KOMPETENZ-KOMPETENZ IN INDIAN LAW: PROCEDURAL ISSUES AND RECOMMENDATIONS

This piece of the article is authored By:- Chezhiiyan Sabapathy Law 4th year law student at O.P. Jindal Global University

I. INTRODUCTION

The competence-competence (kompetenz-kompetenz) principle states that an arbitral tribunal has jurisdiction to decide on any disputes concerning its own jurisdiction. The competence-competence principle was codified by the UNCITRAL Model Law on International Commercial Arbitration (1985) in article 16. The same was adopted with a few minor changes in the Arbitration and Conciliation Act, 1996 in section 16.

There are two aspects to the competence-competence principle – the positive and the negative. While the positive aspect of competence-competence is with regard to the arbitral tribunal’s competency to rule on its own jurisdiction, the negative aspect is a logical extension of the positive aspect. The consequence of providing the arbitral tribunal competency to rule on its own jurisdiction also means that the courts must refrain from ruling on the jurisdiction of the arbitral tribunal in the first instance. This is especially relevant in cases where the courts must refer the parties to arbitration based on a valid arbitration agreement.

In this paper, we will discuss the development of the competence-competence principle in India to understand the legislative intent behind its application. We will then address a conundrum regarding the manner of application of the principle in India and make certain recommendations that can help reconcile the issues.

II. DEVELOPMENT OF THE COMPETENCE-COMPETENCE PRINCIPLE IN INDIA

Section 16 of the Arbitration and Conciliation Act, 1996, embodies the competence-competence principle codified in the UNCITRAL model laws. It provides for the arbitral tribunal to rule on its own jurisdiction, including ruling on any objections regarding the existence of a valid arbitration agreement.

Section 11 of the Arbitration and Conciliation Act allows the parties to apply to the court and request the Chief Justice to make a final arbitrator appointment if in case the procedure that the parties had agreed to is ineffective or there is a lack of procedure and the parties are not in agreement regarding the same. In a 2005 judgement delivered by a seven-judge bench of the Supreme Court of India, S.B.P. and Co. Vs. Patel Engineering Ltd., the court held that a decision by the Chief Justice under S11 was judicial and not administrative. Therefore, if the Chief Justice’s decision in appointing an arbitrator is final, then their decision on the existence of a valid arbitration agreement and the tribunal’s jurisdiction would also be final since the Chief Justice would have to look into the agreement to make the appointment.

This judgement was a direct attack on the negative covenant of the competence-competence principle. Such a judgement renders section 16(1) redundant and is a classic example of judicial overreach. However, Justice Thakker acknowledged this in his dissenting opinion.

Post this judgement, Section 11(6A) was inserted into the Act through the 2015 amendment, which states that the Supreme Court or High Court, while considering appointments under S11(4), S11(5), or S11(6), must confine their examination to the existence of an arbitration agreement. The inclusion of this provision explicitly bars courts from deciding on issues such as the validity of the arbitration agreement. This clearly defines the legislative intent for Section 11.

The Vidya Drolia Vs. Durga Trading Corporation judgement was also largely consistent with Section 11(6A), the judgement stated that subject matter arbitrability must not usually be decided on the S8 or S11 stage unless it is manifestly certain that the arbitration agreement does not exist, invalid or the dispute is on the face of it non-arbitrable. The courts are not supposed to conduct a deep inquiry, just a prima facie one. This judgement, however, ever so slightly widens the judicial scope to the extent where it is stated that the courts may not refer to arbitration disputes which are prima facie non-arbitrable. Nevertheless, this is justified in light of a severely over-burdened judiciary aimed at procedural efficiency. The brief retreat suggested by the 5-judge majority in N.N. Global Mercantile v. Indo Unique Flame Ltd which had held that an unstamped arbitration agreement was unenforceable and that the referral court had to examine stamping, was reversed by a 7-judge Constitution Bench in In Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, which restored the prima facie standard and reaffirmed that stamping-related objections fall to the tribunal under the doctrine of competence-competence.

Therefore, to sum up, the development of the competence-competence principle in India, the legislators initially adopted the principle from the model laws with the best intentions; however, its efficacy was minimized due to judicial overreach. Nevertheless, this issue was substantively fixed with the 2015 amendment and a line of subsequent judgments that have been mindful of both the positive and negative aspects of the competence-competence principle. The Supreme Court’s 2024 ruling in SBI General Insurance Co. Ltd. v. Krish Spinning consolidated this position, expressly recognising “negative competence-competence” and holding that the referral court’s scrutiny under Section 11 is confined to the prima facie existence of an arbitration agreement, with all other questions reserved for the tribunal.

III. APPEALS ON PRELIMINARY DECISIONS OF JURISDICTION – A CONUNDRUM

If a tribunal were to give a preliminary decision on jurisdiction in India there is no clarity as to whether it would be an order or an award, Section 16 of the Act simply provides for the tribunal to take a decision regarding the jurisdiction of the tribunal.

