Dewan Arbitration in India

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Arbitration in India: An Unenjoyable

Litigating Jamboree!
Nakul Dewan (*) Author
Nakul Dewan
A. Introduction Jurisdiction
India
In an economically liberalising regime, there is an underlying need to
have a commercial dispute resolution law which brings about cross- Source
border uniformity in dispute resolution procedure. As judicial
Nakul Dewan,
systems in different countries are dissimilar and fraught with their
Arbitration in India: An
own peculiarities, it is a complex matter to imbibe within the judicial Unenjoyable Litigating
system a cross-border uniform procedural code for adjudication of
Jamboree!, Asian
commercial disputes. This impediment can be overcome by
International Arbitration
adopting an alternate forum for commercial dispute resolution and
Journal, (Kluwer Law
enacting a standardised arbitral procedural code is one such International 2007
mechanism whereby a foreign investor is not thrown into unfamiliar
Volume 3 Issue 1 ) pp.
territory when a legal dispute arises. However, the uniformity only
99 - 123
continues so long as the law is interpreted in accordance with its
international meaning and interpretation of the law is in consonance
with accepted international norms and understandings. Since
adroitness is a known devil of advocacy, very often brilliant and
baffling legal defences are taken up to throw the arbitration
mechanism into a tailspin.
The fanfare with which the (Indian) Arbitration and Conciliation Act
1996 (‘the Act’ or ‘the 1996 Act’) was enacted as the legal
supplement to India's liberalisation policy is all but fading away. As
the Indian legal system is virtually chocked and bogged down by the
astronomical number of pending cases, the Act sought to minimise
the role played by the courts in arbitration proceedings and attune
the procedure to the UNCITRAL Model Law. (1) Bereft page
"99" of the various judicial pronouncements, the Act does exactly
that. The Act is divided into two parts: Part I applies to arbitrations
whose situs is in India and Part II applies to arbitrations whose situs
is outside India. (2) Part I limits the intervention of the courts in arbitral
proceedings both before the appointment of the arbitrator and after
rendering the arbitral award. (3) Under Part I, arbitrators are
appointed by the parties and only on their failure to do so are
appointments made by the Chief Justice of the High Court in the
case of domestic arbitrations and by the Chief Justice of the
Supreme Court in the case of international arbitrations. (4) On the
other hand, if one party has initiated legal proceedings in court and
the defence of an arbitration agreement is taken up, the court is
http://www.kluwerarbitration.com/print.aspx?ids=ipn27888 11/26/2012
required to refer the matter to arbitration. (5) Questions related to

jurisdiction and competence of the arbitrator has been left in the
domain of the arbitrator; there is no provision for such examination
by the court before the passing of the award. (6) Interim relief can be
granted by either the court (7) or the arbitrator (8) and the forum to be
approached depends on the nature of the relief and the stage at
which interim relief is sought. To do away with the cumbersome
procedure of a civil trial, the arbitrators are not bound to follow the
provisions of the Code of Civil Procedure 1908 and the Indian
Evidence Act 1872 and can conduct proceedings in an appropriate
manner, including determining the admissibility, relevance,
materiality and weight of any evidence. (9) The award by the arbitrator
must be in writing (10) and is enforceable like a decree of a civil court,
(11)
where the grounds of challenge are limited unlike a first appeal.
(12)
Part II of the Act deals with foreign awards under the New York
Convention (13) and Geneva Convention (14) and does not contemplate
any intervention by the court in matters of appointment. (15) That is a
question governed by the chosen foreign law or rules. Part II does,
however, page "100" deal with cases where a local judicial
authority has been seized with an action in respect of which parties
have agreed to arbitrate. While in a New York Convention
arbitration, the court has been mandated to refer the matter to
arbitration unless it determines an agreement to be null and void,
inoperative or incapable of being performed, in arbitration
proceedings covered by the Geneva Convention, the court is
required to consider the validity of the agreement and its capability
of being carried into effect, before referring the matter to arbitration.
Awards under Part II are also final and binding like a decree of court
and enforceable (16) unless in conflict with the limited statutory
provisions laid down under Part II. (17) Apart from this limited role laid
down for courts, in matters of appointment, interim relief and
enforcement of arbitral awards, the Act does not contemplate any
further interference.
The initial euphoria about the Act and the judgment of the Supreme
Court in Sundaram Finance Ltd v NEPC India Ltd, (18) holding that
the provisions of the Model Law would serve as a beer interpretative
guide, gave hope that the court would adopt a hands-off policy in
arbitration matters. However, over the years, the court has gradually
stepped back in and increased the scope for its intervention in
arbitral proceedings, in a manner whereby arbitrations have been
caught in the intrinsic web of the delayed and the clogged court
system. The recent Constitution Bench judgment of the Supreme
Court in SBP & Co v Patel Engineering (19) has only further expanded
the scope of the court's role in arbitration.
Apart from the few cases which involve the ingenious application of
the law, the three stages where an arbitration proceeding usually
gets intertwined with litigation in court are:
(1) appointment and jurisdiction of arbitrators;

(2) grant of interim measures of protection; and
(3) after the pronouncement of the award.
Getting entangled in litigation in any of these three stages delays the

arbitration and defeats the purpose of quick adjudication. Courts
have to bear in mind that prior to the commencement of a dispute,
parties had chosen to adjudicate their disputes outside the judicial
system and, in interpreting the provisions of the Act, the court must
act as a facilitator of the alternate dispute resolution mechanism.
Unfortunately, over the years, courts have been unable to resist
interfering in arbitrations, resulting in tremendous delays.
page "101"
B. Appointment of the Arbitrator in Domestic and International

Arbitrations
… I may state that before introducing … [the] provision

giving power to the Chief Justice of the High Court in
domestic arbitrations and the Chief Justice of India in
international arbitrations, the Secretary to the
Government of India had approached me in my
capacity as the Chief Justice of India to ascertain if
granting such administrative power would be in order.
He told me that the avowed purpose was that in
contentious matters if a Chief Justice or his designate
would name the arbitrator(s) it would carry the stamp
of integrity, independence and impartiality, so vital to
infuse confidence in the parties. I saw no objection to
such inclusion. I therefore always thought that the
order would be an administrative order, pure and
simple, and never imagined it would become the
subject matter of such a dingdong judicial process
involving two Constitution Bench decisions, apart from
those of smaller Benches. Whose ingenuity shall I say!
[Emphasis supplied.]
AM Ahmadi (former Chief Justice of India) (20)
Ingenuity has been aptly used by Ahmadi J in describing the

litigation surrounding the appointment of an arbitrator. Litigation
commences when a defendant objects to the appointment of an
arbitrator and the question of appointment becomes inextricably
linked to the jurisdictional competence of the arbitrator(s) to
adjudicate the dispute. Questions relating to the appointment of the
arbitrator and jurisdictional challenges are internationally
categorised as kompetenze-kompetenze, which enables the
arbitrator to determine jurisdictional challenges. Since the ability of
the arbitrator to adjudicate questions of jurisdiction is a sequiter to
the appointment of the arbitrator, the role of the court in matters of
appointment actually determines the extent to which the
kompetenze-kompetenze rule applies.
Unlike the old Arbitration Act 1940, when the 1996 Act was enacted,
the legislature limited court intervention in matters of appointment of
arbitrators and determining challenges to their jurisdictional
competence. Under s 11 of the Act, arbitrators have to be appointed
by the parties in terms of their arbitration agreement, so long as the
agreement is not contrary to statute. (21) Only if parties fail to reach a
consensus on the appointment of an arbitrator or a panel of

