High Court Lacks Authority to Appoint Arbitrators in International Commercial Arbitration

The Madras High Court has issued a significant ruling clarifying the boundaries of judicial authority in international commercial arbitration, declaring that even the voluntary consent of parties cannot confer jurisdiction upon a High Court to appoint an arbitrator in matters where only the Supreme Court holds such authority. Justice N. Anand Venkatesh, presiding over the matter, set aside an entire arbitral award, marking the proceedings a "coram non judice"—a proceeding before a court without jurisdiction.

A Dispute Rooted in Infrastructure

The litigation stemmed from a 2019 contract between M/s. China Datang Technologies and Engineering Company Limited and M/s. NLC India Limited for the installation of flue gas desulphurisation systems at a thermal power project in Neyveli. Disputes regarding delays and the invocation of performance guarantees led to the initial appointment of a sole arbitrator by a single judge of the Madras High Court in 2020. This appointment was facilitated by a memo filed by the parties, in which both sides consented to bypass the original arbitration clause—which specified a three-member tribunal—in favor of a sole adjudicator.

Consent Cannot Cure Jurisdictional Defects

The case resurfaced before Justice N. Anand Venkatesh, who questioned the fundamental legality of the 2020 appointment. The court observed that under Section 11(6) read with Section 11(12)(a) of the Arbitration and Conciliation Act, 1996 , the power to appoint an arbitrator in an International Commercial Arbitration (ICA) is exclusively vested in the Supreme Court.

The central issue was whether the parties' consent to the High Court’s intervention could rectify the absence of statutory power. The court resoundingly answered in the negative.

Key Observations

The judgment underscores that jurisdictional power is a matter of statutory mandate, not private arrangement. As Justice Venkatesh noted:

• "Once it has been held that the jurisdiction of the Hon’ble Supreme Court under Section 11, in an international commercial arbitration, is exclusive in character, it must necessarily follow that no other Court can exercise the said power."
• "No amount of waiver or consent can confer jurisdiction on a court which it inherently lacks or where none exists."
• "The consent of parties purportedly given to this Court while passing the order dated 12.10.2020 appointing the learned Arbitrator… cannot cure what is, on the face of it, a clear case of inherent lack of jurisdiction."

Legal Implications and Outcome

The court relied on precedents such as the Supreme Court’s decision in Amway India Enterprises (P) Ltd. v. Ravindranath Rao Sindhia , which reiterated that the High Court lacks jurisdiction to appoint arbitrators in cases involving foreign entities.

By deeming the original order a "nullity in law," the court effectively voided the subsequent arbitration proceedings. The final decision serves as a stark reminder to legal professionals and corporations that in international commercial disputes, adherence to the specific forums designated by the Arbitration and Conciliation Act is non-negotiable. Parties cannot "waive" the lack of statutory jurisdiction, no matter how convenient or time-saving such an agreement may appear to be at the outset. As a result, the entire arbitral award dated November 9, 2022, was set aside, leaving both parties to pursue their remedies through the legally mandated channels.