By Himanshu Rajora.
Himanshu Rajora is a fourth-year student at National Law University Odisha
This article examines the jurisdictional framework of appointment of arbitrators in international commercial arbitrations in India, against the backdrop of a recent judgment of Madras High Court in M/s. China Datang Technologies and Engineering Co. Ltd. v. M/s. NLC India Ltd., and the draft Arbitration and Conciliation (Amendment) Bill, 2024. It examines the statute on whose basis judicial exclusivity is vested in the Supreme Court, critiques the institutional limitations of a centralised appointment regime, and evaluates the Bill’s proposed shift towards decentralised, seat-centric jurisdiction, assessing its policy rationale and how it impacts aspirations of India to be an arbitration hub.
Keywords: International Commercial Arbitration; Arbitral Appointments; Jurisdiction; Draft Arbitration and Conciliation (Amendment) Bill, 2024
In International Commercial Arbitration (“ICA”), the authority that appoints the arbitral tribunal is not just a technical afterthought, but rather the source of the tribunal’s legitimacy. In the Indian context, jurisdiction at the appointment stage operates as a structural safeguard, since an error at this stage is capable of vitiating the arbitral process and rendering the final award unenforceable.
This issue has assumed renewed urgency following the Madras High Court’s (“Court”) ruling in M/s. China Datang Technologies and Engineering Co. Ltd. v. M/s. NLC India Ltd., wherein it was held that High Courts lack jurisdiction to appoint arbitrators in ICA and any such appointment is void ab initio. The decision is firmly anchored in Supreme Court (“SC”) precedents like, Amway India Enterprises Pvt. Ltd. v. Ravindranath Rao Sindhia & Anr. and TATA Sons Pvt. Ltd. v. Siva Industries and Holdings Ltd. These SC precedents and the existing statutory framework, exposes the rigidity of the current appointment regime.
At the same time, it sits in direct tension with the Draft Arbitration and Conciliation (Amendment) Bill, 2024 (“Bill”), which proposes a deliberate redistribution of appointment jurisdiction in favour of High Courts.
This article dives deep into the divergence between the Bill and of the Court’s ruling, tracing the statutory foundations, institutional consequences, and policy implications for India’s ambition to emerge as an arbitration-friendly jurisdiction.
The Arbitration and Conciliation Act, 1996 (“Act”) is distinct for domestic arbitration and ICA, especially when it comes to appointment of arbitrators. While Section 2(1)(f) of the Act defines an ICA, Section 11 governs the appointment procedure. The most significant proviso is Section 11(12)(a), which provides that where matters under Section 11 arise in the context of an ICA, any reference to the “High Court” shall be construed as a reference to the Supreme Court. Judicial interpretation has been guided by such statute, which mirrors legislative intent. Section 11 leaves no residual or concurrent authority with High Courts after characterisation of an arbitration as international.
Against this statutory backdrop, a jurisdictional challenge to an ICA arbitral award given by arbitrator appointed by the High Court in the proceedings, arose in front of the Court. While assessing the legitimacy of the award, the Court raised a preliminary question regarding its own competence to select an arbitrator in the context of an ICA, even though the appointment had been made with the parties’ consent.
Given the participation of a foreign corporate party, the Court classified the dispute as an ICA. Court held that, this classification must have full statutory effect. Therefore, the forum competent to exercise powers under Section 11 was determined by the international nature of the arbitration. Based on Section 11’s textual and structural interpretation, especially subsections (6) and (12), Court ruled that the SC had the exclusive jurisdiction to appoint arbitrators in ICA.
The Court additionally rejected arguments on party autonomy, consent, or acquiescence. Despite Section 11(2) of the Act allowing parties to agree upon procedures concerning the appointment of arbitrators, such autonomy to agree to procedure is expressly subject to the provisions of Section 11(6), meaning parties can choose procedures for appointing arbitrators, but they cannot override statutory allocation of jurisdiction given in statute.
Jurisdiction under Section 11 was determined as non-derogable. Any appointment made by a forum lacking jurisdiction was held to be void ab initio, resulting in the arbitral tribunal being considered coram non judice and the proceedings and award of the tribunal being null and void. The Court further held such jurisdictional defects as incurable, as they cannot be remedied by waiver, acquiescence, or failure to raise an objection under Section 16, and may be invoked at the stage of a challenge under Section 34. This is because the jurisdictional flaw identified was institutional rather than tribunal-centric, placing it beyond the corrective scope of kompetenz–kompetenz.
The reasoning of the Court is consistent with existing statutory provisions of the Act and precedents by the SC concerning exclusive jurisdiction of the SC to appoint arbitrators in matters of ICA.
