Sections 8 & 11 of the Arbitration & Conciliation Act, 1996

Table of Contents

8. Power to refer parties to arbitration where there is an arbitration agreement – (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.

 

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof: 

 

Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.

 

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.

 

 

11. 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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court]; 

 

(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 1 [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court]. 

 

(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 Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court]to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 

 

[(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement. 

 

(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.] 

 

(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to [the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision].  

 

[(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to— (a) any qualifications required for the arbitrator by the agreement of the parties; and (b) the contents of the disclosure and 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 Supreme Court or the person or institution designated by that Court] may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. 

 

[(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.] 

 

(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, [different High Courts. 

 

[(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the “Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to the “Supreme Court”; and 

(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to “the Supreme Court or, as the case may be, the High Court” in those sub-sections shall be construed as a reference to 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 that High Court.] 

 

[(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case maybe, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. 

 

(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule. 

Explanation.—For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.] 

Introduction

Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 (“the Act”) are two crucial provisions that govern the referral of disputes to arbitration and the appointment of arbitrators, respectively. Both sections aim to minimize judicial intervention and promote arbitration as a preferred mode of dispute resolution, but they function at different stages of the arbitration process.

Section 8 comes into play when a party seeks to bring a dispute before a court despite an existing arbitration agreement. It empowers courts to refer the parties to arbitration if a valid arbitration agreement exists, barring the court from adjudicating the dispute. The court’s role is limited to a prima facie determination of the existence of a valid arbitration agreement. Once these conditions are met, the court must refer the matter to arbitration.

Section 11, on the other hand, governs the appointment of arbitrators. It is invoked when the parties cannot agree on an arbitrator, or when one party fails to comply with the terms of the arbitration agreement regarding the appointment process. Before the 2015 Amendment,1 the scope of judicial scrutiny under this section was broader, requiring the Chief Justice or their designate to examine not just the existence of an arbitration agreement, but also preliminary issues such as the validity of the agreement and whether the dispute was arbitrable.

While Section 8 focuses on ensuring that disputes subject to arbitration agreements are referred to arbitration, Section 11 deals with the mechanism of constituting the arbitral tribunal. The two sections are complementary in that they both serve to reinforce the primacy of arbitration over court proceedings, and their synergy lies in ensuring that disputes are not adjudicated by the courts when arbitration is the agreed-upon method of resolution.

The law on Sections 8 and 11 has evolved significantly through legislative amendments, and key cases have shaped the scope of judicial intervention under these provisions.

History and Background of Section 8

Section 8 of the Arbitration and Conciliation Act, 1996, marks a significant departure from the arbitration regime under the Arbitration Act, 1940.2 The change was a result of India’s effort to modernize its arbitration laws to align with international standards, as encapsulated in the UNCITRAL Model Law on International Commercial Arbitration, 1985.3 The provision reflects India’s adoption of a more pro-arbitration stance, emphasizing party autonomy and minimal judicial interference in arbitration proceedings.

Under the 1940 Act, courts had the discretion to stay proceedings and refer parties to arbitration. This resulted in delays and procedural inefficiencies, undermining the effectiveness of arbitration as a dispute resolution mechanism. Section 8 addressed these concerns by mandating courts to refer parties to arbitration where a valid arbitration agreement exists, provided the application is made at the earliest stage of the judicial process. This mandatory referral principle aimed to curtail judicial intervention and ensure the enforcement of arbitration agreements in line with the intent of the contracting parties.

The provision is inspired by Article 8 of the UNCITRAL Model Law and Article II(3) of the New York Convention,4 which require courts to refer disputes to arbitration unless the agreement is “null and void, inoperative, or incapable of being performed.” By incorporating these principles, Section 8 sought to provide clarity and uniformity in dealing with arbitration agreements, fostering a supportive environment for arbitration in India.

The 2015 Amendment Act significantly refined Section 8 to address ambiguities and streamline its application. Before the amendment, judicial authorities could refuse to refer disputes to arbitration if they believed the arbitration agreement was not valid or applicable. This often led to prolonged litigation at the referral stage, defeating the objective of arbitration as a speedy dispute resolution mechanism. The 2015 amendment introduced a prima facie test, requiring courts to confine their inquiry to the existence of a valid arbitration agreement. Courts were explicitly barred from delving into the merits of the dispute, thereby ensuring that arbitration proceedings are not unnecessarily delayed.

Additionally, the amendment addressed situations where parties did not possess the original arbitration agreement or a certified copy. It introduced a proviso allowing courts to direct the other party to produce the original or certified copy if retained by them, removing a procedural hurdle that often hampered referrals to arbitration.

History and Background of Section 11

Section 11 of the Arbitration and Conciliation Act, 1996, deals with the appointment of arbitrators, providing a framework for ensuring the composition of an arbitral tribunal when parties are unable to agree on the procedure or fail to act within agreed timelines. The section embodies principles from Article 11 of the UNCITRAL Model Law, emphasizing minimal court intervention and party autonomy, aligning Indian arbitration law with global standards. The provision facilitates arbitral appointments by granting parties the freedom to agree on a procedure for appointing arbitrators, while also allowing courts or designated arbitral institutions to step in where necessary. 

