Appointment by Mutual Consent

By G.Ashokapathy, Secretary General CNICA. 

An arbitrator is created out of an arbitration clause or an agreement. So his appointment should be strictly in accordance to the agreement/ clause. The clause relating appointment of arbitrator on mutual consent came up for consideration before the Honourable High Court at Delhi in the case of Rajesh Batra v. Ranbir Singh Ahlawat 2011(4) Arb LR 371 (Delhi).

In this case the parties entered into an agreement wherein they agreed to resolve their disputes through arbitration process by mutually appointing an arbitrator. Dispute arose and the claimant appointed an arbitrator. Respondent had nor consented for the same. The arbitrator with out obtaining the consent from the respondent assumed office and posted the case for hearing. After several hearings the respondent had appeared and sought time on two occasions and on the second occasion, further time was refused by the arbitrator. The respondent sent a letter challenging that he had not consented for the appointment of the arbitrator and that the arbitrator had no jurisdiction. The arbitrator took a view that since the respondent appeared for two hearings he had consented on the appointment of the arbitrator.

The arbitrator seems to have relied on section 16(2) of the arbitration and conciliation act in coming to such conclusion. Section reads as follows:

16.Competence of arbitral tribunal to rule on its jurisdiction.-

 (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,-

(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed , or participated in the appointment of, an arbitrator.

(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall he raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.

(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.

(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.

Section 16(2) states that objection relating to jurisdiction shall be raised before the filling of the statement of defence. In the case under discussion it is seen that the statement of defence was yet to be filed. At the out set the arbitrator ought not to have assumed office with out receiving the consent from the respondent. In clauses where arbitrator is to be appointed by mutual consent, the consent of parties is the foremost requirement and without this the arbitrator cannot act. Hence the arbitrator ought not to have proceeded having proceeded he should have at the least withdrawn after the respondent had raised serious objection as to consent and consequential jurisdiction.   In theses circumstance the High Court had come down heavily on the arbitrator’s action and had ordered cost on the arbitrator.