Appeals, Jurisdiction and Miscellaneous Provisions: Sections 37 to 43

The closing sections of Part I deal with the appeal, with the machinery that keeps the arbitration in one court, and with a group of provisions on deposits, the arbitrator's lien, death, insolvency, confidentiality and limitation. They are short and are often skipped, but three of them decide real cases: Section 37, which lists the orders from which an appeal lies and bars a second appeal; Section 42, which fixes exclusive jurisdiction in one court; and Section 43, which applies the Limitation Act, 1963 to arbitration and supplies the rules on stale claims.

1. Appealable Orders: Section 37

The orders from which an appeal lies, and the orders from which none does

Section 37 is exhaustive. An appeal lies from the orders it lists and from no others, and the list is short because the object of the Act is to keep the arbitration moving.

1. Section 37(1)(a). An order refusing to refer the parties to arbitration under Section 8. There is no appeal against an order referring them, because such an order sends the dispute to the forum the parties chose.
2. Section 37(1)(b). An order granting or refusing to grant any measure under Section 9.
3. Section 37(1)(c). An order setting aside or refusing to set aside an arbitral award under Section 34.
4. Section 37(2)(a). An order of the arbitral tribunal accepting the plea referred to in sub-section (2) or (3) of Section 16. There is no appeal where the plea is rejected; that point is taken under Section 34 after the award.
5. Section 37(2)(b). An order of the tribunal granting or refusing to grant an interim measure under Section 17.
6. Section 37(3). No second appeal lies from an order passed in appeal under this section, but nothing in the section affects or takes away any right to appeal to the Supreme Court.

Two omissions from the list are significant. No appeal lies against an order appointing an arbitrator under Section 11, so recourse is only by special leave under Article 136. And no appeal lies against an order of the court referring parties to arbitration under Section 8, which is the counterpart of the mandatory language of that section.

2. Deposits and the Lien: Sections 38 and 39

Section 38 permits the tribunal to fix the amount of the deposit or supplementary deposit as an advance for the costs it expects to incur, requiring the parties to deposit an equal share, and provides that where one party fails to pay his share the other may pay it; where neither does, the tribunal may suspend or terminate the proceedings in respect of the claim or counterclaim concerned. On termination of the proceedings the tribunal must render an account of the deposits received and return any unexpended balance.

Section 39 gives the tribunal a lien on the award for any unpaid costs. Where the tribunal refuses to deliver the award except on payment of the costs demanded, a party may apply to the court, which may order delivery on the applicant paying into court the costs demanded, and may then inquire into what is reasonable and order payment out accordingly. The provision protects the parties against an excessive demand while ensuring that the arbitrator is not left unpaid.

3. Death and Insolvency: Sections 40 and 41

• Section 40. An arbitration agreement is not discharged by the death of a party, and is enforceable by or against the legal representative of the deceased. The mandate of an arbitrator is not terminated by the death of the party who appointed him. The section is subject to any law by virtue of which a right of action is extinguished by death, so a purely personal claim that does not survive is not preserved by it.
• Section 41. Where a contract containing an arbitration clause is to be carried out by a receiver appointed in insolvency proceedings, the clause is enforceable by or against him so far as it relates to the disputes arising out of the contract. Where the receiver does not adopt the contract and a matter to which the clause applies requires determination in connection with the insolvency proceedings, the court exercising insolvency jurisdiction may, on the application of any other party or of the receiver, order that the matter be referred to arbitration.

4. Exclusive Jurisdiction: Section 42

The purpose is to prevent parties from moving between courts and to keep the supervision of a single arbitration in one place. Four points govern its working.

1. It applies to applications under Part I. An application under Section 9, 11, 14, 27 or 34 attracts the section; a proceeding under Part II does not.
2. The first application fixes the forum. The court in which the first such application is made acquires jurisdiction over all subsequent applications arising out of the agreement and the proceedings.
3. The court must have had jurisdiction. An application made to a court that lacked jurisdiction does not fix the forum; the section presupposes a competent court.
4. Execution stands outside. Enforcement of the award may be sought in any court where the assets are situated, because execution is not an application arising out of the arbitration agreement.

Section 42 is read with the seat. Where the parties have designated a seat, the courts at the seat have supervisory jurisdiction to the exclusion of others, and an application made elsewhere does not attract Section 42 because that court had no jurisdiction to entertain it.

5. Confidentiality and Good Faith: Sections 42A and 42B

Section 42A, inserted in 2019, provides that notwithstanding anything contained by any other law for the time being in force, the arbitrator, the arbitral institution and the parties to the arbitration agreement shall maintain confidentiality of all arbitral proceedings except the award, where its disclosure is necessary for the purpose of implementation and enforcement of the award. Two limits are apparent. The duty attaches to the arbitrator, the institution and the parties, and not to witnesses or third parties; and the exception covers disclosure of the award for enforcement, which in practice extends to a challenge under Section 34, since an award cannot be defended or attacked without producing it.

Section 42B, also inserted in 2019, provides that no suit or other legal proceedings shall lie against the arbitrator for anything which is in good faith done or intended to be done under the Act or the rules or regulations made under it. The protection is the counterpart of the adjudicatory function: an arbitrator who decides honestly is not to be exposed to personal litigation by the losing party. It does not protect conduct that is not in good faith, and it does not affect the consequences of ineligibility under Section 12(5) or of a reduction of fees under Section 29A(4).

6. Limitation: Section 43

The period that governs at each stage, and the two occasions on which time is given back

Section 43(1) provides that the Limitation Act, 1963 applies to arbitrations as it applies to proceedings in court. Section 43(2) provides that for the purposes of that Act and of this section, an arbitration is deemed to commence on the date referred to in Section 21, namely the date on which a request that the dispute be referred to arbitration is received by the respondent.

• The claim. The period is the one the Limitation Act prescribes for a claim of that kind, running from the accrual of the cause of action. A claim already barred when the notice under Section 21 is issued is a dead claim, and an award on it is open to challenge.
• Negotiations. Correspondence and negotiation do not by themselves extend limitation. Time runs from the breaking point, that is the date on which a reasonable party would have abandoned hope of an amicable settlement and issued the notice.
• Application under Section 11. An application for appointment is itself governed by Article 137 of the Limitation Act, and must be made within three years from the refusal to appoint. Limitation for the application is distinct from limitation for the claim, and the court may refuse a reference where the claim is ex facie dead.
• Section 43(3). Where an arbitration agreement provides that a claim shall be barred unless notice is given or some step is taken within a fixed time, and the court is of opinion that undue hardship would otherwise be caused, it may extend that time on such terms as it thinks just.
• Section 43(4). Where an award is set aside, the period between the commencement of the arbitration and the date of the order is excluded in computing the time prescribed for the commencement of fresh proceedings on the same dispute.

7. Related Topics and Provisions