Section 16 of ACA : Section 16: Competence Of Arbitral Tribunal To Rule On Its Jurisdiction

Explanation using Example

Imagine a scenario where two companies, Company A and Company B, have a contract that includes an arbitration clause for resolving disputes. During their business dealings, a dispute arises and Company A initiates arbitration proceedings against Company B.

Company B claims that the entire contract, including the arbitration clause, is invalid because it was signed under duress. According to Section 16(1) of The Arbitration and Conciliation Act, 1996, the arbitral tribunal can independently rule on the validity of the arbitration agreement, separate from the rest of the contract. Thus, even if the contract is eventually found to be void, the arbitration clause may still be valid and enforceable.

Company B must raise the jurisdictional objection before submitting their statement of defence, as per Section 16(2), to ensure that the arbitral tribunal addresses this issue at an early stage of the proceedings.

If during the arbitration, Company A introduces a new claim that falls outside the scope of the arbitration agreement, Company B should immediately raise a plea according to Section 16(3) that the tribunal is exceeding its authority by considering this new claim.

The arbitral tribunal has the discretion, under Section 16(4), to allow a late plea if there is a reasonable justification for the delay.

After considering the pleas on jurisdiction and scope, the tribunal will decide whether to accept or reject them, as stated in Section 16(5). If the plea is rejected, the tribunal will continue with the proceedings and eventually make an award.

If Company B is dissatisfied with the outcome, they have the right to apply for the setting aside of the arbitral award under Section 34, as mentioned in Section 16(6).