Section 11(6)(c) of the Arbitration and Conciliation Act, 1996: Judicial Intervention in Appointment of Arbitrators

Introduction

The landscape of dispute resolution in India has witnessed a paradigm shift with the increasing acceptance and adoption of arbitration as a preferred mechanism for resolving commercial disputes. At the heart of this alternative dispute resolution framework lies the Arbitration and Conciliation Act, 1996, which was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards. The legislation draws its inspiration from the UNCITRAL Model Law on International Commercial Arbitration and represents India’s commitment to providing an efficient and effective arbitration regime that minimizes judicial intervention while ensuring fairness and due process. Among the various provisions that govern the arbitration process in India, Section 11 of the Act holds particular significance as it deals with the appointment of arbitrators—a foundational aspect that determines the constitution of the arbitral tribunal and sets the stage for the entire arbitration proceedings. Within this framework, Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 emerges as a crucial safety valve that prevents the arbitration process from being derailed when persons or institutions entrusted with specific functions under the agreed appointment procedure fail to perform their duties.

This provision embodies the legislative intent to balance party autonomy with judicial supervision, ensuring that while parties remain free to design their own appointment procedures, the arbitration process does not come to a standstill due to inaction or default by any designated person or institution. The provision reflects a pragmatic approach to arbitration, recognizing that even well-designed appointment mechanisms may encounter operational difficulties that require judicial intervention to keep the arbitration machinery functional.

Understanding the Arbitration and Conciliation Act, 1996

The Arbitration and Conciliation Act, 1996 represents a comprehensive legislative framework that governs arbitration in India. The Act came into force on January 22, 1996, replacing the older Arbitration Act of 1940, which had become outdated and was perceived as creating unnecessary delays through excessive judicial intervention. [1] The 1996 Act was specifically designed to reduce the supervisory role of courts and to provide parties with greater autonomy in conducting arbitration proceedings according to their needs and preferences.

The Act is divided into four parts, each dealing with different aspects of arbitration and conciliation. Part I deals with arbitration, covering matters such as the arbitration agreement, composition of the arbitral tribunal, jurisdiction of the arbitral tribunal, conduct of arbitral proceedings, making of arbitral awards, and recourse against arbitral awards. Part II addresses the enforcement of foreign awards, Part III covers conciliation, and Part IV contains supplementary provisions. Over the years, the Act has been amended several times, most notably in 2015, 2019, and 2021, to make the arbitration process more efficient, time-bound, and user-friendly.

The fundamental principle underlying the Act is party autonomy, which allows parties to determine the procedural aspects of arbitration, including the number of arbitrators, the procedure for appointing arbitrators, the rules governing the arbitration, and the seat of arbitration. However, this autonomy is subject to certain mandatory provisions and the overriding principle that parties must act in good faith and ensure that the arbitration process remains fair and effective.

The Framework of Section 11: Appointment of Arbitrators

Section 11 of the Arbitration and Conciliation Act, 1996 establishes a comprehensive mechanism for the appointment of arbitrators, recognizing that the constitution of the arbitral tribunal is a critical step that must be completed efficiently to ensure timely resolution of disputes. The section is structured to give primacy to the agreement between parties regarding the appointment procedure while providing a fallback mechanism through judicial intervention when the agreed procedure fails or becomes unworkable.

The section begins by acknowledging that parties are free to determine the number of arbitrators, provided that such number is not even. In the absence of agreement on the number, the tribunal shall consist of a sole arbitrator. The section then proceeds to outline different scenarios for appointment based on whether the parties have agreed on a procedure for appointment or not, and whether the arbitration involves a sole arbitrator or a panel of three arbitrators.
Section 11(6) specifically addresses situations where the agreed appointment procedure encounters difficulties. This subsection provides that where, under an appointment procedure agreed upon by the parties, certain failures occur, a party may request the Chief Justice of the High Court (in the case of domestic arbitration) or the Chief Justice of India (in the case of international commercial arbitration), or any person or institution designated by them, to take necessary measures to appoint an arbitrator.

