India: Resolving The "Existential" Crisis Of Section 11 Of The Arbitration & Conciliation Act

Abstract

The seemingly innocuous use of the term 'existence' in Section 11(6A) of the Indian Arbitration Act has been the subject of intense interpretative debates. This essay seeks to analyze the jurisprudence that has developed in relation to this 'existence test', by relying on the principles of Kompetenz Kompetenz and party autonomy in arbitration. To do so, it examines the various provisions of Indian Commercial Laws and International Practices to determine the most appropriate application of Section 11. In conclusion, it advocates for having party autonomy as the boundary line for the application of the doctrine of Kompetenz-Kompetenz in the Indian arbitration framework, and how this principle should figure into the framework after the 2019 amendment.

Keywords - Section 11, Existence Test, Party Autonomy, Minimal Judicial Intervention, Kompetenz-Kompetenz.

1. Introduction

The doctrine of Kompetenz-Kompetenz provides that an arbitral tribunal has the authority to assess and determine its jurisdiction.¹ Correspondingly, the application of the doctrine involves two types of effects - positive and negative. The 'positive effect' of Kompetenz-Kompetenz is that the tribunal has the authority to decide on jurisdictional objections.² The 'negative effect' of Kompetenz-Kompetenz is that the judiciary should not have the authority to decide on jurisdictional objections, at least until the tribunal renders an award.³

While the doctrine of Kompetenz-Kompetenz is one of the cornerstones of arbitration, the conventional application of its 'negative effect' has proven to be highly ineffective.⁴ This is largely because of potential annulments of arbitral awards on jurisdictional challenges that could have been resolved at the first instance by judicial authorities.⁵ Despite this shortcoming, national arbitral legislations and judicial authorities, including India, are increasingly opting for the application of 'negative effect'. This leads one to ask the ever-important question of "What should be the judicial authorities' scope of review while determining disputes relating to the existence of arbitration agreements?"

In India-seated arbitrations, applications relating to the appointment of arbitrators are determined under Section 11 of the Arbitration and Conciliation Act, 1996.⁶ While determining the issue of appointing arbitrators, the Courts have to confine their examination to the existence of an arbitration agreement. In Part 2 of this essay, the author traces the jurisprudence of the 'existence' test to determine Section 11 applications.

This essay advocates for having party autonomy as the boundary line for the application of the doctrine of Kompetenz-Kompetenz in the Indian arbitration framework. For this purpose, Part 3 of this essay shall seek to identify the intended meaning of "existence" for Section 11, and the appropriate scope of review for the judiciary, using principles of purposive interpretation. Part 4 analyses the Supreme Court's application of principles of party autonomy and minimal judicial intervention in its judgment in NN Global Mercantile v Indo Unique Flame.

Part 4 analyses the decisions of national courts and arbitral rules of leading arbitral institutions to identify the prevailing approaches in international arbitration with regards to the appointment of arbitrators. Finally, Part 5 of this essay seeks to determine the appropriate scope of review to determine the existence of arbitration agreements for Arbitral Institutions after the 2019 amendment to the Arbitration and Conciliation Act.

2. "Existence" test under Section 11(6A) - A Primer

Section 11(6A) of the Arbitration and Conciliation Act, 1996 stated that "(the court), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."⁷ This provision and its seemingly innocuous use of the term "existence", in the context of appointment of arbitrators by Indian courts, has been a subject of intense judicial interpretation.

The Supreme Court has engaged with interpreting "existence" in numerous matters involving Section 11(6A) for a better part of the decade but has not been able to provide any conclusive answer for the same. It first encountered the question of "existence" in Duro Felguera, S.A. v. Gangavaram Port Ltd.,⁸ where a single-judge bench held, "(a)fter the (2015) amendment, all that the courts need to see is whether an arbitration agreement exists--nothing more, nothing less .. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected."⁹

However, the Supreme Court in United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd.¹⁰ and Garware Wall Ropes Ltd. vs Coastal Marine Constructions¹¹ departed from the interpretation adopted in Duro Felguera. In United India Insurance, the Court declined to appoint an arbitrator since a prerequisite for invoking the arbitration agreement had not been fulfilled. It held that such non-fulfillment made "the arbitration clause ineffective and incapable of being enforced, if not non-existent."¹² Further, in Garware Ropes, the Court relied on its judgment in SMS Tea Estates Pvt. Ltd v. M/s Chandmari Tea Co Pvt. Ltd. to hold that "an arbitration clause in an agreement would not exist when it is not enforceable by law."¹³ The Court opined that "SMS Tea Estates ha(d), in no manner, been touched by the amendment of Section 11(6-A)" since it was not excluded by either the 246th Law Commission Report or the Statement of Object and Reasons of the 2015 Amendment.¹⁴ Accordingly, it held that an arbitration clause contained within an unstamped and unregistered agreement was automatically rendered inadmissible and unenforceable (except unregistered agreements, which are admissible and enforceable for limited purposes).¹⁵