Under the 1940 Act, courts played a central role in appointing arbitrators, often leading to delays and procedural complications. Section 11 of the 1996 Act, on the other hand, prioritizes party autonomy by enabling parties to determine the procedure for appointment and empowering them to directly appoint arbitrators without immediate recourse to the judiciary. 

The 2015 amendment to Section 11 introduced significant reforms aimed at expediting the arbitration process. It confined the scope of judicial inquiry under Section 11(6A) to determining the existence of an arbitration agreement, thereby eliminating delays caused by broader judicial scrutiny of disputes. The amendment also mandated that applications for appointment under Section 11 be disposed of within 60 days, emphasizing the need for time-bound court proceedings dealing with arbitral processes. These changes ensured that contentious issues, including questions of arbitrability, were left to the arbitral tribunal to decide under the principle of Kompetenz-Kompetenz, as enshrined in Section 16 of the Act.

Further changes were introduced through the 2019 amendment, which sought to institutionalize arbitration in India. Section 11(3A), introduced vide the amendment empowered the Supreme Court and High Courts to designate arbitral institutions to handle appointments. Further, the Arbitration Council of India was created to grade and accredit arbitral institutions, with the goal of enhancing transparency and professionalism. Additionally, the amendment required arbitral institutions to appoint arbitrators within 30 days, and fixed arbitrators’ fees based on the Fourth Schedule to ensure affordability and consistency. These amendments were guided by the High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India,5 led by Justice B.N. Srikrishna. The committee emphasized reducing delays, professionalizing the appointment process, and promoting India as a global arbitration hub. It also recommended limiting court intervention during arbitrator appointments to expedite the process, an objective partially addressed by the 2015 amendments. Though introduced in the statute, some of the amendments to Section 11 by way of the 2019 amendments are yet to be notified.

Judicial Evolution and Interpretation by the Courts

The legislative amendments to Sections 8 and 11 have been pivotal in streamlining arbitration proceedings, but the judiciary has also played a crucial role in shaping their interpretation and application. Through landmark rulings, courts have clarified procedural ambiguities and reinforced the principles of party autonomy and minimal judicial interference, ensuring the provisions align with the overarching objectives of the Arbitration and Conciliation Act, 1996.

Scope for Reviewing the Existence of an Arbitration Agreement under Sections 8 and 11  

In the early years of the Arbitration and Conciliation Act, 1996, Section 11 was interpreted as conferring administrative powers on the Chief Justice or their designate. This was established in Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd.,6 where a five-judge bench of the Supreme Court held that the powers exercised by the Chief Justice under Section 11(6) were purely administrative.7 The Court ruled that the Chief Justice or their delegate did not need to engage in an in-depth review of the arbitration agreement or related issues and could simply appoint the arbitrator based on the arbitration agreement. This interpretation significantly limited judicial intervention at the appointment stage, confining it to a basic administrative task.

However, this position was overruled by a larger bench in SBP & Co. v. Patel Engineering.8 Here, a seven-judge bench of the Supreme Court held that the role of the Chief Justice under Section 11 was judicial rather than administrative. The majority opinion, authored by Justice P.K. Balasubramanyan, clarified that the Chief Justice or their designates must examine several preliminary issues before appointing an arbitrator. These included determining the existence and validity of the arbitration agreement, the jurisdiction of the Chief Justice to entertain the request, and whether there was a live claim. This broadened the scope of judicial scrutiny under Section 11 and established a more involved judicial function, compared to the prima facie review required under Section 8. 

The court also held that as the order passed by the Chief Justice of the High Court or the designated Judge of the High Court under section 11 of the Act is a judicial order, an appeal will lie against such order only under Article 136 of the Constitution of India, to the Supreme Court of India. It is important to note, however, that the dissenting judgment, authored by Justice C.K. Thakker, maintained that the function performed by the Chief Justice under Section 11(6) is purely administrative.

In National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.,9 the Supreme Court further affirmed this judicial role under Section 11. The Court clarified that in determining the existence of an arbitration agreement, the Chief Justice or their designate could consider a wider scope of preliminary issues, such as whether the claim was arbitrable. Moreover, the Court held that such decisions would bind the arbitral tribunal, meaning that parties could not re-argue these issues before the tribunal.

Despite these rulings, concerns arose over the extent of judicial intervention in the arbitration process. To address this, the 246th Law Commission Report,10 published in 2014, recommended significant reforms to both Sections 8 and 11. The report proposed limiting the court’s role under Section 8 to a prima facie determination of the existence of an arbitration agreement, without delving into broader issues like arbitrability. Similarly, the report suggested introducing Section 11(6A) to confine the role of the Chief Justice or their designate to a prima facie determination of the existence of an arbitration agreement, aligning Section 11 with Section 8. Additionally, the report recommended that orders under both Sections 8 and 11 should be made appealable under Section 37 to ensure consistency in the law.

