Section 11 Application Not Maintainable If Objection To Jurisdiction Of Arbitrator Rejected By Arbitral Tribunal: Allahabad High Court

The Allahabad High Court has recently held that to challenge the jurisdiction of the arbitrator, once the same has been rejected by the Tribunal, the aggrieved party has to challenge the final award. Application under Section 11 of the Arbitration and Conciliation Act, 1996 before the High Court is not maintainable to that effect.

Justice Ashwani Kumar Mishra held,

“From the statutory scheme, noticed above, it is abundantly clear that where objection to the jurisdiction of arbitrator is rejected by the Arbitral Tribunal, the only way in which such challenge can be pursued is by challenging the award, as and when it is made by the arbitrator. The applicant cannot be permitted to circumvent the statutory scheme by invoking the jurisdiction of this Court under Section 11 of the Act of 1996, on the premise that the appointment of arbitrator itself is bad.”

Due to a dispute between the parties, the Opposite Party appointed its arbitrator and also asked the Applicant to appoint its arbitrator. However, the Applicant did not appoint an arbitrator in response to the notice.

Applicant contended that they had invited the Opposite Party for conciliation, wherein they had agreed to conciliate on the point of differences. Therefore, the Applicant did not appoint their arbitrator.

Further, it was alleged that the arbitrator appointed by the opposite party, proceeded by treating himself to be the sole arbitrator. Even though an objection was raised by the Applicant to the appointment of such arbitrator, it was rejected by the arbitrator and proceedings were continued.

Counsel for the Opposite Party raised an objection as to the maintainability of the Application under Section 11 of the Act on the ground that once the object had been rejected by the arbitrator, the Applicant had the statutory remedy to challenge the award.

Per Contra, Counsel for Applicant stated that the appointment of sole arbitrator by the Opposite Party goes against the scheme of the Act.

The Court observed that “Section 16 of the Act of 1996 contemplates challenge to the competence of Arbitral Tribunal, wherein objection is raised to its jurisdiction. Section 16 is categorical and vests jurisdiction in the arbitrator to adjudicate upon his own jurisdiction.”

With respect to the applicability of the decision of the Supreme Court in Perkins Eastman Architects DPC and another Vs. HSCC (India) Ltd., as relied by the Applicant, the Court observed that

“So far as the judgment in Perkins Eastman Architects DPC (supra), relied upon by the learned counsel for the applicant, is concerned, the Court had merely followed previous judgment of the Supreme Court in TRF Limited Vs. Energo Engineering Projects Limited, (2017) 8 SCC 377, which arises out of a different exigency altogether. In TRF Limited (supra) the Court was dealing with the appointment of an arbitrator, who was ineligible to act by virtue of the embargo contained in 7th Schedule read with Section 12(5) of the Act. A person, who becomes ineligible on account of the said embargo becomes de jure unable to perform his functions, and therefore jurisdiction under Section 11 could be invoked for appointment of arbitrator.”

Accordingly, the Court held that the applicant, herein, never contested that the arbitrator was ineligible to arbitrate in terms of Section 12(5) read with the 7th Schedule of the Act. Thus, application under Section 11(6) of the Act for appointment of arbitrator was misconceived and the Application had the remedy to pursue challenge to the award in the terms of the Act.

Case Title: Purvanchal Vidyut Vitaran Nigam Ltd. (Puvvnl) vs. M/S Prabha Mvomni (Jv) 2023 LiveLaw (AB) 266 [ARBITRATION AND CONCILI. APPL.U/S11(4) No. -137 of 2022 ]

Case Citation: 2023 LiveLaw (AB) 266

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