Arvind Datar SA has succeeded before a bench of seven-judges of the Indian Supreme Court which has now decisively set out the limited role that the High Courts or Supreme Court have when appointing an arbitrator or the Chairperson of an Arbitral Tribunal. Under section 11(6A) of the Arbitration and Conciliation Act 1996, the court is called upon to appoint an Arbitrator or Chairperson because the parties to the arbitration agreement cannot agree on the appointment of the arbitrator or the arbitrators cannot agree upon the Chairperson.
Section 11(6A) reads as follows: “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.”
An earlier bench of five-judges had held that while appointing an arbitrator, the Supreme Court or the High Court had the duty to examine whether the arbitration agreement was duly stamped under the Indian Stamp Act 1899. If the agreement was not stamped, the court could not appoint the arbitrator but impound the agreement and send it to the Registrar of Stamps for collection of duty plus a penalty.
This decision was highly controversial and several arbitrations were stalled as many agreements were either on plain paper or through exchange of letters or emails. The law provides that if an arbitration agreement has to be deciphered from correspondence, any one letter or email must be stamped.
The bench of seven-judges have since unanimously overruled the earlier decision (which was a split verdict of 3:2) and held that while appointing an arbitrator under section 11(6A), the jurisdiction of the High Court or the Supreme Court is very limited. It is not open to the court to go into other issues such as validity of the arbitration agreement, adequacy of stamp duty or the compliance with the Contract Act. This judgment has been widely welcomed and will hasten the disposal of arbitrations.
Please see here for the full judgment.