These recommendations culminated in the 2015 Amendment to the Arbitration and Conciliation Act. The amendment introduced Section 11(6A), which expressly limited the court’s role under Section 11 to an examination of the existence of an arbitration agreement. This brought the judicial role under Section 11 in line with Section 8, where courts are required to refer disputes to arbitration unless they find that prima facie no valid arbitration agreement exists. The amendment also made orders under Section 8 appealable under Section 37, but did not extend this appealability to Section 11, thus creating a disparity between the two sections.

Following the 2015 amendment, the judgment in Duro Felguera S.A. v. Gangavaram Port Ltd.11 reaffirmed that under Section 11(6A), the court’s role is strictly limited to determining the existence of an arbitration agreement. Courts are no longer required to examine broader issues such as arbitrability or the scope of the agreement, which are left to the arbitral tribunal. Justice Banumathi, writing for the majority, emphasized that this narrowed scope aimed to reduce judicial intervention and speed up the arbitration process.

Curiously, the 2019 amendment to the act, marked a pivotal shift in the arbitration landscape by repealing sub-sections (6A) and (7) of Section 11. This amendment aimed to bolster institutional arbitration in India, with the appointment of arbitrators now being entrusted to arbitral institutions. Under the amended Section 11(6), the responsibility for appointing arbitrators lies with arbitral institutions designated by the Supreme Court in the case of international commercial arbitration, and by the High Courts in the case of domestic arbitrations. Specifically, the provision states: “…the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be.” However, the amendments w.r.t to Section 11 has still not been notified and thus, Section 11(6A) and (7) remain in force.

In Garware Wall Ropes Ltd. v. Coastal Marine Constructions12 the Supreme Court, referring to the 246th Law Commission Report, reaffirmed that the scope of judicial scrutiny under Section 11 had been significantly narrowed by the 2015 amendment. The Court emphasized that under Section 11, the judiciary’s role is limited to determining the existence of an arbitration agreement, leaving all other preliminary issues to the arbitral tribunal.

This position was further solidified in Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman13 where the Supreme Court held that both Section 8 and Section 11 now require courts to conduct a prima facie examination limited to the existence of an arbitration agreement. The Court ruled that broader issues like arbitrability must be left to the tribunal, reinforcing the narrow review standard and overturning earlier judgments that allowed for more detailed judicial scrutiny.

In Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd.,14 the Supreme Court addressed whether the High Court was right in rejecting an application filed under Section 11 for  reference to arbitration, on the ground that it was barred by limitation. The Court while upholding the Kompetenz-Kompetenz doctrine enshrined under Section 16 of Act, affirmed that the Arbitral Tribunal has the authority to decide its own jurisdiction, including issues on limitation. The judgment reinforced the impact of the 2015 Amendment to the Arbitration Act, emphasizing the goal of reducing judicial interference at the pre-arbitral stage. The ruling clarified that under Section 11(6A), the Court is now required only to examine the existence of the arbitration agreement and all other preliminary or threshold issues are left to be decided by the arbitrator under Section 16 of the Act, ensuring minimal court involvement and prioritizing party autonomy in arbitration.

In Vidya Drolia v. Durga Trading Corporation15 the Supreme Court further harmonized Sections 8 and 11 by reading the prima facie test into Section 11(6A). The Court laid down key principles regarding the scope of judicial interference under these sections, holding that subject matter arbitrability generally cannot be decided at the stage of Sections 8 or 11 unless the case is clearly non-arbitrable (referred to as “deadwood”). It also upheld the principle of “when in doubt, do refer,” emphasizing that if the validity of the arbitration agreement cannot be determined on a prima facie basis, the matter should be referred to arbitration.

In NTPC Ltd. v. SPML Infra Ltd.,16 the Supreme Court carved out an exception to Section 11(6) through what it termed the “eye of the needle test.” Here, the Court held that judicial intervention under Section 11 is permissible in rare cases where the dispute falls into the category of manifestly and ex-facie non-arbitrable matters. The test was evolved to prevent wastage of public and private resources and to prevent situations where parties would be forced to arbitrate demonstrably non-arbitrable matters. The court emphasized that this test should be applied sparingly, allowing courts to intervene only when it is evident from the pleadings that the dispute cannot be resolved through arbitration. 