Due to the lack of clarity, the current position of the law is if the arbitral tribunal rejects a plea on lack of jurisdiction, then it may continue the arbitral proceedings and can only be appealed once the arbitral award is passed under Section 34. However, if a tribunal accepts a plea claiming lack of jurisdiction, then it can immediately be appealed under Section 37. Had a decision rejecting a plea on the lack of a tribunal’s jurisdiction been termed as an interim award, then it could have immediately been appealed under Section 34 as, according to Section 2(1) of the act, an arbitral award also includes interim awards.

However, this interpretation is non-reconcilable as Section 37, which concerns appealable orders, includes the acceptance of a plea on the arbitral tribunal’s lack of jurisprudence. Therefore, it would not make sense for the acceptance of such a plea to be an order while the rejection of such a plea to be an interim award. Accordingly, a decision regarding the rejection of such a plea must also be termed an order only.

Further, Section 16 in its current form does not prescribe when the tribunal must state its decision regarding its jurisdiction once a plea regarding its jurisdiction has been raised; this is another point of ambiguity. The Draft Arbitration and Conciliation (Amendment) Bill, 2024, released by the Department of Legal Affairs for public consultation on 18 October 2024, partly addresses this gap by inserting a revised Section 16(5) that requires the arbitral tribunal to decide a jurisdictional plea as a preliminary issue within thirty days of filing, with reasons to be recorded in writing if the tribunal defers. However, the Bill has yet to be enacted.

The Law Commission of India, in its 176th report, has stated that an immediate appeal has not been provided in a case where a plea on the lack of the tribunal’s jurisdiction is rejected, because of the possibility of abuse of the provision. The more recent T. K. Viswanathan Expert Committee Report of February 2024, by contrast, recommended that an appellate framework for such interlocutory jurisdictional rulings is essential for coherence with Article 16 of the UNCITRAL Model Law; that recommendation has not been carried into the Draft Bill, 2024.

IV. THE BRITISH SYSTEM

In the English system, Section 31(4) of their Arbitration Act 1996 provides for the tribunal to either rule on its jurisdiction as an award on its own jurisdiction or deal with the objection in its award on merits (while deciding the substantial rights of parties). The parties may, by agreement, decide which of the two courses the tribunal should take. This allows the parties, by mutual agreement, to choose whether the decision on jurisdiction is made preliminarily or while the award on merits is passed.

An important consequence of such a system is that any affected party can appeal such an award on jurisdiction at the preliminary stage itself before waiting for the award on merits to be passed.

Under Section 32 of the English Arbitration Act 1996, a court may, on the application of a party to the arbitral proceedings, determine any question as to the substantive jurisdiction of the tribunal. The applicant party must either have the written agreement of all other parties to the proceeding, or make the application with the permission of the tribunal. Until the recent amendments, the court also had to be independently satisfied that the application would produce a substantial saving in costs, that it was made without delay, and that there was good reason for the court to decide the matter. Those additional conditions were simplified by Section 5 of the UK Arbitration Act 2025, which came into force on 1 August 2025. More significantly, the 2025 Act inserts a new Section 32(1A) providing that “an application under this section must not be considered to the extent that it is in respect of a question on which the tribunal has already ruled.” The effect is that Section 32 is now a track that runs in lieu of, and not in parallel with, the tribunal’s own determination of jurisdiction. Any post-ruling challenge in the United Kingdom must instead proceed under Section 67.

These provisions in my opinion are an ingenious way of maintaining a balance of autonomy between parties, the arbitral tribunal, and the judiciary. However, they can only be adopted by the Indian system with a few necessary changes. The fact that the United Kingdom has, through the 2025 Act, further tightened the relationship between tribunal-level and court-level jurisdictional review, rather than relaxing it, strengthens the case for India to adopt a comparable but locally calibrated framework.

V. RECOMMENDATIONS

Allowing appeal once the arbitral tribunals have decided that they have jurisdiction, before passing the award is a double-edged sword. While on one hand parties may use it as a tactic to delay arbitration proceedings, on the other hand the parties may face delayed justice by having to wait for the tribunal to pass an award before appealing to the courts that the tribunal does not have jurisdiction. Another problem faced in the Indian system is ambiguity with regards to when the decision on jurisdiction will be taken.

One way to ease these problems while balancing the interests of the parties, courts, and arbitral tribunal is to implement a combination of Section 31(4) of the English Arbitration Act, 1996 and the framework that governed Section 32 of the Act prior to its amendment by the UK Arbitration Act 2025.

The first recommended provision would be that parties can force the arbitral tribunal to decide on its jurisdiction in the first instance by agreement. This would rule out the possibility of the parties waiting until the award is passed for the arbitral tribunal to decide on its jurisdiction until the award stage, thereby delaying the process in case an appeal regarding the same were to be sought. This would also waste precious time and resources.

