adr final draft

TABLE OF CONTENTS

1. Introduction 04.2. Appointment of the Arbitrator 06.

3. Appointment by the Chief Justice 09.

4. Nature of the Power of the Chief Justice 12.

5. Conclusion 16.

6. Bibliography 17.INTRODUCTION

Arbitration is a method whereby parties can resolve their disputes privately. Instead of filing a case in a court, parties refer their case to an arbitral tribunal, which is the forum where arbitration proceedings are conducted. The arbitral tribunal will consider the questions over which the parties are in conflict and will arrive at a decision. This decision is known as an 'award'.

In India, the type of arbitrations conducted is mostly ad hoc. The concept of institutional arbitration, though gradually creeping in the arbitration system in India, has yet to make an impact. The advantages of institutional arbitration over ad hoc arbitration in India need no emphasis and the wide prevalence of ad hoc arbitration has its ramifications in affecting speedy and cost effectiveness of the arbitration process.

There are a number of advantages of institutional arbitration over ad hoc arbitration. Some of the advantages are as follows:

1. In institutional arbitration the procedural rules are already established by the institution. Formulating rules is therefore no cause for concern. 2. In institutional arbitration, the arbitral institutions maintain a panel of arbitrators along with their profile. The parties can choose the arbitrators from the panel. Such arbitral institutions also provide for specialized arbitrators. 3. In institutional arbitration, many arbitral institutions such as the International Chamber of Commerce (ICC) have an experienced committee to scrutinize the arbitral awards.

4. In institutional arbitration, the arbitrators are governed by the rules of the institution, and they may be removed from the panel for not conducting the arbitration properly. 5. In institutional arbitration, as the secretarial and administrative staffs are subject to the discipline of the institution, it is easy to maintain confidentiality of the proceedings. In ad hoc arbitration, it is difficult to expect professionalism from the secretarial staff.

In spite of the numerous advantages of institutional arbitration over ad hoc arbitration, there is currently an overwhelming tendency in India to resort to ad hoc arbitration mechanisms.

The procedure of arbitration and the time taken to fulfill it is no doubt very less than the time required for litigation process, but the arbitration procedure has to be followed strictly. The first and the foremost function in this regard is the appointment of an arbitrator or an arbitral tribunal.

APPOINTMENT OF ARBITRATOR

As a general rule, there is no set formula for the appointment of arbitrator(s). The appointment of an arbitrator depends upon the nature of the dispute referred to him and the circumstances in which he is appointed. The powers and duties of arbitrators will vary, depending upon which of these forms of arbitration in adopted.

Appointment of an arbitrator is a contract between the arbitrator on the one side, and the parties on the other, for arbitrating upon the dispute between the parties. This contract is again based upon a contract between the parties to submit the matter to the arbitrator for arbitration of the dispute.Appointment by agreement of parties:

The most preferable method for the appointment of an arbitrator, whether a sole arbitrator or a member of the larger tribunal, is by agreement of the parties to the dispute. The major attraction of arbitration is that it allows parties to submit a dispute to judges of their own choice. The parties, therefore should exercise this choice directly, rather than allow it to be exercised by a third party n their behalf.

If the parties do not agree on the appointment of the arbitrator, they lose the control over the composition of the tribunal. According to Section 11 of the Indian Arbitration Act, 1996, the control then by default passes to the Chief Justice of India or any person or institution designated by him in case of an International Commercial Arbitration and in cases of domestic arbitration to the Chief Justice of the high court having jurisdiction over the arbitration or any person or institution designated by him.

It is very a common feature that any party may in order to frustrate the arbitration, refuse to appoint the arbitrator. Hence it is advisable to make a provision in the arbitration agreement itself to seek intervention of an experienced institution to make the appointment. In an ad hoc arbitration it is often necessary to fall back on the lex arbitri, which normally provides for the appointment to be made by the relevant court.

Appointment by existing arbitrators:

In India, the most common and preferred method employed for appointing arbitrators in the three member tribunal (and also in other odd number member tribunals) is that each party appoints one arbitrator and the two arbitrators so appointed appoint the third arbitrator who acts as a presiding arbitrator. He is also sometimes referred to as the umpire.

Where the party appointed arbitrators are unable to appoint the third arbitrator, in default the Chief Justice or any person or institution designated by him shall make the appointment.

