”), recommending further amendments on the back of the 2015
amendments, primarily to improve on or clarify various provisions.
Key amendments approved include the following:
 Arbitration Council of India
The Report recommended the creation of an independent body to accredit
arbitral institutions and arbitrators as a number of stakeholders interviewed were
disenchanted with the existing arbitral facilities in India. The recommendation
has been accepted and an independent body will be set up, namely, the
Arbitration Council of India to enable formal evaluation and accreditation. This
Council will frame norms for alternate dispute resolution and evolve
professional guidelines. This is a positive step to ensure the quality of arbitral
institutions. Though India has several arbitral institutions, few apart from the
Mumbai Centre for International Arbitration are recognized as having the
expertise to administer multi-party international arbitrations.
The Council will also maintain an electronic depository of arbitral awards that
can be used to analyse how the jurisprudence has evolved. This is a welcome
move. Many international institutions release yearbooks that publish excerpts of
awards and this repository will help develop the jurisprudence in India.
The chairperson of the Council will be a retired Supreme or High Court judge or
“any eminent person”, and include academics, Government nominees etc. The
Report had, however, advised that the Council should be autonomous of any
Governmental involvement. This is pertinent since in arbitrations involving the
Government as a party, accreditation of arbitrators by Government nominees
would bring in conflict of interest issues. It would be good for the 2018 Bill to
consider this. Pursuant to the Report, the New Delhi International Arbitration
Centre Bill, 2018 was introduced in Lok Sabha in January, 2018 for establishing
an arbitration institution, a chamber of arbitration for empaneling arbitrators, a
training academy for arbitration and a research centre.
 Appointment of Arbitrators
Section 11 will be amended so that instead of having to go through court for
appointment of an arbitrator, the Supreme / High Court may designate specific
arbitral institutions that will make the relevant appointments. This obviates the
need to file a formal application for appointment in court, thus speeding up the
process by taking away some part of the burden from the court.
The Report had recommended that such appointments should be made without
the requirement of the Supreme Court or High Courts determining the existence
of an arbitration agreement. This is in line with the kompetence-kompetence
principle of an arbitral tribunal itself determining its own jurisdiction.
On a related note, the present Section 11 (6A) of the 2015 Act mandates that the
Court in a Section 11 proceeding should confine its examination to the existence
of the arbitration agreement. Prior to its amendment, the power under Section 11
was held to be wider in scope and included an examination of whether claims
could be referred to arbitration etc.[2] The Cabinet’s press release does not deal
with this aspect in its recommendation.
 Length of the Arbitral Proceeding
In attempting to redress the criticism of ad hoc Indian arbitration and its lengthy
delays, Section 29A, introduced in the 2015 amendments provides that an award
must be made within 12 months from the Tribunal entering upon reference,
extendable to a period of 18 months by party consent, failing which the mandate
would terminate. Any extension over 18 months can only be obtained with the
Court’s permission. The newly inserted provision though well-intentioned has
been criticized..
In practice, 18 months is an ambitious target for most complex, commercial
disputes. The proposed amendments on the basis of the Report suggest that the
timeline provided in Section 29A should exclude international arbitrations. The
Report noted that international arbitral institutions have criticized the timelines
of Section 29A on the basis that the conduct of the proceeding is best left to the
institutions. However, while promoting, institutional arbitration, applying a
different set of timelines to international arbitrations suggests discrimination
against a purely domestic arbitration.
The 2018 Bill sensibly suggests that the 12 month period should be calculated
after completion of pleadings.
 Confidentiality
Statutory recognition of confidentiality in arbitration has been suggested (the
Act mandates confidentiality only for conciliation proceedings). In line with the
Report’s recommendation, the press release suggests the introduction of a new
section 42A, requiring arbitrators and arbitral institution to keep proceedings
confidential (except the award). This provision will have to be carefully drafted
to exclude any order or award that may be challenged in a court including
Section 17 orders.
 Arbitrator Immunity
Amendments suggest provisions for arbitrator immunity, to protect an arbitrator
from any legal proceedings for acts and omissions during the course of the
proceedings. This is to ensure that the arbitrator is able to exercise her function
without any fear of proceedings ensuing therefrom. Arbitrator immunity
provisions are present in many foreign statutes and international institutional
rules, and MCIA Rules.
  Application of the 2015 Amendments
The Cabinet’s amendments proposed a new section 87 to clarify that unless
otherwise agreed by parties, the 2015 Amendments, would not apply to (a)
Arbitral proceedings that have commenced before the Amendment Act, 2015 (b)
Court proceedings arising out of or in relation to such arbitral proceedings and
shall apply only to Arbitral proceedings commenced on or after the
commencement of the Amendment Act, 2015 and to court proceedings arising
out of or in relation to such Arbitral proceedings.
