A&C Act - CHAPTER III - Kapl Dev Bahl rev 2

CHAPTER III
COMPOSITION OF ARBITAL TRIBUNAL
10. Number of arbitrators
11. Appointment of arbitrators
11A. Power of Central Government to amend Fourth Schedule
12. Grounds for challenge
13. Challenge procedure
14. Failure or impossibility to act
15. Termination of mandate and substitution of arbitrator

Section 10
Number of Arbitrators
10.1
The parties are free to determine the number of arbitrators, provided
that such number shall not be an even number.
Agreement without specifying nr or mode of appointment is not invalid
MMTC vs Sterlite Ind. 1996

Section 10
Number of Arbitrators
10.2
Failing the determination referred to in sub-section (1), the arbitral
tribunal shall consist of a sole arbitrator.
Free to agree on number and procedure
But if clause refers to institutional arbitration
Then rules of institution deemed to be included in arbitration clause
Union Textile vs Bhawani Cotton Mills. 1970-2SCR-429

Section 11
Appointment of Arbitrators
11.1
A person of any nationality may be an arbitrator, unless otherwise
agreed by the parties.
If nation state preclude (bars) arbitrator of another nation
local law prevails
UNCITRAL is not a convention

Section 11
11.2
Subject to sub-section (6), the parties are free to agree on a procedure for
appointing the arbitrator(s)
Subject to reasonable restrictions…….
11.3
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

Section 11
11.4
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 HC

Section 11
11.5
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 HC

Section 11
11.6
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 HC to take measure, unless the agreement provides other
means for securing the appointment

Section 11
HSW filed petition in HC
“Tribunal has failed to conclude proceedings “
Held:- Court will appoint arb only if parties fail to act iaw agreed procedure (11.6)
But in this case tribunal already seized of matter
Petition dismissed
Hindustan Steel vs Union of India

Section 11
11.6A
The SC/HC, shall notwithstanding any judgement, confine to the
examination of existence of an arbitration agreement
Court will not look into “genuineness & validity of claim”
Only consider whether valid grounds for appointing arbitrator

Section 11
Court powers are limited to:-
• Arb clause in agreement (Miller Gibbe vs Smith & Tyrer, 1916)
• Dispute has arisen
• Parties do not concur on appointment of arb
• Arb not appointed within 30 days of written notice served
Ved Prakash vs Union of India

Section 11
Respondent stated that bills of contractor were time barred
Therefore refused appointing arb
Held – the arbitrator (not the court) has exclusive jurisdiction to hear evidence and
interpret agreement
Union of India vs LK Ahuja
Contract:- Dispute arises on rejection of Claim by State Elec Brd
Rejected by Supt Eng, who was signatory to contract obo the SEB
No CoA
Ansal Prop vs HP.SEB 1997

Section 11
11.6B
The designation of any person or institution, shall not be regarded as
delegation of judicial power
11.7
A decision on a matter entrusted by sub-section (4) or sub-section (5)
or sub-section (6) to the SC/HC is final and no appeal shall lie against
such decision

Section 11
11.8
Before appointing an arbitrator, HC shall seek a disclosure in writing
from the prospective arbitrator in terms of sub-section (1) of section
12, and have due regard to
• any qualifications reqd for the arbitrator by agreement of parties; and
• the contents of the disclosure and other considerations as are likely
to secure the appointment of an independent and impartial arbitrator

Section 11
11.9
In the case of appointment of sole or third arbitrator in an international commercial
arbitration, SC may appoint an arbitrator of a nationality other than the
nationalities of the parties, where the parties belong to diff nationalities
11.10
SC/HC, may make such scheme as the said Court may deem appropriate for dealing
with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
11.11
If more than 1 rqst made to diff HC - the one to whom request first made, shall
alone be competent to decide on the request

Section 11
11.12
(a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-
section (10) arise in an international commercial arbitration, the reference to
the “Supreme Court or, as the case may be, the High Court” in those sub-
sections shall be construed as a reference to the “Supreme Court”; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-
section (10) arise in any other arbitration, the reference to “the Supreme Court
or, as the case may be, the High Court” in those sub-sections shall be construed
as a reference to the “High Court” within whose local limits the principal Civil
Court referred to in clause (e) of sub-section (1) of section 2 is situate, and
where the High Court itself is the Court referred to in that clause, to that High
Court.

