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Jurisdiction of the Arbitration tribunal, Section 16 of the Arbitration and Conciliation Act, 1996

HISTORICAL BACKGROUND:

The Arbitration and Conciliation Act of 1996 gives the parties a great deal of latitude in decisions like where to hold the arbitration, how many arbitrators to appoint, whom to appoint, etc. They are even free to choose which issues they want to bring before the arbitral tribunal of their choosing.

Arbitration was created as a solution to the issues that arise during the civil litigation  process in courts. The Bengal rules of 1772 and 1780 marked the first application of the arbitrariness principle under British rule. In 1940, the Arbitration Act was also passed. In India, the earliest version was the panchayat.But over time, it became apparent that the 1940 Arbitration Act was inadequate to meet the needs of a rapidly modernising India. The Arbitration and Conciliation Act succeeded it in 1996 as a result.

WHAT IS ARBITRATION AND THE ROLE OF AN ARBITRATOR?

A more formal version of ADR called arbitration comprises a tribunal process and an impartial adjudicator who hears arguments from both sides before rendering a verdict. The Arbitration and Conciliation Act, 1996 states in Section 2(1)(a) that "Arbitration means any arbitration, whether or not administered by the permanent arbitral institution." In other words, by putting arbitration under the purview of the Arbitration and Conciliation Act, of 1996, all forms of arbitration, regardless of their nature, have been statutorily recognized in India. It consists of a streamlined trial with streamlined evidence procedures and no discovery. Typically, the results of arbitration sessions are not made public.

ROLE OF AN ARBITRATOR:

An arbitrator is a chosen impartial third party with knowledge of managing the arbitration procedure. A single arbitrator or a panel of three arbitrators usually sits on the tribunal that oversees the arbitration process.

They will listen to both sides before making a decision, playing a role equivalent to that of a judge. They will, however, also promote constructive rather than combative dialogue. Although there are no particular requirements to serve as an arbitrator, some legal background and business expertise are helpful if the disagreement involves technological issues.

The procedural and evidential issues are decided by the arbitrators. Although there may be a need for document disclosure and witness cross-examination, arbitration hearings are typically quicker and less formal than court cases.

Based on the evidence submitted by the parties, the arbitrator renders a definitive judgment in a matter. Both parties must consent to arbitration because it is optional, and they should also agree in advance that they will follow the arbitrator's decision.

Arbitrators or the members of the tribunal are commonly appointed by 3 means:

1. They are directly appointed by the disputing parties (by mutual agreement or by each party appointing one arbitrator)

2. By existing tribunal members, for example, each side appoints one arbitrator and then the arbitrator appoints a third.

3. By an external party, for example, the court or an individual or institution nominated by the parties.

Read more: Jurisdiction of the Arbitration tribunal, Section 16 of the Arbitration and Conciliation Act, 1996

 

DISPUTES THAT COME UNDER ARBITRATION:

Matters involving right in personam may be submitted for arbitration, and matters concerning right in rem cannot be referred for arbitration.

Arbitration is typically an option for any disputes involving private rights that can be resolved by a civil court. As a result, arbitration may be used to resolve disagreements involving assets or money, as well as the amount of compensation due in the event of a contract breach, etc.

However, it is customary not to refer the following disputes to arbitration.

1. Marital issues, such as divorce or the return of conjugal privileges;

2. Guardianship issues with minors or other disabled individuals;

3. Testamentary issues, such as doubts concerning a will's legality;

4. Issues relating to insolvency, such as declaring someone insolvent;

5. Inquiries about foundations or charitable trusts;

6. Issues covered by the Monopolies and Restrictive Trade Practices Act;

7. Winding up or dissolution of a company.

Vidya Drolia and the New Four-Fold Test to Determine Arbitrability in India.  

In Vidya Drolia V. Durga Trading Corporation three judge bench gave the New Four-Fold Test to Determine Arbitrability in India. In Supreme Court’s opinion it was appropriate to review Indian law's position on arbitrability and examine the concept of arbitrability in other jurisdictions, even though the order of reference was limited to the question of whether tenancy disputes are arbitrable, given the ambiguity on this issue.

