ALTERNATE DISPUTE

RESOLUTION PROJECT
Power of Arbitral Tribunal to Rule on its Own
Jurisdiction

SUBMITTED BY

PRITIKA JAIN
ROLL NO. 90
SECTION B

UNDER THE GUIDANCE OF

Mr. PRASENJIT KUNDU

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 ACKNOWLEDGEMENT

I hereby take this opportunity to thank all those who have been a constant support to me
while the preparation of this project. I thank my Law of Arbitration Professor Mr. Prasenjit
Kundu, who through his interactive methodology and enthralling class lectures made all our
concepts clear. I also thank my parents who have been a constant support while the project
work was under work.

Without the support of the above mentioned this work would never have been completed.

INDEX

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Introduction3

Scope and Applicability.5

Constitutionality of The Section6

Jurisdiction of The Arbitrator.7

Propriety of proceedings with the arbitration without deciding the question of jurisdiction.8

Consequences of failure to decide application under Section 16.......9

Can the objection regarding jurisdiction be raised for the first time in application under
Section 34?...............................................................................................................................10

Conclusion11

Bibliography11

INTRODUCTION

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Over the matter of jurisdiction the provision in the Arbitration and Conciliation Act, 1996 is
to be found in Section 16, in Chapter IV under the heading Jurisdiction of Arbitration
Tribunals. The chapter carries only two sections. One deals with the matters of jurisdiction
and the nature and validity of the arbitration clause and agreement [S.16] and the other with
the power of the arbitral tribunal as to interim measures [S.17].

However, the provisions of Section 16 of the Arbitration and Conciliation Act 1996 are new
and did not find place in the old Act of 1940. Also the provisions of Section 16 are analogous
to Article 16 of UNCITRAL Model Law.

Section16. 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.

UNCITRAL Model Law

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Article16. Competence of arbitral tribunal to rule on its jurisdiction1

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with
respect to the existence or validity of the arbitration agreement. For that purpose, an
arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract. 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. A party is not precluded from raising such a plea
by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea
that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its authority is raised during the arbitral
proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the
delay justified.

(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either
as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a
preliminary question that it has jurisdiction, any party may request, within thirty days after
having received notice of that ruling, the court specified in article 6 to decide the matter,
which decision shall be subject to no appeal; while such a request is pending, the arbitral
tribunal may continue the arbitral proceedings and make an award.

1 http://www.sice.oas.org/dispute/comarb/uncitral/icomarbe1.asp#art16a

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SCOPE AND APPLICABILITY

Section 16 deals with powers and competency of the arbitral tribunal to give findings on its
own jurisdiction. According to it, the arbitral tribunal may also record findings on any
objections with respect to the existence or validity of an arbitration agreement and for that
purpose an arbitration clause in the contract shall be treated as independent agreement. The
decision of the Arbitral Tribunal that the contract as a whole is null and void shall not
invalidate the arbitration clause in such a contract.

The Act clearly states that an arbitral tribunal may rule on its own jurisdiction including
ruling on an objection with regard to the existence and validity of the arbitration agreement.
Such wide is the jurisdiction of the arbitral forum under the provisions of this Act.2

The section would disclose that the arbitral tribunal, apart from being clothed with the power
of ruling on its own jurisdiction, is also clothed with the power to rule on any objections with
respect to the arbitration agreement. The arbitrator can also go into the validity or otherwise
of the arbitration agreement or the arbitration clause in the agreement.3

It is further provided that the plea of jurisdiction of the arbitral tribunal must be raised before
the submission of statement of defence. It is further provided that the plea of jurisdiction
could be raised by a party even if such party has appointed arbitrator or has participated in the
appointment of arbitrator. The further plea that the arbitral tribunal was exceeding the scope
of its authority shall be raised as soon as the allegation is made. The arbitral tribunal in both
such cases may admit or reject the plea of exceeding the scope of authority. The plea that the
arbitrator was exceeding the scope of the authority is required to be raised as soon as the
matter is alleged to be beyond its authority during the arbitration proceedings. At the
subsequent stage when the award is made against the party, it cannot be permitted to agitate
the question of jurisdiction.4

When the decision is taken regarding the jurisdiction or exceeding the scope of its authority
and such plea is rejected, the tribunal will continue with the arbitral proceedings and shall

2 Jan Satta Shakari Awaz Samiti v. Organic India, 2006 (1) RAJ 124 (Del).

3 SuranderSingh Bajaj v. Harmeet Singh Sethi, 2004 (1) RAJ 486 (A.P.); Karnataka State
Road Transport Corporation v. M Keshvava Raju, 2004 (1) RAJ 646 (Kar.).

4 Manager, Saraswati Vidhya Mandir Senior Secondary School & Ors. v. Madhukar Lal
Nagar & Anr., 2004 (1) RAJ (All); see also Karnataka State Road Transport Corporation v.
M Keshvava Raju, 2004 (1) RAJ 646 (Kar.).