A significant shift occurred with the decision in N. N. Global Mercantile Private Limited v. Indo Unique Flame Ltd.17 In a 3:2 decision, the Supreme Court held that an unstamped arbitration agreement could not be enforced until the stamp duty had been paid. The majority held that, under Section 11(6A), the court must ascertain the existence of an arbitration agreement, and for the agreement to be admissible as evidence, the stamp duty must be paid. The dissent, however, argued that such matters fall within the purview of the arbitral tribunal, maintaining that allowing judicial intervention for issues like stamping would undermine the Arbitration Act. The dissent reaffirmed the prima facie standard, stating that courts should “refer when in doubt” to limit interference.18

This position was overruled in In Re: Interplay between the Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 189919 where a seven-judge bench of the Supreme Court held that an unstamped arbitration agreement is not void ab initio. The Court clarified that while unstamped or inadequately stamped agreements may be inadmissible under Section 35 of the Stamp Act, they are not rendered void or unenforceable. It further held that non-stamping or inadequate stamping is a curable defect, and objections regarding stamping do not fall within the purview of Sections 8 or 11. The court’s role remains limited to determining whether the arbitration agreement prima facie exists, with all stamping-related objections to be handled by the arbitral tribunal. Thus, the Court concluded that objections regarding the stamping of the arbitration agreement are within the jurisdiction of the arbitral tribunal, thereby minimizing judicial intervention and reinforcing the purpose of the 2015 amendment.

In SBI General Insurance Co. Ltd. v. Krish Spinning,20 the Supreme Court addressed the scope of judicial intervention under Section 11 with respect to disputes involving “accord and satisfaction.” The Court clarified that such disputes, which involve mixed questions of law and fact, do not challenge the existence of the arbitration agreement itself and therefore fall exclusively within the jurisdiction of the arbitral tribunal. Observing the interplay between Vidya Drolia, NTPC, and the recent In Re: Interplay decision, the Court held that the tests such as “eye of the needle” or “ex-facie meritless” require courts to engage in a factual analysis, which is not consistent with modern arbitration principles that prioritize arbitral autonomy. The Court emphasized that “accord and satisfaction” disputes must be left to the tribunal, ensuring that the referral court’s role remains strictly limited to examining the prima facie existence of the arbitration agreement.

In other cases, including Cox & Kings Ltd. v. SAP India (P) Ltd.,21 Lombardi Engg. Ltd. v. Uttarakhand Jal Vidyut Nigam Ltd.,22 Ajay Madhusudan Patel v. Jyotrindra S. Patel,23 and Goqii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd.,24 the Supreme Court has consistently reaffirmed that the scope of judicial review under Section 11 is confined to a prima facie determination of the existence of the arbitration agreement. These cases emphasized the need for minimal judicial intervention and reiterated that broader issues like arbitrability, stamping, or mixed questions of law and fact must be left to the arbitral tribunal, in line with the principle of “when in doubt, refer to arbitration.”

Thus, the evolving jurisprudence under Section 11 reflects a consistent effort by the judiciary to strike a balance between limiting court intervention and ensuring that arbitration agreements are enforced in line with the legislative intent of promoting arbitration as an efficient dispute resolution mechanism.

Appealability of Decisions under Sections 8 and 11

In terms of appealability, Pravin Electricals Pvt Ltd v. Galaxy Infra & Engineering Pvt Ltd,25 the Supreme Court pointed out an anomaly. While decisions under Section 8 are appealable under Section 37, similar decisions under Section 11 are not. This anomaly has occurred because the Parliament while enacting the 2015 amendment heeded to the 246th Law Commissions recommendation with respect to Section 8 but not with respect to Section 11. The Court suggested that Parliament may need to reconsider Sections 11(7) and 37 to bring both sections on par in terms of appealability. This anomaly still exists today. However, it is encouraging to see that in The Draft Arbitration and Conciliation (Amendment) Bill, 2024,26 this disparity has been reconciled, and the court’s refusal to appoint an arbitrator under Section 11 has also been made appealable. 

Limitation Period under Section 11

Section 11 of the Arbitration and Conciliation Act, 1996, historically had a lacuna with respect to the limitation period for filing applications for the appointment of arbitrators. This gap in the legislation left room for uncertainty and potential delays in initiating the arbitration process, as the Act itself did not prescribe a specific limitation period for such applications. Over time, the Supreme Court has stepped in to clarify this issue, holding that the limitation for filing an application under Section 11 is governed by Article 137 of the Limitation Act, 1963. This provision, which provides a three-year period for applications where no specific limitation period is prescribed, has been applied by the courts to address the absence of a clear time frame within the Arbitration Act.

The Supreme Court in Geo Miller & Company Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd.,27 addressed this lacuna by introducing the concept of the “breaking point,” which marks the moment when a reasonable party would abandon negotiations and turn to arbitration. This legal fiction was used to determine when the cause of action arises for the purposes of limitation under Section 11. The Court clarified that from this “breaking point,” the three-year limitation period under Article 137 begins to run, providing much-needed guidance on when the right to apply for the appointment of an arbitrator accrues.

Further clarification came in Bharat Sanchar Nigam Ltd. & Anr. v. M/s Nortel Networks Pvt. Ltd.,28 where the Court reiterated that the three-year period under Article 137 governs applications under Section 11. The Court held that this period starts when a party fails to appoint an arbitrator within 30 days of receiving a notice invoking arbitration under Section 21 of the Arbitration Act. However, the Court also expressed concern that allowing such a long period to file an application for the appointment of an arbitrator ran contrary to the legislative intent of promoting expeditious dispute resolution through arbitration. It suggested that Parliament should consider amending Section 11 to prescribe a shorter limitation period, aligning the provision more closely with the goal of swift arbitration.