This position was affirmed, and Duro Felguera was overruled, by a 3-judge bench in Vidya Drolia vs Durga Trading Corporation.¹⁶ The Court held that "(e)xistence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration. The legalistic and plain meaning interpretation would be contrary to the contextual background including the definition clause and would result in unpalatable consequences."¹⁷ It was expected that this would settle the question of "existence" in Section 11(6A) conclusively. But, this was not to be since another 3-judge bench, in NN Global Mercantile v Indo Unique Flame, held that "invalidity, ineffectiveness or termination of the main contract does not affect the validity of the arbitration agreement".¹⁸

Given the difference of opinion between the 2 co-ordinate benches, the Court has referred the issue of the existence/validity of an arbitration agreement pending payment of stamp duty on the substantive contract/instrument to a Constitution bench of 5 judges.¹⁹ The issue essentially boils down to whether the "existence" inquiry under Section 11(6A) should only encompass a mechanical finding of the factum of an arbitration agreement, or should it extend to issues of scope, applying a narrow standard, and issues of enforceability. It is to be seen what the Constitution bench decides in this regard. Any decision on this issue will necessarily intertwine with 2 fundamental tenets of arbitration; kompetenz kompetenz and the doctrine of severability.²⁰

3. What should the use of the term "existence" mean for Section 11(6A)?

Some argue that the legislature's used the term "existence" in Section 11(6A) to confine the court's examination to the bare factum of the existence of an arbitration agreement.²¹ In doing so, it has been argued that the court should leave all issues of scope, validity, and limitation for the arbitral tribunal to decide under Section 16(1).

It is submitted that such an interpretation of Section 11(6A) neglects related provisions of the Arbitration & Conciliation Act, 1996 and the Indian Contract Act, 1872, and leads to the creation of inconsistent standards of review for initiating arbitration for Sections 8, 11 and 45 of the Act. The present section will demonstrate why confining the court's examination to merely determining the factum of the existence of an arbitration agreement under Section 11(6A) is problematic.

3.1. Contextualized Legal Construction of Section 11(6A)

A reasonable and just interpretation of "existence" requires a contextual understanding of the relevant statutory norms which determine the nature of an arbitration agreement.

Section 2(h) of the Indian Contract Act, 1872 defines the term contract as "an agreement enforceable by law is a contract."²² Accordingly, the two prerequisites for a contract are a) an agreement and b) enforceability of that agreement.²³

Section 7(2) of the Arbitration & Conciliation Act states that "An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (emphasis added)"²⁴

A plain reading of these two sections makes it clear that if an arbitration clause is contained in an agreement that is not enforceable by law, the arbitration clause will not fulfill the requirements under Section 7.

A reasonable and just interpretation of "existence" requires a contextual understanding of the relevant statutory norms which determine the nature of an arbitration agreement. Taken in the context of Section 11(6A), this implies that if the arbitration clause is contained in an unenforceable agreement, the arbitration clause will be deemed to not exist. It is reasonable that an agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. Fittingly, the Supreme Court in Vidya Drolia held that "(a) party cannot sue and claim rights based on an unenforceable document. .. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law."²⁵

There are situations where the agreement is void (as under Section 24 of the Indian Contract Act, 1872)²⁶ or voidable at the option of a party (as under Section 19 of the Indian Contract Act, 1872)²⁷, the invalidity attached to the main agreement may also attach itself to the arbitration agreement, if the reasons which make the main agreement void, exist in relation to the making of the arbitration agreement too.²⁸ In such instances, the arbitration agreement cannot be deemed to "exist".

Additionally, some contracts stipulate certain pre-conditions for the invigoration/activation of the arbitration clause.²⁹ Till the time these pre-conditions are not fulfilled and the arbitration clause invigorated/activated, the arbitration agreement cannot be said to "exist" because till then it is unenforceable. It is submitted that the arbitration agreement should not be deemed to exist in any of such instances.