One of the most contentious issues in recent times has been the correct
interpretation of Section 26 of the Amendment Act and whether to the
amendments apply to court proceedings: (i) filed after the amendments came
into force in 2015, but in respect of arbitrations commenced before the
amendments; and (ii) court proceedings which were pending at the time the
amendments came into effect but were decided thereafter. In this context there
were conflicting decisions of various courts.[3]
The Supreme Court recently passed a judgment, [4] ruling that the 2015
amendments would apply to all court proceedings filed after the amendments
came into effect (October 23, 2015), regardless of when the arbitration was
commenced. Crucially, it was also held that the 2015 amendments would apply
to pending proceedings that may have been filed prior to the amendments but
were pending at the time amendments came into force.
The 2018 amendments however provide that the 2015 amendments will apply
only to proceedings actually filed after October 23, 2015. Being so, the Supreme
Court has directed that its aforesaid judgment be transmitted to the Law Ministry
and the Attorney General to take note of its interpretation.
The judgment itself raises questions. Assuming a petition were filed to challenge
an award prior to the 2015 amendments but was pending on the date of the
amendments, by virtue of the judgment, an automatic stay that was earlier
effective would no longer apply. It would then be open to the award-creditor to
apply for enforcement and the award-debtor would have to file a separate
application for a stay (in which case a deposit of the award amount would be
probable), thus taking away a benefit that a party had prior to the 2015
amendments.
It remains to be seen whether the Government takes note of the Supreme Court’s
interpretation and effects amendments in consonance.
The amendments are a welcome development in the field of arbitration and when
implemented will assist further in India being seen as an arbitration friendly
jurisdiction.

The role of courts in arbitrator appointments – Patel Engineering

and beyond

What questions can the Chief Justice entertain while appointing arbitrators under
Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”)? In 2005,
in SBP and Company v. Patel Engineering Ltd. (“the Patel Engineering case”),
a seven-judge bench of the Supreme Court issued determinative dicta in relation
to this function of the court. In this post, we examine a series of subsequent cases
where the Supreme Court has interpreted and given effect to its dicta in the Patel
Engineering case.
Background
Section 11 of the Act provides that when the parties fail to appoint one or more
arbitrators according to the terms of the arbitration agreement, or when two
arbitrators fail to choose the third or presiding arbitrator, or the designated
appointment mechanism otherwise fails, the parties can approach the Chief
Justice to resolve the stalemate and appoint an arbitrator.
Section 11 is based on Article 11 of the UNCITRAL Model Law, 1985 (“the
Model Law”). Similar to the Model Law, Section 11 envisages the Chief Justice
performing a fairly routine, administrative function in making the appointment,
similar to the appointing role that arbitral institutions take on. All that is required
is a request from a party to the Chief Justice to appoint the arbitrator, usually in
the form set out in Notification No F22/1/95/SCA/Genl.The extent of enquiry in
making the appointment should include checking for the impartiality and
independence of the appointee and the qualifications specified in the agreement.
However, in the Patel Engineering case, the Supreme Court held that the
appointing function in Section 11 is a judicial function where the Chief Justice
should examine certain jurisdictional questions like the existence and validity of
the arbitration agreement. The exact scope of enquiry of the Chief Justice was
set out by the Supreme Court as follows:
“It is necessary to define what exactly the Chief Justice, approached with an
application under Section 11 of the Act, is to decide at that stage. Obviously, he
has to decide his own jurisdiction in the sense, whether the party making the
motion has approached the right High Court. He has to decide whether there is
an arbitration agreement, as defined in the Act and whether the person who
has made the request before him, is a party to such an agreement. It is
necessary to indicate that he can also decide the question whether the claim
was a dead one; or a long barred claim that was sought to be resurrected
and whether the parties have concluded the transaction by recording
satisfaction of their mutual rights and obligations or by receiving the final
payment without objection. It may not be possible at that stage, to decide
whether a live claim made, is one which comes within the purview of the
arbitration clause. It will be appropriate to leave that question to be decided by
the arbitral tribunal on taking evidence, along with the merits of the claims
involved in the arbitration. The Chief Justice has to decide whether the
applicant has satisfied the conditions for appointing an arbitrator under Section
11(6) of the Act…”
Further, the Court in this case also held that the court’s decision on any of these
preliminary matters would be final and not open for subsequent examination by
the arbitral tribunal.
In subsequent cases, questions have arisen in relation to this dicta – in relation
to whether the Chief Justice or his designate has to examine all the preliminary
issues laid down in Patel Engineering or whether he can set aside some of these
preliminary issues for the arbitral tribunal to decide. Questions have also been
raised about the extent to which courts can examine the scope of the arbitration
agreement while dealing with a Section 11 application.