page "102" arbitrators, is the tribunal required to be constituted
by the Chief Justice of India in the case of an international arbitration
and the Chief Justice of the High Court in the case of a domestic
arbitration. On the other hand, if a party has initiated litigation in
court and the defence of an arbitration agreement is taken up by the
defendant, s 8 of the Act mandates the judicial authority to page
"103" refer the parties to arbitration. Naturally, in most cases the
opposing party does not unconditionally accept referral to arbitration
and resists the referral on the ground of jurisdictional competence.
To deal with such challenges, the Act, by virtue of s 16 incorporates
the enabling kompetenze-kompetenze principle and allows the
arbitrators to adjudge questions of jurisdiction, including questions
related to the existence and validity of the arbitration agreement. (22)
The court only scrutinises the decision of the arbitrators after the
arbitral award has been rendered, unless of course the arbitrators
decline jurisdiction and the arbitration summarily ends. (23) On the
other hand, when parties agree that arbitration proceedings would
be held outside India, the arbitration is governed by Part II of the
Act. Presumably only because such arbitrations entail considerably
greater expenditure, if a party has initiated judicial proceedings in
India and the defence of an arbitration agreement is taken up, a
larger role page "104" has been carved out for the courts. (24) For
arbitrations governed by the New York Convention, s 45 states that
the court must determine that the arbitration agreement is not null
and void, inoperative or incapable of being performed whereas for
those governed by the Geneva Convention, s 54 requires the court
to determine whether the agreement is valid and capable of being
carried into effect. Apart from this, no other role has been ascribed
to the court in matters of appointment and jurisdiction for arbitration
proceedings which have to be held outside India.
Section 11 became a subject matter of litigation because parties

opposing the appointment of the arbitrator invoked the power of the
court by challenging the arbitration agreement. Sections 8, 45 and
54, on the other hand, became the subject matters of litigation
because parties who had initiated proceedings before a judicial
authority challenged the defence raised by the defendants about
reference to arbitration. Before proceeding to deal with the manner
in which Indian law has evolved on the subject, a brief overview of
the kompetenze-kompetenze principle is in order: kompetenze-
kompetenze is the enabling power given to arbitrators for
determining questions relating to their jurisdiction and
consequentially curbing frivolous litigation initiated by defendants for
page "105" derailing/stalling arbitration proceedings on the
ground of jurisdictional competence. Initially when arbitration
commenced as an alternate dispute resolution mechanism, the
arbitrator was not allowed to determine questions of jurisdictional
competence. (25) However, because jurisdictional challenges were
often taken to defeat the initiation of arbitration proceedings, the
laws changed to enable the arbitrators to determine questions
relating to jurisdictional competence. (26) Harold Crowter, a leading
construction arbitrator, remarked that: ‘Arbitrators should not be
frightened of these new powers; determining questions of jurisdiction
is no different to determining points of law which we have all done
for years. Let us hope that this sensible addition to our armoury will
increase the speed and efficiency of arbitration.’ (27) Even the

observations in the Departmental Advisory Committee (‘DAC’)
Report, (28) page "106" on the basis of which England enacted its
Arbitration Act of 1996, propagates the doctrine by stating that: ‘[t]he
great advantage of this doctrine is that it avoids delays and
difficulties when a question is raised as to the jurisdiction of the
tribunal. Clearly the tribunal cannot be the final arbiter of a question
as to the jurisdiction, for this would provide a classic case of pulling
oneself up by one's own bootstraps, but to deprive a tribunal of a
power (subject to court review) to rule on its own jurisdiction would
mean that a recalcitrant party could delay valid arbitration
proceedings indefinitely by making spurious challenges to its
jurisdiction.’ (29)
The judgments of the Supreme Court on matters relating to

appointment of an arbitrator and determination of their jurisdictional
competence under the 1996 Act display an interesting trend from a
‘hands-off’ to a ‘hands-on’ approach. (30) The initial euphoria in linking
the interpretation of the Act to the provisions of the UNCITRAL
Model Law in Sundaram Finance (31) saw the court adopt a ‘hands-
off’ attitude and take the view that orders passed by page
"107" the court under s 11 for appointing arbitrators were not judicial
orders and were merely administrative in nature. This resulted in the
orders passed by the High Court for appointment of arbitrators in a
domestic arbitration not being challengeable on appeal and ensured
that questions of competence and jurisdiction were decided by the
arbitrators. In Ador Samia (P) Ltd v Peekay Holdings Ltd, (32) the
court, after relying on Sundaram Finance, (33) foreclosed judicial
challenge against such orders even under Art 136 of the
Constitution of India on the ground that the orders were
administrative in nature. Article 136 enables a party to approach the
Supreme Court seeking Special Leave to Appeal against ‘any
judgment, decree, determination, sentence or order in any cause or
matter passed or made by any court, tribunal in the territory of India’
and by foreclosing this relief, the Supreme Court tightened the
noose against challenging the administrative orders of appointment
of an arbitrator. Interestingly, two judges of the Supreme Court,
sitting singly in chambers and delivering judgments for appointment
of arbitrators came out with digressing opinions on the scope of s
11. While M Jagannadha Rao J in Wellington Associates Ltd v Kirit
Mehta (34) took the view that the enabling power on the arbitrators for
determining questions of jurisdiction under s 16 did not take away
the jurisdiction of the Chief Justice of India or his designate, (35) soon
thereafter, Rajendra Babu J (as he then was) (36) in Nimit Resources
Inc v Essar Steel Ltd (37) took the view that even when the
correspondence or exchange or documents between the parties are
not clear as to the existence or non-existence of an arbitral
agreement, (38) the appropriate course would be that the arbitrator
should decide such a question under s 16 of the Act rather than the
Chief Justice of India or his nominee under s 11 of the Act. (39)
Rajendra Babu J proceeded to narrow down the dicta in Wellington
by stating that ‘unless the Chief Justice of India or his nominee can
be absolutely sure that there exists no arbitration agreement
between the parties it would be difficult to state that there should be

no references to arbitration. (40)
page "108"
Since questions relating to the role of the court under s 11 continued

to crop up because the conflicting judgments in Wellington and Nimit
were tendered by litigating parties, the question came to be referred
to three judges of the Supreme Court in Konkan Railways v Mehul
Construction Co. (41) In this case, the court reaffirmed that orders
appointing an arbitrator(s) under s 11 were administrative in nature
and not challengeable by way of Special Leave under Art 136. The
court based its judgment by interpreting that the legislative intent
under s 11 was to set the arbitral process in motion without any
delay whatsoever, leaving contentious issues to be raised before the
arbitral tribunal itself. The court also held that a bare reading of ss
13 and 16 made it clear that questions with regard to the
qualifications, independence and impartiality of the arbitrator(s) as
well as jurisdiction could be raised before the arbitrator. (42) The court
took the view that merely because the Chief Justice nominates the
arbitral tribunal, it does not take away the right to raise questions of
jurisdiction before the arbitrators, (43) and added that ‘[t]he aggrieved
party, however, has a remedy to approach the High Court for
issuance of a writ of mandamus, if so advised, in accordance with
law.’ By reading s 11 together with s 16, the court held it
inappropriate to enter into disputes of jurisdiction. (44) However, the
litigation on this issue did not end there and was referred to a court
of five judges only to be re-affirmed in Konkan Railways Corp Ltd v
Rani Construction Pvt Ltd. (45) The court once again conjointly read
ss 11 and 16, holding that in matters of appointment the court only
exercised administrative powers and that questions going to the
‘very root of its jurisdiction’ (46) could be determined by the arbitrator.
By relying upon Konkan II, in the case of Hindustan Petroleum Corp
Ltd v Pinkcity Midway Petroleums, (47) the Supreme Court took the
view that even in litigation proceedings where the defence of an
arbitration agreement was taken up, the enabling power of the
arbitrators under s 16 required that the court refer the dispute to
arbitration, albeit for determining all objections to the jurisdiction and
the arbitrability of the dispute. Even the exercise of constitutional
supervisory powers conferred on the High Court under Arts 226
page "109" and 227 of the Constitution of India was invalidated
by the Supreme Court. (48) A clear example of the Supreme Court
directing that the arbitral process continue was in the case of Grid
Corp, (49) where the appointment of the third arbitrator was
challenged after having been previously agreed upon and the
arbitrator appointed by the claimant (the Indian party) even tendered
his resignation in protest. When the new arbitrator was appointed,
an application was filed in court under s 11 seeking appointment of a
presiding arbitrator by stating the contention that the appointment
could only be with consent, which was lacking in the present case.
The court refused to entertain the application by holding that once
an arbitral tribunal had come into existence, an application under s
11 was not the appropriate remedy.
There is nothing concrete which explains why the Supreme Court