Section 11
11.13
An application made under this section for appointment of an
arbitrator(s) shall be disposed of by the SC/HC, as expeditiously as
possible and an endeavour shall be made to dispose of the matter
within a period of sixty days from the date of service of notice on the
opposite party

Section 11
11.14
For the purpose of determination of the fees of the arbitral tribunal
and the manner of its payment, the HC may frame such rules as may be
necessary, after taking into consideration the rates specified in the
Fourth Schedule
Shall not apply:-
- International Commercial Arbitration
- Where parties have agreed to fees
- Where parties have agreed to the rules of an arbitral institution.

Section 11
Contract – “MD shall be the final judge to decide tender specs, schedule,
construction, accounts etc”
Held MD role is admin in nature, to prevent disputes, NOT quasi-judicial
Hudsons Building & Eng Contracts
Final payment received under protest
Even if cert of no claim is issued – coercion (not free)
Right to appoint arb is not barred
Hyd UDA vs Utd Constn Co. 1993

Section 12
Grounds for Challenge
12.1
When a person is approached in connection with his possible appointment
as an arbitrator, he shall disclose in writing any circumstances
(a) such as the existence either direct or indirect, of any past or present
relationship with or interest in any of the parties or in relation to the subject-
matter in dispute, whether financial, business, professional or other kind,
which is likely to give rise to justifiable doubts as to his independence or
impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the
arbitration and in particular his ability to complete the entire arbitration
within a period of twelve months

Section 12
12.2
An arbitrator, from the time of his appointment and throughout the
arbitral proceedings, shall, without delay, disclose to the parties in
writing any circumstances referred to in sub-section (1) unless they
have already been informed of them by him.

Section 12
12.3
An arbitrator may be challenged only if
• circumstances exist that give rise to justifiable doubts as to his
independence or impartiality, or
• he does not possess the qualifications agreed to by the parties
Reasonable likelihood is sufficient grounds - actual bias need not be proved
Eckersley vs Mersey Docks. 1894

Section 12
THE FIFTH SCHEDULE
The following grounds give rise to justifiable doubts as to the independence
or impartiality of arbitrators:
01. The arbitrator is an employee, consultant, advisor or has any other
past or present business relationship with a party.
34. The arbitrator is a manager, director or part of the management,
or has a similar controlling influence, in an affiliate of one of the
parties, where the affiliate is not directly involved in the matters in
dispute in the arbitration

Section 12
Attributes one should look for when appointing an arbitrator:-
- Integrity
- Impartiality
- Knowledge
- Experience
- Personal acquaintance

Section 12
Misconduct of Arbitrator
Not Defined – thus have to refer to judicial decisions / case law
Term includes not only :-
Moral turpitude, and
Dishonesty
But also includes:-
Failure to perform duty
General principles of equity and good conscience
Breach of duty, even if honestly erroneous

Section 12
Where the arbitrator was a retained pleader of a party, and this was
not disclosed – award was set aside
Bright vs River Plate Constn 1900

Section 12
Practicing lawyer who is habitually briefed by or appears for one party
is not disqualified merely ogo such appointments
Rajendra Nath vs Abdul Hakim AIR 1918
Expert appointed in similar case by one party as witness is not
disqualified merely ogo such appointment
NW & Great W Railway 1882

Section 12
12.4
A party may challenge an arbitrator appointed by him, or in whose
appointment he has participated, only for reasons of which he
becomes aware after the appointment has been made

Section 12
12.5
Notwithstanding any prior agreement to the contrary, any person
whose relationship, with the parties or counsel or the subject-matter of
the dispute, falls under any of the categories specified in the Seventh
Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen
between them, waive the applicability of this sub-section by an express
agreement in writing

Section 12
THE SEVENTH SCHEDULE [See section 12 (5)]
Arbitrator’s relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other
past or present business relationship with a party
19. The arbitrator or a close family member of the arbitrator has a close
relationship with a third party who may be liable to recourse on the
part of the unsuccessful party in the dispute

Section 12
Explanation 1.—The term “close family member” refers to a spouse, sibling,
child, parent or life partner.
Explanation 2.—The term “affiliate” encompasses all companies in one group
of companies including the parent company.
Explanation 3.—For the removal of doubts, it is clarified that it may be the
practice in certain specific kinds of arbitration, such as maritime or
commodities arbitration, to draw arbitrators from a small, specialised pool. If
in such fields it is the custom and practice for parties frequently to appoint
the same arbitrator in different cases, this is a relevant fact to be taken into
account while applying the rules set out above.