Appointment on behalf of the parties:

According to Section 2 (6) of the 1996 Act the parties are free to authorize any person, including an institution to determine an issue, which they themselves are free to determine. Therefore many a times, the parties in order to reap the benefit of the experience and equipment of experienced persons or institutions, the parties entrust the task of appointing arbitrators to such persons or other institutions which are known as Appointing Authority.Appointment by Arbitral Institutions

There are many national and international arbitral institutions which are acquainted with the needs of various types of arbitrations. They are, by their day-to-day experience, well aware of the potential persons who are suitable for each type of arbitration. Furthermore, they are well equipped machinery for appointing arbitrators under their own rules of arbitration. Many such arbitral institutional are willing to offer their services as appointing authority, even where the arbitration is jot to be conducted according to their own rules.

The parties may also agree to entrust the entire arbitration process to some trade associations. The arbitrators appointed by such associations are generally experienced in the particular trade concerned; they are expected to reach their decision not merely on the basis of evidence and argument presented to them, but on the basis of their own experience of the trade.

According to Section 11 (6) (c) of the 1996 Act if this institution fails to perform the function entrusted to it then the Chief Justice or any person or institution may be requested by him to the necessary measures.

Appointment by List Systems:

A typical list procedure system consists of one party to the arbitration circulating a list of arbitrators to the other. However, under the Rules, it is the appointing authority which would communicate a list of arbitrators to each of the parties. Once the list is given, the parties are to delete names from the list which they consider inappropriate and also allot priority to the arbitrators they approve of. The appointing authority would appoint such the sole arbitrator whom both parties have agreed to, in accordance with the priority allocated by them. The selection in the list is to be done within the time limits specified in the Rules.APPOINTMENT BY THE CHIEF JUSTICE

The following provisions of the Arbitration and Conciliation Act, 1996 deal with the situations wherein the Chief Justice can intervene in the process of appointment of an arbitrator / arbitration tribunal.

Section 11. Appointment of 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.

Hence, a thorough reading of the above stated sub-sections of Section 11 gives rise to the following conclusion. It is clear that for an arbitration proceeding to commence, there needs to be an arbitration agreement. The parties are free to inculcate any procedure in their agreement for the appointment of the arbitrator. Section 11(2) of the act says that the parties are free to agree on a procedure for appointing the arbitrator(s).Whenever the parties or the institutions authorized by them fail to act in order to complete the procedure of appointment of arbitrators then appointment of arbitrators can be secured by taking recourse to the other means if arbitration agreement/clause provides such other means for securing the appointment of arbitrators.In case arbitration agreement does not provide such other means for securing the appointment, the aggrieved party may request the Chief Justice or any person or institution designated by him to take the necessary measure for securing the appointment. Also in situations under which, appointment procedure agreed upon by the parties, the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or a person, including an institution, fails to perform any function entrusted 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.

Section 11(3) only provides for the procedure with three arbitrators if the parties have not agreed on a procedure for appointing the arbitrator. According to this section each party shall appoint one arbitrator, and the two appointed arbitrators, shall appoint the third arbitrator who shall act as the presiding arbitrator. Further Section 11(4) provides a limitation period for such appointment. It clarifies that if a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or 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.

The power of the Chief Justice to appoint an arbitrator under sub sections (4), (5) and (6) of section 11 is a statutory power, which can be invoked only on the request of a party. It is not an ex officio power. Those schemes have been framed by the Chief Justice of India under s 11(10) to make necessary provisions for making the application. In case of a partnership firm, the application may be made by a partner as was opined in the case of Prabhu Shankar Jaiswal v. Sri Sheo Naraian Jaiswal.

Section 11(5) of the 1996 Act relates to both, the procedure and limitation period if the parties have not agreed on a procedure for appointing the arbitrator in arbitration with a sole arbitrator. It says that 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 of any person or institution designated by him. According to Article 137 of the Limitation Act, 1963 the period of limitation for making a request under Section 11 (6), is three years and the limitation is to be counted from the date on which 30 days from the date of notice by one party to the other for appointing arbitrator expires.

