Section 16- Jurisdiction of Arbitral Tribunal

16. Competence of arbitral tribunal to rule on its jurisdiction– 1) The arbitral tribunal may
rule on its own jurisdiction, including ruling on any objections with respect to the existence or
validity of the arbitration agreement, and for that purpose,
(a) an arbitration clause which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than
the submission of the statement of defence; however, a party shall not be precluded from
raising such a plea merely because that he has appointed, or participated in the appointment
of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as
soon as the matter alleged to be beyond the scope of its authority is raised during the
arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-
section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3)
and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral
proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside
such an arbitral award in accordance with section 34.

What Section 16 Does:

• Self-Determination of Jurisdiction: Section 16 lets the arbitration tribunal decide on
its own power to hear a dispute. This means the tribunal can decide whether it has
the authority to resolve the case.
• Key Principles:
o Kompetenz-kompetenz: The tribunal can rule on its own jurisdiction without
waiting for the courts. It decides early on if it can handle the dispute.
o Separability: The arbitration clause is treated as separate from the main
contract. Even if the main contract has issues, the arbitration agreement
remains valid and enforceable.
• Broad Application: The section is written in a flexible way, allowing the tribunal to
address any jurisdictional issues at any stage during the arbitration process.
History and Background:
➢ Earlier Framework: The old Arbitration Act of 1940 did not give tribunals this kind of
authority. There was no clear provision for the tribunal to independently decide its
jurisdiction.
➢ International Influence: Section 16 was modeled on the UNCITRAL Model Law to
update Indian arbitration law and align it with international standards.
➢ Judicial Overreach: Despite the clear mandate of Section 16, Indian courts
sometimes still got involved in deciding jurisdictional matters, which delayed
proceedings.
➢ Reforms and Amendments:
o 246th Law Commission Report: Highlighted problems with judicial
interference and recommended reforms to strengthen the tribunal's
autonomy.
o 2015 Amendment: Introduced Section 11(6A) to limit court involvement,
ensuring tribunals had the primary role in determining jurisdiction.
o 2019 Amendment and Rulings: The removal of Section 11(6A) raised
concerns about reverting to excessive court involvement. However, later
court decisions affirmed that tribunals should remain the main decision-
makers on jurisdiction issues.

Brief Overview of Sub-Sections

➢ S.16(1) of the Act provides that the arbitral tribunal has the authority to determine its
own jurisdiction, including the power to rule on any disputes or challenges related to
the existence or validity of the arbitration agreement. It further stipulates that if a
contract contains an arbitration clause, this clause will be regarded as independent of
the other clauses of the contract. Even if the tribunal finds that a contract has been
frustrated, rendering it null and void, the arbitration clause is not automatically
rendered invalid. In the case of Shree Subhlaxmi Fabrics v. Chand Mal Baradia and
Ors5, the Supreme Court held that the arbitral tribunal may rule on its own jurisdiction,
including ruling on any objections with respect to the existence or authority of the
arbitration agreement. Further, Ashapura Mine-Chem Ltd v. Gujarat Mineral
Development6 affirmed the independence of the arbitration agreement from the
termination of an MoU, clarifying the separability intent of Section 16 of the Act.
➢ S.16(2) states that a challenge to the arbitral tribunal’s jurisdiction must be raised no
later than the submission of the statement of defence. However, a party is not barred
from raising this challenge simply because they have appointed, or taken part in the
appointment of, an arbitrator. In the same vein, S.16(3) provides that a challenge
asserting that the arbitral tribunal is acting beyond its authority must be raised
promptly when the issue that the arbitral Tribunal is alleged to exceed its authority
arises during the proceedings.
➢ S.16(4) and (5) address the tribunal’s discretion to accept delayed challenges if
justified and its authority to continue proceedings and issue an award even after
 rejecting such challenges. If the Tribunal rejects the objection raised by the parties and
continues its proceedings, the party can later set aside the award under S.34 of the
Act.
➢ Lastly, S.16(6) pertains to setting aside of such an award where any party dissatisfied
with such an award can apply to have it set aside by S.34 of the Act.

