Sub-section (6) of Section 11 of the Arbitration and Conciliation Act, 1996 provides that where, under an appointment procedure agreed upon by the parties, (i) a party fails to act as required under that procedure; or (ii) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (iii) a person including an institution, fails to perform any function entrusted to him or it under that procedure, the appointment of arbitrator(s) is to be made upon an application made by the party concerned. M/s S.K. Industries v. State of U.P., 2021 (145) ALR 190.
Category Archives: Appointment of Arbitrator
In Dharma Pratisthanam v. Madhok Construction (Pvt.) Ltd., (2005) 9 SCC 686, a three Judge Bench of the Hon’ble Supreme Court had the occasion to consider the effect of acquiescence on appointment of arbitrator. In that regard, the Hon’ble Supreme Court examined the difference between the unilateral appointment and unilateral reference. While both were termed to be illegal, at the same time, it was observed that it would make a difference if in respect of unilateral appointment and reference, other party submits to the jurisdiction of the arbitrator and waives its rights which it had under the agreement. In that situation, the arbitrator was held entitled to proceed with reference and the party submitting to his jurisdiction and participating in the proceedings precluded and estopped from raising any objection in that regard, at a later stage. If, however, that party had failed to act when called upon, it could not lead to an inference of implied consent or acquiescence being drawn. Thus, the appellant in that case was found to have not responded to the proposal by the other side to join in the appointment of the sole arbitrator. Such an act was not construed as its consent. Meerut Development Authority v. Civil Engineering Construction Corporation, 2020 (3) AWC 2532.
Appointment of Arbitrator – No Claim Certificate Obtained by Fraud, Coercion, Duress or Undue Influence
In Union of India v. Master Construction Company, (2011) 12 SCC 349, it was held as under:
“In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no – claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all.”
From the proposition which has been laid down by the Hon’ble Apex Court, what reveals is that a mere plea of fraud, coercion or undue influence in itself is not enough and the party who alleged is under obligation to prima facie establish the same by placing satisfactory material on record before the Chief Justice or his Designate to exercise power under Section 11(6) of the Arbitration and Conciliation Act, 1996 which has been considered by the Hon’ble Supre Court in New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424 as below:
“It is therefore clear that a bald plea of fraud, coercion, duress or undue influence is not enough and the party who sets up a plea, must prima facie establish the same by placing material before the Chief Justice/ his Designate.”
It is true that there cannot be a rule of its kind that mere allegation of discharge voucher or no claim certificate being obtained by fraud/coercion/undue influence practiced by other party in itself is sufficient for appointment of the arbitrator unless the claimant who alleges that execution of the discharge agreement or no claim certificate was obtained on account of fraud/coercion/undue influence practiced by the other party is able to substantiate the same, the correctness thereof may be open for the Chief Justice/his Designate to look into this aspect to find out at least prima facie whether the dispute is bona fide and genuine in taking a decision to invoke Section 11(6) of the Arbitration and Conciliation Act, 1996. United India Assurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362.
In Booz Allen and Hamnilton Inc. v. S.B.I. Home Finance Ltd., (2011) 5 SCC 532, Hon’ble Supreme Court considered the arbitrability of dispute and scope of Section 11 of the Arbitration and Conciliation Act and held as under:
“The nature and scope of issues arising
for consideration in an application under Section 11 of the act for appointment
of arbitrators, are far narrower than those arising in an application under Section
8 of the Act, seeking reference of the parties to a suit to arbitration. While
considering an application under Section 11 of the Act, the Chief Justice or
his designate would not embark upon an examination of the issue of “arbitrability”
or appropriateness of adjudication by a private forum, once he finds that there
was an arbitration agreement between or among the parties, and would leave the issue
of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly
holds that the dispute is arbitrabe, the aggrieved party will have to challenge
the award by filing an application, under Section 34 of the Act, relying upon
sub-section 2(b)(i) of that Section.”
In Dura Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729, Hon’ble Supreme Court considered the provisions of sub-section (6) and sub-section (6A) of Section 11 of the Arbitration and Conciliation Act, 1996 and held as under:
“From a reading of Section 11(6A), the intention of the legislature is quite clear, i.e. the court should and need only look into one aspect – the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple – it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.” Swatantra Properties (P) Ltd. v. Airplaza Retail Holdings Pvt. Ltd., 2018 (5) AWC 5168.
The time limit for filing a petition for appointment of an Arbitrator under Section 11 of the Act has not been provided either under the Act or under the Limitation Act specifically. The request to the Chief Justice or his designate by way of application would fall within the definition of “application” contained in Section 2(b) of the Limitation Act, 1963. Therefore, the Article 137 of the Limitation Act comes into play and the limitation for seeking appointment of an Arbitrator under Section 11 would be three years from the date when the right to apply accrues.
The observations of the Hon’ble Apex Court in S.B.P. and Company v. Patel Engineering Limited, (2005) 8 SCC 618, as explained and clarified in Indian Oil Corporation Ltd. V. S.P.S. Engineering Limited, (2011) 3 SCC 507, makes it clear that the Chief Justice or his designate is competent to decide if the claim sought to be resolved by arbitration is stale or dead or is long time barred though it is not imperative upon him to enter into the said exercise. It can be left to be decided by the Arbitral Tribunal if it appears to be slightly overtime. However, where the claim is evidently and patently dead or long time barred and does not involve entry into disputed questions of fact or evidence, the court may refuse it to refer to arbitration. Thus, it is only in case where there is a genuine dispute regarding limitation and the claim is slightly beyond time that the matter should be left to be adjudicated by the Arbitral Tribunal but not where the claim is apparently barred by limitation. Sureka International v. Union of India, 2014 (5) AWC 5106.