JURISDICTIONAL ISSUE UNDER ARBITRATION AND CONCILIATION ACT
Author: Pushyami Busam
FUNDAMENTALS:
Arbitration act empowers arbitration tribunal to deal with any jurisdictional challenges that arise through article 16. However, this was derived from adopting a principle “Kompetenze-Kompetenze”. This principle has been adopted from article 16 of UNCITRAL Model Law, which gives the tribunal to deal with jurisdiction issue brought up by either of the parties to the issue. either as preliminary issue or to decide while awarding as it reduce the cost of time and money. But legislation enacted Indian Arbitration Act, does not provide info as to whether jurisdictional issue has to be considered as a preliminary issue or not? Anything not clearly mentioned goes through different judicial interpretation that can be examined through various cases.
JURISDICTION ACCORDING TO ARBITRATION AND CONCILIATION ACT:
Sec 16 of the arbitration and conciliation act, 1996 deals with jurisdiction of arbitral tribunal and specifically the competence of arbitration to rule on its own jurisdiction. Section 16 empowers arbitration tribunal to deal with validity of arbitration agreement and that the decision on validity of agreement does not affect the terms of contract. Thus, it clearly distinguishes between legal contract and agreement.
This section has also provided conditions for deciding jurisdiction of arbitration tribunal and pleas through its sub clauses and avails an opportunity for any party who is aggrieved by the award to make application according with section 34 of the Arbitration and conciliation act.
Section 16 of the act did not expressly been amended till now. Yet, changes were made in section 11, through amendment act 2015, and 2019 which impacts section 16.
Before 2015 amendment, in the case of SBP & Co. vs. Patel Engineering Ltd, all preliminary issues regarding jurisdiction of Supreme Court should be held by Courts according to section 11 of the act and did not consider section 16 of the act.
After 2015 amendment in the case of Indian Farmers Fertilizers Cooperative Limited vs. Bhadra Products [i] ("IFFCO Case") Supreme Court has recognized the principle in section 16 and allowed power to arbitration tribunals to deal with or to decode its own jurisdictional issues. Thus, court was avoided from interfering in the existence of arbitration agreement.
This case has also established “Three Determinatives” which explains intention behind section 16 with respect to jurisdiction. This test examines:
a) Existence of valid arbitration agreement
b) Proper Constitution of arbitration tribunal
c) Whether matters submitted for arbitration are in accordance with arbitration agreement.
CHALLENGES ON JURISDICTION:
There is a lot of contradiction with respect to jurisdiction in different aspects of Arbitration and conciliation Act, 1996
All challenges made on jurisdiction are different and result of each challenges are also changing through different views in different judgments.
1. Whether seat and venue of the arbitration is same
2. Regarding place of arbitration when not agreed upon at the time of contract
3. Whether jurisdictional issue has to consider preliminary.
4. Whether tribunal has jurisdiction to decide limitation.
However the act deals with this issue in section 16. Thus, all jurisdictional issues come under this connected with other sections.
Seat Of Arbitration:
Seat of arbitration is an important issue as it decides which court would supervise arbitration proceedings, gives arbitration award and faces any challenge. This act under section 20 discusses about the place of arbitration but doesn’t mention anything about the seat of Arbitration. However the confusion regarding “place” of Arbitration is clarified by Supreme Court in the case of Bharat Aluminum Company v. Kaiser Aluminium Technical Services Inc [ii] (BALCO)
The precedent for deciding judicial seat for arbitration is decided in the above said case in 2012. It held that the courts are required to take supervisory roles where ever the arbitration takes place.
Calcutta High Court in Hinduja Leyland Finance Ltd vs Debdas Routh &Anr [iii] held that parties at their own discretion cannot confer a court with exclusive jurisdiction for seat of arbitration unless the court has original jurisdiction under CPC to try the matter.
When place of arbitration is not agreed upon:
In the case of Antrix Corporation Ltd v. Devas Multimedia Pvt. Ltd., if there is no specific seatmentioned in the agreement, then there might be several courts with original territorial jurisdiction. Action arises only from that jurisdictional court where cause of action arises.
Whether jurisdictional issue has to be considered preliminary?
McDermott International Inc. v. Burn Standard Co. Ltd., Supreme Court decided to “jurisdictional challenge should be decided as preliminary issue”.
Maharishi Dayanand University v. Anand Coop. L/C Society Ltd, Supreme Court ordered that jurisdictional issues may be decided while awarding a reward.
In Kvaerner Cementation India Limited v. Bajranglal Agarwal [iv], Supreme Court held while deciding section 16 of the act that “tribunal would do well in disposing of the jurisdictional challenge as a preliminary issue so that it may not be necessary to go into the entire gamut of Arbitration proceedings” which is later upheld in Ayyaswami v. A. Paramasivam Precedents’ regarding preliminary issue in India is still not yet settled.
Among the recent cases, Hon'ble Delhi High Court in the judgement of Parsvnath Developers Limited &Anr. v Rail Land Development Authority, held that preliminary issues fall within the domain of arbitration tribunal and said that arbitration agreement can be invoked any number of times following the Supreme Court judgment in Dolphin Drilling Ltd. v Oil and Natural Gas Corporation Ltd.[v]
·Reason for confused jurisdictional issue:
There has been different views’ regarding jurisdictional challenge by different courts and different judges. But, there is only 2 exact reasons for all those contradicting decision. It is of Hon'ble Judge’s decision as to which view should be considered.
a. As soon as jurisdictional challenge is decided as preliminary, parties get to know about their situation of their case. Thus, this is the reason for generally not deciding jurisdictional issue preliminary.
b. Existence of two situations allows parties to manipulate with the proceedings.
Model law contains a provision allowing liberty to the tribunal to take actions as to prevent any malicious intentions of parties. Implementing such power in the Arbitration and Conciliation Act would give better insights to decide whether jurisdictional challenges to be decided preliminary.
If challenge decided as final award on merit, if it has no jurisdiction then final award becomes invalid with cost of time and money. Also, after analysis it is better to decide when this issue to be taken care of by the arbitration tribunal itself depending on the facts of each case and its requirements during the procedure followed. This view was taken by Hon'ble court in Maharishi Dayananda and Steel Authority of India[vi] case.
Jurisdiction of tribunal to decide limitation:
In Uttarakhand PurvSainak Kalyan Nigam Limited vs. Northern Coal Field Limited [vii]("UPSKNL Case"), Supreme Court held that arbitration tribunal has power to decide on the limitation along with the issues of preliminary jurisdictionand cannot be decided by court under sec 11. However, it is not followed in various other cases. Thus, scope of jurisdiction remains unclear.
References:
[i] Civil Appeals No 824 of 2018 [ii] (2012) 9 SCC 552 [iii] AIR 2018 Cal 322 [iv](2012) 5 SCC 215 [v] (2010) 3 SCC 267. [vi](2007) 5 SCC 295 [vii] (2020) 2 SCC 455