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pass the award. A party aggrieved from nay such decision is entitled to raise the plea in the
application filed for setting aside the final award according to the provisions of Section 34.5

CONSTITUTIONALITY OF THE SECTION

Section 16 deals with the competence of the arbitral tribunal to rule on its own jurisdiction
and decide any objection with respect to the existence or validity of the arbitration agreement.
Section 16 (5) of the new Act provides that where the arbitral tribunal rejects the plea referred
to in sub section (2) and (3), he shall continue the arbitral proceeding and make an award.
The rejection of the plea is not immediately appealable or revisable. It is contended before the
High Court and the Supreme Court that in the absence of the power of judicial review, the
Arbitration and Conciliation Act, 1996 was ultra-vires of the Constitution. The Supreme
Court Rejected the plea.6

In Lexicon Finance Limited, Unit No. II, Mumbai v. Union of India, 7the main contention was
that Section 16 (5) of the Act is ultra vires. Repelling the contention, the Division Bench of
the High Court repelled the contention.

JURISDICTION OF THE ARBITRATOR

Jurisdiction means the legal authority to administer justice according to the means, the law
has provided subject to the limitation imposed by the law upon the judicial authority.8

Jurisdiction observes Cheshire, depends upon physical power, and since the right to
exercise power, or, what is the same thing in the present connection, the power of issuing
process, is exercisable only against persons who are within the territory of the sovereign
whom the court represents, the rule at common law has always been that jurisdiction is
confined to persons who are within reach of the process of the court at the time of service of

5 West Bengal State Electricity Board v. Calcutta Electric Supply Corporation, AIR 2002
SC 2627.

6 Babar Ali v. Union of India and Ors. (2000) 2 SCC 178.

7 2003 (2) RAJ 316 (Kar.).

8 Parmatama Prasad Pandey v. Union of India, (1995) 29 ATC 233.

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the writ. A court cannot extend its process and so exert sovereign power beyond its own
territorial limits.

The concept of jurisdiction of a court comprehends (i).Pecuniary jurisdiction (ii).Territorial

jurisdiction and (iii).Jurisdiction of the subject matter9. Jurisdiction under the Civil Procedure
Code, 1908, means authority to decide.10

The word jurisdiction has both a narrow and a wider meaning. In the sense of the former, it
means the authority to embark upon an enquiry; in the sense of the latter it is used in several
aspects, one of such aspects being that the decision of the tribunal is in non-compliance with
the provisions of the Act.11

Under Section 16 of the Act of 1996, the Arbitral Tribunal is competent to rule on its own
jurisdiction and to the existence or validity of the arbitration agreement. The plea that the
arbitral tribunal does not have jurisdiction shall also be raised before the arbitrator and the
arbitral tribunal shall decide on this plea and where the arbitral tribunal takes a decision
rejecting the plea, it shall continue with the arbitral proceedings and make an arbitral award.
It is further provided therein that a party aggrieved by such an arbitral award can make an
application for setting aside the arbitral award in accordance with Section 34 of the said Act.12

Validity of an action of the termination of the contract incorporating the arbitration clause is
also within the jurisdiction of the arbitrator.13While considering the dispute, the arbitrator has
the power and jurisdiction to decide the question whether there was an abandonment of the
work and also whether the contract was frustrated and its consequences. 14 The tribunal also
has the jurisdiction to adjudicate the plea that it was exceeding the scope of its authority.15

9 Church of South India Trust Association v. Telgu Church Council, (1996) 2 SCC 520.

10 Ujjam Bai v. State of U.P., AIR 1962 SC 1621.

11 Union of India v. Tarachand Gupta & Bros., (1971) 1 SCC 486.

12 Punjab State Elect Board v. Indure Ltd., 2000 (1) PLR 4.

13 Nepa Ltd. V. Manoj Kumar, AIR 1999 MP 57.

14 Raj Kumar v. Bareilly Development Authority, 1999 (3) RAJ 114 (All.).

15 H.P.Gupta v. DDA, 2002 (2) RAJ 645 (Del.).

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PROPRIETY OF PROCEEDINGS WITH THE ARBITRATION WITHOUT
DECIDING THE QUESTION OF JURISDICTION

Section 16 makes it mandatory for the arbitrator to decide the plea of jurisdiction as and when
received before proceeding further in the arbitration proceedings. No detailed order is
required to be passed for accepting or rejecting the plea of jurisdiction. However, a party has
a right to know whether his plea of jurisdiction or objection regarding the existence and
validity of arbitration agreement has been accepted or rejected. The arbitrator may initiate the
party about rejection of the objection by a non-speaking order and may incorporate the
reasons for it in the ultimate final arbitral award.

Since the question of jurisdiction goes to the root of the matter, it is required to be settled at
the earliest and before dealing with other questions raised by the parties in the case. In Arati
Dhar v. S.K. Dutta,16the Court dealt with this aspect in detail and held the Section 16 (1) read
with Section 16 (2) makes it clear that the plea relating to jurisdiction of the arbitral tribunal
should be raised at the earliest and not later than the submission of the statement of defence.

16 (2003) 3 Arb. L.R. 499 (Cal.); 2003 (4) RAJ 98.

