Jurisdictional Powers of Arbitrators: An Examination of Section 16 of the Arbitration and Conciliation Act, 1996"

INTRODUCTION

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Section 16(1) of the Arbitration and Conciliation Act, 1996 ("A&C Act") mirrors Article 16 of the UNCITRAL Model Law, incorporating the doctrine of "Kompetenze-Kompetenze." This doctrine empowers an arbitral tribunal to determine its own jurisdiction, including challenges to the existence or validity of the arbitration agreement brought by the parties.

However, Section 16(4) of the A&C Act does not explicitly state whether an arbitral tribunal can address other preliminary issues when an application under Section 16(5) is filed. Adding to the complexity, the Supreme Court of India has delivered inconsistent and often contradictory rulings on the tribunal’s scope of jurisdiction under Section 16(6), creating uncertainty and diverse interpretations. Moreover, this ambiguity often leads to prolonged disputes and procedural delays, affecting the efficiency of arbitration proceedings under the A&C Act.

SCOPE OF 'JURISDICTION' UNDER SECTION 16

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Though Section 16[8]?of the A&C Act has not undergone any amendment since its enactment, the revisions introduced by Arbitration and Conciliation (Amendment) Act, 2015 ("2015 Amendment") and the Arbitration and Conciliation (Amendment) Act, 2019 ("2019 Amendment") in respect to Section 11[9], has significant importance in truly understanding and correctly interpreting the scope of Section 16(1)[10]?of the A&C Act.

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When to object to the jurisdiction of the arbitral tribunal?

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1. According to Section 16[11]?of the A&C Act, a plea should be presented before the arbitral tribunal for an objection to the jurisdiction of the arbitral tribunal. This objection should be raised before the submission of the statement of defence. Also, a party does not get precluded from raising such an objection merely because he has participated in the appointment of an arbitrator.?
2. Also, an objection that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter, which is alleged to be beyond the scope of its authority, is brought up during the arbitration proceedings.?
3. The arbitral tribunal may admit a plea of objection at a stage later than the stages mentioned above if it considers the delay justified. However, if the arbitral tribunal, upon an examination of the matter, is of the opinion that the delay is unjustified, it is at complete discretion to dismiss the same. If such an application is made directly to the courts then the courts are bound to reject the application and direct the parties to refer such a matter before the arbitral tribunal.?

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Arbitral tribunal accepting the objection to its jurisdiction?

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1. An appeal against an order of the arbitral tribunal accepting the objection raised on its jurisdiction or the plea that it is exceeding its scope of authority can be made to a court having competent jurisdiction under Section 37[12]?of the A&C Act.
2. According to Section 37[13], there should not be a?second appeal from an order of the Appellate Court. But this does not apply to the power of the Supreme Court to entertain special leave petitions.?

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Arbitral tribunal dismissing the objection to its jurisdiction

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1. As per Section 16(5)[14]?of the A&C Act if the arbitral tribunal rejects the objection and decides that it is competent to adjudicate the present dispute then it shall continue with the arbitral proceedings and pass the arbitral award.??
2. The remedy is provided under Section 16(6)[15]?of the A&C Act.?According to this subsection challenge to this order of the arbitral tribunal can be made in a court?of competent jurisdiction?through an application/petition under Section 34[16]?for setting aside the impugned arbitral award.?
3. According to Section 34(3)[17]?of the?A&C Act the petition for setting aside the impugned award must be made within a period of three months from the date of the receipt of the arbitral award by the party making such application.?
4. The court must dispose of an application for setting aside an arbitral award within a period of 1 year from the date on which the notice of intention of appellant to invoke Section 34[18]?is served upon the respondent.?
5. Under Section 37(1) (b)[19]?of the A&C Act an order setting aside the arbitral award or refusing to set aside the impugned award can be appealed.

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Claimant's Case for Tribunal Authority

As the claimant initiating arbitration, the focus is on reinforcing the tribunal’s jurisdiction by emphasizing the existence and validity of the arbitration agreement, which empowers the tribunal under the doctrine of "Kompetenze-Kompetenze" to rule on its own jurisdiction, including objections about the agreement’s validity. Highlighting the broad scope of the arbitration clause ensures that the disputes fall within its ambit, backed by supportive case law and public policy favoring arbitration for efficient dispute resolution. The separability doctrine further protects the arbitration agreement from disputes affecting the main contract, and the respondent’s participation without timely objections can be argued as a waiver of their right to contest jurisdiction. Additionally, stressing the tribunal’s authority to decide preliminary issues and the strong legal presumption in favor of arbitration supports the claimant’s stance, ensuring the process moves forward without unwarranted challenges.

Respondent’s Challenge to Tribunal Jurisdiction

The respondent may contest the tribunal's jurisdiction by questioning the existence and validity of the arbitration agreement, asserting that it does not encompass the disputes raised by the claimant. They can argue that the arbitration clause is either invalid, unconscionable, or has been waived due to the claimant's actions. The respondent could also invoke procedural requirements, claiming that the claimant failed to comply with pre-arbitration steps or did not follow the agreed-upon dispute resolution processes. Additionally, they may assert that the tribunal lacks the authority to rule on certain preliminary issues, arguing that such matters should be resolved by the courts instead. Finally, the respondent can highlight any previous communications or conduct that suggest a rejection of arbitration, thereby reinforcing their position against the tribunal's jurisdiction in the matter.

Can an order dismissing an application under Section 16[20]?of the Arbitration and Conciliation Act be challenged??

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Section 5[21]?of the A&C Act clearly express that there should be no judicial intervention in the matters governed by Part I of the A&C Act except where it is provided in the A&C Act. Therefore this act follows the principle of minimum judicial intervention in arbitration proceedings. For speedy resolution of the disputes, this act allows for limited appealable orders. Under?Section 16[22]?of the A&C Act if the arbitral tribunal finds that it does not have jurisdiction then an appeal can be filed under Section 37[23]?of the A&C Act. But if the arbitral tribunal considers that it is competent then no right to appeal is provided in such cases if an award is passed. According to Section 16(5)[24], the decision rejecting the plea can be challenged only with the final award. The aggrieved party has to wait till the passing of the final award and then he can file an application for setting aside such an arbitral award.?

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