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Appointment of Arbitrator

Appointment of Arbitrator under Arbitration and Conciliation Act, 1996

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Arbitration is a dispute resolution mechanism through which parties resolve their disputes outside the courts. The dispute must be decided by one or more Arbitrators. The decision given by the Arbitrator is enforceable in a court of law. The decision given by Arbitrators is called the Arbitral Award. Section 11 of Arbitration and Conciliation Act, 1996 provides Appointment of arbitrator. The arbitrator is an individual who is legally appointed to solve the dispute between parties.  

Number of arbitrators

Section 10 deals with the Number of Arbitrators. Parties are free to determine the number of arbitrators for the arbitral hearing but that number should be an odd number and not an even number. In case parties fail to decide the number of arbitrators in such case the sole arbitrator should be appointed. 

Who may be appointed as arbitrator?

The person who is appointed as Arbitrator can be of any nationality except any contrary conditions expressed by the parties. It is not mandatory that arbitrators should have a nationality other than the parties’ nationality. parties are free to choose any arbitrator of any nationality. 

Procedure of Appointment of Arbitrator

It’s on the complete discretion of parties to agree with the procedure of appointment of arbitrator or arbitrators.

 If case parties fail to appoint arbitrators, then, in that case, each party will appoint one arbitrator and that appointed arbitrator will appoint a third arbitrator called as the presiding arbitrator. So the appointment of three arbitrators is a must.

In the case of Narayan Prasad Lohia V. Nikunj Kumar Lohia1, the issue was whether the Arbitration Agreement became invalid on the ground that it provided only the appointment of 2 Arbitrators. It was held that even if parties provided for 2 arbitrators, the Arbitration Agreement doesn’t become invalid. As according to Section 11(3) the two arbitrators appoint the third presiding arbitrator. The appointment of the third arbitrator is done in an earlier stage but there is no hard and fast rule that it cannot be done at a later stage. So it may be appointed in the later stage as and when they differ. This is done because difference of opinion won’t result in frustration and if it occurs then a common award is granted so that there won’t be any frustration of proceeding.  

 Where the appointment of an arbitrator is not made in 30 days on the receipt of a request made by other party, or where two appointed arbitrators fails to appoint the third presiding arbitrator within the time frame of 30 days from their date of appointment, the appointment shall be made upon the request of parties by the Chief Justice or any person or institution designated by him for this purpose only.

In absence of procedure to appoint a sole Arbitrator and if parties fail to appoint Arbitrator or agree on Arbitrator within the period of 30 days, then parties can make a request to Chief Justice or any other person or institution designated by him.

Appointment Procedure agreed by the Parties

Where the parties fail to acts in the required manner as per procedure or fails to appoint the Arbitrator

Where the two appointed Arbitrators fail to follow the required procedure which are expected from them.

Where the person including an institution fails to follow the procedure which was required to be followed by them, in such a case party may request to the Chief Justice or any other person or institution designated by them to take necessary steps in absence of an agreement for other means of securing an appointment.

In the case of National Aluminum Company Ltd V. Metalimpex Ltd2 it’s clear in the Arbitration Agreement that 2 Arbitrators would appoint the third arbitrator. Petitioner appointed his arbitrator and requested the respondent to appoint others. On the failure of appointment of arbitrator, the plaintiff approached the chief justice for the appointment of a sole arbitrator. It was held that sole arbitrator cannot be appointed in such a case, as it is not mentioned in the Arbitration Agreement. It may not be legal to appoint a sole Arbitrator. Sole Arbitrator can be appointed only in one condition that is when both the parties approached the court and agreed for the same.

The decision made by the Chief justice regarding the appointment of Arbitrator shall be final. No further appeal can be done for the same. 

In such case, 2 things to be kept in mind while appointing the Arbitrator –

  • Qualification of Arbitrator as mentioned in the Arbitration Agreement by the parties.
  • Arbitrators must be impartial and independent. 