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CONSEQUENCES OF FAILURE TO DECIDE APPLICATION UNDER
SECTION 16

Unlike the old Arbitration Act of 1940, under the new Act 1996 the arbitrator is clothed with
power to decide upon his jurisdiction and, therefore, any party-raising objection to his
jurisdiction can move an application before him requesting to decide that issue. As and when
such an issue is raised before the arbitrator, he is obliged to decide the same. However, it
would not follow, that in case the arbitrator does not decide the issue, the arbitration award
would itself be rendered invalid. The award may be set aside only when it is found that it is
without jurisdiction. Even if the arbitrator overrules the objection regarding his jurisdiction,
the aggrieved party has the right to challenge it in the Court by filing application under
Section 34 of the Act. Ultimately, it would be for the appropriate Court to take the final view
in the matter in such proceedings. Thus although the arbitrator was obliged to decide the issue
raised under Section 16 and in case where he did not decide the issue it is open to the
aggrieved party to raise the said issue before the Court. Upon raising such an issue, the Court
has the power and jurisdiction to examine the validity of the contention of the aggrieved
person. It is a different matter that after examining the issue it is found that the arbitral
tribunal was within its jurisdiction to decide the disputes referred to him, notwithstanding the
objection raised. The award of the tribunal cannot be declared invalid on the ground that the
arbitral tribunal did not decide the issue raised before him.

The arbitration award may be set aside on the ground of objection if the Court finds that the
arbitrator had not decided the question of jurisdiction in accordance with law or failed to
decide it despite being raised, particularly when the question of jurisdiction touched the root
of the dispute. It is expected that in all cases where a plea is raised in terms of Section 16 the
tribunal shall decide the same before passing the award.

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CAN THE OBJECTION REGARDING JURISDICTION BE RAISED FOR THE
FIRST TIME IN APPLICATION UNDER SECTION 34?

Sub-section (2) of Section 16 provides that the plea regarding lack of jurisdiction shall be
raised before the arbitral tribunal before or at the time of the submission of statement of
defence and not later than that.

In Oil and Natural Gas Corporation v. Oil Field Instrumentation 17, it has been held that
objection in terms of this Section can be raised even after participation in appointment of
arbitral tribunal, appearing before it and seeking time to submits the reply. This view of
Bombay High Court does not appear to be inconsonance with the judicial pronouncements
and the object of the Act.

In Kitiku Imports Trade Pvt. Ltd. V. Savitri Metals Ltd. And Another,18 it has been held that if
such a plea of jurisdiction is not raised before the arbitrator then it cannot be permitted to be
raised for the first time in application under Section 34.

CONCLUSION

Thus to conclude it could be stated that Section 16 provides:

a) The arbitral tribunal may give finding on its own jurisdiction;

b) The Tribunal may give findings on any objection relating to the existence or validity
of the arbitration agreement;

c) For the purpose of deciding the jurisdiction and objections, arbitration clause forming
part of the contract may be treated as independent agreement, separate from other
terms of the contract;

d) The decision of arbitral tribunal that a contract is null and void shall not invalidate the
arbitration clause ipso jure;

e) The plea that arbitral tribunal does not have jurisdiction shall be raised not later than
submission of defence statement;

f) A party shall not be precluded from raising plea of absence of jurisdiction merely
because such party has appointed the arbitrator or has participated in the appointment
of arbitrator;

17 2005 (1, RAJ 69 (Bom)

18 1999 (2) Arb. L.R. 405 (Bom.)

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 g) The plea that the tribunal is exceeding scope of authority is required to be raised as
soon as the matter alleged to be beyond the scope of its authority is raised during the
arbitral proceedings;

h) The pleas of jurisdiction of the arbitral tribunal or exceeding the scope of its authority
can be allowed to be raised after the submission of the statement of defence if it is
found that the delay in raising such plea was justified;

i) The tribunal shall decide the plea of jurisdiction and exceeding the scope of
authorities and when the plea is rejected, the arbitral tribunal shall continue with the
arbitral proceedings and would make arbitral award; and

j) The party aggrieved from any order passed under this Section has the remedy of filing
application for setting aside the award according to the provisions of Section 34 and
to challenge the orders passed by the arbitral tribunal under this Section.

This Section has been incorporated, with an intention to curtail the time consuming litigation
regarding the matters relating to appointment of an arbitrator/arbitrators.

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BIBLIOGRAPHY

Books and References:-

a) Malhotra O.P. and Malhotra Indu, The Law and Practice of Arbitration And
Conciliation, Second Edition, 2006, Lexis Nexis Butterworths, New Delhi.
b) Majumdar P.K., Basu on Law of Arbitration And Conciliation, 10th Edn., Reprint
2008, Orient Publishing Company, New Delhi and Allahabad.
c) Kwatra G.K., Arbitration And Alternate Dispute Resolution: How To Settle
International Business Disputes, 2008, International Trade Centre, New Delhi.
d) Sethi R.P., Law of Arbitration and Conciliation, Volume 1 and 2, 2007, Ashoka Law
House, New Delhi.

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