| Authored by R & D Law Chambers LLP
Ravish Bhatt | Advocate, Bar Council of Gujarat (G/504/2008) | Dual-qualified lawyer (India and England & Wales) | ADIT, CIOT, London Published: 12 October 2026 | Last reviewed: 2 November 2026 |
| Scope and instruments. This page is written against sections 19 and 23 of the Arbitration and Conciliation Act, 1996, including sub-section (2A) of section 23 inserted by section 11 of the Arbitration and Conciliation (Amendment) Act, 2015 with effect from 23 October 2015, and against Order XXIX Rule 1 of the Code of Civil Procedure, 1908. The company law authorities discussed were decided under the Companies Act, 1956; the corresponding power of the board is now in section 179 of the Companies Act, 2013. |
| A counterclaim is a fresh claim, so the question of who authorised it arises again at the counterclaim stage and is routinely overlooked. The objection is nonetheless weaker than it looks. The Supreme Court treats a defect in authority as curable, and ratification can be inferred from the conduct of the proceedings. The party taking the point must take it early, and the party facing it should cure it rather than argue it. |
- Who may authorise a company to bring a claim?
| The board. A director or officer has no inherent power to commence proceedings for the company. The power has to come from the articles of association or from a resolution of the board, and a power of attorney is only as good as the authority of the person who granted it. |
The leading statement is in Nibro Ltd v National Insurance Co Ltd, AIR 1991 Delhi 25, decided by the Delhi High Court. At paragraph 27 the Court held that Order XXIX Rule 1 of the Code of Civil Procedure, 1908 authorises certain officers to sign and verify pleadings on behalf of a corporation and does nothing more: it does not authorise them to institute proceedings. The distinction between signing a pleading and deciding to bring a claim runs through the whole of this subject and is the one most often missed.
At paragraphs 28 and 29 the Court held that a director has no authority to institute a suit unless that power is specifically conferred on him, and that such a power can be conferred by the board of directors only by passing a resolution to that effect. At paragraph 29 the Court added that the institution of proceedings is not a mere technicality. On the facts, no board resolution authorising the signatory was produced, the memorandum and articles were not placed on record, and a resolution reappointing him as a director did not empower him to sue (paragraph 30). The issue was decided against the plaintiff.
Two practical points follow. A resolution that appoints a person to an office is not a resolution authorising proceedings. And where the authority is said to come from the articles rather than from a resolution, the articles have to be on the record, because a tribunal cannot take the content of a company’s articles on trust.
- Does the same requirement apply to a counterclaim in arbitration?
| Yes, and this is where the point is usually missed. A counterclaim is not a defence. Section 23(2A) of the Arbitration and Conciliation Act, 1996 treats it as a claim the respondent submits in support of its own case, to be adjudicated if it falls within the scope of the arbitration agreement. |
Sub-section (2A) was inserted into section 23 by section 11 of the Arbitration and Conciliation (Amendment) Act, 2015, which is deemed to have come into force on 23 October 2015. It provides that the respondent, in support of his case, may also submit a counterclaim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal if it falls within the scope of the arbitration agreement.
The structural point is that a company defending a reference may have authorised the defence and nothing more. A board resolution authorising an officer to defend proceedings, or a power of attorney granted when the dispute was still a commercial disagreement, does not obviously extend to the institution and prosecution of affirmative claims for money. Where the counterclaim is substantial, and particularly where it exceeds the claim, the authority behind it deserves the same scrutiny as the authority behind the statement of claim, and rarely receives it.
The same applies with more force where the counterclaim is brought on behalf of more than one respondent, or where one respondent purports to act for others. Authority to represent a group company in a reference is not the same thing as authority from that company’s own board to prosecute a claim in its name, and a letter signed by an individual director of the other company does not record a decision of its board.
- Is a defect in authority fatal, or can it be cured?
| It is usually curable. In United Bank of India v Naresh Kumar, (1996) 6 SCC 660, decided on 18 September 1996, the Supreme Court held that a defect of this kind does not go to the root of the matter and involves no jurisdictional infirmity. A company may ratify the act, and ratification may be inferred. |
This is the answer to most authority objections and it is the reason the point has to be handled with judgement rather than enthusiasm. In United Bank of India v Naresh Kumar the Supreme Court held that a corporation may expressly or impliedly ratify an act done without authority, that ratification may be inferred from the evidence and from the conduct of the trial, and that the court below could have presumed authority, inferred ratification, or required production of the authority document. On the facts, proceedings had been brought in the company’s name, court fee had been paid and evidence had been led over roughly two years, from which the Court concluded that the signatory was authorised or that the bank had ratified what he did.