In M/s B&T AG v. Ministry of Defence,29 the Supreme Court further reinforced the principle that the statutory three-year period cannot be extended by ongoing negotiations between the parties. In this case, the Court dismissed a Section 11 application that was filed five years after the “breaking point,” making it clear that the continuation of discussions does not extend the limitation period. The ruling confirmed that the limitation period remains fixed, and applications filed beyond the three-year limit are time-barred.

Finally, in Arif Azim Company Limited v. Aptech Limited,30 the Supreme Court reaffirmed the applicability of Section 43 of the Arbitration Act, which explicitly mandates that the Limitation Act applies to arbitration proceedings. The Court emphasized that the three-year period under Article 137 begins when a party fails to act on a valid arbitration notice, not from the date of the underlying dispute. In this case, the Court again reiterated the need for legislative reform, highlighting the necessity of prescribing a specific limitation period for Section 11 applications, rather than relying on the general three-year period under Article 137. 

Special Acts v. The Arbitration and Conciliation Act, 1996

The conflict between the Arbitration and Conciliation Act, 1996, and various special legislations such as the Electricity Act, 2003, Consumer Protection Act, 2019, and Micro, Small and Medium Enterprises Development (MSME) Act, 2006, has been a significant area of legal interpretation. The Supreme Court has clarified which legislation prevails in scenarios where both Acts could potentially govern dispute resolution.

In Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd.,31 the Supreme Court addressed the interplay between the Arbitration and Conciliation Act, 1996, and the Electricity Act, 2003. The Court held that Section 86(1)(f) of the Electricity Act, which deals specifically with the adjudication of disputes between licensees and generating companies, takes precedence over the general provisions of the Arbitration Act, particularly Section 11.

The Court ruled that disputes involving licensees and generating companies must be adjudicated exclusively under the Electricity Act by the appropriate regulatory commission, rather than through arbitration under the Arbitration Act. It was clarified that Section 11 of the Arbitration Act does not apply to such disputes, as Section 86(1)(f) of the Electricity Act governs who has the authority to arbitrate these issues. This decision highlighted the principle that in cases involving specialized legislation, the provisions of such special Acts, like the Electricity Act, will override the general provisions of the Arbitration Act, ensuring that disputes are resolved within the framework of the sector-specific regulatory regime. 

In M. Hemalatha Devi v. B. Udayasri​,32 the Supreme Court examined whether disputes involving consumer grievances could be referred to arbitration under Section 11 of the Arbitration Act. The Court affirmed that disputes falling within the purview of the Consumer Protection Act, a beneficial legislation, are non-arbitrable. It emphasized that consumer fora are public forums established to protect consumer rights, and allowing arbitration to oust their jurisdiction would frustrate the legislative intent. This ruling is consistent with earlier judgments such as Emaar MGF Land Ltd. v. Aftab Singh,33 which clarified that an arbitration clause in a consumer contract cannot prevent a consumer from seeking remedies under the Consumer Protection Act.

In Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd.,34 the Supreme Court addressed the conflict between the MSME Act and the Arbitration Act. It held that Chapter V of the MSME Act, which governs delayed payments to micro and small enterprises, overrides the Arbitration Act. The Court clarified that even if an independent arbitration agreement exists, parties can invoke the jurisdiction of the Micro and Small Enterprises Facilitation Council under Section 18 of the MSME Act. The Council is empowered to initiate conciliation proceedings and, if those fail, to act as an arbitrator or refer the matter to another arbitral institution. This ensures that the statutory protections under the MSME Act are not diluted by private arbitration agreements.

These judgments illustrate the Supreme Court’s approach to harmonizing the Arbitration Act with special statutes. The Court has consistently held that the provisions of specialized legislation, being tailored to specific contexts and public policies, must prevail over the general provisions of the Arbitration Act. 

Procedure for Arbitrator Appointment

Section 11 the Arbitration and Conciliation Act, 1996, outlines the framework for the appointment of arbitrators in both domestic and international arbitrations. Section 11 emphasizes the principle of party autonomy while providing for judicial intervention in specific and limited instances to ensure that the arbitration process remains efficient and in line with the agreement between the parties.

The Act mandates that in domestic arbitration, an application for the appointment of an arbitrator must be disposed of by the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour to dispose of the same  within 60 days from the date of service to the opposite party. This time-bound provision aims to promote the expeditious conduct of arbitration proceedings, reducing unnecessary delays. In the case of international commercial arbitration, the Supreme Court may appoint arbitrators, and it may also appoint arbitrators of a different nationality to ensure neutrality, which is a crucial aspect in cross-border disputes. Section 11 ensures that the appointment process is aligned with the parties’ expectations while safeguarding fairness and neutrality in international contexts. Although further amendments were made to Section 11 by way of Section 3 of the Act 33 of 2019, the same are yet to be notified.  

