The Crucial Role of Arbitrators in the Arbitration Process

When two parties agree to settle a dispute outside the traditional court system, they place enormous trust in one person – the arbitrator. This neutral third party holds the authority to hear arguments, evaluate evidence, and deliver a binding decision, much like a judge. But unlike a judge who operates within the formal machinery of the state, an arbitrator derives power from the consent of the disputing parties themselves. Under the Arbitration and Conciliation Act, 1996, the role of an arbitrator is carefully defined, carrying a mix of judicial responsibility, procedural flexibility, and strict ethical obligations. Understanding this role is essential for anyone studying or practising dispute resolution in India.

Who is an arbitrator? 🔗

An arbitrator is a person appointed by the disputing parties (or by a court, in some cases) to preside over the arbitration proceedings and deliver a final, binding decision known as an arbitral award. The arbitrator functions in a capacity similar to that of a judge – they hear both sides, examine evidence, apply relevant legal principles, and render a decision. However, the key difference is that this process is private, consensual, and governed by the agreement of the parties rather than the rigid procedural rules of civil courts.

The arbitration process is flexible, and many of the technical aspects of court proceedings can be bypassed at the parties’ discretion. The arbitrator conducts hearings, manages timelines, and ultimately decides the outcome – and that decision carries the force of a court decree under Indian law.

Appointment of an arbitrator under the Act 🔗

The process of appointing an arbitrator is dealt with primarily under Sections 10 and 11 of the Arbitration and Conciliation Act, 1996. Section 10 provides that parties are free to determine the number of arbitrators, with the condition that this number must always be odd. If the parties fail to agree on the number, the tribunal defaults to a sole arbitrator.

Section 11 lays down the appointment procedure. Parties can mutually agree on who the arbitrator will be. In a three-member tribunal, each party typically nominates one arbitrator, and the two appointed arbitrators then select the third, who usually serves as the presiding arbitrator. If the parties fail to reach an agreement within 30 days, either party can approach the Supreme Court (for international commercial arbitrations) or the High Court (for domestic arbitrations) to make the appointment.

Importantly, a person of any nationality may serve as an arbitrator unless the parties have agreed otherwise. The 2015 Amendment to the Act also introduced requirements that courts must consider the prospective arbitrator’s disclosure regarding independence and impartiality before making an appointment.

Qualifications of an arbitrator 🔗

While the Act does not prescribe rigid qualifications, certain basic requirements apply. The arbitrator must be of sound mind, must have attained the age of majority, and must not be disqualified by any law. Parties can, through their arbitration agreement, specify additional qualifications – for instance, requiring that the arbitrator have expertise in a particular technical field. General expectations include neutrality, impartiality, and fairness, along with the capacity to complete the arbitration within the prescribed time frame.

Key powers of an arbitrator 🔗

The Arbitration and Conciliation Act, 1996 vests the arbitrator with several important powers to ensure the effective conduct and conclusion of proceedings.

Power to rule on jurisdiction (Section 16) 🔗

One of the most significant powers of an arbitrator is the competence to decide on the tribunal’s own jurisdiction. Under Section 16 of the Act, the arbitral tribunal can rule on questions regarding the existence or validity of the arbitration agreement itself. This is known as the principle of kompetenz-kompetenz. If a party believes the tribunal lacks jurisdiction, they must raise this objection at the very outset of proceedings. In the landmark case of Gas Authority of India Ltd v. Keti Construction Ltd. (2007), the Supreme Court held that jurisdictional objections must be raised at the beginning of proceedings to prevent unnecessary expense and delay.

Power to make an award (Section 29A) 🔗

The arbitral tribunal must deliver its award within 12 months from the date the tribunal completes the pleadings under Section 23(4). If the award is made within six months, the tribunal may receive additional fees as agreed by the parties. The parties can mutually extend this timeline by up to six months. Beyond that, any extension requires court approval. This time-bound framework was introduced by the 2015 Amendment to address chronic delays in arbitration proceedings.