3.2. Need for uniform standards of review for Section 8, 11 & 45

Section 11(6A) was added to the Arbitration & Conciliation Act in 2015 upon the recommendation of the Law Commission of India through its 246th Report, entitled 'Amendment to the Arbitration and Conciliation Act, 1996'.³⁰ This report emphasized on making arbitrations in India more time-effective and cost-effective to ensure that it becomes an effective and efficient alternative to the traditional dispute resolution process.³¹

The report recommended the insertion of sub-section (6A) to Section 11 of the Arbitration & Conciliation Act, which read as follows, "An appointment .. under sub-section (4) or sub-section (5) or sub-section (6) shall not be made only if the .. Court finds that the arbitration agreement does not exist or is null and void."³² This was to mean that if a ".. Court is prima facie satisfied regarding the existence of an arbitration agreement, it shall refer the parties to arbitration and leave the final determination of the existence of the arbitration agreement to the arbitral tribunal in accordance with section 16, which shall decide the same as a preliminary issue."³³ This envisaged the same process of determination as is reflected in Section 8 of the Arbitration & Conciliation Act, which deals with a judicial authority's power to refer parties to arbitration where there is an arbitration agreement.³⁴

The Commission prescribed similar tests as applicable in the context of Section 8 for Sections 11 and 45 to ensure that the scope and nature of judicial intervention do not change upon whether a party (intending to defeat the arbitration agreement) refuses to appoint an arbitrator in terms of the arbitration agreement, or moves a proceeding before a judicial authority in the face of such an arbitration agreement.³⁵ Hence, the test to determine the scope of judicial intervention should not differ if parties approach the judicial authority under Section 11(6) instead of Section 8, or vice-versa.

The amended Section 8(1) of the Arbitration & Conciliation Act states that "a judicial authority .. shall .. refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists."³⁶ Hence, the scope of this judicial intervention is restricted to situations where the judicial authority prima facie finds that a valid arbitration agreement does not exist. It is submitted that a similar test should be applied while dealing with Section 11(6A) applications. This means that if the judicial authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be. This exposition is in line with the Supreme Court's decision in Shin Etsu Chemicals Co. Ltd. v Aksh Optifibre,³⁷ where it ruled in favour of looking at the issues only prima facie in context of Section 45 of the Arbitration & Conciliation Act.

In furtherance of this, a 3-judge bench of the Supreme Court recently held that the prima facie test has been read into Section 11(6A) to bring the provisions of Sections 8(1) and 11(6) r/w 11(6A) on par.³⁸ It also recommended that the Parliament relook Sections 11(7) and 37 "so that orders made under Sections 8 and 11 are brought on par qua appealability as well."³⁹

These considerations lead the author to suggest a prima facie analysis of the legal existence of an arbitration agreement for the appointment of an arbitrator under Section 11 of the Arbitration & Conciliation Act. After all, arbitration is a creature of consent. If a party has not given their free consent to an arbitration agreement or to refer certain kinds of issues to arbitration, how can they be compelled by judicial authorities to appear before an arbitral tribunal to secure their rights? Hence, it is submitted that the following standard of review be adopted by the judicial authority when deciding a petition under Section 11 of the Arbitration & Conciliation Act;

The judicial authority, when deciding a petition under Section 11 of the Act for the appointment of an arbitrator(s), shall confine to the examination of the existence of the arbitration agreement.

When examining the existence of an arbitration agreement, the judicial authority may find;

1. whether the arbitration agreement exists in fact (factum of existence); and
2. whether the arbitration agreement exists in law (legal existence), that is:
   
   1. whether an arbitration agreement prima facie exists that pertains to the dispute(s) which has arisen between the parties to the contract; or
   2. whether the arbitration agreement is prima facie null and void.

When appointing an arbitrator(s), the court shall do so on a prima facie satisfaction that an arbitration agreement exists, leaving the final determination to the arbitral tribunal. Such decision is final and no appeal, including Letters Patent Appeal, shall lie against such decision. Except, if the court determines that no arbitration agreement exists as per 2.1. or 2.2., then the determination of the court shall be final and not barred from appeal.⁴⁰

In undertaking any such analyses, the preponderance of probabilities should be in the favour of the existence of an arbitration agreement unless the converse is exceedingly evident. This can be said to be similar to the examination under the English Arbitration Act which requires the Court to see whether there exists a "good arguable case".⁴¹

4. Analysing the SC Judgment in NN Global Mercantile v Indo Unique Flame

In NN Global Mercantile v Indo Unique Flame, the Supreme Court was faced with the question of the existence of an arbitration agreement contained in an unstamped contract.⁴² The Court held that non-stamping/insufficient stamping is a curable defect and will hence, not invalidate the arbitration agreement.⁴³ In doing so, the 3-judge bench overruled the Court's judgment in SMS Tea Estates and disagreed with the findings in Vidya Drollia and its affirmation of Garware Wall Ropes.