IBI Consultancy India Pvt. Ltd. v. DSC Limited,35 reaffirmed the principle of party autonomy, which is central to arbitration proceedings. In this case, the Supreme Court emphasized that parties are free to decide the number of arbitrators and the procedure for their appointment, as outlined in their arbitration agreement. However, if the parties fail to reach an agreement on the arbitrators or the appointment procedure, judicial intervention can be sought under Section 11 of the Act. The Court clarified that the role of judicial intervention in such cases is limited. The court’s involvement under Section 11 is not meant to override the parties’ autonomy but to ensure that the agreed-upon procedure is adhered to. This intervention is permissible only when one party fails to act in accordance with the procedure established in the arbitration agreement, thereby preserving the integrity of the arbitration process while respecting the parties’ contractual freedom.

Referring Parties to Arbitration under Section 8(1)

Section 8 of the Arbitration and Conciliation Act, 1996, plays a crucial role in ensuring that parties are referred to arbitration when there is a valid arbitration agreement between them. The courts have clarified through various rulings the circumstances under which a referral to arbitration should be made, emphasizing the mandatory nature of Section 8 and reinforcing the binding power of arbitration agreements.

In P. Anand Gajapathi Raju & Ors. v. P.V.G. Raju (Died) & Ors., the Supreme Court laid down four essential conditions for the court to exercise its power under Section 8. These conditions are: an arbitration agreement must exist; the action brought before the court must concern the same subject matter as the arbitration agreement; the defendant must request arbitration before submitting the first statement on the substance of the dispute; and the arbitration agreement must not be null, void, or inoperative. The Court held that all these conditions must be met, before the civil court refer the matter to arbitration.

In Smt. Kalpana Kothari v. Smt. Sudha Yadav & Ors.,, the Supreme Court emphasized the importance of an arbitration agreement in referring parties to arbitration under Section 8. The Court held that the mere existence of an arbitration clause requires the court to refer the matter to arbitration unless there is a specific challenge to the validity of the arbitration agreement. The Court further clarified that civil courts should not entertain matters covered by an arbitration agreement, as long as the arbitration clause exists, preventing the parties from bypassing arbitration.

In Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya, the Supreme Court clarified that for Section 8 to apply, the subject matter of the dispute must align entirely with the arbitration agreement. The Court ruled that if a suit involves both arbitrable and non-arbitrable issues, the court is not required to bifurcate the matter and then refer only a part of the dispute to arbitration. Instead, the entire suit must be covered by the arbitration agreement for it to be referred to arbitration.

In Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, the Court addressed whether the validity of an arbitration clause can be challenged before a court when an application for referral to arbitration is made. The Supreme Court held that if the existence of the arbitration clause is admitted, the court must refer the dispute to arbitration under Section 8. The issue of applicability or validity of the arbitration agreement is to be decided by the arbitral tribunal, not the court.

In Agri Gold Exims Ltd. v. Sri Lakshmi Knits & Wovens Ltd., the Supreme Court reiterated the mandatory nature of Section 8, stating that when a valid arbitration agreement exists, the court has no discretion and must refer the dispute to arbitration. Failing to refer the dispute to arbitration violates the mandatory language of Section 8(1), reinforcing the binding nature of arbitration agreements.

In H. Srinivas Pai and Anr. v. H.V. Pai (D) thr. L.Rs. and Ors., the Court clarified that the Arbitration Act applies to both commercial and non-commercial disputes, including civil disputes. The key factor is the existence of a valid arbitration agreement, irrespective of whether the dispute is commercial in nature.

Requirement of an Original Arbitration Agreement or a Certified Copy under Section 8(2)

Section 8(2) of the Arbitration and Conciliation Act, 1996, mandates that parties seeking referral to arbitration must submit the original arbitration agreement or a certified copy thereof. This requirement is critical in ensuring that courts have sufficient evidence to refer a dispute to arbitration. Several key cases have reinforced this procedural mandate.

In Magma Leasing and Finance Ltd. v. Potluri Madhavilata, the Supreme Court emphasized that the submission of the original arbitration agreement or a certified copy is essential for invoking the court’s power under Section 8. The Court held that failure to produce the original or certified copy of the arbitration agreement could result in the dismissal of the application seeking reference of the dispute to arbitration. The ruling reaffirmed that Section 8 is a legislative command, leaving courts with no discretion, once the prerequisite conditions, particularly the existence of a valid arbitration agreement, are met.

In N Radhakrishnan vs. M/S Maestro Engineers and Others, the Supreme Court reaffirmed the mandatory nature of Section 8(2). The Court held that non-compliance with the requirement to submit the original or certified copy of the arbitration agreement could lead to the dismissal of the application, as this requirement is a necessary condition for the court to exercise its powers under Section 8.