Power to grant interim measures (Section 17) 🔗

Under Section 17, the arbitral tribunal has the power to grant interim relief during the pendency of proceedings. This can include orders for preservation of evidence, protection of goods subject to the dispute, appointment of a receiver, or any other measure deemed necessary. After the 2015 Amendment, orders passed under Section 17 are enforceable as court orders, significantly strengthening the arbitrator’s authority.

Power to proceed ex parte (Section 25) 🔗

If a party fails to participate in the proceedings without sufficient cause – for instance, by not submitting a statement of defence or not appearing for oral hearings – the arbitrator can proceed ex parte. This means the arbitrator can continue the proceedings and deliver an award based on the material available. However, if the claimant fails to submit their statement of claim, the tribunal has the power to terminate the proceedings entirely.

Power to appoint experts (Section 26) 🔗

The arbitral tribunal may appoint one or more experts to report on specific technical or specialised issues relevant to the dispute. The expert submits a written report, and parties may be given the opportunity to question the expert at an oral hearing. This power allows the arbitrator to make well-informed decisions even in highly technical disputes.

Duties and obligations of an arbitrator 🔗

Along with substantial powers, the Act places several duties on arbitrators to ensure that proceedings remain fair, transparent, and efficient.

Duty to disclose (Section 12) 🔗

This is one of the most critical duties imposed on an arbitrator. Section 12 of the Act requires that any person approached for appointment as an arbitrator must disclose, in writing, any circumstances that could give rise to justifiable doubts about their independence or impartiality. This includes any past or present relationship – whether financial, professional, or personal – with the parties or the subject matter of the dispute.

This duty of disclosure is continuous. It applies not just at the time of appointment but throughout the entire duration of the arbitration. If new circumstances arise during the proceedings that might affect the arbitrator’s neutrality, they must be promptly disclosed to both parties. The Supreme Court in the CORE II judgment (2024) emphasised the mandatory nature of these disclosure requirements, particularly in the context of government-appointed arbitrators.

The Act also includes the Fifth Schedule, which lists specific grounds that may give rise to doubts about impartiality, and the Seventh Schedule, which specifies categories of persons who are outright ineligible to serve as arbitrators – such as current employees or consultants of a party to the dispute.

Duty to act independently and impartially (Sections 12 and 18) 🔗

Independence and impartiality are the twin pillars on which the credibility of any arbitration rests. Section 18 of the Act provides that both parties must be treated with equality and each party must be given a full opportunity to present their case. This provision is often referred to as the due process clause of arbitration.

Independence means the arbitrator must be free from any relationship – direct or indirect – with the parties or the subject matter that could influence the outcome. Impartiality means the arbitrator must approach the case without any preconceived notions or favouritism. Together, these requirements ensure that the arbitral process mirrors the fairness expected of a judicial proceeding, even though it operates in a private setting.

The Supreme Court, in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), went further to hold that unilateral appointment clauses in contracts – where one party has exclusive control over choosing the arbitrator – are fundamentally contrary to the principles of equality and natural justice guaranteed under Article 14 of the Indian Constitution.

Duty to determine procedure (Section 19) 🔗

The arbitral proceedings are not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. Under Section 19, parties are free to agree on the procedure the tribunal should follow. If the parties have not agreed, the arbitrator has the discretion to conduct the proceedings in whatever manner they consider appropriate. This includes determining the admissibility, relevance, and weight of evidence. This flexibility is one of the core advantages of arbitration over traditional litigation.

Duty to determine the place of arbitration (Section 20) 🔗

The place (or “seat”) of arbitration is important because it determines which courts have supervisory jurisdiction over the proceedings. The parties are free to agree on the seat. If they cannot, the arbitrator decides, keeping in mind the convenience of the parties and the circumstances of the case.

Natural justice: the guiding principle 🔗

Arbitration, despite being a private process, is fundamentally governed by the principles of natural justice. These principles ensure that the entire process remains fair and that the resulting award is legally sustainable.

