Composition of an Arbitration Tribunal

Composition of an Arbitration Tribunal

Author: Sneha Chugh

Introduction

Litigation is considered as a tedious process. It is not only time-consuming but also costly. The reason why private parties and institutions have come up with alternative modes of dispute resolution. Arbitration is one such alternative mechanism that is used to resolve commercial disputes in India.

What is an Arbitration Tribunal?

Whenever a commercial dispute arises between two or parties, and they decide to resolve the dispute through arbitration, an arbitral tribunal is to be set up. It consists of one or more arbitrators that adjudicate and resolve the dispute and provide an arbitral award.

The Indian Council of Arbitration has provided a set of rules known as the ‘Rules of Arbitration’ that are to be abided by the parties undergoing the arbitration process as well as the arbitrators. Rule 2 of these regulations defines Arbitral Tribunal as “an arbitrator or arbitrators appointed for determining a particular dispute or difference”^[1] Section 2(d) of the Arbitration and Conciliation Act, 1996 also defines an arbitral tribunal as a sole arbitrator or panel of arbitrators.

Composition of an Arbitration Tribunal

Chapter III of the Arbitration and Conciliation Act, 1996 (herein referred to as the ‘Act’) lays down the provisions for the Composition of an Arbitral Tribunal. Also, Rule 22 of the Rules of Arbitration laid down by the Indian Council of Arbitration states that when an application for arbitration procedure is received, the Council takes necessary steps for the constitution of an arbitral tribunal to adjudicate the disputes or differences between parties. Several provisions concerning the composition of an arbitral tribunal are as follows:

Number of arbitrators in an Arbitration Tribunal

Section 10 of the Act mentions the number of arbitrators that shall be a part of the arbitral tribunal. According to clause (1) of the Section, the parties to the dispute are free to mutually decide the number of arbitrators that shall constitute the arbitral tribunal to adjudicate the dispute. It is, however, necessary that the number of arbitrators appointed shall be an odd number and not an even one ensure that there are no ties. Furthermore, Section 10 also states that if the parties to the dispute are unable to decide the number of arbitrators, in that case, only one arbitrator shall be appointed.

Rule 22 of the Rules of Arbitration provides that if the value of the claim made under arbitration is One Crore or less, a single arbitrator can resolve the dispute if the parties agree to it. In cases where the claim to the dispute exceeds one Crore, the arbitral tribunal shall be composed of three arbitrators with the agreement of the parties.

In Narayan Prasad Lohia vs, Nikunj Kumar Lohia,^[2] the Supreme Court observed that if two arbitrators are appointed for an Arbitral Tribunal instead of three, and they give an award through common opinion, there will be no frustration of proceedings.

What is the Procedure for appointment of arbitrators?

The procedure and appointment of arbitrators under the arbitral tribunal is specified under Section 11 of the Arbitration and Conciliation Act. It states the following:

1. Nationality- The parties to the dispute may, on agreement, appoint an arbitrator belonging to any nationality.
2. Appointment by Parties- The procedure to appoint one or more arbitrators can be decided by the parties. If the parties fail to do so, they may individually appoint an arbitrator each, and the two arbitrators, mutually decide the third one.
3. Appointment by Court- if the parties do not appoint an arbitrator within 30 days from the receipt of the request, the Supreme Court, the High Court, or any other official designated by the Court may appoint an arbitrator.

In Golden Chariot Recreations Pvt. Ltd. v Mukesh Panika & Anr.,^[3] the Supreme Court held that a party to the dispute can file an application for the appointment of an arbitrator by the Court only after the expiry of 30 days.

4. Payment of fees- the High Court has the authority to frame rules concerning the determination of fees of the arbitral tribunal and the manner of its payment.

The Rules of Arbitration also provide the manner of the appointment of a sole arbitrator or three arbitrators under Rule 23. According to this rule, on receipt of the application, the Registrar of the Arbitration Committee may ask the parties to the dispute to select an arbitrator from among the Panel of Arbitrators within 30 days. In case of failure, the Registrar himself appoints a sole arbitrator to resolve the dispute between parties. Similarly, the Registrar can also appoint three arbitrators if the parties to the dispute do not arrive at an agreement.