However, in Ananthesh Bhakta vs. Nayana S. Bhakta and Ors, the Supreme Court took a more flexible approach, clarifying that the absence of the original agreement or a certified copy at the time of filing the application does not automatically result in rejection of the Section 8 Application. The Court held that if the original or certified copy is produced at a later stage during the proceedings, when the court is examining the application, the application can still be considered. This ruling allowed for a more pragmatic interpretation, ensuring that technicalities do not obstruct justice, if the necessary document is eventually provided.

Implicit Inclusion of Kompetenz-Kompetenz principle under Section 8

Section 8 of the Arbitration and Conciliation Act, 1996, allows courts to refer parties to arbitration when a valid arbitration agreement exists. However, the scope of Section 8 also implicitly includes the principle of Kompetenz-Kompetenz, which grants arbitral tribunals the authority to determine their own jurisdiction. Various rulings have further clarified the interpretation of Section 8 and its interplay with judicial authority.

In Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd., the Supreme Court addressed the tribunal’s competence to rule on its own jurisdiction under Section 8. Although the Act does not explicitly mention this, the Court held that arbitral tribunals have the implied authority to determine their jurisdiction. This interpretation aligns with the principle of Kompetenz-Kompetenz, reinforcing the arbitral tribunal’s autonomy to rule on its own competence without court interference. Courts must recognize the tribunal’s authority, which limits the scope of judicial intervention when referring parties to arbitration.

In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., the Supreme Court clarified the issue of arbitrability, ruling that disputes involving rights in rem, such as criminal disputes, matrimonial disputes, guardianship matters, insolvency and winding up matters, tenancy disputes and intellectual property disputes, are not arbitrable and must be resolved by competent civil or criminal courts or tribunals. Arbitration is limited to disputes involving rights in personam, where the tribunal has competence. Furthermore, the Court addressed the non-arbitrability of fraud, ruling that serious fraud allegations requiring detailed evidence or public interest considerations should not be arbitrated but instead be handled by civil courts. This ruling slightly weakened the principle of Kompetenz-Kompetenz by allowing courts to refuse arbitration referrals in cases involving non-arbitrable issues like fraud, thus limiting the tribunal’s autonomy to decide jurisdictional questions.

The 2015 Amendment to the Arbitration Act brought a significant change by mandating that courts must refer parties to arbitration if they find, prima facie, that a valid arbitration agreement exists. This amendment overrides earlier rulings, such as Booz Allen & Hamilton Inc., which excluded certain disputes like fraud from arbitration. The amendment ensures that courts can no longer refuse to refer disputes to arbitration based on earlier judicial exclusions. This reform reinforces party autonomy and minimizes judicial interference, ensuring that disputes are referred to arbitration whenever a valid arbitration clause exists.

The Supreme Court in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, refined the framework for determining arbitrability post the 2015 Amendment to the Arbitration and Conciliation Act by introducing a comprehensive four-fold test. The test mandates that disputes are non-arbitrable when (i) they pertain to actions in rem and do not involve subordinate rights in personam, (ii) they affect third-party rights, require centralised adjudication, or have erga omnes effects, (iii) they involve sovereign or public interest functions, or (iv) are expressly or impliedly barred from arbitration by mandatory statutes. In the context of fraud, Vidya Drolia departed from emphasising a presumption in favour of arbitrability. It clarified that mere allegations of fraud are arbitrable unless the fraud vitiates the arbitration agreement itself or implicates rights in rem. The decision ensured that only complex fraud with public domain implications remains non-arbitrable, thereby fostering an arbitration-friendly jurisprudence.

In Gujarat Composite Ltd. v. A Infrastructure Ltd., (2023) 7 SCC 193, the Supreme Court observed that the 2015 amendment to Section 8 was based on the recommendations of the 246th  Law Commission Report. The Court noted that the judicial authority must refer parties to arbitration if a valid arbitration agreement exists. The only exceptions are if the agreement is null, void, inoperative, or incapable of being performed. This case reinforced the mandatory nature of the 2015 amendment, further limiting judicial discretion and ensuring that arbitration remains the preferred dispute resolution mechanism.

The First Statement on the Substance of the Dispute

Section 8 of the Arbitration and Conciliation Act, 1996, specifies that a party must request for arbitration before submitting the “first statement” on the substance of the dispute. The interpretation of what constitutes this “first statement” is crucial in determining whether a party has waived its right to invoke arbitration.

In Rashtriya Ispat Nigam Ltd. v. Verma Transport Company, the Supreme Court clarified that the “first statement” refers to the first substantial statement made by a party in court regarding the dispute. The Court held that the “first statement” is distinct from the written statement, and it plays a critical role in determining whether a party has waived its right to arbitration by engaging in court proceedings without raising the arbitration clause. This distinction ensures that parties cannot use the court process to delay invoking arbitration, preserving the integrity of the arbitration process.