Though the practice of centralised appointment system is doctrinally correct, yet it poses significant institutional and procedural concerns. Treatment of improper appointments as an incurable jurisdictional defect poses a significant risk of invalidating arbitral awards after parties have spent considerable time and resources. Furthermore, the centralisation of the appointment process with the SC creates a fragmented supervisory approach to arbitrations whereby various stages of an arbitration can be subjected to the supervision of different courts. For example, an application for interim relief under Section 9 of the Act may be sought before a jurisdictional High Court, arbitrator appointment before the SC under Section 11, and post-award challenges again before the court exercising jurisdiction under Section 34. Such fragmentation introduces outcomes, such as procedural complexity, institutional strain, and uncertainty for parties acting in good faith, which sit uneasily with the Act’s objectives of efficiency and predictability. It is these limitations that form the immediate backdrop to the proposed legislative intervention.
The Bill is a clear departure from ICA under current jurisdictional framework of the Act. Introduction of section 2A in the Bill redefines “Court” within the Act, and provides a new jurisdictional framework for ICA related court functions.
Under the proposed Section 2A (2), where a dispute is characterised as an ICA, High Courts will be conferred with jurisdiction in two situations. Where a seat of arbitration has been designated by parties, understood as the juridical centre of the arbitration rather than its physical venue, or where such seat is determined by the arbitral tribunal, the High Court exercising jurisdiction over that seat is deemed the competent court. In case, where no seat has been designated, jurisdiction lies with the High Court which has the territorial nexus with the dispute. This framework expands High Court’s jurisdiction significantly including matters related to appointment of arbitrators.
This new framework is in clear contrast to the judicial interpretation of the statute that exists currently, as per which SC is the sole ‘competent authority’ for the appointment of ICA arbitrators. The Bill represents the legislature’s deliberate intent to decentralise jurisdiction and vest supervisory authority across High Courts, representing the future of jurisdictional landscape envisioned by the legislation.
The Bill is a reflection of Governmental response to pragmatic uncertainties along with institutional inefficiencies which is the by-product of a highly centralised jurisdictional framework of arbitration in India. This Bill seeks to streamline arbitration processes, also reducing procedural complexities, in turn providing clarity in competency of courts at different stages of arbitration.
This Bill adopts a seat-centric jurisdictional model in which the seat of arbitration is the factor which determines the competency of High Court in matters related to ICA seated in India. Section 2A attempts to streamline judicial supervision at different stages of arbitration while ensuring consistency in oversight. This rearrangement aligns jurisdiction with territorial and institutional proximity, resulting in less fragmentation.
This Bill also represents the ambition of India to position itself as a global arbitration hub. The Bill aims to achieve so by removing barriers of jurisdiction and streamlining supervisory authority. The proposed framework enhances institutional efficiency while also bringing procedural uniformity.
Conversely, Court’s ruling mirrors the rigidity of existing statutory framework and the ruling is true to the settled precedent. Textual interpretation of the current statute stands correct, but continued adherence to this rigid framework poses risks of inefficiencies and uncertainty. Court’s judgment and the Bill are divergent; one walks the path of current statute, the other aligns the path for India to be the arbitration hub.
Arbitration friendly jurisdictions like England, and the UNICITRAL Model Law governing ICA, adopt a decentralised approach which is seat-centric for the appointment of arbitrators. In England, under the Arbitration Act, 1996, issues which concern the jurisdiction and composition of the arbitral tribunal primarily fall within tribunal’s competence under Section 30, subject to limited curial review under Section 67. Appointment for jurisdiction in ICA matters is not with the apex court, but is linked to courts at the seat of arbitration.
A similar approach is reflected in the UNCITRAL Model Law. Articles 13 and 16 establish mechanisms for challenging arbitrators and determining jurisdiction, with supervisory authority exercised by courts at the seat. The Model Law does not envisage routine or exclusive involvement of a constitutional apex court at the appointment stage.
In contrast, Section 11(12)(a) of the Act adopts a distinctly centralised model, mandating that parties in ICA matters approach the SC exclusively for the appointment of arbitrators.
The Court’s interpretation of the Act is that arbitrator’s appointment is subject of legislative allocation, and not a subject of party autonomy or procedural convenience. Also, the Court indicates that the presence of jurisdictional fault is a real danger to the legitimacy of arbitration, and strongly emphasises the importance of institutional competence in the arbitration process.
The Bill is evidence of the legislators’ intention to make the arbitrator appointment in matters of ICA more decentralised, accessible and less concentrated in the apex court. However, until the new framework is implemented, parties involved in ICA will continue to experience uncertainty regarding the interpretation of the old statute which is in contrast with the intent of the legislators expressed in the Bill.
If India wants to reinforce its position as an arbitration hub, legislative intervention should be undertaken in a timely manner, with some level of doctrinal reconciliation. Having a well-defined and clear framework governing the jurisdictional competence at the stage of appointing an arbitrator will assist in alleviating uncertainty, reinforcement of party confidence, and safeguarding the enforceability and finality of arbitral awards.
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