Arbitration Tribunal should first decide preliminary objections as to its jurisdiction

Recently, the Delhi High Court made essential observations concerning the Arbitral Tribunal’s power to rule in its jurisdiction and to decide the same.

Hon’ble Justice Pratibha Singh also addressed the High Court’s jurisdiction over an arbitral tribunal and the scope of the Court’s interference.

Regarding the first aspect, the Bench ruled that as per the principle of kompetenze-kompetenze, an Arbitral tribunal can rule its jurisdiction; however, there are objections regarding its jurisdiction (Section 16 applications) that should be decided on an urgent basis.

The Court placed reliance on McDermott International Inc. vs Burn Standard Co Ltd wherein the Apex Court held that u/s 16 of the Act, if a party questions the jurisdiction of an arbitrator, then the question should be raised before the arbitrator and question of jurisdiction should be determined as a preliminary ground.

According to the Bench, the following factors should be considered when objections are raised u/s 16:-

  • If an objection is raised based on admitted documents, then it should be decided at the inception.
  • If that is not possible, then the Tribunal should consider framing issues and then decide.
  • If the Tribunal opined a need to lead evidence, it should allow the same.
  • If the Tribunal opines that detailed evidence, both written and oral, should be led, then the Tribunal should adjudicate the objections after evidence is led.
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Regarding the scope of interference as per Article 227/226, that challenges order of the Tribunal, including orders, passed under Article 16, the Court had the following observations:-

  • Applications under Article 226/227 would be maintainable against an Arbitral tribunal.
  • The Non-obstante clause mentioned under Section 5 will not apply to the exercise of powers under Article 227.
  • To warrant the interference of Article 227/226, there have to be exceptional circumstances.
  • Even though interference is permissible, the Court shall not interfere unless the order was perverse and lacked inherent jurisdiction.
  • High Courts should discourage litigation that might interfere with the arbitral process.
  • Judicial interference in the arbitral process should not be encouraged.
  • There should be an exceptional rarity or bad faith if power needs to be exercised.
  • Courts should not allow the efficiency of the arbitral process to diminish.

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