It is submitted that the Court was correct in holding that non-stamping/insufficient stamping of the contract containing the arbitration clause does not invalidate the arbitration agreement. On the other hand, it is submitted that the Court's holding that "(t)he allegations made by a party that the substantive contract has been obtained by coercion, fraud, or misrepresentation has to be proved by leading evidence on the issue .. (t)hese issues can certainly be adjudicated through arbitration"⁴⁴ is an incorrect application of the doctrine of minimal judicial intervention and party autonomy in arbitration.⁴⁵ The following subsections will expound upon both of these submissions.

4.1. Insufficient Stamping should not invalidate the Arbitration Agreement

Section 35 of the Indian Stamp Act, 1899 states that "No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped" (emphasis added).⁴⁶ It is a settled position of law that the words 'for any purpose' "should be given their natural meaning and effect and would include a collateral purpose (and that) an unstamped partition deed cannot be used to corroborate the oral evidence for the purposes of determining even the factum of partition as distinct from its terms."⁴⁷

The Supreme Court, in SMS Tea Estate and Garware Wall Ropes, relied on this understanding of Section 35 of the Stamp Act to hold that an arbitration agreement contained in an unstamped/insufficiently stamped contract will not be deemed to exist. However, what the Court failed to consider in both these cases was that an arbitration agreement is not liable to be stamped under the provisions of the Indian Stamp Act, 1899.⁴⁸ The Act only mandates the stamping of an arbitration award and not an arbitration agreement.⁴⁹ This crucial distinction was taken into consideration by the Court in NN Global Mercantile, which held "that since the arbitration agreement . is not chargeable to payment of stamp duty, the non-payment of stamp duty on the commercial contract, would not invalidate the arbitration clause, or render it un-enforceable, since it has an independent existence of its own."⁵⁰

In consequence, the Court built upon the balancing exercise between promoting arbitration and protecting revenue interests of the State that had been first undertaken by the Bombay High Court in Gautam Landscapes Pvt. Ltd. v. Shailesh Shah.⁵¹ The Court rightly identified that the defect of non-stamping can be cured at any stage of a proceeding and thus revenue can be secured at a later point in time too. With respect to equal rights of the litigants, it was observed that parties often drag issues relating to stamping before the revenue authorities to delay adjudication and cause hardship to the other party.⁵²

Taking these factors into consideration, the Court provided the following guidelines on how judicial authorities should deal with objections regarding non-stamping or insufficient stamping:

• An arbitrator/tribunal shall impound the instrument, and direct the parties to pay the requisite Stamp Duty (and penalty, if any), and obtain an endorsement from the concerned Collector as per Section 33 of the Indian Stamp Act, 1899 (or the applicable State Act).
• Under Section 11, the High Court/Supreme Court will impound the substantive contract which is either unstamped or inadequately stamped, and direct the parties to cure the defect before the arbitrator/tribunal can adjudicate upon the contract.
• Under Section 8, the judicial authority will make the reference to arbitration and in the meanwhile, direct the parties to have the substantive contract stamped per the relevant Stamp Act so that the rights and obligations emanating from the substantive contract can be adjudicated upon.

Accordingly, it is submitted that this judgment provides for an effective means to safeguard the revenue of the State while ensuring that the arbitration does not come to a standstill. It is felt that this judgment will go a long way in reversing the trend for parties to object stamping at the pre-reference stage to avoid or delay arbitration.

4.2. Interplay between Minimal Judicial Intervention and Party Autonomy

In NN Global Mercantile, the Court held that its duty under Section 11(6A) was confined to a mechanical finding of the factum of an arbitration agreement and consequent appointment of an arbitrator. It was held that "(t)he allegations made by a party that the substantive contract has been obtained by coercion, fraud, or misrepresentation has to be proved by leading evidence on the issue .. (t)hese issues can certainly be adjudicated through arbitration".⁵³ It also raised questions about the correctness of the following statement made by its co-ordinate bench in Vidya Drolia: "Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement."⁵⁴

This is an extremely narrow and incorrect construction of Section 11(6A), as was shown in the previous section. The doctrine of minimal judicial intervention should not be applied in a manner compelling parties, who have never consented to the arbitration agreement in the first place, to appear before an arbitral tribunal to secure their rights.⁵⁵ In Kerala State Electricity Board and Anr. v. Kurien E. Kathilal, the Court fittingly held that "(r)eferring parties to arbitration has serious civil consequences, procedurally and substantively."⁵⁶ Therefore, a judicial authority should take the necessary steps to ensure that a non-consenting party is not bound to the process of arbitration.