moved from adopting a ‘hands-off’ approach in arbitration
proceedings to enlarging its role in matters of appointment and
jurisdictional competence. The deviation from the hands-off
approach showed up in Sukanya Holdings (P) Ltd v Jayesh H Panda
(50)
in which the court held that in matters where a reference to
arbitration had been made under s 8 in a pending judicial
proceeding, the bar of limited court intervention under s 5 would not
apply. The court held that the application would have to be judicially
considered before it could be referred. (51) The judicial self-restraint in
arbitration proceedings has now been sent into a tailspin by the
latest judgment of the court in SBP & Co v Patel Engineering Ltd, (52)
where a seven-judge bench has set aside Konkan II and taken the
view that the appointment of an arbitrator by a court is a judicial
function and not merely administrative. While parties played mischief
in arbitration proceedings by fabricating arbitration agreements and
invoking the jurisdiction of innocuous arbitral tribunals knowing that
questions of jurisdiction would be determined by the arbitrator and
no challenge could be made against these decisions until the
delivery of the final award, (53) such page "110" mischief was not
the basis for the court to have changed its approach. The reasons
which have weighed with the court relate to primacy of the power of
the Chief Justice being the highest judicial officer and exercise of
power either by him or his nominee in a contentious case of
appointment of an arbitrator as being in his judicial capacity. The
court has taken the view that the decision of the highest judicial
officer or his nominee cannot be questioned either by way of writ
proceedings or by an arbitral panel, which is subsequently enabled
to adjudicate questions relating to jurisdiction. The judgment
proceeds to hold that an appointment of the arbitrator pursuant to an
application under s 11 by the court would not be questionable before
the arbitrator under s 16 despite neither s 11 nor s 16 contemplating
such a situation. In fact, the judgment actually proceeds to render s
16 practically otiose because any party objecting to the initiation of
arbitration proceedings can refuse to nominate its arbitrator or
refuse to consent to the appointment of a sole arbitrator and ensure
that the question of jurisdiction be decided by a court. It can hardly
be imagined that a party would consent to the appointment of an
arbitrator only to, thereafter, object to his jurisdiction.
In fact, in cases of arbitrations governed by Part II, under ss 45 and

54, the court can at least consider whether the agreement is null and
void, inoperative or incapable of being performed. Arbitrations under
Part II are now governed by the recent judgment of the Supreme
Court in Shin-Etsu Chemicals Co Ltd v Aksh Optifiber Ltd, (54) which
restricts the ambit of s 45 to only allow the court to make a prima
facie determination of whether an arbitration agreement exists,
leaving the question to be decided by the arbitrators. (55)
With the pronouncement of the judgment in Patel Engineering, the

applicability of the kompetenze-kompetenze principle for arbitrations
governed under Part I is relegated to only those cases where parties
consent to arbitrate and then object to the jurisdiction of the
arbitrators. Part II arbitrations, however, continue to retain this
subject to the governing law. However, the paradigm shi of the court
in Patel Engineering is a retrograde step in the development of

arbitration in India and the court was misplaced in its approach
because kompetenze-kompetenze is neither about the arbitrators
competing with the court nor about comparing their judicially
comparative powers: there page "111" cannot be such a
comparison because the court is the final adjudicator on all issues.
The doctrine is only a hands-off doctrine, where the court keeps
away from arbitration proceedings until after culmination of the
proceedings. The doctrine also curbs frivolous jurisdictional
objections raised by parties.
C. Grant of Interim Measures of Protection
In arbitration proceedings, court intervention for granting interim

measures of protection is often necessary, keeping in mind factors
of urgency and enforceability of injunctive orders. Interim measures
of protection can also, at times, become necessary before the
constitution of an arbitral tribunal or after the passing of the award
and the court is the only available forum in such situations. Part I of
the Act provides a twin modicum for grant of interim measures,
either by the court under s 9 or by the arbitrators under s 17. (56) The
judgment of the Supreme Court in Sundaram Finance (57) clarifies
that the court can always act under s 9 and grant interim measures
of protection in arbitration page "112" proceedings even before
notice for commencement of arbitration has been sent, so long as
the party seeking the interim relief commences arbitration
proceedings soon thereafter: implicit in seeking interim relief under s
9 is the recognition of a valid arbitration agreement.
Unlike s 9 under Part I, there is no provision under Part II which

deals with the grant of interim measures by courts in India for
arbitration proceedings held outside India. That does not, however,
mean that court intervention for the grant of interim relief in such
cases is non-existent because intervention in such cases depends
on the procedural law applicable to the parties. For example, in an
international arbitration under the arbitration rules of the
International Chamber of Commerce International Court of
Arbitration, art 23 provides for intervention by the competent judicial
authority prior to the constitution of the arbitral tribunal. This means
that in a case where parties have chosen the governing law as
English law and the place of arbitration as London, the competent
judicial authority would be the courts in London. Merely because one
of the parties is an Indian party and the cause of action has arisen in
India does not enable Indian courts to grant interim relief. Only if the
place of arbitration is in India do Indian courts have the jurisdiction to
grant interim relief because such an arbitration falls under Part I.
This leads to a uniform interpretation of arbitration clauses providing
for arbitration outside India, because a foreign party entering into
such contracts is aware of the courts upon which it has chosen to
confer jurisdiction: if the jurisdiction of courts in India has been
(impliedly) excluded, then it is unfair that after a dispute arises a
party is suddenly foisted with intervention by Indian courts in matters
of granting interim injunction, merely because part of the cause of
action arises in India.
The judgment of the Supreme Court in Bhatia International v Bulk

Trading SA (58) now allows courts in India to grant interim measures
even in arbitrations governed by Part II, ie arbitrations held outside
India. The judgment proceeds on the footing that the jurisdiction
conferred on the courts under s 9 (falling in Part I) applies to
arbitrations outside India for want of being specifically excluded.
Thus, departing from the scheme of the Act where the provisions of
Part I only apply to arbitrations held in India, the judgment confers
jurisdiction on Indian courts to grant interim relief despite there not
being any express inclusion of s 9 in relation to arbitrations
governed by Part II of the Act. The fact that the court stretched its
reasoning while rendering this interpretation becomes evident
because it adopted the rule of interpretation where it sought to act
as ‘finishers, refiners and polishers of legislation which comes to
them in a state requiring varying degrees of further processing.’ (59)
The vulnerability page "113" of this legal reasoning in the
judgment is also evident because the judgment excludes the
jurisdiction of Indian courts if the applicability of s 9 and Part I has
been expressly excluded by contract. The relevant extract from the
judgment of the court reads as follows:
32. To conclude, we hold that the provisions of Part I

would apply to all arbitrations and to all proceedings
relating thereto. Where such arbitration is held in India
the provisions of Part I would compulsorily apply and
parties are free to deviate only to the extent permitted
by the derogable provisions of Part I. In cases of
international commercial arbitrations held out of India
provisions of Part I would apply unless the parties by
agreement, express or implied, exclude all or any of its
provisions. In that case the laws or rules chosen by
the parties would prevail. Any provision, in Part I,
which is contrary to or excluded by that law or rules
will not apply. [Emphasis supplied.]
The above interpretation only benefits vigilant parties who are aware
of the judgment and exclude the application of s 9 and Part I in all
future contracts: all existing contracts which provide for arbitration
outside India but do not expressly exclude s 9 and Part I are
however roped in. Therefore, the judgment does not, ipso facto,
make Indian courts competent to grant interim relief in arbitrations
held outside India but lets parties exclude jurisdiction by contract. By
this interpretation, a statute has been subjected to the written
agreement between parties and only on this count makes the
reasoning vulnerable.
In the international legal and commercial circles, the various