Lexicon Finance Limited Unit No II Mumbai Vs Union of India, 2003(2) RAJ 316 (Kar)
In this matter, the contract was held void. The scope of the arbitral tribunal to rule on its
jurisdiction under the effect of a void contract was examined in this case.
It was held that given the provision of section 16(1), an arbitration clause in an agreement is
to be treated as an agreement independent of other clauses and terms in the contract. Even
if the arbitral tribunal were told to hold that the contract is null and void, it shall not entail
ipso jure the invalidity of the arbitration clause. In other words, even if the contract is held
to be void, the clause regarding arbitration found in a void contract would not become void.
It exists independently and is enforceable

When can Jurisdictional Challenges be raised?

Jurisdictional challenges must generally be raised early in the arbitration process. The
underlying idea is that the contract between the parties creates an arbitral tribunal and,
therefore, should limit itself to disputes that fall within the scope of that contract. This
principle was established in cases such as MD. Army Welfare Housing Organisation v.
Sumangal Service (P) Ltd and Indian Oil Corporation Ltd. v. M/s. Shree Ganesh Petroleum
Rajgurunagar, where the courts confirmed that the tribunal should act only within the
boundaries of its founding agreement. Consequently, if an award goes beyond the issues
contemplated by the arbitration agreement, it can later be set aside under Section 34 of the
Act.
Section 16 of the Act further reinforces this approach by empowering the arbitral tribunal to
rule on its own jurisdiction. In other words, the tribunal itself can decide whether it has the
authority to hear a dispute, including any objections about whether an arbitration
agreement exists or is valid. The use of the word “including” in Section 16(1) indicates that
challenges to the existence or validity of the arbitration agreement are just examples and
not an exhaustive list of jurisdictional challenges that may be raised.
A key aspect of this framework is timing. Section 16(2) specifies that any objections to the
tribunal’s jurisdiction must be raised before the party submits its statement of defense. This
requirement is intended to prevent parties from introducing such challenges later, which
would only serve to delay the process and increase costs. It also helps to limit later court
intervention, thus supporting the principle of kompetenz-kompetenz—the idea that an
arbitral tribunal is best positioned to decide its own jurisdiction.
This principle has been endorsed by the Supreme Court in several decisions. For example, in
Konkan Railway Corporation Ltd. v. M/S. Rani Construction Pvt. Ltd., a Constitution Bench
held that Section 16 grants the tribunal authority over its jurisdiction, a power that goes to
the very root of its existence. Similarly, in NALCO v. Subhash Infra Engineers Pvt. Ltd., the
Court reiterated that any question regarding the existence or validity of the arbitration
agreement must be raised under Section 16, thereby excluding the possibility of later judicial
review on these grounds.
There is, however, an exception noted in the case of M/S Lion Engineering Consultants v.
Madhya Pradesh. In this decision, the Supreme Court held that if a party fails to raise a
jurisdictional challenge before the tribunal, it could still be raised during the setting-aside
proceedings under Section 34 of the Act. This ruling, while allowing a later challenge, runs
counter to the original intent of Section 16, which aims to settle jurisdictional issues at the
outset of arbitration.

Judicial Interpretation of Appeals under Section 16

The judicial interpretation of appeals under Section 16 has evolved through several key
decisions over time. Initially, when a party challenges the tribunal’s jurisdiction under
Section 16(2) or (3)—raising issues about the arbitration agreement, the parties, its validity,
the subject matter, or the arbitrators’ authority—the tribunal itself decides whether it has
jurisdiction under Section 16(5) of the Act. If it accepts the challenge and rules the matter
non-arbitrable, the aggrieved party can appeal that decision under Section 37. This was
clarified in the case of National Thermal Power Corpn. Ltd. v. Siemens Atkeingesellschaft,
where the Court held that a direct appeal is available from an order accepting a jurisdictional
plea under Section 16(2) or (3).
However, if the tribunal rejects the application and asserts its jurisdiction, the party cannot
immediately appeal. Instead, they must wait until the final award and then challenge it
under Section 34 of the Act.
The approach of minimizing judicial interference was strongly emphasized by the Supreme
Court in SBP & Co. v. Patel Engineering. In this case, the Court expressed strong reservations
about allowing High Courts to entertain writ petitions challenging tribunal orders under
Articles 226 or 227 of the Constitution. The Court stressed that such petitions would
undermine the arbitration process, as Section 34 of the Act already provides a means to
address grievances against both the final award and interim orders. Essentially, once
arbitration begins, parties are expected to wait for the final award before challenging it,
except where a right to appeal exists under Section 37.
Later, in McDermott International Inc. v. Burn Standard Co. Ltd., the Court reiterated the
supervisory role of the judiciary in arbitration matters. It emphasized that court intervention
should be limited only to instances of fraud or bias, reinforcing the need for a restrained
approach.
Building on this, Deep Industries Limited v. ONGC clarified that although the constitutional
provisions under Articles 226 and 227 remain intact, High Courts should exercise extreme
caution when interfering with tribunal orders. They should only step in if an order is patently
without inherent jurisdiction, meaning that the lack of jurisdiction must be obvious.
This principle was further reinforced in Punjab State Power Corporation Limited v. Emta
Coal Limited, where the Court stated that if there is a clear, unmistakable absence of
jurisdiction, no elaborate argument is needed—the deficiency must simply be glaring.
Finally, in Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., the Supreme Court
revisited the interpretation of Section 34. It held that the term “only” in Section 34 serves
two important purposes: it makes the Act a complete code for addressing disputes, and it
lays out the proper procedure for challenging orders. The Court underlined that since the
Act provides a specific forum for redressal, writ petitions should not bypass this statutory
mechanism except in exceptional circumstances—such as when a party has no remedy
under the Act or when there is clear evidence of bad faith.