Rule against bias (Nemo judex in causa sua) 🔗

No person should be a judge in their own cause. This principle requires that the arbitrator must have no personal interest – financial or otherwise – in the outcome of the dispute. If it can be shown that the arbitrator had a conflict of interest, the resulting award can be declared void. Section 12 of the Act is a direct legislative expression of this principle. It requires disclosure of any circumstances that could suggest bias, whether actual or apparent. The 2015 Amendment specifically addressed the problem of apparent bias by introducing detailed schedules listing disqualifying relationships.

Right to be heard (Audi alteram partem) 🔗

Both parties must be given a fair and equal opportunity to present their case. The arbitrator cannot make a decision without hearing both sides. Section 18 of the Act codifies this by mandating that both parties be treated equally and given full opportunity to present their case. Even procedural decisions – like setting timelines or allowing adjournments – must reflect this principle of fairness.

Reasoned awards 🔗

Under Section 31(3) of the Act, an arbitral award must state the reasons upon which it is based, unless the parties have agreed otherwise or the award is based on a settlement between the parties. A reasoned award ensures accountability – it demonstrates that the arbitrator applied their mind objectively to the facts and law, and it provides a basis for judicial review if the award is challenged under Section 34.

Accountability and challenge of arbitrators 🔗

The Act provides safeguards to ensure arbitrators remain accountable. Under Section 13, if a party has grounds to believe that the arbitrator lacks impartiality, independence, or the agreed-upon qualifications, they can challenge the arbitrator’s appointment. The parties may agree on a challenge procedure; failing that, the challenging party must send a written statement to the tribunal within 15 days of becoming aware of the grounds for challenge.

If the challenge is unsuccessful before the tribunal, the aggrieved party can seek recourse under Section 34 after the award is passed, arguing that the tribunal’s composition was not in accordance with the parties’ agreement or the Act. This layered system of accountability – from mandatory disclosure to challenge procedures to post-award judicial review – is designed to preserve the integrity of the entire arbitration process.

The arbitrator’s role in delivering justice 🔗

An arbitrator occupies a unique position in the legal landscape. They wield the decision-making power of a judge but operate within a framework shaped by party consent and contractual freedom. Their effectiveness depends not just on legal knowledge, but on maintaining the confidence of both parties through transparent, impartial, and efficient conduct. The Arbitration and Conciliation Act, 1996 provides the statutory backbone for this role, while landmark judicial decisions continue to strengthen the standards of independence and fairness expected of arbitrators in India.

As India positions itself as a global hub for arbitration, the role of the arbitrator becomes even more significant. The quality of arbitration depends, ultimately, on the quality of the arbitrator – their knowledge, their integrity, and their commitment to delivering fair outcomes.

What do you think? Given the emphasis on independence and impartiality, do you believe the current safeguards under the Arbitration and Conciliation Act, 1996 are sufficient to prevent biased appointments, especially in government contracts? How might institutional arbitration further strengthen the credibility of the arbitral process in India?

References

1. https://www.indiacode.nic.in/handle/123456789/1978?view_type=browse
2. https://www.lexology.com/library/detail.aspx?g=c74be5b9-f8c1-4d5a-ae87-936d0ca6de8b
3. https://singhania.in/blog/selection-and-appointment-of-arbitrators-in-india
4. https://indiankanoon.org/doc/109140/
5. https://ibclaw.in/section-12-grounds-for-challenge/
6. https://www.scconline.com/blog/post/2024/11/14/supreme-court-unilateral-appointment-arbitrator-independence/
7. https://www.bimacc.org/a-z-of-adr-independence-and-impartiality-of-arbitrators/
8. https://globalarbitrationreview.com/insight/know-how/commercial-arbitration/report/india
9. https://legaleagleweb.com/articalsdetail.aspx?newsid=46
10. https://www.mondaq.com/india/arbitration-dispute-resolution/935374/arbitration-a-perspective