arbitration proceedings initiated by Enron Power Development
Corporation and its shareholders, including General Electric and
Bechtel through Capital India Power Mauritius and Energy
Enterprises (Mauritius), qua their dispute with the Government of
India, the Government of Maharashtra, governmental agencies (60)
and institutional investors in the controversial Dabhol Power Plant
being set up in Maharashtra appears to have sent a message that
Indian courts have a bias against foreign companies and a
protectionist attitude towards Indian companies and the Indian
government. This notion arises presumably because of the various

injunctions granted by courts in India restraining the arbitration
proceedings as well as injunctions granting interim measures of
protection. Dabhol, however, was not a case of Indian court bias,
though it was painted to be one. Since the matters were eventually
resolved out of court and there was no adjudication on whether the
injunctions were justified, a discussion on the justification for the
court to have granted the injunctions is, at best, academic.
page "114"
Dispelling the notion that Indian courts favour Indian parties is best
done by other examples where courts have either refused or granted
interim injunctions in favour of the foreign companies and against
the interests of government companies or undertakings in matters
which were referable to arbitration. In the case of National
Agricultural Coop Mktg Federation of India (NAFED) v Alimenta SA,
(61)
two contracts were signed between the parties for supply of 5,000
MTS of Indian HPS Groundnut Kernel Javas. On a dispute having
arisen, arbitration proceedings were initiated by Alimenta SA (a
Swiss company) under the Federation of Oil Seeds and Fats
Association (‘FOSFA’). NAFED challenged the initiation of arbitration
proceedings in the High Court of Delhi, which upheld the arbitration
agreement qua the first contract but came to take the view that qua
the second contract there was no arbitration agreement in existence.
NAFED then approached the Supreme Court, which, on the
submission of Alimenta SA passed an interim order permitting
Alimenta SA to also initiate parallel proceedings in the form of
money suits for both the contracts against NAFED in view of the
period of limitation expiring. The court observed that ‘such suit shall
not constitute abandonment of the pending arbitrations
instituted/commenced by Alimenta S. A. against NAFED or in any
manner prejudice the said arbitrations or any awards made therein
or the enforcement thereof and shall not prejudice Alimenta's
contention in any of the cases’. (62) While Alimenta SA filed civil suits
in India, qua the first contract, it also started arbitration proceedings
under FOSFA. On arbitration proceedings having been initiated, an
application was filed in the High Court of Bombay by NAFED
seeking an injunction against the arbitration proceedings. However,
both the single Judge and the Division Bench of the High Court of
Bombay refused to grant the injunction and NAFED approached the
Supreme Court. But even the Supreme Court did not grant NAFED
the injunction that was prayed for and observed as follows: (63)
The learned Single Judge of the High Court in the

instant case had taken into account all the relevant
facts. It had considered the contract of the parties, the
arbitration agreement, the statement made on behalf
of the respondent and had thereafter exercised its
jurisdiction not to stay the proceedings of arbitration in
relation to the first contract. There is a valid arbitration
agreement between the parties. In view of the
direction of this Court, the continuation of the
arbitration proceedings in respect of the filing of the
suit would not be bad. In those circumstances if the
court declined to exercise its jurisdiction under Section
151 of the Code of Civil Procedure to grant stay of the

proceedings of arbitration in London, the court, in our
opinion, has not acted in excess of jurisdiction or has
not exercised its jurisdiction improperly. In such a
situation the appellate court page "115" should not
normally interfere. In the premises, it would have been
improper to exercise any jurisdiction to interfere.
This is an example which shows that Indian courts do not merely

injunct international arbitration proceedings on references made by
Indian parties or use their inherent powers to deny a foreign party its
international arbitral rights. The dispute between Gerald Metals SA,
a company incorporated in Switzerland, and the National Aluminium
Co Ltd (‘NALCO’), a public sector undertaking under the control of
the Government of India is another example. In this case, Gerald
Metals SA had entered into a contract on 30 November 1998 for a
period of five years expiring on 31 December 2003 for the sale of
approximately 790,000mt of alumina at USD$178/mt. There was no
disagreement between the parties regarding the supply of alumina
through the five-year duration of the contract, except for the last
consignment of 33,000mt which was due to be loaded by 31
December 2003. However, since the ship engaged by Gerald Metals
SA arrived on 1 January 2004 (one day late), NALCO excused itself
from supplying the balance alumina. It must be stated that by that
time, the price of alumina was more than USD$450. By NALCO's
refusal to load the goods, Gerald Metals SA, which had a forward
contract with a third party and had its ship berthed ready for loading,
went into a quandary.
Despite the contract being governed by English law and the place of
arbitration being England, by relying upon the judgment of the
Supreme Court in Bhatia International, Gerald Metals SA invoked
the jurisdiction of Indian courts to grant interim relief. On 8 January
2004, Gerald Metals SA filed a petition before the Principal District
Judge at Visakhapatnam, Andhra Pradesh, under s 9 of the 1996
Act and pleaded that NALCO be directed to load the 33,000mt of
alumina on the ship, which was incurring a demurrage of
USD$25,000 per day. After issuing notice to NALCO, within 15 days,
on 23 January 2004, the district judge directed NALCO to load the
goods and also directed Gerald Metals SA to pay NALCO the
contracted price and create a bank guarantee in favour of NALCO
for the differential amount between the contracted price and the
international market value of the goods. The court directed the bank
guarantee to be furnished in the court, making its release subject to
the outcome of arbitration. Aggrieved, on 27 January 2004, NALCO
filed an appeal in the High Court of Andhra Pradesh, challenging the
said order. Realising the urgency of the matter, the High Court took
up the matter immediately and after hearing the parties, by an order
dated 3 February 2004, affirmed the order of the Principal District
Judge directing NALCO to load the goods. However, the High Court
slightly modified the order of the district judge by fixing the price
differential for which Gerald Metals SA was required to create a
bank guarantee. Continuing to be aggrieved, NALCO challenged the
order of the High Court in the Supreme Court under its discretionary
page "116" jurisdiction under Art 136 of the Constitution of India.
(64)
In the Supreme Court, in the normal course of events, a matter
takes at least two weeks to be placed for hearing from the date it is
filed; (65) but in this case on an oral request made by counsel

representing Gerald Metals SA, the Supreme Court directed early
listing of the matter which had been filed by NALCO. Parties were
directed to immediately complete the pleadings and the Supreme
Court concluded the matter by passing an order on 27 February
2004 directing that:
… we think it necessary that with a view to protect the

interest of both the parties, to make some
modifications in the impugned order. We do so
because of the fact that the claim of the respondent
herein is yet to be decided by the arbitrators. But in
the meanwhile if the respondent is not permitted to lift
the goods in question it is likely to be put to a great
hardship. At the same time, if the appellant is not
allowed to collect the fair price of its goods it will be
deprived of the monetary value of the goods. The
rights of the parties to receive the goods and value
payable will be ultimately decided by the arbitrators.
Therefore, we think it appropriate that while the
respondent should be permitted to take the goods, the
appellant should be paid as an interim measure the
present value of the goods.
To protect the interest of Gerald Metals SA in case it succeeded in

the arbitration, the Supreme Court directed NALCO to file an
undertaking that it would pay all sums which may become payable
by it under the award within six weeks from the same becoming
payable. Ultimately, in the international arbitration held at London,
Gerald Metals SA succeeded and could savour its success and
honour its future commitment because all courts had granted Gerald
Metals SA the interim relief by directing NALCO to load the goods.
NALCO, on its part, even sought a reconsideration of Bhatia
International, but the request was declined by the Supreme Court,
which left the question of law open for a more worthy case.
Courts in India, at all levels, consider matters on their legal merits

