Section 11(6) of the Arbitration and Conciliation, Act, 1996 — Jurisdiction of Courts to Appoint Arbitrator — Scope Should be Limited to Name the Arbitrator

The plain language of Section 11(6) of the Arbitration and Conciliation Act, 1996¹ does not allow or permit the courts to reach beyond the job of naming and appointing the person or the institution, where parties to the dispute fail to agree on their own in this regard, because courts, High Court or the Supreme Court are expected to have the record or list of such trained persons with them who can work as arbitrators and the parties may not be able to approach them directly for want of information available to them, yet and therefore the recent trend of the judgments from the Supreme Court deciding the questions of arbitrability of dispute or mixed questions of facts and law like limitation, and holding an approach for appointment of arbitrator under Section 11(6) of the Act as ex facie time-barred, etc., and they have rejected such applications/petitions under Section 11(6) of the Act is quite a disturbing trend. Such rejections are beyond the narrow scope of Section 11(6) of the Act, which does not call for any interpretative exercise but is rather an administrative job to name the person as arbitrator or the institution, who will appoint the arbitrator from their panel, of which they have the better and comprehensive information and record and not the disputant parties.

The arbitration is an alternative dispute resolution (ADR) mechanism and nobody doubts, that the role of the courts is deliberately legislated to be very limited and that too in specified circumstances and the courts are deliberately excluded to intervene, because of their back-breaking workloads otherwise also, but every now and then in arbitration-related issues, months and sometimes years’ after the applications/petitions under Section 11(6) are filed, the courts are ending up rejecting such applications and holding that in their view, even appointment of arbitrator will be a futile exercise. Well, the Parliament never expected or called upon them to say so whether arbitration will be fruitful or futile at the beginning. Thus, those who want to go out of the court system and seek their remedy under ADR law, are effectively prevented from doing so. What should they do in such a situation? Be left remediless? What a self-contradiction in terms?

Section 11 with the heading “appointment of arbitrators” falls in Chapter III of the Act entitled “composition of Arbitral Tribunal” comprising of Sections 10 to 15². In this Chapter, the role of court in Section 11 is only for “appointment” of arbitrator, which as said above, is an administrative job assigned to courts for given reasons and their judicial interference is envisaged only in Section 13, whereas Section 12 only provides for “grounds for challenge”. Section 12 does not use the word “court” at all. Section 13 which provides for “challenge procedure” only after providing for parties to sort it out at their own level qua the arbitrator, whose appointment is under challenge, in last sub-section (6) of Section 13, it provides that where the award is set aside under Section 34 of the Act³, the “court” may decide as to whether the arbitrator who is challenged is entitled to any fees or not. Section 14 under this Chapter III which provides for termination of the mandate of the arbitrator, if the arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without under delay, the court can terminate the mandate on application. Even Section 15 of the Act, which provides for “termination of mandate and substitution of arbitrator” does not use the word “court” and even in that contingency of substitution of arbitrator, the law provides for precedence to the mutual agreement of the parties in that regard.

Actually, therefore in this scheme of the Act in Chapter III wherein Section 11 is embedded, the courts cannot refuse to appoint arbitrator, when approached by any party and where the parties have failed to agree on such name or names. The question of deciding arbitrability under the agreement or the questions like limitation, etc. does not and cannot arise under Section 11(6) of the Act. The courts are not at all expected to go into these questions and they must be left to be determined by the arbitrator, come what may, if the principle of competence-competence (also known as kompetenz-kompetenz) the core thread of UNCITRAL model adopted by India in 1996, vide Section 16 of the Act⁴, has to be given a meaningful and respectful place. But which is talked only to be referred and said that scope of court interference is limited or “eye of the needle” view, etc. but in practice reams and loads are written to reject such arbitration petitions seeking appointments of arbitrators, just to “prevent the other party to be dragged in long-drawn and costly arbitration. Well, which defendant will like to be dragged in arbitration or for that matter any judicial forum? Is it not contrary to the basic limitation of court’s powers to go into such questions? Is the arbitrator or tribunals not competent to decide all such questions. No foreign jurisdiction courts do so.