Kompetenz-Kompetenz and the Interplay between Section 11 and Section 16

of the Act
• Kompetenz-Kompetenz Principle
o The principle of kompetenz-kompetenz means that the arbitral tribunal has
the power to decide on its jurisdiction—including any issues about the
existence or validity of the arbitration agreement.
o This is enshrined in Section 16 of the Act, as reiterated in Food Corporation of
India vs. Indian Council of Arbitration and Ors and Enercon (India) Ltd And Ors
vs Enercon Gmbh And Anr. These cases confirm that the legislative intent was
to minimize court supervision, leaving contentious issues to be addressed by
the tribunal itself.
• Role of Section 11 in Arbitrator Appointment
o Section 11 deals with the appointment of arbitrators by the Supreme Court or
High Courts when parties cannot agree.
o In Wellington Associates Ltd. v. Kirit Mehta, the Supreme Court held that
disputes concerning the existence or validity of the arbitration clause must be
decided under Section 11. This means that while Section 16 empowers the
tribunal, it does not strip the courts of their authority over the arbitration
agreement's existence because the arbitrator’s jurisdiction stems from that
very clause.
• Interaction between Sections 11 and 16
o When jurisdictional issues have already been decided under Sections 8 or 11
without invoking Section 16, the tribunal must accept those decisions, as
noted in State of West Bengal v. Sarkar & Sarkar.
o In SBP & Co. v. Patel Engineering, a 7-judge bench ruled that the power of the
Chief Justice in appointing an arbitrator is a judicial act. This widened Section
11(6) to include questions on arbitrability, the validity of the arbitration
agreement, and other jurisdictional matters.
 o National Insurance v. Boghara Polyfab further clarified this by segregating
issues under a Section 11 application into three categories:
1. First Category: Issues the Chief Justice (or his designate) must
decide—such as the existence of the arbitration agreement and
whether the applicant is a party to it.
2. Second Category: Issues the Chief Justice may also decide—like
determining if a claim is long-barred or live, and whether contractual
obligations have been conclusively discharged.
3. Third Category: Issues that should be left to the arbitral tribunal—
such as whether the claim falls within the scope of the arbitration
clause and the merits of the claim.
• Legislative and Law Commission Developments
o The 246th Law Commission Report recommended adding an explanation to
Section 11(6A) clarifying that the court should refer parties to arbitration
once it is prima facie satisfied that an arbitration agreement exists.
o The idea was that if the court finds the agreement non-existent or void, that
decision would be final. Although this explanation was omitted in the final
enactment, it influenced the 2015 Amendment, which introduced Section
11(6A) to limit the court’s role strictly to examining the existence of an
arbitration agreement.
o This amendment, however, has led to new interpretative challenges regarding
what “existence” precisely means.

