Appointment of Arbitrators under Arbitration and Conciliation Act, 1996

Arbitration has become one of the most preferred methods of dispute resolution in India, particularly in commercial and contractual disputes. The effectiveness of arbitration largely depends on the constitution of the arbitral tribunal, especially the appointment of arbitrators. 

The Arbitration and Conciliation Act, 1996 (“the Act”) lays down a detailed statutory framework governing the appointment of arbitrators, balancing party autonomy with judicial intervention where necessary. Section 11 of the Act plays a central role in this process and has been the subject of extensive judicial interpretation.

This article explains the legal framework governing the appointment of arbitrators under the Act, the procedure prescribed by law, the role of courts and designated authorities, the requirements of a valid appointment, and the consequences of non-compliance with statutory and contractual provisions.

Statutory Basis for Appointment of Arbitrators

Section 11 of the Arbitration and Conciliation Act, 1996 deals comprehensively with the appointment of arbitrators. The provision recognises party autonomy as its foundational principle while also providing a default mechanism to ensure that arbitration proceedings are not frustrated due to non-cooperation or failure on the part of one or more parties.

Under Section 11(1), a person of any nationality may be appointed as an arbitrator unless the parties have agreed otherwise. This provision reflects the international character of arbitration and ensures flexibility in the choice of arbitrators.

Party Autonomy in Appointment Procedure

Section 11(2) grants parties complete freedom to agree upon a procedure for appointing the arbitrator or arbitrators. This agreement is usually incorporated in the arbitration clause of the contract. Parties may specify the number of arbitrators, their qualifications, the appointing authority, or even name a specific individual.

Party autonomy is one of the strongest features of arbitration. Courts generally respect the appointment mechanism agreed between the parties and interfere only when such a mechanism fails or becomes unworkable.

Default Procedure for Appointment of Arbitrators

Where parties fail to agree on a procedure, or where the agreed procedure does not operate effectively, the Act provides default mechanisms.

Appointment in a Three-Member Tribunal

Section 11(3) applies where the arbitral tribunal consists of three arbitrators. Each party is required to appoint one arbitrator, and the two appointed arbitrators must appoint the third arbitrator, who acts as the presiding arbitrator.

If a party fails to appoint its arbitrator within 30 days of receiving a request from the other party, or if the two appointed arbitrators fail to agree on the third arbitrator within 30 days of their appointment, Section 11(4) empowers the court to make the appointment upon a request by a party.

Appointment of a Sole Arbitrator

Section 11(5) governs situations where a sole arbitrator is to be appointed. If the parties fail to agree on the sole arbitrator within 30 days from the receipt of a request by one party, the appointment may be made by the court upon the request of either party.

Appointment by Designated Authority (Persona Designata)

Many arbitration clauses, particularly in government contracts, provide for appointment by a designated authority. Such clauses are valid and binding. However, if the designated authority fails to act, Section 11(6)(c) permits court intervention.

In P. Kumaran v. Executive Engineer, it was held that a clause restricting arbitration only to a named authority cannot defeat statutory remedies under Section 11.

Circumstances Triggering Court Intervention

Section 11(6) expands the scope of judicial intervention and applies even where an appointment procedure has been agreed upon by the parties. Court intervention becomes permissible in the following situations:

• A party fails to act as required under the agreed appointment procedure
• The parties or the appointed arbitrators fail to reach the agreement expected of them
• A designated person or institution fails to perform its function under the agreed procedure

In such cases, a party may approach the court to take necessary measures for appointment unless the agreement itself provides alternative means.

Jurisdiction of Courts under Section 11

The Act clearly demarcates the jurisdiction of courts for the purpose of appointment of arbitrators.

In domestic arbitrations, the power under Section 11 is exercised by the Chief Justice of the High Court or any person or institution designated by the High Court.

In international commercial arbitrations, Section 11(12)(a) provides that the reference to the Chief Justice shall be construed as a reference to the Chief Justice of India.

Section 11(11) further clarifies that where requests are made before different High Courts, the Chief Justice or designate to whom the first request was made alone shall have jurisdiction.

Finality of Orders under Section 11

Section 11(7) states that the decision of the Chief Justice or the designated person or institution under sub-sections (4), (5), or (6) is final. This provision ensures certainty and prevents prolonged litigation at the stage of appointment.

Considerations While Appointing an Arbitrator

Section 11(8) mandates that while appointing an arbitrator, due regard must be given to:

• Qualifications required by the agreement between the parties
• Considerations likely to secure the appointment of an independent and impartial arbitrator

This statutory safeguard reinforces the principles of neutrality and fairness in arbitration.

