When commercial giants lock horns over international contracts, the swift and binding resolution offered by arbitration is often the chosen panacea. But what happens when the very mechanism intended to deliver justice is founded on a jurisdictional flaw so fundamental it renders the final decision null and void? Such was the pivotal question that recently came before the Madras High Court in China Datang Technologies vs. NLC India Limited1, forcing a critical examination of the non-derogable provisions of the Arbitration and Conciliation Act (ACA).
In a concise yet powerful observation, the bench of Justice N. Anand Venkatesh held that “the appointment of an arbitrator by a High Court in a case of international commercial arbitration is a jurisdictional overreach that results in the award being a nullity.”
The issue arose from a dispute between a Chinese foreign entity, China Datang Technologies and Engineering Company Ltd. (Datang), and a public sector undertaking, NLC India Ltd. (NLC), concerning a power project contract which NLC had terminated. Both parties approached the Madras High Court under Section 34 of the ACA to set aside or modify parts of the resulting award, which was delivered by an arbitrator whom the High Court had appointed by consent of the parties.
Before delving into the merits of the cross-petitions, the Court, on its own motion, raised a fundamental legal quandary: Could the High Court, and not the Supreme Court, validly appoint a Sole Arbitrator in this international commercial arbitration?
This article will explore the deep-seated legal principles specifically the non-derogable nature of Sections 4 and 11(6) of the ACA that empower only the Apex Court to appoint an arbitrator in such cases, forming the basis for the Madras High Court’s finding that the very foundation of the arbitral proceedings was fatally flawed.
Can a High Court Appoint an Arbitrator in an International Commercial Arbitration?
The answer to this critical jurisdictional question, as established by a lineage of authoritative precedents, is an unequivocal No. The Madras High Court meticulously addressed this point, recognizing that the power to appoint an arbitrator in an international commercial arbitration is the exclusive domain of the Hon’ble Supreme Court of India under Section 11 of the ACA. This exclusivity strips any other court, including the High Court, of the inherent power to make such an appointment.
The Court leaned heavily on the Supreme Court’s clear pronouncement in TATA Sons (P) Ltd. Vs. Siva Industries & Holdings Ltd2., where it was explicitly observed that “The Supreme Court had exclusive jurisdiction to entertain the arbitration petition since the proposed arbitration between the applicant and the respondents, of whom the second respondent is a foreign party, was an international commercial arbitration in terms of Section 2(1)(f) of the Arbitration Act.” This exclusivity, as the Madras High Court reasoned, is a matter of statutory mandate: once jurisdiction is declared “exclusive,” it necessarily rules out the vesting of power in any other court.
The Inherent Flaw: Jurisdiction vs. Consent
The crux of the matter in the Datang case was that the High Court, through its order dated October 12, 2020, had actually made the appointment of the Sole Arbitrator, albeit with the consent of both parties. This fact raised the subsequent, even more potent question: can the consent of the parties cure this inherent jurisdictional defect?
The Court found a powerful answer in the Bombay High Court’s earlier observation in Roptonal Ltd., a case where an arbitrator, initially appointed by the High Court in an international commercial arbitration, was later recalled due to jurisdictional issues. The Bombay High Court emphatically held: “In my view even by consent of parties, the learned designate of the Chief Justice of this court could not have appointed an arbitrator under section 11(6) of the Arbitration Act in view of the arbitration being ‘international commercial arbitration’ within the meaning of section 2(1)(f) of the Arbitration Act.”
The appeal against the Roptonal decision reached the Supreme Court in Anees Bazmee Vs. Roptonal Ltd3. While the Supreme Court, in the “peculiar facts” of that case, validated the continuation of the same arbitrator to avoid derailing proceedings that were already underway, it did so by exercising its own extraordinary power and making a critical clarification: the arbitration would continue as an “International Commercial Arbitration” and, crucially, “if any exigency arises, the Court in question shall be this Court and not the High Court.” The Madras High Court interpreted this as the Supreme Court’s implicit yet clear approval of the legal position that an appointment order made by the High Court in such cases “would suffer from an inherent lack of jurisdiction.”
This principle was further cemented by the Supreme Court in Amway (India) Enterprises (P) Ltd., where the Court set aside a Delhi High Court order appointing a sole arbitrator in an international commercial arbitration. The Supreme Court’s definitive observation was: “This being the case, it is clear that the Delhi High Court had no jurisdiction to appoint an arbitrator in the facts of this case.” The combined weight of these judicial pronouncements left no doubt: the High Court’s order in the Datang case suffered from a complete lack of inherent jurisdiction, making it a nullity in law.
The Nullity of the Award: Can Waiver and Consent Salvage the Tribunal?
With the appointment order declared void, the article naturally progressed to its final, critical inquiry: What is the effect of an award rendered by an Arbitral Tribunal constituted pursuant to an order that suffered from an inherent lack of jurisdiction?