Section 11(7) provides that a decision of the Chief Justice or the person or institution designated by him is final on the matter entrusted by sub section (4) or sub section (5) or sub section (6) of Section 11 whereas sub section (10) of it clarifies that the Chief Justice may make such scheme as he may deem appropriate for dealing with such matters. The Chief Justice or the person or institution designated by him, in appointing arbitrator, shall have due regaled to (a) 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.

NATURE OF THE POWER OF THE CHIEF JUSTICE

According to subsection 7 of section 11 of the Arbitration and Conciliation Act, 1996, a decision on a matter entrusted by subsections 4, 5 or 6 to the Chief Justice or the person or institution by him is final. This provision left a very important question for interpretation that whether the nature of the order passed by the Chief Justice on appointment of Arbitrators was judicial or administrative in nature?Power of Chief Justice is Administrative in nature:One of the first few interpretations was the one made in the case of Sundaram Finance Ltd v.NEPC India Ltd. In this case it was held that:

under the 1996 Act appointment of arbitrator/s is made as per the provision of Section11which does not require the Court to pass a judicial order appointing arbitrator/s.

In the same case the intent of the legislature was also scrutinized. The court came to the conclusion that if the intention of the legislature was to consider the order a judicial one then they would have mentioned the word court instead of the Chief Justice. However they used the word Chief Justice, hence it is crystal clear that the intention was to make it an administrative order. The same decision was reiterated by the Supreme Court in the case of Ador Samia Private Ltd v. Peekav Holdings Limited wherein it was also added that held by the Hon'ble Supreme Court that as the learned Chief Justice or his designate under Section11(6)of the Act acts in administrative capacity as held by this Court in the aforesaid decision it is obvious that this order is not passed by any court exercising any judicial function nor it is a tribunal having trappings of a judicial authority. And as a petition under Article136can lie only for challenging a judgment, decree, determination, sentence or order in any cause of matter passed or made by any court or a tribunal, therefore orders passed by the learned Chief Justice under Section11(6)of the Act being of an administrative nature cannot be subjected to any challenge directly under Article136of the Constitution of India.The decision of the bench of three judges in Konkan Railway Corporation Ltd & Ors v. Mehul Construction Co. affirmed the view taken in Ador Samia case. According to it, the order of the Chief Justice or his designate in exercise of the power under S.11 of the Act was an administrative order. Such an order was not amenable to the Jurisdiction of the Supreme Court under Article 136. The main reason behind the formation of this opinion was that the intention of the legislature in enacting the Arbitration and Conciliation Act, 1996 was to expedite the process of arbitration. Therefore if the order was to be considered as a judicial or quasi-judicial, then it would take a long time as it would be amenable for judicial exam, hence frustrating the very purpose behind the enactment. The effect of this judgment was that the decision of the Chief Justice being an administrative order was now amenable to the Writ Jurisdiction under Article 226 of the Constitution. A bench of five judges in the case Konkan Railway Corporation Ltd Anr v. Rani Construction Pvt. Ltd decided on the following issue: It appears that the Chief Justice or his nominee, acting under Section 11 of the Arbitration and Conciliation Act, 1996, have decided contentious issues arising between the parties to an alleged arbitration agreement and the question that we are called upon to decide is whether such an order deciding issues is a judicial or an administrative order?After duly examining all the intricacies involved it was held that the order of the Chief Justice or his designate under Section 11 nominating an arbitrator was not an adjudicatory order and the Chief Justice or his designate was not a tribunal. Such an order cannot properly be made the subject of a petition for special leave to appeal under Article 136. Hence a reading of the above stated cases gives a clear picture that the opinion of the courts with regards to the nature of the order of the Chief Justice was that its an administrative order. However the situation did not remain stationary for a very long period of time. Power of Chief Justice is Judicial in nature:The opinion/judgments were again challenged in the case of S.B.P. & Co v. Patel Engineering & Anr., where the question before the Hon'ble Supreme Court was the nature of the function of the Chief Justice or his designate under S. 11 of the Arbitration and Conciliation Act, 1996. The main issues which were examined in this case were:1. What is the nature of the function of the Chief Justice or his designate under S. 11 (6) of the Arbitration and Conciliation Act, 1996?