without being biased or influenced by considerations other than law.
Often matters do get delayed because they get stuck in the clogged
judicial system and not because courts in India are biased or cowed
down by governmental pressures. Indian courts are fiercely
independent and adjudicate the merits of a case in accordance with
the rule of law, without any influence from the government or any
other agency. If a party is able to make out a case in law, Indian
courts do not and will not shy away from granting relief.
page "117"
D. Challenge to an arbitral Award
Under the repealed Arbitration Act 1940, an arbitral award had to be

made the rule of the court, which meant that the court would
judicially scrutinise the award for the purpose of making it applicable
and binding. Under the present 1996 Act, an arbitral award under
Part I is akin to a decree which only has to be executed in a court of
law. Apart from this change, the Act also limits the challenge to an
award under Part I. The limited grounds of challenge have been laid
down under s 34 (66) and can broadly be classified under two heads:
(1) where the party challenging the award furnished proof that:
(a) it was incapacitated in some way;
(b) the arbitration agreement is not valid;
(c) proper notice of arbitration was not given or there was no
proper opportunity to present its case;
(d) the award deals with a dispute not contemplated by or
falling within the terms of the submission to the arbitrator;
(e) the composition of the tribunal is not in accordance with the
arbitral agreement;
(2) the court finds that:
(a) the subject matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force; page "118"
(b) the arbitral award is in conflict with the public policy of
India, including if it was induced or affected by fraud or
corruption.
Apart from challenges on the ground that the arbitral award deals
with a dispute not contemplated by or falling within the terms of the
submission to the arbitrators and that the award is in conflict with
public policy or induced by fraud or corruption, the remaining
grounds of challenge do not require the merits of the award to be
scrutinised. These are challenges based on equal opportunity and/or
jurisdiction. The ground for challenging the merits of the award does
not include a challenge on facts or law like in an appeal from an
original decree. The grounds to challenge the merits of an award
under Part I are limited and if there is no procedural or jurisdictional
lapse by the arbitrator, an award is usually challenged on the ground
that it violates public policy. Challenges to New York Convention
awards under s 48 and a Geneva Convention award under s 57 are
similar to s 34, albeit factoring their page "119" international
context. However, notably, unlike an award under ss 34 and 48, a
party can challenge a Geneva Convention award under s 57 on
merits by taking the plea that the award is contrary to the law of
India.
Losing parties usually challenge the award and the most common
ground of challenge adopted is that the award conflicts with public
policy. In the regime under the 1996 Act, the definition of the words
‘public policy of India’ came up for adjudication before the Supreme
Court in Oil and Natural Gas Commission v Saw Pipes (67) and the
court proceeded to expand the meaning of ‘public policy’, from the
earlier meaning which had been accorded in an earlier judgment in
Renusagar Power Co Ltd v General Electric Co Ltd (68) delivered
under the 1940 Act. The court opined that:
31. Therefore, in our view, the phrase “public policy of

India” used in Section 34 in context is required to be
given a wider meaning. It can be stated that the
concept of public policy connotes some matter which
concerns public good and the public interest. What is
for public good or in public interest or what would be
injurious or harmful to the public good or public

interest has varied from time to time. However, the
award which is, on the face of it, patently in violation of
statutory provisions cannot be said to be in public
interest. Such award/judgment/decision is likely to
adversely affect the administration of justice. Hence, in
our view in addition to narrower meaning given to the
term “public policy” in Renusagar case it is required to
be held that the award could be set aside if it is
patently illegal. The result would be — award could be
set aside if it is contrary to:
(a) fundamental policy of Indian law; or

(b) the interest of India; or
(c) justice or morality; or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the

illegality is of trivial nature it cannot be held that award
is against the public policy. Award could also be set
aside if it is so unfair and unreasonable that it shocks
the conscience of the court. Such award is opposed to
public policy and is required to be adjudged void.
Unfortunately, this reasoning makes every award vulnerable on the

ground that it contravenes a statutory provision. This reasoning is
contrary to the legislative intent because it is evident that the
legislature only chose to add the words ‘or the law of India’ under s
57 and not under ss 34 and 48. Had the legislature sought that the
phrase ‘public policy of India’ under ss 34 and 48 should include
contravention of any statutory law, it would have been easy to
employ the same phraseology in ss 34 and 48. Having not done so,
it becomes apparent that the defence of violation of public policy
permitted page "120" by s 34 was not intended to extend to
contravention of Indian law. However, because of the judgment in
Saw Pipes, a challenge to an arbitral award has been expanded.
Since any challenge under s 34 automatically stays execution
proceedings under s 36, the losing party benefits by challenging the
award because the objections are decided only after long passage
of time in court. In fact, AM Ahmadi J (69) in a recent speech delivered
at Malaysia, had this to say about the judgment in Saw Pipes:
There can be no doubt that this decision runs counter

to the object and reasons for the enactment of the
1996 Act, namely, to limit judicial interference, provide
for expeditious disposal of trade and commercial
disputes through arbitration and to ensure speedy
enforcement of foreign awards. The decision sets at
naught each of these objectives and glosses over the
ratio of a larger Bench binding decision on the plea to
enlarge jurisdiction in the hope to correct errors of law
not realizing that the entire process will get defeated
by delay which is what parties sought to avoid by
referring their dispute to arbitrators. In the zeal to
retain power to be the final arbiter, the two learned
judges of the Division Bench have virtually taken the
law to the pre-1940 era. They have rendered the
Model Law irrelevant and the 1996 Act a lame duck.

Its adverse impact on international trade and
commerce and foreign investment in India has been
totally overlooked. The earlier amends are made, the
better.
One need not go beyond the critique of Ahmadi J, except to point

out that the recent Supreme Court pronouncement in State of
Rajasthan v Basant Nahata (70) has taken the view that public policy
cannot have a definite meaning and that new heads of illegality can
always come up. Though the judgment is not under the Arbitration
Act, it does deal with s 23 of the Indian Contract Act and is an added
supplement to the losing party for challenging the award.
E. Conclusion
This discussion, which could be subjected to far greater analysis

and research, only brings out how the court has again come to play
a pivotal role in arbitral proceedings and intrusion by the court at the
most relevant stages is now writ large. Judicial pragmatism and
impressions are important and in the initial years the court adopted a
hands-off approach to arbitration proceedings. However, over the
years, court intervention has arisen, first in the cases for granting
interim relief through Bhatia International for arbitrations outside
India and thereafter in matters relating to challenge of an award
under s 34 though Saw Pipes. But none of these affected the
commencement of arbitral proceedings, which meant that a
defending party could not escape from the speedy initiation of
arbitration.
page "121"
In the dissenting judgment of Newman J, of the Second Circuit Court

of the United States in Ottley v Shepshead Nursing Home, (71) a
doubt was cast on the impartiality of an arbitrator in determining
questions of jurisdiction on the assumption that refusing jurisdiction
would ultimately reduce the monetary benefits that would accrue to
the arbitrator in terms of his fees. While, academically, this question
does arise, fortunately in the years of arbitration proceedings such
doubts have not often been raised. The opinion, rather unique, is
worth quoting.
Our deference to arbitrators had gone beyond the

bounds of common sense. I cannot understand the
process of reasoning by which any court can leave to
the unfettered discretion of an arbitrator the
determination of whether there is a duty to arbitrate. I
am even more mystified that a court will permit such
unrestrained power to be exercised by the very person
who will profit by deciding that an obligation to
arbitrate survives, thus ensuring his own business. It is
too much to expect even the most fair minded
arbitrator to be impartial when it comes to determining
the extent of his own profit. We do not let judges make
decisions which fix the extent of their fees. How then
can we shut our eyes to the obvious self-interest of an