Nationality of Arbitrator in International Commercial Arbitration

Section 11(9) provides that in the appointment of a sole or presiding arbitrator in an international commercial arbitration, the Chief Justice of India or the designated authority may appoint an arbitrator of a nationality different from that of the parties, where the parties belong to different nationalities. This provision enhances confidence in the neutrality of the arbitral process.

Limitation for Filing Application under Section 11

The Act does not prescribe a specific limitation period for filing an application under Section 11. However, courts have consistently held that the limitation period of three years under the Limitation Act, 1963 applies.

In A.P. Beverages Corporation Ltd. v. IBM Global Services India Ltd., it was held that the right to apply for appointment of an arbitrator arises when the respondent fails to act on the notice invoking arbitration, and the limitation period begins from that date.

Requirements of a Valid Appointment of Arbitrator

A valid appointment of an arbitrator must satisfy certain essential requirements.

• First, the party appointing an arbitrator must give proper notice of such appointment to the other party. Failure to communicate the appointment renders the constitution of the arbitral tribunal invalid and may vitiate the arbitral award.
• Second, the person proposed to be appointed must be informed of the appointment. This enables the proposed arbitrator to assess any conflict of interest or inability to act.
• Third, the consent of the arbitrator must be obtained. The arbitrator must consciously accept the appointment after considering all relevant circumstances.

The requirement of consent was recognised in Trader Export S.A. v. Volkswagenwerk AG, where it was observed that an arbitrator must agree to act before assuming jurisdiction.

Existence of Arbitration Agreement and Dispute

Appointment of an arbitrator presupposes the existence of a valid arbitration agreement. If the arbitration agreement itself is disputed, the court must first determine its existence before appointing an arbitrator.

In Chhogalal v. N.G. Finance and Co., it was held that no appointment can be made unless an arbitration agreement exists between the parties.

Further, the existence of a dispute is a sine qua non for appointment. In I.S. Rekhi v. Delhi Development Authority, the Supreme Court held that a live dispute must exist for invoking arbitration.

Scope of Judicial Scrutiny at Appointment Stage

At the stage of appointment under Section 11, courts do not examine the merits of the claims. Issues such as limitation of claims or whether the dispute falls within excepted matters are left to be decided by the arbitral tribunal.

This principle was reiterated in Wazir Chand v. Union of India, where it was held that such objections cannot be adjudicated at the appointment stage.

Others Aspects Related to Appointment of Arbitrators under Arbitration and Conciliation Act, 1996

Appointment in Accordance with Arbitration Agreement

Appointment of arbitrators must strictly conform to the arbitration agreement. Any deviation may render the appointment and the resulting award invalid.

In Dharma Prathishthanam v. Madhok Construction Pvt. Ltd., the Supreme Court held that an award passed by an arbitrator unilaterally appointed without proper consent was a nullity.

Completion and Communication of Appointment

Appointment of an arbitrator is complete only when it is communicated to the other party. Mere internal appointment without communication does not satisfy statutory requirements. Courts have clarified that even if an appointment is made within 30 days, failure to communicate it within the prescribed period amounts to non-appointment.

Continuation of Arbitration Despite Change in Office

Once an arbitrator validly enters upon reference, subsequent cessation of office does not invalidate the proceedings.

In National Research Development Corporation v. Synthetic Industrial Chemicals Pvt. Ltd., it was held that the relevant date is the date of reference, not subsequent changes in office.

Schemes Framed by Chief Justices

Section 11(10) empowers the Chief Justice of India and Chief Justices of High Courts to frame schemes for handling appointment requests. These schemes provide procedural clarity and streamline the appointment process. The Chief Justice of India has framed such a scheme, and many High Courts have adopted similar mechanisms.

Conclusion

The appointment of arbitrators under the Arbitration and Conciliation Act, 1996 is a carefully structured process designed to uphold party autonomy while ensuring fairness, neutrality, and efficiency. Section 11 provides a comprehensive mechanism to address both consensual and default appointments, preventing obstruction of arbitration proceedings due to non-cooperation.

Judicial interpretation has consistently reinforced that courts play a facilitative role at the appointment stage, intervening only to give effect to arbitration agreements and not to adjudicate disputes. A proper understanding of the statutory provisions and judicial principles governing appointment is essential for ensuring the legitimacy and effectiveness of arbitral proceedings in India.