2. What is the scope and power of the Chief Justice under S. 11?

The Supreme Court examined the above stated issues in detail and held that the power exercised by the Chief Justice or the person designated under S. 11 of the 1996 Act is a judicial power and not an administrative power. Some of the other important views as discussed and opined in the case have been enlisted.1. The power that is exercised by the Chief Justice of India or the Chief Justices of other High Courts under S. 11(6) of the Act is judicial in nature and not administrative. 2. The power can be delegated by the Chief Justice of India to another judge of the Supreme Court and by the Chief Justice of the High Court only to another judge of that High Court. The power so delegated would be exercised by the designated judge at par to the Chief Justice as conferred by the statute.

3. The opinion pertaining to intention of legislature with regard to the nature of power was based on the theory that had the legislature intended to treat it as a judicial order they would have used the word Court and not Chief Justice was also negated. Instead it was opined that the very reason that Court was not used in the statute was to exclude the District Courts and other lower courts from the ambit of this power. In other words, designation of a district judge as the authority under S. 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.4. The Chief Justice or the designated judge has the right to decide the preliminary aspects like his own jurisdiction to entertain the request; the existence of a valid arbitration agreement; the existence or otherwise of a live claim; the existence of the condition for the exercise of his power; and on the qualifications of the arbitrator or arbitrators. 5. They are also entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of S. 11(8) of the Act.

6. An order passed by the Chief Justice of the High Court or by the judge designated by him is a judicial order therefore an appeal will lie against it only under Article136of the Constitution of India to the Supreme Court. However no appeal can be made against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under S. 11(6) of the Act.7. If the matter reaches the arbitrator(s), the High Court could not interfere with orders passed by the arbitrator(s) during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 34 or 37 of the Act.8. The decision inKonkan Railway Corporation Ltd. and Anr.v.Rani Construction Pvt. Ltd was overruled.

CONCLUSION

In the landmark judgment of S.B.P. & Co v. Patel Engineering & Anr., it was held by the Honble Supreme Court of India that the power exercised by the Chief Justice of India or the Chief Justice of High Court under Section 11 (6) of the Arbitration and Conciliation Act, 1996 is not an administrative power but a judicial one. The decision of the Hon'ble Supreme Court was reiterated in the case of Maharishi Dayanand University v. Anand Coop. L/C Society Ltd & Anr. In many cases a very important issue had been raised by the appellants, i.e. who should decide whether there is an arbitration agreement or not. Should it be decided by the Chief Justice or his designate before making an appointment of arbitrator under S.11 or the arbitrator who is appointed under S.11 of the Act? This issue is no longer res-integra. Since the decision in S.B.P. & Co v. Patel Engineering & Anr., it is now a recognised law, that any question on whether there is an arbitration agreement or not, or whether the party who has applied under S.11 of the Act, is a party to such an agreement, is an issue which has to be decided by the Chief Justice or his designate under S.11 before making appointment of arbitrator.BIBLIOGRAPHY No single resource can speak with authority on the topic of Appointment of Arbitrator: Role of Chief Justice I, therefore, have utilized the matter from the following sources:

1. O.P. Malhotra, Indu Malhotra, The Law & Practice of Arbitration & Conciliation (2nd Edn. Butterworth LexisNexis, New Delhi 2006)

2. Avtar Singh, Law of Arbitration & Conciliation (7th Edn. Eastern Book Co., Lucknow 2006)

3. Ashwinie Kumar Bansal, Arbitration Agreement and Awards (2nd Edn. Universal Law Publishing, Delhi 2006)

4. Surendra Malik, Supreme Court on Arbitration (1st Edn. Eastern Book Co., Delhi 2003) OP Malhotra, Indu Malhotra, The Law and Practice of Arbitration and Conciliation 528 (2nd edn, 2006)

Robert Merkin, Arbitration Law 361-361 (2004)

OP Malhotra, Indu Malhotra, The Law and Practice of Arbitration and Conciliation 533 (2nd edn, 2006)

Section 11 (4) of the Arbitration and Conciliation Act, 1996


Id at 539

Section 11(6)(a) of the Arbitration and Conciliation Act, 1996

Section 11(6)(b) & (c) of the Arbitration and Conciliation Act, 1996

1996 (2) ArbLR 677, 680


Section 11(8) of the Arbitration and Conciliation Act, 1996

MANU/SC/0012/1999

AIR 2000 SC 2821

MANU/SC/0053/2002

(2005) 8 SCC 618

AIR 2007 SC 2441

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