Different Nationality in case of International Commercial Arbitration

In case of appointment of sole or third Arbitrator in International Commercial Arbitration, the chief justice of India or other person or institution appointed by him may appoint the arbitrator of a nationality other than the nationality of the parties. For example, one party is from Russia, the other is from Japan so Arbitrator who is appointed in such a case must not be from Russia and Japan.

Chief justice can make any scheme as they may think fit. Where more than one request has been made with the chief justice of different High courts or their designates in such case where the request has first made shall alone be competent to decide the request.

In the case of International Commercial Arbitration case must be referred to the Chief Justice of India and in case of Domestic Arbitration case must be referred to the Chief justice of High Court. 

Case laws

In the case of Ratnakar Pradhan V. Mahanadi Coalfileds Ltd3, the parties in their agreement mentioned that in case of dispute, sole Arbitrator would be appointed by the respondent. But when such dispute occurs the respondent didn’t appoint any Arbitrator and thereafter plaintiff approached the court under section 11. But when the respondent came to know about the fact, then respondent appointed the Arbitrator and contended they wanted to explore the possibility of conciliation.

In the new act, it is mentioned that conciliation can be done even after the appointment of the Arbitrator and the respondent has no reasonable justification for his actions. Hence the respondent fails to exercise his power within the limited time frame provided, and also can’t insist in the court to continue with the arbitrator which was appointed by him. So the court-appointed a different Arbitrator.

In the case of US Global Corporation Ltd V. Kaveri Impex4, it was held that power can jurisdiction of the court can only emerge –

  • When all parties agree and ambit about the existence of an Arbitration Agreement.
  • When Chief Justice or his designates satisfy themselves with the existence of an Arbitration Agreement.

Amendment made in Section 11

The government of India amended Arbitration and Conciliation Act 1996 by introducing Arbitration and conciliation (Amendment) bill 2015 in the Parliament. Few Highlights regarding the amendment made in Section 11 of the act are as follow –

  • The new law makes it compulsory for the Supreme Court, High court or any person designated by them to dispute an application to appoint the Arbitrator within the period of 60 days from the date of service of notice made to the other party.
  • In the earlier act. the expression chief justice of India or the Chief Justice of High court has been replaced with the Supreme Court or as the case may be or with the High court respectively.
  • Whatever decision given by the Supreme Court or High Court or any other person or institution appointed by them for the same shall be final. Only appeal can be made through the Supreme Court by way of Special Leave petition against an order of appointment of Arbitrator.
  • The new act also limits the fees payable to Arbitrators and gives power to the High court to make necessary rules while considering the rates mentioned under Fourth Schedule. 

Conclusion

Arbitration is preferred as a more convenient and easiest way to solve any dispute as compared to litigation. The aim of the 2015 Amendment is to promote Arbitration in India and make it more transparent and reliable for the same. Section 11 deals with the appointment of an Arbitrator. The act gives liberty to the parties to choose their Arbitrators on their own. While choosing any person as Arbitrator it is important to check whether that person has a special knowledge of that particular subject matter or not related to the dispute. Also, the Arbitrator must be impartial and unbiased. Also, it is the duty of the Arbitrator that his decision must be based on the principle of natural justice. 

Endnotes

1.  2002(1) RAJ 381 (SC).

2.  2001(1) RAJ 548 (SC).

3.  2001(4) RAJ 106 (Ori).

4.  2003(4) RAJ 499 (Kar).

5. http://www.icaindia.co.in/icanet/judgment2.htm

6.  http://www.legalserviceindia.com/legal/article-2794-appointment-of-arbitrator.html

7.  https://ibclaw.in/section-11-appointment-of-arbitrators/

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Avni Mehra

Student, ICFAI University, Dehradun

Avni Mehra is a passionate law student who is ready to learn and face new challenges. As an avid reader and researcher, her interest areas include business law, criminal law and family law. She is enthusiastic, knowledge seeker and a hard worker. For any clarification, suggestion or advice you can reach her at avnimehra38@gmail.com

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