Section 12
Office Holder (ex-officio) appointed as arbitrator
Ceases to hold chair during arbn proceedings
NOT disqualified
Bhardwaj vs Haryana State Agri Mktg Brd. 1989 2 ARB LR
Withdrawal of appointed arbitrator does not adversely affect the existence
and identity of tribunal and the office of Presiding Arbitrator
Italy Contractor vs State Agency 1997. UNICITRAL year bk of comm arb

Section 13
Challenge Procedure
13.1
Subject to sub-section (4), the parties are free to agree on a procedure
for challenging an arbitrator.
In case of disagreement, the matter shall be referred to the Gen Sec of
the Assn, whose decision shall be final…………………..
The challenging party shall have to exhaust all avlbl remedies, by
seeking decision of GS, but it would not be final
Parties cannot contract “out of law” (by excluding the court)

Section 13
Challenge Procedure
13.2
Failing any agreement referred to in sub-section (1), a party who
intends to challenge an arbitrator shall, within fifteen days after
becoming aware of the constitution of the arbitral tribunal or after
becoming aware of any circumstances referred to in sub-section (3) of
section 12, send a written statement of the reasons for the challenge to
the arbitral tribunal

Section 13
Challenge Procedure
13.3
Unless the arbitrator challenged under sub-section (2) withdraws from his office or
the other party agrees to the challenge, the arbitral tribunal shall decide on the
challenge
In case of 3 Arbitrators:- Psychological difficulty in deciding on one of its members
BOTH the remaining arbitrators have to concur in order to sustain the challenge
In case a Sole Arbitrator has been challenged & chooses not to withdraw…….

Section 13
Challenge Procedure
13.4
If a challenge under any procedure agreed upon by the parties or under
the procedure under sub-section (2) is not successful, the arbitral
tribunal shall continue the arbitral proceedings and make an arbitral
award

Section 13
Challenge Procedure
13.5
Where an arbitral award is made under sub-section (4), the party
challenging the arbitrator may make an application for setting aside
such an arbitral award in accordance with section 34.
13.6
Where an arbitral award is set aside on an application made under sub-
section (5), the Court may decide as to whether the arbitrator who is
challenged is entitled to any fees.

Section 14
Failure or Impossibility to Act
14.1
The mandate of an arbitrator shall terminate and he shall be
substituted by another arbitrator, if
(a) he becomes de jure or de facto unable to perform his
functions or for other reasons fails to act without undue delay;
and
(b) he withdraws from his office or the parties agree to the
termination of his mandate

Section 14
Failure or Impossibility to Act
14.2
If a controversy remains concerning any of the grounds referred to in clause
(a) of sub-section (1), a party may, unless otherwise agreed by the parties,
apply to the Court to decide on the termination of the mandate.
14.3
If, under this section or sub-section (3) of section 13, an arbitrator withdraws
from his office or a party agrees to the termination of the mandate of an
arbitrator, it shall not imply acceptance of the validity of any ground referred
to in this section or sub-section (3) of section 12.

Section 15
Termination of mandate & substitution of arbitrator
15.1
In addition to the circumstances referred to in section 13 or section 14, the
mandate of an arbitrator shall terminate
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
15.2
Where the mandate of an arbitrator terminates, a substitute arbitrator shall
be appointed according to the rules that were applicable to the appointment
of the arbitrator being replaced

Section 15
Termination of mandate & substitution of arbitrator
15.3
Unless otherwise agreed by the parties, where an arbitrator is replaced
under sub-section (2), any hearings previously held may be repeated at the
discretion of the arbitral tribunal.
15.4
Unless otherwise agreed by the parties, an order or ruling of the arbitral
tribunal made prior to the replacement of an arbitrator under this section
shall not be invalid solely because there has been a change in the
composition of the arbitral tribunal

A&C Act - CHAPTER III - Kapl Dev Bahl rev 2

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A&C Act - CHAPTER III - Kapl Dev Bahl rev 2