Section 11 of the Arbitration and Conciliation Act

Arbitration has emerged as a preferred method of dispute resolution, particularly in commercial disputes, due to its efficiency, flexibility, and minimal court interference. Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”) plays a pivotal role in this process by outlining the provisions for the appointment of arbitrators. Over the years, the section has evolved through significant amendments, with the primary aim of reducing judicial intervention and strengthening institutional arbitration. 

What is Section 11 of Arbitration and Conciliation Act, 1996

Section 11 governs the appointment of arbitrators. It provides a comprehensive framework for parties to appoint arbitrators by mutual agreement and prescribes alternative mechanisms if the parties fail to agree. The section embodies the principles of party autonomy and minimal judicial interference, allowing parties to tailor the arbitration process to their needs while ensuring fairness and impartiality.

Key Provisions of Section 11 of Arbitration and Conciliation Act, 1996

Nationality of Arbitrators

Section 11(1) states that arbitrators can be of any nationality unless the parties agree otherwise. This provision is particularly relevant in international commercial arbitrations, where parties often prefer arbitrators from neutral jurisdictions to ensure impartiality.

Appointment Procedure

Section 11(2) allows parties to agree on a procedure for appointing arbitrators. In the absence of such an agreement, the Act provides default mechanisms:

• For a three-member arbitral tribunal, each party appoints one arbitrator, and the two appointed arbitrators select the presiding arbitrator.
• For a sole arbitrator, mutual agreement between the parties is required.

Role of Arbitral Institutions

The 2019 Amendment introduced Section 11(3A), empowering the Supreme Court and High Courts to designate arbitral institutions for appointing arbitrators. In jurisdictions lacking such institutions, the Chief Justice of the High Court may maintain a panel of arbitrators.

Failure to Act

Section 11(4)-(6) addresses situations where parties or arbitrators fail to act as per the agreed procedure. In such cases, the designated arbitral institution or, in its absence, the courts, step in to ensure the appointment process is not stalled.

Disclosure Requirements

Section 11(8) mandates that prospective arbitrators disclose any circumstances likely to give rise to justifiable doubts regarding their independence or impartiality, as per Section 12(1). This ensures transparency and maintains the integrity of the arbitration process.

Time Frame for Appointment

To promote expeditious dispute resolution, Section 11(13) requires the arbitral institution to dispose of appointment applications within 30 days of serving notice on the opposite party.

Fees Determination

Section 11(14) empowers arbitral institutions to determine arbitrators’ fees, subject to the Fourth Schedule of the Act. This does not apply to international commercial arbitrations or cases where parties have agreed otherwise.

Evolution of Section 11 of Arbitration and Conciliation Act, 1996

Pre-2015 Framework

Before the 2015 Amendment, the Chief Justices of High Courts and the Supreme Court were directly involved in appointing arbitrators. This led to significant judicial delays and undermined the autonomy of arbitration.

2015 Amendment

The Arbitration and Conciliation (Amendment) Act, 2015, introduced several changes:

• Substituted “Chief Justice” with “Supreme Court or High Court.”
• Inserted Section 11(6A), limiting judicial scrutiny to the prima facie existence of an arbitration agreement.
• Introduced timelines for disposing of applications, enhancing procedural efficiency.

2019 Amendment

The 2019 Amendment marked a paradigm shift by institutionalising arbitration:

• Empowered arbitral institutions to handle appointments.
• Omitted Section 11(6A), removing restrictions on judicial examination at the referral stage.
• Reduced judicial intervention and streamlined the arbitration process.

Judicial Interpretation of Section 11 of Arbitration and Conciliation Act, 1996

Minimal Judicial Interference

The principle of minimal judicial interference is central to Section 11. Courts are expected to confine their role to verifying the prima facie existence of an arbitration agreement. This was emphasised in Duro Felguera, S.A. v. Gangavaram Port Limited (2017), where the Supreme Court clarified that courts should not delve into the validity of agreements or substantive issues.

Competence-Competence Doctrine

Competence-Competence Doctrine, upheld in Vidya Drolia v. Durga Trading Corporation (2021), allows arbitral tribunals to rule on their own jurisdiction. Courts must refrain from addressing complex factual disputes at the referral stage, leaving such matters to the tribunal.

Inclusion of Non-Signatories

The inclusion of non-signatory parties in arbitration was addressed in Cox and Kings v. SAP India Pvt Ltd. The Supreme Court reiterated that such issues should be decided by the tribunal, emphasising the tribunal’s competence to address jurisdictional challenges.

Non-Arbitrability at the Referral Stage

While courts generally avoid determining non-arbitrability at the referral stage, exceptions exist, as seen in Oriental Insurance Co. Ltd. v. Narbheram Power and Steel Pvt Ltd. (2018). Courts may intervene if the subject matter of the dispute clearly falls outside the scope of arbitration.

Landmark Judgements on Section 11

1. DLF Home Developers Ltd. v. Rajapura Homes Pvt. Ltd. (2021): Expanded judicial inquiry scope, allowing courts to consider preliminary issues beyond the existence of an agreement.
2. Garware Wall Ropes Ltd. v. Coastal Marine Constructions (2019): Held that unstamped agreements are invalid for arbitration.
3. United India Insurance Co. Ltd. v. Hyundai Engineering & Construction Co. Ltd. (2018): Allowed examination of non-arbitrability in insurance contracts.
4. Perkins Eastman Architects v. HSCC India Ltd. (2022): Prohibited unilateral appointment of arbitrators by one party.

Principle of Party Autonomy

Section 11 upholds the principle of party autonomy, granting parties the freedom to:

• Decide procedural aspects, including venue, language, and timelines.
• Choose arbitrators based on expertise and impartiality.

However, autonomy is subject to limitations. For instance, unilateral appointments are discouraged to maintain fairness and impartiality, as highlighted in Perkins Eastman Architects v. HSCC India Ltd. (2022).

Role of Arbitral Institutions

The 2019 Amendment institutionalised arbitration by designating arbitral institutions for appointing arbitrators. This:

• Reduced the burden on courts.
• Enhanced procedural efficiency.
• Ensured appointments are handled by specialised bodies.

However, the implementation faces challenges, such as the absence of graded institutions in certain jurisdictions. In such cases, High Courts maintain panels of arbitrators.

Conclusion

Section 11 of the Arbitration and Conciliation Act, 1996, has undergone a significant transformation, aligning with global best practices to promote arbitration as an efficient and impartial dispute resolution mechanism. The 2015 and 2019 Amendments have reduced judicial intervention and strengthened institutional arbitration, fostering a pro-arbitration environment in India.

However, challenges such as ambiguities in drafting and procedural delays need to be addressed to fully realise the potential of arbitration. As India continues to modernise its arbitration framework, Section 11 remains a cornerstone, ensuring fairness, efficiency, and party autonomy in arbitrator appointments while maintaining judicial safeguards where necessary.