To do so, the judicial authority must determine if the arbitration agreement has a prima facie legal existence before referring the parties to arbitration. This approach will help prevent unnecessary expenditure of time and costs, and save the party from having to go through an arbitration proceeding, or any part of it provided it has a genuine case against arbitration determinable by a judicial authority at the appointment stage. Hence, it is submitted that the Court erred in NN Global Mercantiles by holding the converse to be true and removing a crucial procedural safeguard against arbitrations without any jurisdictional basis. It is hoped that the forthcoming 5-judge constitutional bench rectifies this error and clarifies the Court's position on this issue.

5. International Approaches to Appointment of Arbitrators

In A. Ayyasamy v. Parmasivam & Ors., Justice D.Y. Chandrachud opined that the Arbitration and Conciliation Act should be interpreted in a manner that is consistent with the prevailing approaches in international arbitration.⁵⁷ The following section examines the scope of review adopted by several national courts and arbitral institutions for appointing arbitrators.

5.1. National Courts

Article II(3) of the New York Convention provides that, "The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed."⁵⁸

A court applying Article II(3) may determine whether the arbitration agreement is null and void, inoperative or incapable of being performed. However, no indication is provided in the Convention as to the standard that should be applied for such determination. A comparative study of the decisions of the highest courts in Switzerland,⁵⁹ France,⁶⁰ England,⁶¹ and Canada⁶² reveals that all of them have adopted a version of the prima facie test to determine the existence of an arbitration agreement, leaving all other issues to the arbitral tribunals.

5.2. International Arbitral Tribunals

International arbitral institutions invest significant efforts into updating their respective rules to ensure that they provide the most time and cost-efficient arbitral procedures.⁶³ Hence, it is safe to say that the rules of leading arbitral institutions reflect the prevailing approaches and best practices in international arbitration.⁶⁴

The International Chamber of Commerce Court (ICC Court), the London Court of International Arbitration (LCIA), the Hong Kong International Arbitration Centre (HKIAC), the Singapore International Arbitration Centre (SIAC), and the Arbitration Institute of the Stockholm Chambers of Commerce (SCC) have been identified as the most preferred arbitral institutions in the world, in a survey conducted by the Queen Mary University of London.⁶⁵ Analysing these institutions' rules on the appointment of arbitrators and identifying their common elements can help us better interpret Section 11 to bring it in line with international arbitral practice. Relevant extracts of their rules, governing the appointment of arbitrators/referring parties to arbitration, have been produced in the footnotes.⁶⁶

It is quite evident that all these decisions and rules have one thing in common; the Court/Registrar/Board/Centre undertake a prima facie examination of whether the arbitration should proceed, i.e. whether an arbitral tribunal be appointed, when one of the parties to the dispute objects to the existence, validity or scope of the arbitration agreement(s). Here, a prima facie examination indicates a threshold of scrutiny much lower than what an arbitral tribunal would require to satisfy itself of the existence of an arbitration agreement when it rules on its jurisdiction.⁶⁷ These rules provide an important safeguard against putting arbitrations into motion when no jurisdictional basis exists.

Taking these rules into account, it becomes increasingly clear that the scope of review under Section 11 should entail the judicial authority determining whether an arbitration agreement prima facie exists, as has been submitted in the previous sections.

6. Section 11 after the 2019 Amendment - What is the way forward?

In 2017, the Ministry of Law and Justice set up a High Level Committee (HLC) under the Chairmanship of Justice B.N. Srikrishna to review the institutionalisation of arbitration mechanisms in India and submit a report on suggested reforms. In context of appointment of arbitrators under Section 11, the HLC recommended that " . to ensure speedy appointment of arbitrators, section 11 may be amended to provide that the appointment of arbitrator(s) under the section shall only be done by arbitral institution(s) designated by the Supreme Court (in case of international commercial arbitrations) or the High Court (in case of all other arbitrations) for such purpose, without the Supreme Court or High Courts being required to determine the existence of an arbitration agreement."⁶⁸ Based on the HLC's recommendations, the Parliament enacted the Arbitration and Conciliation (Amendment) Act, 2019.

The 2019 amendment repealed Sections 11(6A) and 11(7) and amended Section 11(6) to provide for appointment of arbitrators by arbitral institutions. The relevant portion of amended Section 11(6) states that "... 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, this amendment does not provide any clarification on the arbitral institutions' scope of examination while determining a Section 11 application. This could lead to a lot of confusion and interpretational inconsistency, which goes against the stated objective of the amendment; to make India an arbitration-friendly jurisdiction by minimising judicial intervention.

It is crucial to learn from the past and avoid the situations which arose earlier. Hence, the legislature must clearly define the institutions' scope of examination in a way that balances judicial restraint and judicial intervention.