The three limbs of Section 11(6) cover different types of failures: first, when a party fails to act as required under the agreed procedure; second, when the parties or two appointed arbitrators fail to reach an agreement expected of them under the procedure; and third, when a person, including an institution, fails to perform any function entrusted to them under the appointment procedure. This third limb, embodied in Section 11(6)(c), forms the focus of our analysis and has significant practical implications for arbitration practice in India.

Detailed Analysis of Section 11(6)(c) of the Arbitration and Conciliation Act, 1996

Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 provides a remedial mechanism for situations where a person or institution designated under the agreed appointment procedure fails to perform their assigned function. The provision states that where “a person, including an institution, fails to perform any function entrusted to him or it under that procedure,” a party may approach the Chief Justice or the designated person or institution for taking necessary measures to appoint an arbitrator.

The scope of this provision is deliberately broad to encompass various scenarios where the appointment process may be stalled. The term “person, including an institution” casts a wide net, covering individuals such as third-party neutrals, subject matter experts, or retired judges, as well as institutional bodies such as arbitration centers, industry associations, professional bodies, or statutory authorities. The reference to “any function entrusted” similarly encompasses a range of responsibilities that parties might assign as part of their appointment mechanism.

The functions that may be entrusted under the appointment procedure can vary significantly depending on the sophistication of the parties and the complexity of the dispute. Common functions include nominating or appointing arbitrators from a panel, verifying the qualifications and credentials of proposed arbitrators, resolving disputes regarding the eligibility of arbitrators, maintaining lists of empaneled arbitrators, or conducting preliminary assessments of arbitrators’ availability and suitability. When any designated person or institution fails to discharge these functions within a reasonable timeframe, Section 11(6)(c) becomes operational.

The provision requires that there be a “failure to perform” the entrusted function. This failure can manifest in different ways—it may be an outright refusal to act, an indefinite delay in taking action, or negligent performance that does not effectively discharge the function. Courts have interpreted this requirement liberally to ensure that the arbitration process is not held hostage to the inaction of designated persons or institutions. The key consideration is whether the failure has reached a point where it effectively prevents the constitution of the arbitral tribunal and thereby frustrates the arbitration agreement between the parties.

An important limitation on the application of Section 11(6)(c) is contained in the proviso to Section 11(6), which states that the remedy of approaching the Chief Justice is not available if the agreement on the appointment procedure provides for “other means for securing the appointment.” This means that if parties have built redundancy into their appointment mechanism by providing alternative procedures to be followed in case of failure of the primary mechanism, those alternatives must be exhausted before judicial intervention can be sought. However, if the alternative means themselves fail or prove inadequate, Section 11(6)(c) would again become applicable.

The MSMED Act and Arbitration Framework

To fully appreciate the significance of the Microvision Technologies case, it is essential to understand the relationship between the Arbitration and Conciliation Act, 1996 and the Micro, Small and Medium Enterprises Development Act, 2006. The MSMED Act was enacted to facilitate the promotion and development of micro, small and medium enterprises and enhance their competitiveness. [2] A critical aspect of this legislation is the protection it provides to MSMEs against delayed payments by buyers, which is a pervasive problem that affects the cash flow and viability of small businesses.

Section 15 of the MSMED Act creates a statutory obligation on buyers to make payment to suppliers of goods or services on or before the date agreed upon between them, and in the absence of agreement, within fifteen days of acceptance of goods or services. Section 16 provides that in case of delay in payment, the buyer shall be liable to pay compound interest with monthly rests to the supplier at three times the bank rate notified by the Reserve Bank of India. These provisions create substantive rights in favor of MSMEs that are enforceable through a special dispute resolution mechanism.

Section 18 of the MSMED Act establishes this special mechanism by mandating that state governments constitute Micro and Small Enterprises Facilitation Councils. The purpose of these councils is to provide a forum for conciliation and resolution of disputes relating to payment between suppliers and buyers. Section 18(3) specifically provides that where conciliation fails, the Council shall either itself take up the dispute for arbitration or refer it to any institution or center providing alternate dispute resolution services for such arbitration. This provision creates a mandatory arbitration framework for MSME payment disputes.

