Delhi High Court: Arbitral Tribunal ought to decide Section 16 objections

Apr 10, 2021 #Arbitration #Delhi High Court

Elisha Vaswani

Referring to the case of Surender Kumar Singhal vs Arun Kumar Bhalotia, the Delhi High Court held that  an arbitral tribunal ought to decide the objection under Section 16 of the Arbitration & Conciliation Act as soon as possible, as a preliminary ground.

An order passed by Justcie Prathiba M Singh stipulates essential factors that must be taken into consideration while objections are being raised:

  • When the issue of jurisdiction can be decided on the basis of admitted documents on record, the tribunal ought to proceed to hear the matter/ objections at the inception itself;
  • If the tribunal is of the opinion that the objections under Section 16 of the Act cannot be decided at the inception and would require further enquiry into the matter, it could consider framing a preliminary issue and deciding the same as soon as possible;
  • If the tribunal is of the opinion that objections under Section 16 would require evidence to be led then it could direct limited evidence to be led on the said issue and adjudicate the same;
  • And lastly If the tribunal is of the opinion that detailed evidence needs to be led both written and oral, then after the evidence is concluded, the objections under Section 16 would have to be adjudicated first before proceeding to passing of the award.

The Court observed, “The statute contemplates that the party raising the objection has to raise it with alacrity and hence by an overall reading of Section 16 and especially Section 16(5) of the Act, there is no doubt that the Tribunal also ought to decide the objection with a sense of urgency. Such dispensation would be favoured especially in order to ensure that parties to whom the arbitral proceedings may not even be applicable are not entangled to long drawn arbitral proceedings with substantial costs being incurred”

In the matter at hand, the petitioner preferred a writ petition challenging an order of the arbitrator which refused to rule on its jurisdiction to entertain any further claims.

The arbitrator believed that the ultimate order can not be reached without further evidence and hence, would be decided at the final stage.

The Court highlighted that despite the fact that a petition under A.226/227 would be wholly maintainable against an arbitral tribunal, such interference would be permitted only in the instance where the order in question is utterly perverse in nature.

Court supplied emphasis, “For interference under Article 226/227, there have to be `exceptional circumstances’.. Though interference is permissible, unless and until the order is so perverse that it is patently lacking in inherent jurisdiction, the writ court would not interfere”

Dealing with the order of the arbitrator, the instant matter does not appear as an ‘exceptional rarity’ which would necessitate the exercise of it’s jurisdiction.

It’s pertinent to note that the question of jurisdiction must be settled first, and only after it has been adjudicated can a final award be passed.

The petition was subsequently disposed of, “The ld. Arbitrator would proceed to adjudicate the disputes expeditiously and pass an award, preferably within a period of six months.


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