Discretion to leave issues to the arbitral tribunal
In National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1
SCC 267, a two-judge bench of the Supreme Court held that the Chief Justice,
in exercising his powers under Section 11, does not have to decide all the
preliminary questions set out in Patel Engineering.
The Court segregated the preliminary issues into three categories, that is, “(i)
issues which the Chief Justice or his designate is bound to decide; (ii) issues
which he can also decide, that is, issues which he may choose to decide; and (iii)
issues which should be left to the Arbitral Tribunal to decide.”
The first category included the Chief Justice’s territorial jurisdiction as well as
the issue of whether there was an arbitration agreement and whether the Section
11 applicant is indeed a party to the agreement. The second, optional category
included issues of whether claim is a dead (barred by limitation) claim or a live
claim and whether the parties have concluded their contract by recording
satisfaction of their mutual rights and obligation or by receiving the final
payment without objection. If the Chief Justice did decide to rule on these
optional issues, his decision would be final and cannot be reopened by the
tribunal. However, the court urged the Chief Justice to exercise caution in
exercising this option and to be guided by the objective of the Act of “expediting
the arbitration process with minimum judicial intervention”. The last category
of issues which the Chief Justice should not decide included issues of “(i)
Whether a claim made falls within the arbitration clause (as for example, a
matter which is reserved for final decision of a departmental authority and
excepted or excluded from arbitration)” or “(ii) Merits or any claim involved in
the arbitration.”
The categorisation of the Court in this case is interesting, especially in relation
to the second category, because in a previous case, Shree Ram Mills
Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC 599, the Supreme Court had
suggested that the second category of cases, involving the decision of whether
the claim is a live claim or not, has to be decided by the court as it is only by
deciding this limitation issue that the court can decide whether to constitute a
tribunal or not. The Court said: “… the Chief Justice has to record satisfaction
that there remains a live issue in between the parties…” and that “where the
Chief Justice comes to a finding that there exists a live issue, then naturally this
finding would include a finding that the respective claims of the parties have not
become barred by limitation.”
In Chloro Controls India Private Ltd v. Severn Trent Water Purification
Inc., (2013) 1 SCC 641, a three-judge bench of the Supreme Court said that there
is no variance between the Shree Ram Mills Ltd. and Boghara Polyfab Private
Limited judgments; both judgments were in line with the law declared in the
Patel Engineering Case. Quoting from Shree Ram Mills, the Court clarified that
it laid down that “it is only for the purpose of finding out whether the arbitral
procedure has to be started that the Chief Justice has to record satisfaction that
there remains a live issue in between the parties.
… The Chief Justice only has to record his satisfaction that prima facie the issue
has not become dead by the lapse of time or that any party to the agreement has
not slept over its rights beyond the time permitted by law to agitate those issues
covered by the agreement….”
Thus, “…the Chief Justice may not decide certain issues finally and upon
recording satisfaction that prima facie the issue has not become dead even leave
it for the Arbitral Tribunal to decide.”
The Court also upheld the categorisation laid down in Boghara Polyfab Private
Limited: “We have no reason to differ with the classification carved out in
National Insurance Co. as it is very much in conformity with the judgment of the
Constitution Bench in SBP.”
[Learn International Arbitration here!]
The scope of the arbitration agreement
In Arasmeta Captive Power Company Private Limited v. Lafarge India Private
Limited, the Supreme Court in December, 2013, reiterated another aspect of the
Patel Engineering decision, namely that the Chief Justice should not decide on
whether the claim in question is one which comes within the purview of the
arbitration clause or not. In 2005, the Supreme Court had said: “It will be
appropriate to leave that question to be decided by the arbitral tribunal on
taking evidence, along with the merits of the claims involved in the arbitration.”
In 2013, the question was whether the claims raised by the parties fell within the
definition of a ‘billing dispute’ and thus, within the scope of the arbitration
agreement. The Supreme Court categorically stated that the question fell to be
determined by the arbitral tribunal and not the courts.
The Court said, “….the designated Judge… while dealing with an application
under Section 11(6) of the Act, on an issue raised with regard to the excepted
matters, was not justified in addressing the same on merits whether it is a dispute
relating to excepted matters under the agreement in question or not…..The
designated Judge has fallen into error by opining that the disputes raised are
not “billing disputes”, for the same should have been left to be adjudicated by
the learned Arbitrator…”
Thus, the third category of issues (under Boghara) are strictly for the tribunal to
decide. With Arasmeta, the Supreme Court has shown that it is prepared to
strictly enforce the jurisdictional line (between the court and the tribunal) and
not further encroach upon the jurisdiction of the tribunal apart from what is
necessary to appoint an arbitrator under Section 11.
BIBLIOGRAPHY