The second provision would be a modified version of Section 32 of the English Arbitration Act. Wherein parties would be able to appeal the interlocutory order made by the arbitral tribunal stating that it has subject matter jurisdiction if the appealing party either:

1. Has the written agreement of all other parties in the proceeding to apply for the same; or
2. It is made with the tribunal’s permission, and the court is satisfied that it is likely to result in shortened arbitral proceedings, that the appeal has been preferred within 30 days of the tribunal’s own jurisdictional ruling under Section 16(5) of the Draft Bill, 2024, and that the question goes to the root of the tribunal’s competence in a manner that would make deferral to the post-award stage under Section 34 substantively futile.

Such a provision would make it almost impossible for parties to use the mechanism as a delay tactic so as not to further burden our overburdened judiciary while also ensuring that genuine concerns still have the ability to reach courts in a timely manner instead of waiting for the award to be passed before appealing.

Both of these provisions would still allow the arbitral tribunals to assert competence over their jurisdiction while easing procedural burdens on the stakeholders in an arbitration proceeding. They uphold the competence-competence principle while limiting the negative effects of its manner of application in India.

REFERENCES

1. UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006, Art.16, 2006 (UNCITRAL).
2. The Arbitration and Conciliation Act (1996), § 16, No.26, Acts of Parliament, 1996 (India).
3. John J. Barcelo III, Who Decides the Arbitrator’s Jurisdiction – Separability and Competence – Competence in Transnational Perspective, 36 VAND. J. TRANSNAT’l L. 1115, 1124-1126 (October 2003).
4. The Arbitration and Conciliation Act (1996), § 16, No.26, Acts of Parliament, 1996 (India).
5. The Arbitration and Conciliation Act (1996), § 11, No.26, Acts of Parliament, 1996 (India).
6. S.B.P. & Co v. Patel Engineering Ltd. & Anr, 2005 INSC 526.
7. The Arbitration and Conciliation Act (1996), § 16(1), No.26, Acts of Parliament, 1996 (India).
8. The Arbitration and Conciliation Act (1996), § 11(6A), No.26, Acts of Parliament, 1996 (India).
9. Vidya Drolia v. Durga Trading Corporation, 2019 INSC 290.
10. N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1.
11. In re Interplay Between Arbitration Agreements Under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, (2024) 6 SCC 1.
12. The Arbitration and Conciliation (Amendment) Act, 2015, No. 3, Acts of Parliament, 2016 (India).
13. SBI General Insurance Co. Ltd. v. Krish Spinning, (2024) 12 SCC 1.
14. Vaishnavi Chillakuru, The Rule of Competence-Competence: A Comparative Analysis of Indian and English Law, 6 CONTEMP. ASIA ARB. J. 133, 145-147 (May 2013).
15. The Arbitration and Conciliation Act (1996), § 34, No.26, Acts of Parliament, 1996 (India).
16. The Arbitration and Conciliation Act (1996), § 37, No.26, Acts of Parliament, 1996 (India).
17. The Arbitration and Conciliation Act (1996), § 2(1), No.26, Acts of Parliament, 1996 (India).
18. Vaishnavi Chillakuru, The Rule of Competence-Competence: A Comparative Analysis of Indian and English Law, 6 CONTEMP. ASIA ARB. J. 133, 145-147 (May 2013).
19. DEPARTMENT OF LEGAL AFFAIRS, MINISTRY OF LAW & JUSTICE, GOVERNMENT OF INDIA, THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2024 (DRAFT) (Oct. 18, 2024) (India).
20. LAW COMM’N OF INDIA, ONE HUNDRED AND SEVENTY SIXTH REPORT ON THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2001 (2001)(India).
21. EXPERT COMM. TO EXAMINE THE WORKING OF THE ARB. LAW, REPORT OF THE EXPERT COMMITTEE TO EXAMINE THE WORKING OF THE ARBITRATION LAW AND RECOMMEND REFORMS IN THE ARBITRATION AND CONCILIATION ACT, 1996, TO MAKE IT ALTERNATIVE IN LETTER AND SPIRIT (Feb. 7, 2024) (India) (T.K. Viswanathan, Chair).
22. DEPARTMENT OF LEGAL AFFAIRS, MINISTRY OF LAW & JUSTICE, GOVERNMENT OF INDIA, THE ARBITRATION AND CONCILIATION (AMENDMENT) BILL, 2024 (DRAFT) (Oct. 18, 2024) (India).
23. Arbitration Act 1996, § 31, c. 23, Acts of Parliament, 1996 (UK).
24. Neil Modi, The Rule of Competence-Competence: A Historical & Comparative Analysis between English-Indian Law, 26 WILLAMETTE J. INT’l L. & DISP. RESOL. 75, 86-89 (2019).
25. Vaishnavi Chillakuru, The Rule of Competence-Competence: A Comparative Analysis of Indian and English Law, 6 CONTEMP. ASIA ARB. J. 133, 145-147 (May 2013).
26. Arbitration Act 1996, c. 23, § 32 (UK).
27. Arbitration Act 1996, c. 23, § 32(1A) (UK).
28. Arbitration Act 1996, c. 23, § 67 (UK).
29. Arbitration Act 1996, c. 23, § 32 (UK).