It is submitted that to do so the arbitral institutions should be empowered to examine whether an arbitration agreement exists prima facie before appointing an arbitrator under Section 11. The 30-day time limit for the arbitral institutions, encompassed in the amended Section 11(13),⁶⁹ provides sufficient time for the institutions to carry out a prima facie examination of the existence of the arbitration agreement. It can also be argued that this 30-day time limit is demonstrative of the legislature's intention to give institutions enough time to carry out a prima facie examination before appointing the arbitrator(s).

In addition to this, the 2021 amendment to Section 36 of the Arbitration Act provides that the Court may stay an award unconditionally if it is prima facie satisfied that the arbitration agreement/contract which is the basis of the award has been induced by fraud and/or corruption.⁷⁰ This amendment reiterates the importance of a prima facie analysis before a dispute is referred to arbitration, and how much time and money can be saved by doing so.

Hence, it is believed that the adoption of this approach will ensure that arbitrators are appointed in a manner that saves both time and cost while preventing arbitrations that do not have any jurisdictional basis at all. This approach is also in line with the Kompetenz Kompetenz principle as the tribunals retain the final power to rule on their jurisdiction.

7. Conclusion

As a final comment, locating party autonomy as the boundary line for the application of Kompetenz-Kompetenz is imperative to prevent the proliferation of arbitrations without any jurisdictional basis. It is submitted that prima facie determination of the existence of arbitration agreements by the Courts/Arbitral Institutions will ensure a healthy balance between judicial restraint and intervention in the domain of arbitrations.

The author acknowledges that this application of the prima facie test to determine the existence of arbitration agreements comes with its set of pros and cons. This test might likely result in increasing the burden on already overburdened national courts since Arbitral Institutions have not been designated yet. It might also lead to replication of arguments before two forums and resultant additional costs. More importantly, it might result in an inquiry into the merits of the disputes by national courts, if the jurisdictional issues are intertwined with issues on merits. However, it is submitted that the benefits of using such an approach far outweigh the disadvantages, provided the forthcoming changes to the Indian arbitral framework under the 2019 amendment.

Indian Courts have continually taken a pro-arbitration approach and there exists no reason to believe that they will not continue to do so while determining Section 11 applications under the proposed prima facie test.

Footnotes

1. Gary Born, International Commercial Arbitration, Second Edition, Chapter 7: International Arbitration Agreements and Competence-Competence, p. 1048. [hereinafter, Born]

2. Born, p. 1069 -1071.

3. Born, p. 1069 -1071.

4. See Devas v. Antrix (ICC Case No. 18051/ CYK of 2011).

5. Sai Anukaran, Niyati Rawal, The Negative Affect of Negative Effect of Kompetenz-Kompetenz on International Arbitration: Notes from the Devas v. Antrix Saga, Kluwer Arb. Blog, 9 June 2020, available at http://arbitrationblog.kluwerarbitration.com/2020/06/09/the-negative-affect-of-negative-effect-of-kompetenz-kompetenz-on-international-arbitration-notes-from-the-devas-v-antrix-saga/

6. Arbitration and Conciliation Act, No. 26 of 1996, § 11 (India).

7. Arbitration and Conciliation Act, No. 26 of 1996, § 11(6A) (India).

8. Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729. [hereinafter, Duro Felguera]

9. Duro Felguera.

10. United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607. [hereinafter, Hyundai Engg]

11. Garware Wall Ropes Ltd. vs Coastal Marine Constructions, AIR 2019 SC 2053. [hereinafter, Garware]

12. Hyundai Engg.

13. Garware, p. 19.

14. Garware, p. 19.

15. Garware.

16. Vidya Drolia and Ors. vs Durga Trading Corporation, (2021) 2 SCC 1. [hereinafter, Vidya Drolia]

17. Vidya Drolia, p. 92.

18. NN Global Mercantile v Indo Unique Flame , 2021 (1) CTC 868. [hereinafter, NN Global]

19. NN Global.

20. See Emmanuel Gaillard, Yas Banifatemi, 'Negative Effect of Competence-competence: The Rule of Priority in Favour of the Arbitrators' in Emmanuel Gaillard, Domenico di Pietro (eds) Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice (2008) 257, 257.

21. Duro Felguera; NN Global.

22. Indian Contract Act, 1872, § 2(h).

23. Balfour v Balfour, [1919] 2 KB 571.

24. Arbitration and Conciliation Act, No. 26 of 1996, § 7(2) (India).

25. NN Global, p. 92.

26. Indian Contract Act, 1872, § 24 - "Agreements void, if considerations and objects unlawful in part. -If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void."

