The shifting sands of the arbitration law in India have sparked significant debate, particularly concerning the precarious equilibrium between judicial intervention and party autonomy. Central to this debate is the omission of Section 11(6A) from the Arbitration and Conciliation Act, 1996 (the “Act”) which was instrumental in maintaining this equilibrium. However, the post-amendment era remains engulfed in the fog of uncertainty and confusion. This article aims to elucidate this uncertainty and provide potential solutions to the same. The first section of the blog provides an overview of the pre-amendment scenario, setting the stage for understanding the context. The next section examines the judicial discourse, with a focus on the role of Section 11(6). The third section delves into the key provisions of the 2019 Amendment. Sections four and five address the dilemma created by the omission of Section 11(6A) and explore potential solutions moving forward.
The Pre-Amendment Equilibrium
Regulated by the Arbitration and Conciliation Act, 1996 in India, arbitration is based on the foundation of party autonomy. One of its manifestations is the freedom accorded to the parties, by virtue of Section 11(2), to mutually agree upon the procedure for appointing arbitrators. However, when parties fail to reach a consensus, the Act comes to the rescue by allowing court intervention under Section 11(6). In addition to party autonomy, another crucial principle embedded in the Act is kompetenz-kompetenz, as established under Section 16. This principle grants the arbitral tribunal the authority to determine its jurisdiction.
Prior to the 2019 Amendment, the interplay of intervention of court under Section 11(6) with the principle of autonomy was balanced by Section 11(6A), which ‘had’ explicitly limited the courts’ role to examining the ‘existence of an arbitration agreement’ only and nothing else. This means that the court was barred from ruling on issues such as the validity or scope of the arbitration agreement, which are better suited for arbitrators to adjudicate under Section 16. This division of roles aimed to minimize judicial interference in the arbitral process, thereby reinforcing the autonomy of the parties and the authority of the arbitral tribunal.
The Not-So-Consistent Judicial Discourse
Despite the legislative intent, judicial interpretations frequently blurred the distinction between the court’s role and that of the arbitral tribunal. In various cases, courts went beyond simply examining the existence of an arbitration agreement and delved into issues like arbitrability, thereby encroaching on the tribunal’s jurisdiction. This judicial trend paradoxically expanded the courts’ influence in arbitration matters, contrary to the intended restrictions. Let’s delve deeper into these cases to understand the issue.
In Konkan Railway Corp. Ltd. v. Mehul Construction Co. (2000) [1] the Supreme Court held that the Chief Justice’s powers under Section 11(6) of the Act are administrative, not judicial, and emphasized that the arbitral process should begin without delay, leaving contentious issues for the tribunal to decide under Section 16. This was upheld in Konkan Railway Corp. v. Rani Constructions (2002).[2] However, in SBP & Co. v. Patel Engineering Ltd. (2005)[3], a seven-judge bench overruled this view, holding that the appointment of arbitrators under Section 11 is judicial in nature, allowing courts to determine the validity of arbitration agreements and other key issues. In National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd. (2008)[4], the Supreme Court categorized the issues that arise under Section 11(6) of the Arbitration and Conciliation Act, 1996, into three groups to streamline the role of the Chief Justice or their designate in appointing arbitrators. The Chief Justice must decide on issues like whether the correct High Court is approached and whether there is a valid arbitration agreement involving the applicant. Discretionary issues, which the Chief Justice may decide or leave to the tribunal, include determining if the claim is still valid or if the contract is concluded by mutual satisfaction or final payment. Finally, issues that the Chief Justice should leave to the arbitral tribunal include assessing whether claims fall under the arbitration clause and reviewing the merits of the claims. This framework clarified the extent of judicial intervention allowed under Section 11 applications.
Thus, SBP & Co. and Boghara Polyfab expanded the scope of Section 11 inquiries, drawing criticism for conflicting with the kompetenz-kompetenz principle and causing delays in forming arbitral tribunals. Due to these complications, the Law Commission of India, in its 246th Report, recommended adding Section 11(6A). This provision was introduced on October 23, 2015.
Post this insertion, the confusion didn’t get resolved but transformed itself into interpretations of 11(6A). In Duro Felguera, S.A. v. Gangavaram Port Ltd. (2017),[5] the Supreme Court recognized that the 2015 Amendment narrowed the scope of Section 11, stating that post-amendment “all that the Courts need to see is whether an arbitration agreement exists – nothing more, nothing less.” This understanding was superseded by United India Insurance Co. Ltd. v. Hyundai Engineering (2018).[6] The Court held that Duro Felguera’s statements were “general observations” on the amended provision rather than directly addressing the specific issue at hand. In NCC Ltd. v. Indian Oil Corporation Ltd. (2019),[7] the Delhi High Court nuanced the “existence” test under Section 11(6A) stating that unless the case is open-and-shut, the issue should be left to the arbitral tribunal. Therefore, when parties disputed the scope of the arbitration agreement, as in NCC Ltd., the tribunal would resolve the matter.