In Oriental Insurance Company v M/S Narbheram Power and Steel Pvt,^[4] it was held that the arbitration clause under an agreement is to be strictly interpreted. It expresses the intention of the parties to appoint an arbitrator for the settlement of any dispute. This clause cannot be waived off in normal circumstances.

What are the grounds for challenging the appointment of arbitrators and its procedure?

When a person is nominated as an arbitrator, he is required to disclose his past or present connection to either party or parties, whether direct or indirect. Also, he shall disclose if he has a financial, business, professional or any other interest in any of the parties or in the subject matter of the dispute, which may prevent him from adjudicating in an impartial manner. Therefore, as perSection12 of the Act, either party to the dispute may challenge the appointment of an arbitrator on the following grounds:

1. If there is a sufficient doubt that the arbitrator may act in a partial or biased manner.
2. If the nominated arbitrator does not possess the qualifications required by the parties to the dispute.

The appointment of an arbitrator can be challenged in accordance with the procedure mentioned in Section 13 of the Arbitration and Conciliation Act, 1996. Either party can challenge the appointment within 15 days after receiving the knowledge of the constitution of the arbitral tribunal or after the knowledge of circumstances mentioned above. The authority to decide on the challenge is vested in the hands of the arbitral tribunal.

In Antrix Corp. Ltd. v Devas Multimedia Pvt. Ltd,^[5] the Court held that if any party to the dispute disagrees or is dissatisfied with the composition of the arbitral tribunal, it can approach the Court to challenge the appointment of the arbitrator by way of application.

How can an arbitrator be terminated?

Not only the appointment of the arbitrator can be challenged but also his mandate can be terminated under Section 14 and 15 of the Act in the following cases:

1. If the arbitrator is unable to carry out his functions in an effective manner or there is an undue delay in the performance of his duties.
2. If the arbitrator himself withdraws from his office or the parties agree to his termination.

Rule 27 of the Rules of Arbitration also states that an arbitrator can be terminated from his mandate on account of his resignation or death, if he is negligent in performing his duties or fails to act in an expeditious manner, and does not declare the arbitral award within a prescribed time.

In National Highways Authority of India vs Gammon Engineers and Contract^[6], the Delhi High Court held that the Arbitral Tribunal is bound by the Arbitration agreement between parties. The Arbitration agreement cannot be rewritten and neither can the tribunal accept an appointment in part.

Substitution of an arbitrator

If an arbitrator is terminated from his mandate, another arbitrator may be appointed as a substitute by following the appointment procedure. In such a case, the arbitral hearings can be repeated at the discretion of the arbitral tribunal. The provisions related to the substitution of an arbitrator are mentioned under Section 15 of the Arbitration and Conciliation Act, 1996.

Conclusion

The Indian Judiciary has recommended time and again that parties should take up arbitration as a dispute settlement mechanism to reduce the burden on the courts and for a speedy resolution of disputes. Therefore, several amendments have been proposed in the Arbitration and Conciliation Act, 1996. Sections 10-15 of this Act and Rules 22-27 of the Rules of Arbitration, lays down provisions for the composition of an Arbitral Tribunal. This is of utmost concern in the adoption of arbitration as a mechanism for dispute settlement. It is important for the parties to choose the right arbitrator or arbitrators that constitute the arbitral tribunal so that the award delivered by the tribunal is fair and just and free of any discrimination or biasness. It also ensures that the dispute is resolved in an effective and speedy manner.

---

^[1] http://www.icaindia.co.in/icanet/rules/commercialarbitration/arbitration&conciliation/clause.htm

^[2] https://indiankanoon.org/doc/413018/

^[3] https://indiankanoon.org/doc/27512549/

^[4] https://indiankanoon.org/doc/23402471/

^[5] https://indiankanoon.org/doc/178725217/

^[6] https://indiankanoon.org/doc/41932636/