27. Indian Contract Act, 1872, § 19 - "Voidability of agreements without free consent. -When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused."

28. Vidya Drolia. See also Gómez Domínguez, Luis Alfonso. (2007). Causes and Consequences of Faulty Arbitration Clauses. Estudios Socio-Jurídicos, 9(2), 111-141; Mayer, The Limits of Severability of the Arbitration Clause, in A. van den Berg (Edn.), Improving the Efficiency of Arbitration Agreements and Awards: 40 Years of Application of the New York Convention, 261, 264 (ICCA Congress Series No. 9, 1999).

29. For instance, United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607

30. Law Commission of India, Report No. 246, "Amendment to the Arbitration and Conciliation Act, 1996" (246).

31. Law Commission of India, Report No. 246.

32. Law Commission of India, Report No. 246, p. 40.

33. Law Commission of India, Report No. 246, p. 45.

34. Arbitration and Conciliation Act, No. 26 of 1996, § 8 - Power to refer parties to arbitration where there is an arbitration agreement.

35. Law Commission of India, Report No. 246, p. 20.

36. Arbitration and Conciliation Act, No. 26 of 1996, § 8.

37. Shin Etsu Chemicals Co. Ltd. v Aksh Optifibre, (2005) 7 SCC 234

38. Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engineering Pvt. Ltd., LL 2021 SC 147. [hereinafter, Pravin Electricals]

39. Pravin Electricals, p. 21.

40. Juhi Gupta, Existential Crisis of Section 11(6A)of the Indian Arbitration Act, Kluwer Arb. Blog (11 June 2019), available at http://arbitrationblog.kluwerarbitration.com/2019/06/11/existential-crisis-of-section-116a-of-the-indian-arbitration-act-part-ii/

41. Silver Dry Bulk Co. Ltd. v. Homer Hulbert Maritime Co. Ltd., [2017] EWHC 44 (Comm)

42. NN Global.

43. NN Global.

44. NN Global, p. 6.9.

45. See Banerji, Gourab. "Judicial Intervention in Arbitral Awards: A Practitioner's Thoughts" National Law School of India Review, vol. 21, no. 2, 2009, pp. 39-53; Born, Gary. "The Principle of Judicial Non-interference in International Arbitral Proceedings", Penn Law: Legal Scholarship Repository, 2014; Böckstiegel, Karl-Heinz. "The Role of Party Autonomy in International Arbitration", Dispute Resolution Journal, vol. 52, no. 3.

46. Indian Stamp Act, 1899, § 35.

47. Ram Rattan v. Parma Nand, AIR 1946 PC 5.

48. See Indian Stamp Act, 1899, §3 and Schedule I.

49. Shriram EPC Limited v. Rioglass Solar SA, (2018) 18 SCC 313; Indian Stamp Act, 1899, Schedule 1, Item 12.

50. NN Global, p. 6.8.

51. Gautam Landscapes Pvt. Ltd. v. Shailesh Shah, 2019 SCC OnLine Bom 563. [hereinafter, Gautam Landscapes]

52. Gautam Landscapes, p. 99.

53. NN Global.

54. Hyundai Engg, 92.

55. Kerala State Electricity Board and Anr. v. Kurien E. Kathilal, AIR 2018 SC 1351. See also Reuben, Richard. "First Options, Consent to Arbitration, and the Demise of Separability: Restoring Access to Justice for Contracts with Arbitration Provisions", 56 SMU L. Rev. 819 (2003)

56. The court held that "once the parties are referred to arbitration, the proceedings will be in accordance with the provisions of Arbitration and Conciliation Act and the matter will go outside the stream of the civil court. Under Section 19 of Arbitration and Conciliation Act, the arbitral tribunal shall not be bound by the Code of Civil Procedure and the Indian Evidence Act. Once the award is passed, the award shall be set aside only under limited grounds."

57. A. Ayyasamy v. Parmasivam & Ors., (2016) 10 SCC 386.

58. Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. II(3).

59. Swiss Fed. Trib., 29 April 1996, Fondation M. v. Banque X., ATF 122 m 139,1996(3) ASA Bull. 527.

60. Cass, le civ., 26 June 2001, American Bureau of Shipping (ABS) v. Copropriété Maritime Jules Verne, 2001(3) Rev. arb.

61. Premium Nafta Products Ltd. v. Fili Shipping Co. Ltd. [2007] UKHL 40; Silver Dry Bulk Co. Ltd. v. Homer Hulbert Maritime Co. Ltd., [2017] EWHC 44 (Comm).