arbitrator. (72)
However, with Patel Engineering, even the commencement of

proceedings can be stalled by the defending party by seeking a
determination on questions of jurisdiction about the existence and
validity of an arbitral agreement. Though the arbitration process was
also misused by parties who fabricated arbitration agreements and
nominated their arbitrator, knowing full well that no challenge could
be meted until the conclusion of the arbitration, these were not the
reasons which weighed with the court when interpreting the role of
the court in appointing arbitrators. The court interpreted the Act in a
manner to demonstrate its primacy when the same was never under
challenge. The Indian legal and justice delivery system, though fair
and independent, is overloaded and the swollen dockets delay the
disposal of cases. The number of cases going to trial is enormous
and the number of civil and criminal cases pending before Indian
courts has exceeded 30 million, up from 20 million in 1997. (73) The
shortage of judges, just 11 for every one million people, compared
with 51 in Britain and 107 in America makes it difficult for the
backlog to be cleared. (74) With the Indian court system being as
chock-a-block as it is and with appeals, second appeals and Special
Leave Petitions taking a number of years, even the initiation of an
arbitration proceeding could be held up for page "122" years at
a time. (75) Unfortunately, today the arbitral process in India is losing
out as an effective alternate dispute resolution mechanism. The
arbitral procedure is caught in a litigating jamboree, to the
displeasure of the propagators of arbitration. The lack of an effective
alternate dispute resolution mechanism acts as a deterrent for
foreign investment. For a country looking for economic growth,
imbibing an internationally acceptable arbitral culture is necessary
rather than sending a hapless party, seeking to effectively arbitrate a
dispute, mirthlessly into a conundrum of delay. page "123"
*
Advocate, Supreme Court of India. Founding President of
‘Students for the Promotion of International Law’ (SPIL) and former
Law Assistant to the Honourable Mr Justice AM Ahmadi (former
Chief Justice of India).
1
Ie the United Nations Commission on International Trade Law
Model Law on International Commercial Arbitration, General
Assembly Resolution 40/72, adopted on 11 December 1985 (‘Model
Law’).
2
The 1996 Act, s 2(2).
3
Id, s 5.
4
Id, s 11.
5
Id, s 8.
6
Id, ss 16 and 34.
7
Id, s 9.
8
Id, s 17.
9
Id, s 19.
10
Id, s 31.
11
Id, s 36.
12
Id, s 34.
13
Ie the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (New York, 10 June 1958) (‘New York Convention’).
14
Ie the Convention on the Execution of Foreign Arbitral Awards
(Geneva, 26 September 1927) (‘Geneva Convention’).
15
The 1996 Act, ss 45 and 54.
16
Id, ss 49 and 58.
17
Id, ss 48 and 57.
18
(1999) 2 SCC 479 (‘Sundaram Finance’).
19
(2005) 8 SCC 618.
20
In his speech entitled ‘International Arbitration in India: Issues and
Pit-Falls’ delivered at Malaysia (30 March 2006–1 April 2006).
21
Section 11 of the Arbitration Act 1996 states as follows:
Appointment of arbitrators
(1) A person of any nationality may be an arbitrator,

unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to
agree on a procedure for appointing the
arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section
(2), in an arbitration with three arbitrators, each
party shall appoint one arbitrator, and the two
appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding
arbitrator.
(4) If the appointment procedure in sub-section (3)
applies and
(a) a party fails to appoint an arbitrator within
thirty days from the receipt of a request to
do so from the other party; or
(b) the two appointed arbitrators fail to agree on
the third arbitrator within thirty days from the
date of their appointment,
the appointment shall be made, upon request of

a party, by the Chief Justice or any person or
institution designated by him.
(5) Failing any agreement referred to in sub-section

(2), in an arbitration with a sole arbitrator, if the
parties fail to agree on the arbitrator within thirty
days from receipt of a request by one party from
the other party to so agree the appointment shall
be made, upon request of a party, by the Chief
Justice or any person or institution designated by
him.
(6) Where, under an appointment procedure agreed

upon by the parties,
(a) a party fails to act as required under that
procedure; or
(b) the parties, or the two appointed arbitrators,
fail to reach an agreement expected of them
under that procedure; or
(c) a person, including an institution, fails to
perform any function entrusted to him or it
under that procedure,
a party may request the Chief Justice or any

person or institution designated by him to take
the necessary measure, unless the agreement
on the appointment procedure provides other
means for securing the appointment.
(7) A decision on a matter entrusted by sub-section

(4) or sub-section (5) or sub-section (6) to the
Chief Justice or the person or institution
designated by him is final.
(8) The Chief Justice or the person or institution
designated by him, in appointing an arbitrator,
shall have due regard to
(a) any qualifications required of the arbitrator
by the agreement of the parties; and
(b) other considerations as are likely to secure
the appointment of an independent and
impartial arbitrator.
(9) In the case of appointment of sole or third
arbitrator in an international commercial
arbitration, the Chief Justice of India or the
person or institution designated by him may
appoint an arbitrator of a nationality other than
the nationalities of the parties where the parties
belong to different nationalities.
(10) The Chief Justice may make such scheme as he
may deem appropriate for dealing with matters
entrusted by sub-section (4) or sub-section (5) or
sub-section (6) to him.
(11) Where more than one request has been made
under sub-section (4) or sub-section (5) or sub-
section (6) to the Chief Justices of different High
Courts or their designates, the Chief Justice or
his designate to whom the request has been first
made under the relevant sub-section shall alone
be competent to decide on the request.
(12) (a) Where the matters referred to in sub-
sections (4), (5), (6), (7), (8) and (10) arise
in an international commercial arbitration,
the reference to “Chief Justice” in those sub-
sections shall be construed as a reference
to the “Chief Justice of India”.
(b) Where the matters referred to in sub-

sections (4), (5), (6), (7), (8) and (10) arise
in any other arbitration, the reference to
“Chief Justice” in those sub-sections shall
be construed as a reference to the Chief
Justice of the High Court within whose local
limits the principal Civil Court referred to in
clause (e) of sub-section (1) of Section 2 is
situate and, where the High Court itself is
the Court referred to in that clause, to the
Chief Justice of that High Court.
22
Under the Arbitration Act 1940, the arbitrator had no power to
decide questions related to jurisdiction. See Justice RS Bachawat,
Law of Arbitration and Conciliation (4th Ed, 2005), Wadhwa & Co,
Nagpur, India, p 678.
23
Basf Styrentes Pvt Ltd v Offshore Industrial Construction Pvt Ltd
AIR 2002 Bom 289: ‘In our considered opinion, therefore, the
scheme of the Act is clear, and it is that if the arbitral Tribunal holds
that it has jurisdiction, such an order cannot be said to be illegal or
without jurisdiction at that stage, inasmuch as the competent
Legislature has conferred the power on arbitral Tribunal “to rule on
its own jurisdiction”. Hence, such an order can be challenged only in
the manner laid down in sub-sections (5) and (6) of s. 16, viz., after
the arbitration proceedings are over and the award is made. If, on
the other hand, it holds that it has no jurisdiction, an order can be
challenged under sub-section (2) of section 37 of the Act.’
24
See Shin-Etsu Chemical Co Ltd v Aksh Optifibre Ltd (2005) 7
SCC 234 wherein there was a divergence of views in the three-
judge bench. The dissenting judgment by YK Sabharwal J (as he
then was) states:
38. … In case of foreign arbitration, however, in its

wisdom the legislature left the question relating to the
validity of the arbitration agreement being examined
by the court. One of the main reasons for the
departure being the heavy expense involved in such
arbitrations which may be unnecessary if the
arbitration agreement is to be invalidated in the
manner prescribed in Section 45.
The majority judgment of BN Srikrishna J states that:
106. Undoubtedly, an international commercial