The respondents argued that since the parties had consented to the appointment and had failed to challenge the Tribunal’s jurisdiction under Section 16 of the ACA, the doctrines of waiver and estoppel should prevent them from challenging the award under Section 34. This argument, however, proved to be an uphill battle against established jurisprudence on inherent jurisdiction.
First, addressing the procedural aspect, the Madras High Court highlighted the clear overruling of previous contrary views by the Supreme Court in Lion Engineering Consultants Vs. State of M.P4., where it was decisively held: “We do not see any bar to plea of jurisdiction being raised by way of an objection under Section 34 of the Act even if no such objection was raised under Section 16.” This confirmed that a plea of lack of inherent jurisdiction is an exception and can be examined at the stage of setting aside the award. Furthermore, the Court cited Hindustan Zinc Ltd., which solidified the view that if there is an inherent lack of jurisdiction, “the plea can be taken up at any stage and also in collateral proceedings.”
Second, addressing the substance of the waiver argument, the Court recalled the hallowed principle: Waiver cannot confer jurisdiction. Citing Vithalbhai (P) Ltd. Vs. Union Bank of India5, the Court reiterated: “No amount of waiver or consent can confer jurisdiction on a court which it inherently lacks or where none exists.”
The key to understanding this lies in Section 4 of the ACA, which provides for the waiver of the right to object only to those provisions “from which the parties may derogate.” The Madras High Court clarified that the exclusive power of the Supreme Court to appoint an arbitrator under Section 11(6), when read with Section 11(12) for international commercial arbitration, is non-derogable. This power is a matter of the Court’s power and jurisdiction, not a personal right of the party, as was pointed out by the Supreme Court in Jagmittar Sain Bhagat Vs. Director, Health Services, Haryana6: “The court cannot derive jurisdiction apart from the statute. In such eventuality the doctrine of waiver also does not apply.”
Conclusion
The Madras High Court’s ruling is more than just an outcome for the parties in Datang and NLC; it stands as a seismic reaffirmation of the statutory hierarchy established by the Arbitration and Conciliation Act. By declaring the award a nullity due to the High Court’s inherent lack of jurisdiction in an international commercial arbitration, the judgment reinforces the non-derogable nature of Section 11(6) read with Section 11(12). The key takeaway for the global commercial community is clear: jurisdictional competence cannot be fabricated by consent, waiver, or procedural expediency. Even the most practical and well-intentioned agreement between parties to fast-track an appointment cannot override the specific legislative mandate vesting such power exclusively with the Supreme Court. This decision serves as a stern guardrail, ensuring that the legitimacy of international arbitrations seated in India rests upon a foundation of scrupulous compliance with the law’s most fundamental provisions.
The immediate ramification of this judgment is the creation of a significant procedural hurdle for parties who may have, in the past, relied on consensual appointments by High Courts in international matters. It compels litigants to undertake rigorous due diligence at the threshold of arbitration, confirming that the forum for arbitrator appointment is the Apex Court, regardless of geographical convenience or the express agreement of the parties. Moving forward, the industry faces critical questions: What is the fate of awards passed in the past five years where High Courts may have appointed arbitrators by consent in similar international commercial cases? Furthermore, while the Supreme Court in Anees Bazmee validated an existing tribunal using its Article 142 powers, will it adopt such a curative approach routinely, or will it strictly enforce the principle of nullity, forcing parties to restart the entire arbitral process?
Ultimately, this ruling acts as a cleansing agent, scrubbing the possibility of tacit jurisdictional shortcuts from the arbitration landscape. It underscores a core philosophy of the ACA: certain statutory requirements, designed to maintain legal certainty and legitimacy, are absolute. By setting aside the award as coram-non-judice, the Madras High Court has sent an unambiguous message: a quick fix for arbitrator appointment through the wrong court can unravel years of complex arbitral proceedings. The future of Indian arbitration, particularly concerning international agreements, will now be defined by strict adherence to this jurisdictional mandate, ensuring that the process, from appointment to award, is legally unimpeachable.
Citations
- Madras High Court in China Datang Technologies vs. NLC India Limited, 2025 NHC 2716.
- TATA Sons (P) Ltd. vs. Siva Industries & Holdings Ltd., (2023) 5 SCC 421.
- Anees Bazmee vs. Roptonal Ltd., 2016 SCC Bom 3555.
- Lion Engineering Consultants vs. State of M.P., (2018) 16 SCC 758.
- Vithalbhai (P) Ltd. vs. Union Bank of India, AIR 2005 SC 1891.
- Jagmittar Sain Bhagat vs. Director, Health Services, Haryana, (2013) 10 SCC 136.
Expositor(s): Adv. Anuja Pandit