“Existence” as under Section 11(6A)

The evolution starts with a narrow interpretation of “existence” (Duro Felguera, 2017)
focused on the mere presence of an arbitration clause.
➢ Duro Felguera Judgment, 2017:
The Supreme Court clarified that, post-2015 Amendment, a court’s role under Section
11(6A) is limited to determining whether an arbitration agreement exists—nothing more.
The decision emphasized that "existence" means checking if the contract includes a clause
providing for the arbitration of disputes between the parties, thus reaffirming the
kompetenz-kompetenz principle.
➢ United India Insurance & M/S Brightstar Telecommunications:
The Court held that if an insurer does not admit liability, the arbitration agreement does not
exist in law.
Similarly, in M/S Brightstar Telecommunications v. M/S World Digital Solutions, the Court
explained that “existence” should be broadly interpreted. It must be determined whether
the arbitration mechanism agreed by the parties relates to the disputes arising out of their
transaction. This means that while the tribunal has the power to decide on arbitrability, the
court must first establish that the dispute falls within the scope of the arbitration clause.
➢ 2019 Amendment and Its Implications:
The 2019 Amendment removed Sections 11(6A) and (7).
• In M/S Mayavti Trading Pvt. Ltd. v. Pradyuat Murman, the Court clarified that this
removal was not meant to return to the pre-2015 framework but to facilitate the
appointment of arbitrators by designated institutions or High Courts.
• Vidya Drolia case further noted that the rationale behind Section 11(6A) still informs
the court’s jurisdiction at the referral stage. The court should screen for both the
formation and formal validity of an arbitration agreement on a prima facie basis and,
if in doubt, refer the matter to arbitration.
➢ Delhi High Court & Supreme Court on Dispute Correlation:
• In NCC Ltd. v. Indian Oil, the Delhi High Court observed that the link between the
arbitration agreement and the dispute is very narrow.
• The Court stated that unless it is an "open and shut" case, the determination should
be left to the arbitral tribunal—a view that the Supreme Court later upheld on
appeal.
➢ Unstamped Arbitration Agreements – Judicial Developments:
• In SMS Tea Estates Pvt. Ltd. v. Chandmari Tea Company Pvt. Ltd. and Garware Wall
Ropes Ltd. v. Coastal Marina Constructions and Engineering Ltd., the courts held
that unstamped arbitration agreements are unenforceable as contracts must be
stamped.
• In N.N. Global Mercantile Private Ltd. v. Indo Unique Flame Ltd., the Court ruled
that an unstamped arbitration agreement is void unless the stamp duty is paid and
that the court must determine this during the Section 11 inquiry.
• However, in In Re: Interplay between the Arbitration Agreements under the
Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, a 7-judge
bench upheld the validity of unstamped arbitration agreements for arbitration
(though inadmissible as evidence).
• This judgment emphasized arbitral autonomy and separability, clarifying that the
inquiry into “existence” should only assess whether the underlying contract contains
an arbitration clause for the disputes at hand. Validity issues, such as the agreement
being in writing, may be examined later by the tribunal without binding the court’s
initial review.
 • Limitation under Section 16
The question of whether the issue of limitation falls within the tribunal’s jurisdiction under
Section 16 has undergone varied judicial interpretation. Initially, a narrow view was adopted
that excluded preliminary issues like limitation from Section 16, but later judgments have
broadened the scope, affirming that such issues should be decided by the arbitrator. The
evolution of these views is outlined below.
M/S Indian Farmers Fertilizer Co. (IFFCO) v. M/S Bhadra Products:
The Supreme Court defined three key aspects of jurisdiction under Section 16:
✓ The existence of a valid arbitration agreement.
✓ Proper constitution of the arbitral tribunal.
✓ Compliance of the matters submitted to arbitration with the arbitration agreement.
This ruling took a narrow view, excluding preliminary issues like limitation from Section 16
and treating them as matters to be resolved on the merits.
Uttarakhand Purv Sainik Kalyan Nigam Ltd v. Northern Coal Field:
The Court took a contrasting position by holding that Section 16 is an inclusive provision.
Once the arbitration agreement is established, all issues—including limitation—should be
decided by the arbitrator. The ruling clarified that limitation falls within the tribunal’s powers
under Section 16.
Home and Soul Private Limited v. T.V. Today Network Limited:
The Delhi High Court reinforced the tribunal’s autonomy by emphasizing that limitation is a
mixed question of fact and law. It held that such issues should be adjudicated by the
tribunal, thereby reducing judicial intervention.
This pro-arbitration stance, reinforced by various High Court and Supreme Court rulings,
underscores the tribunal’s autonomy in determining preliminary issues and limits judicial
intervention.