The MSMED Act further provides that the arbitration shall be governed by the provisions of the Arbitration and Conciliation Act, 1996. This creates an interesting interplay between the two statutes—while the MSMED Act provides the substantive framework and the initial procedural gateway through the Facilitation Council, the actual arbitration proceedings are conducted under the Arbitration and Conciliation Act. This relationship becomes particularly relevant when the Facilitation Council fails to discharge its statutory function of referring disputes to arbitration, as was the case in Microvision Technologies.

The Microvision Technologies Case: Facts and Proceedings

The case of Microvision Technologies Private Limited versus Union of India, decided by the Bombay High Court in January 2023, presented a novel question regarding the applicability of Section 11(6)(c) to situations where the Micro and Small Enterprises Facilitation Council fails to refer a dispute to arbitration as mandated by Section 18 of the MSMED Act. The factual matrix of the case reveals the practical challenges faced by MSMEs in enforcing their payment rights even when a statutory mechanism exists for this purpose.

Microvision Technologies was a micro enterprise engaged in providing software development and related technology services. The company had entered into multiple contracts with a public sector undertaking engaged in defense manufacturing, under which it was to provide specialized software solutions. After completing the contracted work and delivering the services, the company found itself in a familiar predicament faced by many MSMEs—outstanding payments from the client. The unpaid dues amounted to approximately two and a half crore rupees, a significant sum that affected the company’s operations and financial stability.

Seeking to invoke its statutory rights under the MSMED Act, Microvision Technologies filed an application before the Micro and Small Enterprises Facilitation Council for recovery of its dues with interest. The Council duly issued notices to both parties and scheduled hearings for the matter. However, despite these initial steps, the proceedings before the Council entered a state of limbo. The Council neither conducted conciliation proceedings nor referred the matter to arbitration as required under Section 18(3) of the MSMED Act, which mandates such reference within ninety days from the date of making the application.
After waiting for a considerable period without any progress, and facing mounting financial pressures, Microvision Technologies filed an application under Section 11(6)(c) of the Arbitration and Conciliation Act before the Bombay High Court. The company argued that the Facilitation Council, being an institution entrusted with the function of referring disputes to arbitration under the agreed statutory procedure, had failed to perform its function, thereby entitling the company to seek judicial intervention for appointment of an arbitrator.

The respondent Union of India contested the application on multiple grounds. The primary argument was that Section 11(6)(c) had no application to the situation at hand because the failure of the MSEFC to act was not a failure under an “agreed appointment procedure” but rather a failure to discharge a statutory duty. It was contended that the appropriate remedy was to file a writ petition under Article 226 of the Constitution seeking a mandamus directing the Council to perform its statutory duty. Additionally, the respondent argued that the applicant had failed to exhaust the alternative remedy of filing an appeal before the State Government against the inaction of the Council, as provided under Section 18(4) of the MSMED Act.

The Bombay High Court’s Reasoning and Decision

The Bombay High Court’s judgment in the Microvision Technologies case represents a significant judicial interpretation of Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 and its application to statutory arbitration frameworks. The Court adopted a purposive approach to interpretation, focusing on the legislative intent behind both the Arbitration and Conciliation Act and the MSMED Act, and the practical realities of dispute resolution for MSMEs.

The Court first addressed the fundamental question of whether the MSEFC could be considered a “person, including an institution” within the meaning of Section 11(6)(c). The Court held that the term “institution” must be given a broad interpretation to include statutory bodies that perform functions related to arbitration. The MSEFC, though a statutory creation under the MSMED Act, was performing a function directly related to the appointment and reference process for arbitration, and therefore fell squarely within the contemplation of Section 11(6)(c).

On the question of whether there existed an “agreed appointment procedure,” the Court reasoned that when parties enter into commercial transactions knowing that they are governed by the MSMED Act, they implicitly agree to the statutory mechanism provided under that Act for resolution of payment disputes. This statutory mechanism, culminating in mandatory arbitration, constitutes an appointment procedure within the meaning of Section 11(6) even though it is imposed by law rather than expressly negotiated between parties. The Court emphasized that the Arbitration and Conciliation Act itself recognizes various sources of arbitration agreements, including those arising from statutes.

