What is Section 16 of Arbitration and Conciliation Act

Section 16. Competence of arbitral tribunal to rule on its jurisdiction under Arbitration and Conciliation Act, 1996

CHAPTER IV

Jurisdiction Of Arbitral Tribunals

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.

Scope of Section 16 of Arbitration and Conciliation Act, 1996

Article 16 of the UNCITRAL Model law embodies Legal doctrine i.e., "Kompetenze - Kompetenze" which means the court or an arbitral tribunal to rule upon its 'own' jurisdiction, brought forth by one of the parties to the dispute. Section 16 of the Arbitration and Conciliation Act, 1996 has been framed in accordance with the same. 

However this provision is not saying anything on whether it is permissible for any arbitral tribunal to determine other preliminary issues in the begining itself when an application filed under Section 16 of the A&C Act.

This statute came under scrutiny of Hon'ble Supreme Court in the case of Indian Farmers Fertilizers Cooperative Limited vs. Bhadra Products, 2018 Latest Caselaw 33 SC. Bench heard submissions on two aspects, whether an award passed on the issue of limitation can be said to be an interim award and whether it can be set aside under Section 34 of the act and whether a decision on a point of limitation would go to jurisdiction so as to be covered by Section 16 of the Act.

While stating that an Award on issue of limitation can be treated as interim award bench ruled on the second aspect of covering it under Section 16 that the language of Section 16(1) states that Arbitral Tribunal may rule on its own jurisdiction, which makes it clear that it refers to whether the arbitral tribunal may embark upon an enquiry into the issues brought forth by the parties.

If the arbitral tribunal finds that it is not competent, an appeal can be filed under Section 37. Still, the situation is different if the arbitral tribunal considers that it is capable, then no right to appeal is provided in such cases if an award is passed.

The jurisdiction should be challenged at the initial stage. If there is a refusal to go into the merits, then it is considered a jurisdictional issue.