The most decisive judgment we have had so far is the decision of the Supreme Court in Vidya Drolia & Ors. v. Durga Trading Corporation (2019). The two-judge bench clarified that “existence” does not include the “validity of an arbitration agreement,” which is a separate issue. Regarding the court’s authority to decide subject matter arbitrability under Section 11(6A), the Supreme Court stated that this question should be addressed by a larger bench. Therefore, the same was addressed by a three-judge bench of the Supreme Court in a later judgment in 2020. The Court confirmed a refined scope for judicial intervention at the pre-arbitration stage. However, the Court emphasized a limited “prima facie test” to verify the existence of an arbitration agreement without delving deeply into non-arbitrability issues, leaving them to the arbitral tribunal itself or allowing for later court intervention or “second look” under Section 34 of the Act during the challenge stage.
It is settled law that a decision under Section 11 is made final by virtue of Section 11(7) of the Act. Issues decided by the Court under Section 11 cannot be challenged before an arbitral tribunal under Section 16. This is why crystal clarity on this aspect is essential for the machinery of arbitration to function smoothly. This clarity becomes the need of the hour in the post-amendment scenario wherein Section 11(6A) is ‘vintage’ and potentially the years-long judicial discourse has been wiped off.
The 2019 Amendment: The Turning Point
The Arbitration and Conciliation (Amendment) Act, 2019 (the “2019 Amendment Act”) introduced several key changes aimed at enhancing the effectiveness of arbitration. Among these changes, the amendment related to the appointment of arbitrators is particularly relevant to our discussion.
Under Section 3(iv) of the 2019 Amendment Act, the Supreme Court and High Courts are now empowered to designate arbitral institutions for the appointment of arbitrators, as opposed to the pre-amendment practice of appointing arbitrators by the Chief Justice under Section 11. For international commercial arbitration, the Supreme Court will designate the institution responsible for appointments, while for domestic arbitration, this role falls to the institution designated by the relevant High Court. The Statement of Objects and Reasons further clarifies that if no suitable arbitral institutions are available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators to fulfill these functions.
Concomitantly, Sections 11(6A) and 11(7) have been omitted by sub-section 3(v) of the Amendment. However, since Section 3 of the Amendment Act has not yet been notified, the pre-2019 regime remains in effect.
From Clarity to Confusion: The Implications of the Amendment
The omission of Section 11(6A) opens Pandora’s box. Concerningly, no specific reason has been assigned to this especially when it contradicts the B.N. Srikrishna Report, which did not advocate for the removal of Section 11(6A). This lack of alignment adds further ambiguity to the rationale behind the change. Instead of clearing the air, the Amendment statutorily derecognized an imperative limitation that earlier kept the courts from delving into other issues beyond its mandate. The removal erases the already blurred boundary between the roles of the judiciary and arbitral institutions. The legislative intent of the same is not explicable in light of the aspiration of the pro-arbitration regime.
Although the Amendment states that arbitral institutions will handle the appointment of arbitrators, it is mute on the question – ‘Who will now verify the existence of an arbitration agreement?’, the answer to which is a pre-requisite to the appointment. The unanswered question can give rise to three possibilities:
First, the traditional route i.e., the courts. If the courts are still expected to determine the ‘existence’ of the agreement, the intent behind removing the sub-section is undermined. Unrestricted judicial intervention, enabled by the omission of Section 11(6A), further threatens the independence of arbitration proceedings.
Second, if this responsibility is transferred to the arbitral institutions, it raises a key concern: Are they authorized to perform quasi-judicial functions, or are they confined to the administrative role of appointing arbitrators? The appointment of an arbitrator is generally regarded as an administrative function, as highlighted by Section 11(6B), which states that the designation of any person or institution by the Supreme Court or High Court for this purpose does not constitute a delegation of judicial power. However, different arbitral institutions adopt varied approaches concerning the assessment of an arbitration agreement’s validity. For instance, the Mumbai Centre for International Arbitration Rules, 2017 (“MCIA Rules”) allow for challenges to the existence of an arbitration agreement but does not provide a specific mechanism for the same. In contrast, the Delhi International Arbitration Centre Rules, 2023 (“DIAC Rules”) delegate the determination of the agreement’s existence to the tribunal itself. If permitted, the potential shift of power to the arbitral institution could weaken due diligence and judicial scrutiny. Further, in the absence of Section 11(7) which decided the finality, it is unclear if the arbitrator can take up the question beyond ‘existence’ if it has been already decided by arbitral institution.
Third, the task could be assigned to the arbitrators themselves. This route might be impractical, costly and may lead to a catch-22 situation where the authority of arbitrators is derived from the agreement, however, they themselves are assigned the task of verifying the existence of that very agreement. Thus, pre-arbitration verification is essential to avoid such issues and expenses, which is one of the primary reasons arbitration is preferred in the first place.
Furthermore, even if this responsibility of pre-arbitration ascertainment was affixed to the courts or arbitral institution, the extent of this verification in the light of years of judicial efforts and sudden erasure is the biggest bone of contention, which has been pending a clarification for long now.
