Arbitral Tribunal ought to decide Section 16 objection as soon as possible as a preliminary ground: Delhi High Court

12th Apr,2021


Arbitral Tribunal ought to decide Section 16 objection as soon as possible as a preliminary ground: Delhi High Court

As a preliminary basis, the Delhi High Court ruled that an arbitral tribunal should determine the objection under Section 16 of the Arbitration & Conciliation Act as soon as possible (Surender Kumar Singhal vs Arun Kumar Bhalotia).

*FACTS*
In this case, the defendant filed a writ petition in response to an arbitrator's refusal to rule on the arbitrator's authority to hear any arguments. According to the arbitrator, a definitive judgement on the Petitioners' application under Section 16 could not be made without further facts in the case, so it would be determined at the end. The Court also considered the extent of its intervention under Article 226 of the Constitution in reaching its decision.

*FACTORS AROSE DURING THE HEARINGS*
- If the question of jurisdiction can be resolved based on admitted records on file, the tribunal should proceed to hear the matter/objections right away.
- If the tribunal believes that the objections under Section 16 of the Act cannot be resolved at the outset and that further investigation is needed, it can consider framing a preliminary issue and ruling on it as soon as possible.
- If the tribunal believes that evidence is required to resolve Section 16 objections, it can order restricted evidence to be presented on the issue and adjudicate the matter.
- If the tribunal believes that detailed proof, both written and oral, is required, then, after the evidence is completed, the objections under Section 16 must be adjudicated before the award can be passed.

*OBSERVATIONS MADE BY THE COURT*
Justice Prathiba M Singh presided over a single-judge bench that issued the order. The law requires the party making the objection to do so quickly, and therefore, based on an overall reading of Section 16 and particularly Section 16(5) of the Act, there is no question that the Tribunal should determine the objection quickly as well. The Court noted that such a dispensation would be preferred in order to ensure that parties to whom the arbitral proceedings might not even be relevant are not involved in lengthy arbitral proceedings that incur significant costs. It claimed that while a petition under Article 226/227 could be filed against an arbitral tribunal, intervention is only permitted if the order is absolutely irrational, i.e., the irrationality must be obvious. The Court stated that the arbitral process' sufficiency should not be compromised. There must be "exceptional circumstances" for intervention under Article 226/227. Though intervention is permitted, the writ court will not intervene unless and until the order is so irrational that it is clearly devoid of inherent jurisdiction, the Court said.