arbitration involves huge expenses, particularly where
the parties have subjected the contract to a foreign
law. But, that cannot be a deterrent to this Court from
pronouncing on the correct approach to be adopted
under Section 45 of the Act. In fact, as I have pointed
out, adopting a final and determinative approach
under Section 45 may not only prolong proceedings at
the initial stage but also correspondingly increase
costs and uncertainty for all the parties concerned.
Finally, having regard to the structure of the Act,
consequences arising from particular interpretations,
judgments in other jurisdictions, as well as the opinion

of learned authors on the subject, I am of the view
that, the correct approach to be adopted under
Section 45 at the pre-reference stage, is one of a
prima facie finding by the trial court as to the validity or
otherwise of the arbitration agreement.
25
See Yves Derains and Eric A Schwartz, A Guide to the New ICC
Rules of Arbitration (1998), Kluwer Law International, p 79: The ICC
Rules were one of the first to amend and enlarge the powers of the
arbitrator for determining the jurisdictional question. The ICC
brought about a change in 1931 by taking the view that ‘the
arbitration process could be undermined if the parties were required
to refer to and await the final decision of a court of law whenever the
existence or validity of an ICC arbitration clause might be called into
question, irrespective of the good or bad faith of such a contention’
and decided to empower the ICC Court to determine questions of
jurisdiction. See also Derains and Schwartz, ibid at p 80: ‘The
principle that the arbitrators have jurisdiction to determine their own
jurisdiction (“competence-competence”) has been accepted in
international conventions (eg Article 5(3) of the Geneva Convention
of 1961 on International Commercial Arbitration and Article 41(1) of
the Washington Convention of 1965 on the Settlement of Investment
Disputes Between States and Nationals of Other States) as well as
modern international arbitration legislation, such as, e.g. Article 16 of
the UNCITRAL Model Law, Article 1458 of the French Code of Civil
Procedure, Article 186 of the Swiss Private International Law Act
and section 30 of the English Arbitration Act 1996. … Ultimately, the
Arbitral Tribunal's determination will usually be the subject of judicial
control once the tribunal rendered its Award, although in some
jurisdictions the power of the arbitrators to decide upon their own
competence does not necessarily preclude the matter being decided
by the courts before the arbitrators have done so. See eg, section
32 of the English Arbitration Act 1996. …’
26
Ibid.
27
Harold Crowter in a paper presented to ARBIX, November 1996.
See D Mark Cato, Arbitration Practice and Procedure: Interlocutory
and Hearing Problems (2nd Ed, 1997), LLP Ltd, London, p 139.
28
The DAC Report at [139] states that ‘This clause (section) and
the following clause (section) are based on article 16 of the Model
Law, but unlike that model we have not made this provision
mandatory so that parties, if they wish, can agree that the tribunal
shall not have this power. We have also spelt out what we mean by
‘substantive jurisdiction.’
29
Id at [138]. See also id at [142] where even the English law, which
otherwise departed from the UNCITRAL Model Law, recognised the
importance of the doctrine in their DAC Report on the Draft Bill. The
DAC Report gives the reasons for providing an alternative option in
cases ‘where a party starts an arbitration but the other party, without
taking part, raises an objection to the jurisdiction of the tribunal. In
such circumstance, it might well be cheaper and quicker for a party
wishing to arbitrate to go directly to court to seek a favourable ruling
on jurisdiction rather than seeking an award from the tribunal.’ In
fact, Saville LJ stated that: ‘Kompetenze-Kompetenze is also
expressly recognised. This reflects the common law, but the
common law has only recently embraced this concept and rejected
previous authorities to the opposite effect; and had not worked out
all the implications e.g. whether the arbitrators were entitled to
continue when a court challenge to their jurisdiction was threatened
or mounted. What we have tried to do is to deal with these matters,
by setting up a system whereby challenges to jurisdiction can be
made along the lines of the UNCITRAL Model Law but with further
safeguards to ensure that challenges to jurisdiction (today a fertile
ground on which recalcitrant respondents can sow the seeds of
delay) do not allow this to happen.’
30
See Narayan Prasad Lohia v Nikunj Kumar Lohia (2002) 3 SCC
572, for the ‘hands-off’ approach where the Supreme Court
observed that: ‘One of the objects of the said Act is to minimise the
role of Courts in the arbitration process. It is with this object in mind
that Section 5 has been provided. Judicial authorities should not
interfere except where so provided in the Act.’ See SBP & Co v
Patel Engineering Ltd (2005) 8 SCC 618 for the ‘hands-on’ approach
where in matters of appointment of an arbitrator(s) and
determination of jurisdiction, the Supreme Court held that: ‘[t]he
ground of ensuring minimum judicial intervention by itself is not a
ground to hold that the power exercised by the Chief Justice is only
an administrative function’. This judgment has been dealt with
through the course of this section.
31
Supra, n 18.
32
(1999) 8 SCC 572.
33
Supra, n 18.
34
(2000) 4 SCC 272; decided on 4 April 2000 (‘Wellington’).
35
Ibid, where M Jagannadha Rao J stated that: ‘Section 16 does
not declare that except the Arbitral Tribunal, none else can
determine such a question. Merely because the new Act permits the
arbitrator to decide the question, it does not necessarily follow that
at the stage of Section 11 the Chief Justice or his designate cannot
decide a question as to the existence of the arbitration clause.’
36
He was later appointed Chief Justice of India.
37
(2000) 7 SCC 497; decided on 19 October 2000 (‘Nimit’).
38
In terms of s 7 of the Act, which states that an arbitration
agreement shall be in writing.
39
Supra, n 37 at 500.
40
Supra, n 34.
41
(2000) 7 SCC 201; decided on 21 August 2000.
42
Id at 206.
43
See Grid Corp of Orissa Ltd v AES Corp & Ors (2002) 7 SCC 736
(‘Grid Corp’), at 748.
44
The Supreme Court had in Ador Samia (P) Ltd v Peekay Holdings
Ltd (1999) 8 SCC 772 taken the view that the Chief Justice of a High
Court exercises an administrative function under s 11(6) and an
order passed thereunder is not passed by the court exercising any
judicial function.
45
(2002) 2 SCC 388 (‘Konkan II’).
46
Id at 405.
47
(2003) 6 SCC 503.
48
Hythro Power Corp Ltd v Delhi Transco Ltd (2003) 8 SCC 35.
49
Supra, n 43.
50
(2003) 5 SCC 531.
51
The court opined that if the judicial proceedings initiated
encompassed ‘a matter’ which was only partially referable to
arbitration, the court would not be required to render the partial
matter to arbitration. The court held that ‘[i]f bifurcation of the subject
-matter of a suit was contemplated, the legislature would have used
appropriate language to permit such a course. Since there is no
such indication in the language, it follows that bifurcation of the
subject-matter of an action brought before a judicial authority is not
allowed’: id at 536, para 16.
52
(2005) 8 SCC 618 (‘Patel Engineering’).
53
M/s Ram Gopal Hariram v M/s Reliance Industries Ltd FAO (OS)
261 of 2003, pending before the High Court of Delhi. In this case
M/s Ram Gopal Hariram, a wholesale textile trader in Delhi sought
to invoke arbitration proceedings against the conglomerate Reliance
Industries under the jurisdiction of a local Mercantile Arbitral
Association on the ground that the rules of the local Mercantile
Arbitral Association permitted arbitration between members and non
-members. Reliance moved the High Court of Delhi and under the
court's inherent powers got an injunction against further arbitration
proceedings. M/s Ram Gopal Hariram has filed an appeal against
the order, which is pending.
54
Supra, n 24.
55
Ibid.
56
Since this article is concerned with interim injunctions granted by
the court under s 9, the section is reproduced below for ready
reference:
Interim measures, etc. by Court
A party may, before or during arbitral proceedings or