The Court further examined whether the MSEFC had been “entrusted” with a “function” under the appointment procedure. Section 18(3) of the MSMED Act clearly mandates that the Council shall either itself take up the matter for arbitration or refer it to an institution or center for arbitration. This creates a statutory obligation that amounts to entrustment of a function. The failure of the MSEFC to discharge this function within the stipulated ninety-day period or within any reasonable timeframe thereafter constituted a failure to perform the entrusted function, thereby triggering the applicability of Section 11(6)(c).
The Court rejected the argument that a writ petition would be the more appropriate remedy. While acknowledging that a writ petition could theoretically be filed to compel the MSEFC to perform its duty, the Court noted that this would only add another layer of litigation and delay. The purpose of Section 11(6)(c) is to provide a quick and effective remedy to ensure that arbitration proceeds without being stalled by procedural failures. To require a party to first file a writ petition, obtain orders, and then wait for the MSEFC to act would defeat this purpose and cause further prejudice to the aggrieved party, particularly a small enterprise waiting for payment of its dues.

Similarly, the Court found no merit in the contention that the applicant should have exhausted the remedy of appeal to the State Government under Section 18(4) of the MSMED Act. The Court noted that Section 18(4) provides for an appeal against awards made by the Council, not against the failure of the Council to act. More fundamentally, the Court observed that even if such an appeal were maintainable, it would not constitute an “alternative means for securing the appointment” within the meaning of the proviso to Section 11(6), which contemplates contractual alternatives built into the appointment procedure itself, not separate statutory remedies.

The Court ultimately allowed the application and proceeded to appoint an arbitrator to resolve the dispute between the parties. In doing so, the Court emphasized that its decision was driven by the need to give effect to the arbitration agreement (whether express or statutory) and to ensure that parties are not denied their right to arbitration due to failures in the appointment mechanism. [3]

Implications and Significance of the Decision

The Bombay High Court’s decision in Microvision Technologies has far-reaching implications for arbitration practice in India, particularly in the context of MSME disputes. The judgment establishes several important principles that clarify the scope and application of Section 11(6)(c).

First, the decision confirms that Section 11(6)(c) is not limited to failures in privately negotiated appointment procedures but extends to statutory mechanisms for arbitration as well. This is particularly significant given that Indian law provides for mandatory arbitration in several specific contexts, such as MSME payment disputes, insurance disputes, and certain commercial disputes. The judgment ensures that parties in these statutory arbitration frameworks have recourse to judicial intervention when the designated authorities fail to perform their functions.

Second, the judgment recognizes that the MSMED Act creates a complete code for resolution of payment disputes, with arbitration as the mandatory endgame when conciliation fails. By allowing parties to invoke Section 11(6)(c) when the Facilitation Council fails to refer disputes to arbitration, the Court has strengthened the enforcement mechanism available to MSMEs. This is crucial because the effectiveness of the MSMED Act depends not just on the substantive rights it creates but on the ability of MSMEs to actually realize those rights through efficient dispute resolution.

Third, the decision reflects a pragmatic understanding of the challenges faced by small businesses in the Indian commercial ecosystem. MSMEs often lack the resources and staying power to engage in prolonged litigation or to pursue multiple remedies across different forums. By providing a direct route to arbitration through Section 11(6)(c), the Court has made the dispute resolution process more accessible and efficient for this vulnerable class of business entities.
Fourth, the judgment contributes to the growing body of jurisprudence that interprets the Arbitration and Conciliation Act liberally to advance its pro-arbitration objectives. Courts have increasingly recognized that the Act should be interpreted in a manner that facilitates arbitration rather than creating obstacles to it. The Microvision Technologies decision exemplifies this approach by finding a practical solution to a procedural impasse rather than requiring parties to navigate through multiple layers of litigation.

