Appointment of Arbitrator — Section 11

Note: The 2019 Amendment shifted appointment power from courts to arbitral institutions designated by the Supreme Court or High Court, aligning India with international best practices.

Who Can Be an Arbitrator — Section 11(1)

Section 11(1): A person of any nationality may be an arbitrator, unless the parties have agreed otherwise.

• Must satisfy qualifications agreed by the parties.
• Must be independent and impartial (Section 12).
• Persons listed in the Seventh Schedule are ineligible (e.g., employee, partner, or legal counsel of a party).

Appointment Procedure — Visual Flow

flowchart TD
    A[Dispute Arises] --> B[Notice of Arbitration\nby one party]
    B --> C{Procedure\nin Agreement?}
    C -- Yes --> D[Follow agreed\nprocedure]
    C -- No --> E{Sole or\n3 Arbitrators?}
    E -- Sole --> F[Parties try to agree\nwithin 30 days]
    F --> G{Agreed?}
    G -- Yes --> H[Arbitrator Appointed]
    G -- No --> I[Apply to HC / SC\nunder Sec 11]
    E -- 3 Arbitrators --> J[Each party appoints 1]
    J --> K[Two arbitrators\nappoint Presiding]
    K --> H
    I --> L[Court refers to\nArbitral Institution]
    L --> H
    style H fill:#6BCF7F,color:#fff

Default Procedure for Appointment

Sole Arbitrator

1. Parties try to agree on a single arbitrator within 30 days of notice.
2. If they fail → either party applies to High Court or Supreme Court (Section 11(5)).
3. Court refers the appointment to a designated arbitral institution.

Three-Arbitrator Tribunal

1. Each party appoints one arbitrator within 30 days.
2. The two appointed arbitrators appoint a third (presiding) arbitrator.
3. If any step fails → court/institution appoints.

Time-Limit (After 2019 Amendment)

• Court must decide Section 11 application within 60 days (Section 11(13)).

Grounds for Challenging an Arbitrator — Section 12

Section 12(1): When approached to be an arbitrator, a person must disclose in writing any circumstance likely to give rise to justifiable doubts about independence or impartiality.

Section 12(3): Arbitrator may be challenged only if: (a) Circumstances exist raising justifiable doubts about independence/impartiality; or (b) The arbitrator does not possess qualifications agreed by parties.

Section 12(5) (2015 Amendment): A person whose relationship falls under the Seventh Schedule is ineligible — unless both parties expressly waive this in writing after the dispute arises.

Common Grounds for Challenge

• Conflict of interest (employee, partner, consultant, investor in a party).
• Past representation of a party.
• Spouse or close relative connected to a party.
• Financial interest in the outcome.

Procedure — Section 13

• Challenge filed before the arbitral tribunal itself.
• If the tribunal rejects the challenge → arbitration continues.
• Unsuccessful challenger can raise the issue again when challenging the final award under Section 34.

Key Cases

• TRF Ltd. v. Energo Engineering Projects (2017) 8 SCC 377 — A person who is themselves ineligible cannot nominate an arbitrator either.
• HRD Corporation v. GAIL (India) Ltd. (2018) 12 SCC 471 — Clear interpretation of Fifth and Seventh Schedules; ineligibility is automatic, not discretionary.

Frequently Tested Exam Problems

Sample Problems (KSLU-style)

Problem 1 — Arbitrator’s Spouse Invested in a Party

(Asked: June 2011, June 2015)

A sole arbitrator gives a verdict in favour of Company X. Months later, the losing party discovers that the arbitrator’s spouse held shares in Company X during the proceedings. Can the award be set aside?

Answer (IRAC):

• Issue: Whether undisclosed financial interest of an arbitrator’s spouse constitutes bias justifying the setting aside of the award.
• Rule: Section 12(1) requires disclosure of any circumstance raising justifiable doubts as to independence or impartiality. The Seventh Schedule (inserted by 2015 Amendment) lists “arbitrator’s spouse has a financial interest in one of the parties” as a ground of ineligibility. Section 34(2)(a)(v) allows setting aside for procedural irregularity; public policy under Section 34(2)(b)(ii) also applies where there is fraud or violation of fundamental policy.
• Analysis: The arbitrator had a duty to disclose under Section 12(1). Failure to disclose a Seventh Schedule disqualification = concealment of a material fact. A reasonable person would doubt the impartiality of an arbitrator whose spouse financially benefits from the outcome. This is a clear case of apparent bias.
• Conclusion: Yes, the award can be set aside under Section 34(2)(a)(v) (composition of tribunal not as agreed / conflict of interest) and potentially under the public policy ground. The losing party should apply within 3 months of discovering the fact.

Problem 2 — Only 2 of 3 Arbitrators Sign the Award

(Asked: June 2017, June 2019)

Three arbitrators are appointed. After hearings, the final award is signed by only two of them — the third refuses to sign. Is the award valid?

Answer (IRAC):

• Issue: Whether an award signed by a majority (2 out of 3) of arbitrators is legally valid under the A&C Act, 1996.
• Rule: Section 31(1) — award shall be in writing and signed by members of the arbitral tribunal. Section 31(2) — for a tribunal with more than one arbitrator, the signatures of the majority are sufficient, provided the reason for omission of the third’s signature is stated in the award.
• Analysis: The legislature specifically provided for majority-signature awards in Section 31(2), anticipating that one arbitrator may dissent or refuse to sign. The key requirement is that the award records the reason why the third arbitrator did not sign (e.g., dissent or refusal). If that reason is stated, the award is valid; if not, the award may be incomplete on its face.
• Conclusion: The award signed by 2 out of 3 arbitrators is valid, provided the award itself states the reason for the third arbitrator’s non-signature as required by Section 31(2).