The spree of long judgments on arbitration petitions explaining and sometimes overruling or deviating from the previous judgments, to reject such petitions for appointment of arbitrators through courts, have created more confusion that clearing it. Actually, there was none — no confusion. But they created it themselves and are now struggling to clarify it. It has almost become a fashion to make long arguments on petitions under Section 11(6) in the cases of international arbitrations before the Supreme Court, where the stakes are obviously high and the top lawyers of the country are engaged, whose vested interest lies in making long and complicated arguments perhaps to justify their thick pay packets, taking most of the precious time of the Supreme Court, where workload is already back-breaking and then series of judgments are produced with lot of pain taken, but sometimes frustrating the basic object of such petitions themselves i.e. just give the name of arbitrator or institution.

Unfortunately, such petitions are treated as “reference to arbitration”. It is not. Nowhere, the word “reference” is used in Section 11 unlike in Section 8⁵ of the Act, where the court “shall” refer to dispute to arbitration, on an application filed by any party along with the arbitration agreement.

The 2019 Amendment⁶ to the Act of 1996 undoing 2015 Amendment⁷ which was brought to undo the judgment of SBP & Co. v. Patel Engg. Ltd.⁸ (7- Judge Bench) was notified w.e.f. 30-8-2019 but Section 3 of 2019 Amendment Act, by which sub-sections (6-A), (6-B), (7) and (10) of parent Section 11 of the 1996 Act, which were inserted by 2015 Amendment and were again omitted by 2019 Amendment has not been included in that Gazette Notification dated 30-8-2019⁹ and God knows for why for good 5 years not so done, (well then we are known for our lethargy), yet no latest judgment discusses the effect of the same on the scheme of Section 11(6) of the Act. One needs to look to the singular minority view of Justice C.K. Thakker in that 7-Judge decision¹⁰. Actually, no cogent reason was given by majority to say that the power under Section 11(6) of the Act was a judicial power and not an administrative power of the court. Para 36 of that judgment Justice P.K. Balasubramanyan writing for majority says, 36. … the Chief Justice when confronted with two points of view presented by the rival parties, is called upon to decide between them and the decision vitally affects the rights of the parties in that, either the claim for appointing an Arbitral Tribunal leading to an award is denied to a party or the claim to have an arbitration proceeding set in motion for entertaining a claim is facilitated by the Chief Justice. In this context, it is not possible to say that the Chief Justice is merely exercising an administrative function when called upon to appoint an arbitrator and that he need not even issue notice to opposite side before appointing an arbitrator.¹¹ Well, notice to other side just to name the arbitrator, if possible, by consent, otherwise, court just appoints one. But why decide the arbitrability itself?

Limitation question

The most dicey field the Supreme Court chose to “cover” by their series of judgments was that of claim itself or the petition under Section 11(6) being barred by limitation. Knowing fully well, that it is always a mixed question of fact and law, the court should not have gone into the same. What “appears” to them to be “prima facie” time-barred, may not be actually hit by the law of limitation after a debate and full analysis of facts and law of limitation. That may be only a defence of the defendant or the respondent, which may or may not ultimately sustain. The limitation gets extended by facts like later acknowledgement of debt, etc. How Section 11(6) primary enquiry permits to raise such a defence in Section 11(6) petitions and entertained or examined?

When court say in para 56 of Arif Azim Co. Ltd. v. Aptech Ltd.¹², decided in April 2024 and reiterated in the judgment dated 18-7-2024 in SBI General Insurance Co. Ltd. v. Krish Spg.¹³ that no limitation is prescribed for filing petition under Section 11(6) of the Act, and where no such limitation is prescribed, then why the court should take up the questions like Section 43 of the 1996 Act¹⁴ whether the petition itself is time-barred or the claim (merit of the dispute) itself is hopelessly time-barred? Well, that can very well be decided by the Arbitral Tribunal looking into the merit of the defence? Taking help of that provisions of the “Limitation Act, 1963¹⁵” will apply to “arbitrations” as it applies to proceedings in court, does not apply to Section 11(6) petitions because they are not “proceedings of arbitration”. It applies to the “proceedings” before the arbitrator or Tribunal. Invoking Article 137¹⁶, a residuary clause for petitions under Section 11(6) of the Act is not at all a correct proposition, when Section 11(6) does not provide for any limitation and it is a casus omissus, a deliberate omission. Then recommending to Parliament to reduce it from 3 years further is only a well-intended but misplaced suggestion of the court.

Someday, perhaps the Court will introspect and set limitation for its own powers of judicial review of causes not prescribed anywhere in the statute and clear these clouds of confusion. It is a sanguine hope, which may or may come up over the reams of papers already written.