62. Sup. Ct. Canada, Dell Computer Corp. v. Union des consommateurs, 13 hily 2007,2007 SCC 34,2007(3) Rev. arb. 5

63. Fabian Bonke, 2018 In Review: Recent Revisions of Institutional Rules in Europe - Where Do Europe's Arbitral Institutions Now Stand Against Global Competition?, Kluwer Arb. Blog, 29 January 2019, available at http://arbitrationblog.kluwerarbitration.com/2019/01/29/2018-in-review-recent-revisions-of-institutional-rules-in-europe-where-do-europes-arbitral-institutions-now-stand-against-global-competition/

64. See Stéphanie Papazoglou, The Battle for Survival among Arbitral Institutions, Kluwer Arb Blog, 12 June 2020, available at http://arbitrationblog.kluwerarbitration.com/2020/06/19/the-battle-for-survival-among-arbitral-institutions/

65. '2015 International Arbitration Survey: Improvements and Innovations in International Arbitration', Queen Mary University of London and White & Case LLP (2015), available at http://www.arbitration.qmul.ac.uk/media/arbitration/docs/2015_International_Arbitration_Survey.pdf .

66. International Chamber of Commerce Arbitration Rules 2021 - Article 6(4): In all cases referred to the Court under Article 6(3), the Court shall decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist.

London Court of International Arbitration (LCIA) Arbitration Rules - Article 5(6): The LCIA Court shall appoint the Arbitral Tribunal promptly following delivery to the Registrar of the Response or, if no Response is received, promptly after 28 days from the Commencement Date (or such other lesser or greater period to be determined by the LCIA Court pursuant to Article 22.5). Article 5(9): The LCIA Court shall appoint arbitrators with due regard for any particular method or criteria of selection agreed in writing by the parties. The LCIA Court shall also take into account the transaction(s) at issue, the nature and circumstances of the dispute, its monetary amount or value, the location and languages of the parties, the number of parties and all other factors which it may consider relevant in the circumstances. Article 32(1): A party who knows that any provision of the Arbitration Agreement has not been complied with and yet proceeds with the arbitration without promptly stating its objection as to such non- compliance to the Registrar (before the formation of the Arbitral Tribunal) or the Arbitral Tribunal (after its formation), shall be treated as having irrevocably waived its right to object for all purposes.

Hong Kong International Arbitration Centre Arbitration Rules - Article 11(1): If a question arises as to the existence, validity or scope of the arbitration agreement(s) or to the competence of HKIAC to administer the arbitration before the constitution of the arbitral tribunal, HKIAC may decide whether and to what extent the arbitration shall proceed. The arbitration shall proceed if and to the extent that HKIAC is satisfied, prima facie, that an arbitration agreement under these Procedures may exist. Any question as to the jurisdiction of the arbitral tribunal shall be decided by the arbitral tribunal once constituted.

Singapore International Arbitration Centre Arbitration Rules - Article 28(1): If any party objects to the existence or validity of the arbitration agreement or to the competence of SIAC to administer an arbitration, before the Tribunal is constituted, the Registrar shall determine if such objection shall be referred to the Court. If the Registrar so determines, the Court shall decide if it is prima facie satisfied that the arbitration shall proceed. The arbitration shall be terminated if the Court is not so satisfied. Any decision by the Registrar or the Court that the arbitration shall proceed is without prejudice to the power of the Tribunal to rule on its own jurisdiction.

Arbitration Institute of the Stockholm Chambers of Commerce Rules - Article 11(i): The Board takes decisions as provided under these Rules, including deciding whether the SCC manifestly lacks jurisdiction over the dispute pursuant to Article 12 (i). Article 12(i): The Board shall dismiss a case, in whole or in part, if the SCC manifestly lacks jurisdiction over the dispute.

67. Park, William. "Challenging Arbitral Jurisdiction: The Role of Institutional Rules", No. 15-40 Boston University School of Law, Public Law Research Paper (2015).

68. Department of Legal Affairs, Report Of The High Level Committee To Review The Institutionalisation Of Arbitration Mechanism In India, available at https://legalaffairs.gov.in/sectiondivision/report-high-level-committee-review-institutionalisation-arbitration-mechanism-india

69. Section 11(13), Arbitration and Conciliation Act: "An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party."

70. Arbitration and Conciliation (Amendment) Act, 2021, amendment to Section 36, available at https://prsindia.org/files/bills_acts/bills_parliament/Arbitration%20and%20Conciliation%20(Amendment)%20Bill,%202021.pdf

Aachman is a student of NALSAR University of Law, Hyderabad and the Winner of the 1st Prize of the 8th Ed. Arb Excel Essay Writing Competition.

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