Understanding Section 16: The Competence of Arbitral Tribunal to Rule on its Jurisdiction under The Arbitration and Conciliation Act
Our team of legal experts at SimranLaw is dedicated to providing comprehensive insights into the complexities of the law. In this article, we will examine Section 16 of The Arbitration and Conciliation Act, 1996, which deals with the competence of an arbitral tribunal to rule on its jurisdiction.
Understanding Section 16
Section 16 of The Arbitration and Conciliation Act is loosely based on Article 16 of the UNCITRAL Model Law. This section essentially espouses the principle of ‘Kompetenz-Kompetenz’, which means that an arbitral tribunal has the autonomy to determine and rule on its jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement.
- Section 16(1): The arbitral tribunal may rule on its jurisdiction and over objections made about the existence or validity of the arbitration agreement.
- Section 16(2): A plea that the arbitral tribunal does not have jurisdiction must be raised not later than during the submission of the statement of defense.
- Section 16(3): A plea related to exceeding the scope of authority by the arbitral tribunal may be raised as and when the matter alleged to be beyond the scope is raised during arbitral proceedings.
- Section 16(4): The arbitral tribunal has the discretion to decide on a plea referred to in subsection (2) or (3) either as a preliminary question or in an award on the merits of the dispute.
- Section 16(5) and 16(6): If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request the court to decide the matter, within thirty days after having received notice of that ruling.
Case Laws and Judgments
- Chatterjee Petrochem (India) Pvt. Ltd. & Anr. v. Haldia Petrochemicals Ltd.
- Indian Oil Corporation v. SPS Engineering Ltd.
- SBP & Co v. Patel Engineering Ltd.
- Vidya Drolia & Others v. Durga Trading Corporation
In this case, the Supreme Court held that the arbitrator is competent to rule on its own jurisdiction under Section 16 of the Act. Moreover, while deciding any objections or pleas regarding its jurisdiction, the arbitrator can examine whether conditions necessary for the exercise of its jurisdiction have been fulfilled.
Here, the Supreme Court clarified that an objection under Section 16 must be raised at the earliest possible opportunity and no later than the submission of the statement of defense. Any objection not raised will not be entertained later.
This landmark judgment held that when there is an objection questioning the existence or validity of the arbitration agreement itself, the interference of the court is required.
A recent 2020 Supreme Court judgment, it indicated that the decision of the arbitral tribunal on its jurisdiction is final and binding if no timely application for judicial review against such a decision is made before the court.
Understanding Section 16 of The Arbitration and Conciliation Act is essential to comprehend the competence and jurisdiction of the arbitral tribunal. It is a clear assertion of the principle of ‘Kompetenz-Kompetenz’ and empowers the arbitral tribunal to decide matters related to its jurisdiction and the validity of the arbitration agreement.