Supreme Court ruled that claims and/or the dispute's subject matter are not arbitrable if:

1. is related to real property activities that don't concern real property rights' inferior rights in personam;

2. seems to have an ergaomnes impact, necessitates centralized adjudication, and is not ideal for mutual adjudication;

3. pertains to the State's unassailable sovereign and public interest functions; and

4. is explicitly or impliedly non-arbitrable under a certain statute.

An affirmative response to any of the aforementioned questions would make the issue non-arbitrable. Although these tests are not "watertight compartments," the Supreme Court made it clear that they would be very helpful in evaluating whether a particular subject matter would be non-arbitrable under Indian law.

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SECTION 16 OF THE ARBITRATION AND CONCILIATION ACT:

Meaning and application of Section 16:

The arbitral tribunal has the power to determine its jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996. By Section 16, the arbitral tribunal has the power to determine whether it has jurisdiction to decide the dispute. The arbitral tribunal may also rule on any challenges to the existence or legality of the arbitration agreement.

Section 16 (1): Ability to determine the applicable jurisdiction

It states that an arbitration panel has the authority to make decisions about its jurisdiction. When an arbitration tribunal acknowledges that the law is competent to make decisions within its jurisdiction, the doctrine of Kompetenz-kompetenz or competence de la competence is applicable. This is a method of reducing judicial involvement in the arbitration process. As a result, if a party questions the arbitral tribunal's jurisdiction, he must present his application to the tribunal, which will then decide whether to accept or reject it.

The following two things are further stated for establishing the legitimacy of the arbitration agreement:

(a) When an arbitration clause is incorporated into a contract, it is deemed to be an independent agreement and becomes self-sustaining. Even though it is a component of the agreement, the arbitration provision stands alone from the other clauses.

(b) The arbitration provision in a contract that the arbitration tribunal rules is void does not, by itself, render the deal void.

Northern Coal Field Limited v. M/s Uttarakhand Purv Sainik Kalyan Nigam Limited

Under Section 16, which codifies the Kompetenz-Kompetenz principle, the arbitrator shall decide all other preliminary or threshold problems.

Section 16(2) states the objection upon jurisdiction;

(1) Any party who wishes to object to the arbitration tribunal's jurisdiction must do so in the first instance, i.e., before or concurrently with the submission of the defense statement, but not thereafter.

(2) The right to make such an objection is not taken away from a party who appointed or assisted in the nomination of an arbitrator.

Plea for increasing the extent of authorities under Section 16 (3)

A claim that the arbitration tribunal is acting outside of its authority must be made as soon as the topic that is allegedly outside its purview is brought up during the arbitral procedures.

Section 16(4): Justification for delay

subsection (4) enables the tribunal to excuse the delay with which the pleas against jurisdiction under Section 16(2) and the arbitration tribunal's exceeding its authority under Section 16 (3) were raised.

Section 16(5) states the Procedural decision regarding a plea under Section 16 (2) or 16 (3),

This subsection requires the arbitration tribunal to rule on the argument made under Section 16(2) or Section 16. (3).

It further stipulates that the arbitration tribunal should carry on with the arbitration proceedings and announce the final award if either of the requests is refused.

Procedure for contesting such an arbitral decision

Section 16 (6) provides a remedy against such an arbitral award. This section provides a remedy to a party who feels wronged by an award made under subsection (5). The opportunity to apply for the aforementioned arbitral judgment to be set aside in accordance with Section 34 is provided to the party that feels wrong. The party cannot immediately appeal the tribunal's denial of its claim under Sections 16 (2) or 16 (3) based on the availability of this provision until after the award has been made by the tribunal (3).

CONCLUSION:

It is evident that any challenge to the arbitrator's or tribunal's jurisdiction must first be settled by that arbitration or tribunal, and that only the final arbitral verdict may be challenged under Section 34. Section 16 of the Arbitration and Conciliation Act of 1996 prohibits the right to appeal the decision if the tribunal recognises its power. The arbitral tribunal has the power to decide on its own jurisdiction as well as any disputes about the validity or existence of the arbitration agreement. For this purpose, an arbitration clause in a contract is treated separately from all other provisions.