Another issue arising from the omission of Section 11(6A) is the ambiguity in the hierarchy between arbitral institutions and arbitrators. If courts are stripped of their powers, leaving the process solely to arbitral institutions and arbitrators, it raises concerns about the legal standing and authority of these institutions, which are not judicial bodies. This ambiguity could lead to jurisdictional conflicts, inconsistent rulings, and greater uncertainty for parties in arbitration. For example, with Section 11(6A) now removed, it is unclear whether courts can intervene in jurisdictional matters and, if so, to what extent. This uncertainty may weaken the effectiveness of the kompetenz-kompetenz principle, potentially leading to more court challenges.
The aforementioned issues are amplified by the omission of Section 11(7) which earlier barred any appeal against the decision taken under Section 11(6). Now the parties may find themselves mired in a series of litigation even before the initiation of arbitration proceedings. Such a maneuver is antithetical to the spirit of arbitration.
Charting the Course: The Probable Solutions
The authors are of the opinion that before resorting to any methods to delineate the jurisdiction Section 11(6A) delineated explicitly, it must be clarified who will ascertain the existence of an arbitration agreement . Once that is determined, the following courses of action can be taken up: –
Legislative Amendment : The Path Not Properly Taken
The 2019 Amendment is a missed opportunity which could have put a rest to this issue instead of exacerbating it. To resolve the ambiguity introduced by the omission of Section 11(6A), a new legislative amendment could be introduced to define the scope of judicial intervention under Section 11. This amendment should restore a modified version of Section 11(6A), explicitly confining the court’s role to ‘verifying’ the existence of an arbitration agreement, and not ‘examine’ to restrict further scope of interpretation. It should also affirm that issues like arbitrability and the validity of the agreement fall within the jurisdiction of the arbitral tribunal under Section 16, or otherwise, as is deliberated.
Key Points for the Amendment
Reinstate Section 11(6A) with clear limitations on the court’s role.
Retain judicial intervention only for verifying the “existence” of an arbitration agreement.
Establish that arbitral tribunals hold the authority to decide on all matters except existence of arbitration agreement.
Structured Procedure for Appointment
A detailed framework should be set out to streamline the process of appointing arbitrators, ensuring that judicial functions are minimal and clearly defined. One possible approach is:
Court’s Role: The court’s role in the process should be defined and cemented statutorily or judicially to verifying the existence of arbitration agreement in the opinion of authors.
Referral to Arbitral Institutions: Once the existence of the arbitration agreement is confirmed, the court would refer the matter of appointing arbitrators to an appropriate arbitral institution. The institution would then take over the final step of selecting and appointing the arbitrator, thereby reinforcing the autonomy of the arbitration process.
This approach would maintain judicial oversight at the initial stage while minimizing court involvement in the substantive arbitration process.
Judicial Clarification
In the absence of a legislative amendment, the Supreme Court could clarify the scope of judicial intervention under the current regime. A landmark decision from the Court could provide much-needed guidance on the boundaries of court involvement, particularly in cases related to the eligibility of arbitrator nominations or arbitrability.
Potential Judicial Clarifications
Affirm the kompetenz-kompetenz principle, making it clear that courts should limit their involvement to determining the existence of an arbitration agreement.
Provide clear guidelines on when and how courts can intervene in arbitration-related matters to reduce delays and procedural conflicts.
Practical Solutions for Parties
Parties to arbitration agreements can take proactive measures to reduce court intervention in the arbitration process, while respecting legal boundaries:
Contractual Clauses: Draft arbitration clauses that clearly express the parties’ preference for resolving disputes through arbitration, including matters of jurisdiction and scope, to the fullest extent allowed by law. This can help ensure that, whenever possible, issues are referred to the arbitral tribunal under Section 16, while acknowledging that certain matters may still require judicial determination.
Institutional Arbitration Rules: Opt for institutional arbitration rules that outline the specific roles of courts and tribunals in handling preliminary issues, such as the existence and validity of the arbitration agreement. For instance, MCIA (Rule 20) or DIAC (Rule 20) embody the principle of kompetenz-kompetenz. This can help streamline the process and minimize unnecessary litigation, enhancing the efficiency of the arbitration process.
By implementing these measures, parties can better navigate the uncertainties following the omission of Section 11(6A), while respecting the statutory role of courts and promoting a more effective and autonomous arbitration process.
As Indian arbitration law copes with the statutory derecognition of Section 11(6A), stakeholders must seek legislative clarity which upholds the principles of party autonomy and kompetenz-kompetenz, and ensure that the arbitration process remains an effective alternative to litigation and not its counterpart.
[1] (2000) 7 SCC 201.
[2] (2002) 2 SCC 388.
[3] (2005) 8 SCC 618.
[4] (2009) 1 SCC 267.
[5] (2017) 9 SCC 729.
[6] AIR 2018 SC 3932.
[7] (2019) 2 Arb LR 199.
Author(s)
Stuti Singh
Student at RGNUL, Patiala
Aviral Pathak
Student at RGNUL, Patiala