Regulatory Framework and Procedural Considerations

The implementation of Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 involves several procedural aspects that parties and practitioners must understand. When a party seeks to invoke this provision, they must file an application before the appropriate judicial authority—the Chief Justice of the High Court for domestic arbitrations or the Chief Justice of India for international commercial arbitrations, or their designates. Following the amendments to the Arbitration and Conciliation Act, most High Courts have designated specific judges or judicial officers to hear and decide applications under Section 11.

The application must demonstrate that there exists a valid arbitration agreement, whether express or implied, including those arising from statutes. The applicant must show that an appointment procedure was agreed upon or provided by law, that a specific person or institution was entrusted with a function under that procedure, and that such person or institution has failed to perform the function. The application should also establish that no alternative means for securing the appointment have been provided in the agreement, or that such alternative means have themselves failed.

Courts hearing applications under Section 11(6)(c) conduct a prima facie review of these aspects without entering into a detailed examination of the merits of the underlying dispute. This limited scope of inquiry is consistent with the principle that courts should interfere minimally in arbitration matters and that most issues, including jurisdictional questions, should be left to the arbitral tribunal to decide. [4]

Once the court is satisfied that the conditions for invoking Section 11(6)(c) are met, it may proceed to appoint an arbitrator. In making this appointment, the court considers factors such as the nature of the dispute, the qualifications required in the arbitrator, the preferences expressed by the parties, and the need to ensure the independence and impartiality of the arbitrator. The court’s role is facilitative—to remove the roadblock that was preventing the constitution of the tribunal and to enable the arbitration to proceed on its merits.

The appointed arbitrator then proceeds to conduct the arbitration in accordance with the provisions of the Arbitration and Conciliation Act and any applicable rules that the parties may have agreed upon. The arbitrator has all the powers and jurisdiction that would have been available to an arbitrator appointed through the originally agreed procedure, including the power to rule on their own jurisdiction, to decide procedural matters, and to make the final award.

Comparative Analysis with Other Jurisdictions

The issue of judicial intervention in arbitrator appointments when designated authorities fail to act is not unique to India. Many jurisdictions have grappled with similar problems and have developed various approaches to address them. A comparative perspective helps illuminate the strengths and potential areas of improvement in the Indian framework.

The UNCITRAL Model Law on International Commercial Arbitration, on which the Indian Act is based, provides in Article 11(4) that if a party fails to appoint an arbitrator or if the two arbitrators fail to agree on the third arbitrator, the appointment shall be made by a court or other authority specified in the Model Law. This provision has been interpreted broadly in various jurisdictions to cover institutional failures as well, though the specific approaches vary.
In England, the Arbitration Act 1996 provides extensive provisions for court intervention in appointment of arbitrators. Section 18 of the English Act specifically empowers the court to intervene when an appointment mechanism fails, and the courts have adopted a pragmatic approach similar to that seen in Microvision Technologies, focusing on ensuring that arbitration proceeds rather than on technical distinctions between different types of failures.
Singapore, which has emerged as a leading arbitration hub in Asia, has provisions in its International Arbitration Act that allow for judicial appointment when agreed mechanisms fail. The Singapore courts have been particularly proactive in facilitating arbitration and have developed detailed guidelines for appointments that balance party autonomy with the need for efficient dispute resolution.

The Indian approach, as exemplified by the Microvision Technologies decision, aligns well with international best practices in emphasizing substance over form and in focusing on the ultimate objective of enabling effective arbitration. However, there remains room for further development, particularly in creating more specialized and expedited procedures for handling appointment applications and in building institutional capacity within courts to handle these matters efficiently.

Challenges and Future Directions

Despite the positive developments represented by judgments like Microvision Technologies, several challenges remain in the effective implementation of Section 11(6)(c) and the broader framework for arbitrator appointments in India. One significant challenge is the lack of uniform standards across different High Courts for evaluating applications under this provision. While some courts have developed detailed protocols and standard operating procedures, others continue to adopt varying approaches, leading to uncertainty and inconsistency.

The time taken to resolve applications under Section 11 remains a concern in many cases. Although the provision is intended to provide a quick remedy when appointment mechanisms fail, applications can sometimes take months or even longer to be decided, particularly in High Courts with heavy caseloads. This defeats the purpose of having a fast-track mechanism and adds to the overall time required for dispute resolution.

