Arbitration and Conciliation Act, 1996
Section 16 of the Arbitration Act: Competence of Arbitral Tribunal to Rule on Its Jurisdiction
Section 16 of the Arbitration and Conciliation Act, 1996 empowers an arbitral tribunal to rule on its own jurisdiction. It also recognizes the separability of an arbitration clause from the main contract and prescribes when objections to jurisdiction or excess of authority must be raised.
Meaning and purpose of Section 16
Section 16 forms part of Chapter IV of Part I of the Arbitration and Conciliation Act, 1996, dealing with jurisdiction of arbitral tribunals. The provision allows the tribunal to determine objections to its own jurisdiction rather than requiring every jurisdictional question to be decided first by a Court.
- Section 16(1): the tribunal may rule on its own jurisdiction, including the existence or validity of the arbitration agreement.
- Section 16(1)(a): the arbitration clause is treated as independent of the other contractual terms.
- Section 16(1)(b): invalidity of the main contract does not automatically invalidate the arbitration clause.
- Section 16(2): a plea that the tribunal lacks jurisdiction must ordinarily be raised not later than the statement of defence.
- Section 16(3): a plea that the tribunal is exceeding its authority must be raised as soon as the allegedly excessive matter arises.
- Section 16(4): a late plea may be admitted if the tribunal considers the delay justified.
- Sections 16(5) and 16(6): if the plea is rejected, proceedings continue to an award, which may later be challenged under Section 34.
Competence-competence and separability under Section 16
Competence-competence
The principle commonly described as competence-competence means that the arbitral tribunal has authority to rule on its own jurisdiction. Section 16(1) expressly includes objections concerning the existence or validity of the arbitration agreement.
Separability of the arbitration clause
Section 16(1)(a) treats an arbitration clause forming part of a contract as an agreement independent of the other terms of that contract. Section 16(1)(b) reinforces this by providing that a tribunal's decision that the contract is null and void does not, ipso jure, make the arbitration clause invalid.
Section 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.
When must jurisdictional objections be raised?
| Type of plea | Time prescribed by Section 16 |
|---|---|
| Tribunal has no jurisdiction | Not later than submission of the statement of defence. |
| Tribunal is exceeding its authority | As soon as the matter alleged to be beyond its authority is raised during the proceedings. |
| Late plea | May still be admitted if the tribunal considers the delay justified. |
Participation in appointing an arbitrator does not by itself prevent a party from later raising a plea under Section 16(2) that the tribunal lacks jurisdiction.
Can the arbitral tribunal admit a late plea?
Yes. Section 16(4) gives the tribunal discretion to admit a plea raised after the time contemplated by Section 16(2) or Section 16(3), provided the tribunal considers the delay justified.
What happens if the tribunal rejects the jurisdictional plea?
Under Section 16(5), if the tribunal rejects a plea that it lacks jurisdiction or is exceeding the scope of its authority, the tribunal continues the arbitral proceedings and makes an arbitral award.
The section therefore does not provide for automatic termination of proceedings merely because a jurisdictional objection has been raised.
Remedy after the arbitral award under Section 34
Section 16(6) provides that a party aggrieved by the resulting arbitral award may apply to set aside that award in accordance with Section 34 of the Arbitration and Conciliation Act, 1996.