In Greaves Cotton Ltd. v. United Machinery & Appliances, the Supreme Court further clarified the meaning of the “first statement.” The Court ruled that applying for an extension of time to file a written statement does not constitute the “first statement on the substance of the dispute” under Section 8. As a result, such an application does not amount to waiving the right to invoke arbitration. Only a substantive response on the merits of the case qualifies as the “first statement.” This ruling reinforced the idea that procedural actions, such as seeking time extensions, do not impact the party’s ability to invoke an arbitration agreement, preserving the right to arbitration even after requesting procedural accommodations.

  1. Arbitration and Conciliation (Amendment) Act, 2015, No. 3, Acts of Parliament, 2016 (India).
    ↩︎
  2. Arbitration Act, 1940, No. 10 of 1940, India Code (1940). ↩︎
  3. UNCITRAL Model Law on International Commercial Arbitration, art. 16, U.N. Doc. A/40/17, Annex I (1985), as amended by U.N. Doc. A/61/17 (2006).
    ↩︎
  4.  Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 330 U.N.T.S. 3. ↩︎
  5. High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, Report, Ministry of Law & Justice, Gov’t of India (2017), https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf. ↩︎
  6. Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd., AIR 2002 SC 778, ¶ 26-31. ↩︎
  7. SBP & Co. v. Patel Engineering, (2005) 8 SCC 618 (C. K. Thakker, J. dissenting), ¶ 44. ↩︎
  8. SBP & Co. v. Patel Engineering, (2005) 8 SCC 618, ¶ 46. ↩︎
  9. National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd., AIR 2009 SC 170, ¶ 17. ↩︎
  10. Law Commission of India, 246th Report on Amendments to the Arbitration and Conciliation Act, 1996 (Report No. 246, 2014). ↩︎
  11. Duro Felguera S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729, ¶ 19. ↩︎
  12. Garware Wall Ropes Ltd. v. Coastal Marine Constructions, AIR 2019 SC 2053, ¶ 13. ↩︎
  13. Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714, ¶ 10. ↩︎
  14. Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455, ¶ 9.8 & 9.9. ↩︎
  15. Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, ¶ 86 & 87. ↩︎
  16. NTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385, ¶ 25-28. ↩︎
  17. N. N. Global Mercantile Private Limited v. Indo Unique Flame Ltd., (2023) 7 SCC 1, ¶ 109-114. ↩︎
  18. N. N. Global Mercantile Private Limited v. Indo Unique Flame Ltd., (2023) 7 SCC 1 (Rastogi, J. dissenting), ¶ 97; N. N. Global Mercantile Private Limited v. Indo Unique Flame Ltd., (2023) 7 SCC 1 (Hrishikesh Roy, J. dissenting), ¶ 87.3-88. ↩︎
  19. In Re: Interplay between the Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, (2024) 6 SCC 1, ¶ 224. ↩︎
  20. SBI General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754. ¶ 132-135. ↩︎
  21.  Cox & Kings Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1. ↩︎
  22. Lombardi Engg. Ltd. v. Uttarakhand Jal Vidyut Nigam Ltd., (2024) 4 SCC 341. ↩︎
  23. Ajay Madhusudan Patel v. Jyotrindra S. Patel, 2024 SCC OnLine SC 2597. ↩︎
  24. Gogii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd., 2024 SCC OnLine SC 3189. ↩︎
  25. Pravin Electricals Pvt Ltd v. Galaxy Infra & Engineering Pvt Ltd, (2021) 5 SCC 671, ¶ 21. ↩︎
  26. Ministry of Law & Justice, Government of India, Inviting Comments on the Draft Arbitration and Conciliation (Amendment) Bill, 2024 (Oct.18,2024), https://cdn.ibclaw.online/legalcontent/ACM/Other/Inviting+Comments+on+the+draft+Arbitration+and+Conciliation+(Amendment)+Bill%2C+2024+18.10.2024.pdf. ↩︎
  27. Geo Miller & Co. Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd., (2020) 14 SCC 643, ¶ 10. ↩︎
  28. Bharat Sanchar Nigam Ltd. & Anr. v. M/s Nortel Networks Pvt. Ltd., (2021) 5 SCC 738, ¶ 40. ↩︎
  29. M/s B&T AG v. Ministry of Defence, 2023 SCC OnLine SC 657, ¶ 61-63. ↩︎
  30. Arif Azim Company Limited v. Aptech Limited, (2024) 3 SCR 73, ¶ 46-50. ↩︎
  31. Gujarat Urja Vikas Nigam Ltd. v. Essar Power Ltd., (2008) 4 SCC 755, ¶ 60. ↩︎
  32. M. Hemalatha Devi v. B. Udayasri, (2024) 4 SCC 255, ¶ 16-21. ↩︎
  33. Emaar MGF Land Ltd. v. Aftab Singh, (2019) 12 SCC 751, ¶ 54
    ↩︎
  34. Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd. (2023) 6 SCC 401, ¶ 34. ↩︎
  35. IBI Consultancy India Pvt. Ltd. v. DSC Limited, (2018) 17 SCC 95, ¶ 10. ↩︎