There is also a need for greater awareness and capacity building among institutions that are frequently designated for arbitrator appointments. Many professional bodies, industry associations, and even statutory authorities like MSEFCs may lack the expertise or resources to efficiently discharge their appointment-related functions. Developing best practices, providing training, and creating standardized procedures could help reduce instances of institutional failure that necessitate judicial intervention.

The recent amendments to the Arbitration and Conciliation Act have sought to address some of these issues by establishing the Arbitration Council of India and creating provisions for accreditation of arbitral institutions. [5] However, the full impact of these reforms remains to be seen, and continued monitoring and refinement will be necessary to ensure that the arbitration ecosystem in India becomes truly world-class.

Looking forward, there is potential for further legislative and judicial developments in this area. Courts may need to provide more detailed guidance on what constitutes “reasonable time” for institutions to perform their functions and on the standard of scrutiny to be applied when evaluating claims of institutional failure. There may also be scope for developing alternative mechanisms, such as online platforms for arbitrator appointments or creating specialized arbitration courts that can handle appointment matters more efficiently.

Conclusion

Section 11(6)(c) of the Arbitration and Conciliation Act, 1996 serves as a vital safety mechanism that ensures the arbitration process does not fail due to inaction or default by persons or institutions entrusted with appointment-related functions. The provision reflects the law’s commitment to party autonomy while recognizing that such autonomy must be supported by effective fallback mechanisms when private arrangements encounter difficulties.

The Bombay High Court’s decision in Microvision Technologies Private Limited versus Union of India represents an important milestone in the interpretation and application of this provision. By holding that Section 11(6)(c) applies to statutory institutions like the MSEFC and that parties need not exhaust alternative remedies before seeking judicial intervention for arbitrator appointment, the Court has strengthened the practical effectiveness of both the Arbitration and Conciliation Act and the MSMED Act.

The decision underscores several fundamental principles that should guide the Indian arbitration framework going forward. First, arbitration laws must be interpreted purposively to advance their pro-arbitration objectives rather than creating technical obstacles. Second, the focus should be on enabling arbitration to proceed rather than on jurisdictional technicalities. Third, the special needs of vulnerable parties like MSMEs must be recognized in the application of procedural rules. And fourth, judicial intervention, while limited in scope, plays a crucial role in keeping the arbitration machinery functional.
As India continues to develop as an arbitration destination and as domestic arbitration becomes increasingly accepted as the preferred mode of commercial dispute resolution, provisions like Section 11(6)(c) will play a critical role in maintaining confidence in the system. The provision ensures that even when appointment mechanisms encounter difficulties—whether due to party default, institutional failure, or unforeseen circumstances—the path to arbitration remains open and accessible.

For legal practitioners, businesses, and policymakers, the key takeaway from the Microvision Technologies case and the broader analysis of Section 11(6)(c) is the importance of designing robust appointment procedures that minimize the likelihood of failure while recognizing that judicial intervention remains available as a backstop when such failures nevertheless occur. As the arbitration landscape continues to evolve, the interplay between party autonomy, institutional competence, and judicial supervision will remain a central theme in ensuring that arbitration fulfills its promise of providing efficient, effective, and fair dispute resolution.

References

[1] The Arbitration and Conciliation Act, 1996, Available at: https://www.indiacode.nic.in/handle/123456789/1978 

[2] The Micro, Small and Medium Enterprises Development Act, 2006 

[3] Microvision Technologies Private Limited v. Union of India, (2023) ibclaw.in 726 HC 

[4] SBP & Co. v. Patel Engineering Ltd., (2005) 8 SCC 618 

[5] The Arbitration and Conciliation (Amendment) Act, 2021 

[6] UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006, Available at: https://uncitral.un.org/en/texts/arbitration/modellaw/commercial_arbitration 

[7] National Highway Authority of India v. M. Hakeem, (2021) 9 SCC 1

[8] Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2019) 20 SCC 760 

[9] Duro Felguera, S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729