at any time after the making of the arbitral award but
before it is enforced in accordance with Section 36,
apply to a Court:
(i) for the appointment of a guardian for a minor or a

person of unsound mind for the purposes of
arbitral proceedings; or
(ii) for an interim measure of protection in respect of
any of the following matters, namely:
(a) the preservation, interim custody or sale of
any goods which are the subject-matter of the
arbitration agreement;
(b) securing the amount in dispute in the
arbitration;
(c) the detention, preservation or inspection of
any property or thing which is the subject-
matter of the dispute in arbitration, or as to
which any question may arise therein and
authorising for any of the aforesaid purposes
any person to enter upon any land or building
in the possession of any party, or authorising
any samples to be taken or any observation

to be made, or experiment to be tried, which
may be necessary or expedient for the
purpose of obtaining full information or
evidence;
(d) interim injunction or the appointment of a
receiver;
(e) such other interim measure of protection as
may appear to the Court to be just and
convenient,
and the Court shall have the same power for

making orders as it has for the purpose of, and in
relation to, any proceedings before it.
57
Supra, n 18.
58
(2002) 4 SCC 105 (‘Bhatia International’).
59
Id at para 15.
60
Ie the Maharashtra State Electricty Board and the Maharashtra
Electricity Regulatory Commission.
61
1989 Supp (1) SCC 308.
62
Id at 310.
63
Id at 314.
64
See National Aluminium Co Ltd v Gerald Metals SA (2004) 9
SCC 307.
65
Subject to the matter being without any filing defect.
66
Section 34 states as follows:
Application for setting aside arbitral award
(1) Recourse to a Court against an arbitral award

may be made only by an application for setting
aside such award in accordance with sub-section
(2) and sub-section (3).
(2) An arbitral award may be set aside by the Court
only if —
(a) the party making the application furnishes
proof that —
(i) a party was under some incapacity; or
(ii) The arbitration agreement is not valid
under the law to which the parties have
subjected it or, failing any indication
thereon, under the law for the time being
in force; or
(iii) the party making the application was not
given proper notice of the appointment
of an arbitrator or of the arbitral
proceedings or was otherwise unable to
present his case; or
(iv) the arbitral award deals with a dispute

not contemplated by or not falling within
the terms of the submission to
arbitration, or it contains decisions on
matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters

submitted to arbitration can be
separated from those not so submitted,
only that part of the arbitral award which
contains decisions on matters not
submitted to arbitration may be set
aside; or
(v) the composition of the arbitral tribunal or

the arbitral procedure was not in
accordance with the agreement of the
parties, unless such agreement was in
conflict with a provision of this Part from
which the parties cannot derogate, or,
failing such agreement, was not in
accordance with this Part; or
(b) the Court finds that
(i) the subject-matter of the dispute is not
capable of settlement by arbitration
under the law for the time being in force,
or
(ii) the arbitral award is in conflict with the
public policy of India.
Explanation.—Without prejudice to the generality

of sub-clause (ii), it is hereby declared, for the
avoidance of any doubt, that an award is in
conflict with the public policy of India if the making
of the award was induced or affected by fraud or
corruption or was in violation of Section 75 or
Section 81.
(3) An application for setting aside may not be made

after three months have elapsed from the date on
which the party making that application had
received the arbitral award or, if a request had
been made under Section 33, from the date on
which that request had been disposed of by the
arbitral tribunal:
Provided that if the Court is satisfied that the

applicant was prevented by sufficient cause from
making the application within the said period of
three months it may entertain the application
within a further period of thirty days, but not
thereafter.
(4) On receipt of an application under sub-section (1),

the Court may, where it is appropriate and it is so
requested by a party, adjourn the proceedings for

a period of time determined by it in order to give
the arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action
as in the opinion of arbitral tribunal will eliminate
the grounds for setting aside the arbitral award.
67
(2003) 5 SCC 705 (‘Saw Pipes’).
68
1994 Supp (1) SCC 644.
69
Supra, n 20.
70
(2005) 12 SCC 77.
71
688 F 2d 883 at 898.
72
See also Tumey v Ohio 273 US 510 (1927); Gary B Born,
International Commercial Arbitration in the United States:
Commentary and Materials (1994), Kluwer Law International, p 184.
73
See The Economist, 29 June 2006.
74
Ibid.
75
The backlog in the Supreme Court in July 2006 was 37,045
cases, which included 16,313 cases listed for regular hearing and
20,732 cases listed as admission matters, ie matters where the
Supreme Court had to determine whether Special Leave under Art
136 of the Constitution ought to be granted. In the month of July
2006, 5,533 cases were registered with the Supreme Court. For
further details, log on to
<http://www.supremecourtofindia.nic.in/new_s/pendingstat.htm>
(accessed 16 February 2007).
© 2012 Kluwer Law International BV (All rights reserved).

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Dewan Arbitration in India

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Arbitration in India: An Unenjoyable

Nakul Dewan (*) Author

required to refer the matter to arbitration. (5) Questions related to

(1) appointment and jurisdiction of arbitrators;

Getting entangled in litigation in any of these three stages delays the

B. Appointment of the Arbitrator in Domestic and International

… I may state that before introducing … [the] provision

AM Ahmadi (former Chief Justice of India) (20)

Ingenuity has been aptly used by Ahmadi J in describing the

consensus on the appointment of an arbitrator or a panel of

Section 11 became a subject matter of litigation because parties

increase the speed and efficiency of arbitration.’ (27) Even the

The judgments of the Supreme Court on matters relating to

between the parties it would be difficult to state that there should be

Since questions relating to the role of the court under s 11 continued

There is nothing concrete which explains why the Supreme Court

In fact, in cases of arbitrations governed by Part II, under ss 45 and

With the pronouncement of the judgment in Patel Engineering, the

in Patel Engineering is a retrograde step in the development of

C. Grant of Interim Measures of Protection

In arbitration proceedings, court intervention for granting interim

Unlike s 9 under Part I, there is no provision under Part II which

The judgment of the Supreme Court in Bhatia International v Bulk

32. To conclude, we hold that the provisions of Part I

In the international legal and commercial circles, the various

government. This notion arises presumably because of the various

The learned Single Judge of the High Court in the

151 of the Code of Civil Procedure to grant stay of the

This is an example which shows that Indian courts do not merely

filed; (65) but in this case on an oral request made by counsel

… we think it necessary that with a view to protect the

To protect the interest of Gerald Metals SA in case it succeeded in

Courts in India, at all levels, consider matters on their legal merits

D. Challenge to an arbitral Award

Under the repealed Arbitration Act 1940, an arbitral award had to be

31. Therefore, in our view, the phrase “public policy of

injurious or harmful to the public good or public

(a) fundamental policy of Indian law; or

Illegality must go to the root of the matter and if the

Unfortunately, this reasoning makes every award vulnerable on the

There can be no doubt that this decision runs counter

Model Law irrelevant and the 1996 Act a lame duck.

One need not go beyond the critique of Ahmadi J, except to point

This discussion, which could be subjected to far greater analysis

In the dissenting judgment of Newman J, of the Second Circuit Court

Our deference to arbitrators had gone beyond the

can we shut our eyes to the obvious self-interest of an

However, with Patel Engineering, even the commencement of

(1) A person of any nationality may be an arbitrator,

the appointment shall be made, upon request of

(5) Failing any agreement referred to in sub-section

(6) Where, under an appointment procedure agreed

a party may request the Chief Justice or any

(7) A decision on a matter entrusted by sub-section

(b) Where the matters referred to in sub-

38. … In case of foreign arbitration, however, in its

The majority judgment of BN Srikrishna J states that:

106. Undoubtedly, an international commercial

judgments in other jurisdictions, as well as the opinion

Interim measures, etc. by Court

A party may, before or during arbitral proceedings or

(i) for the appointment of a guardian for a minor or a

any samples to be taken or any observation