Nibro and Naresh Kumar are therefore not in conflict so much as at different points on the same line. Nibro states what the authority has to be. Naresh Kumar states what happens when it was absent at the outset and the company has since conducted the proceedings as its own. The later decision is of the Supreme Court and is the one a tribunal is likely to begin from.
The practical consequence is a question of timing rather than principle. An objection taken at the first opportunity, before the other side has had the chance to put a resolution on the record, is a real objection. The same objection taken in final argument, after the company has led evidence and conducted the reference throughout, invites the answer that the conduct of the proceedings is itself the ratification.
- Does the Code of Civil Procedure apply in arbitration, and what difference does that make?
| Section 19(1) of the Arbitration and Conciliation Act, 1996 provides that the tribunal is not bound by the Code of Civil Procedure, 1908. That removes Order XXIX Rule 1 as a binding rule, but it removes nothing from company law, which is where the requirement of board authority actually comes from. |
The distinction matters because the two sources of the rule are often run together. Order XXIX Rule 1 is a procedural rule about who may sign and verify a pleading for a corporation. A tribunal is not bound by it. The requirement that the board decide to bring a claim is not procedural at all: it comes from the allocation of corporate power, which in Nibro was located in the Companies Act, 1956 and is now in section 179 of the Companies Act, 2013. Section 19 does not touch that, and an argument that the authority requirement falls away in arbitration because the Code does not apply is misconceived.
| Question | Civil suit | Arbitration seated in India |
| Who may sign and verify the pleading | Order XXIX Rule 1, Code of Civil Procedure, 1908 | No binding rule: section 19(1) removes the Code |
| Who must decide to bring the claim | The board, under the company’s constitution | The board, under the company’s constitution; unchanged by section 19 |
| Where the counterclaim rule sits | Order VIII of the Code | Section 23(2A), and the scope of the arbitration agreement |
| Effect of a defect in authority | Curable; ratification may be inferred (Naresh Kumar) | Curable on the same principle |
| What a tribunal will want to see | Board resolution, articles, power of attorney | The same documents, since the source of the rule is unchanged |
| When the objection is effective | Taken early, before the record is cured | Taken early, and in any event before the company has conducted the reference throughout |
- What should each side actually put on the record?
| The party bringing the claim should file the board resolution authorising those proceedings, the relevant articles, and any power of attorney, with the statement of claim or counterclaim. The party objecting should take the point at the first opportunity and should identify what is missing rather than assert that authority is absent. |
For the party bringing a claim or a counterclaim the cure is cheap and the exposure is not. A resolution that identifies the dispute, authorises the institution and prosecution of the claim, and names the person authorised, filed with the pleading, closes the question before it opens. Where the authority flows through a power of attorney, the resolution authorising the grant of that power of attorney matters as much as the instrument itself, because a power of attorney cannot confer an authority its grantor did not hold.
For the party objecting, the useful objection is specific. Nibro turned on identifiable absences: no board resolution for these proceedings, no articles on the record, and a resolution that did something else. An objection framed in those terms puts the other side to an election between producing the document and explaining why it does not exist. A general assertion that authority has not been proved invites the answer in Naresh Kumar, that the conduct of the proceedings supplies what the paperwork did not.
One point of sequence is worth noting. Because the defect is curable, an objection raised for the first time in written submissions has usually already lost most of its force, and the tribunal will be asked to infer ratification from everything that has happened since the reference began. If the point is worth taking, it is worth taking at the first opportunity and recording in the statement of defence or the reply to the counterclaim.
How R & D Law Chambers Works on These Matters
R & D Law Chambers LLP is an Ahmedabad law firm. It advises on arbitration seated in India and abroad, including the conduct of the reference, statements of claim and defence, counterclaims and set-off under section 23(2A) of the Arbitration and Conciliation Act, 1996, and the corporate authorisations that sit behind them.
On a question of authority the documents decide the answer, so the first step is usually to establish what was resolved, when, and by whom, and to compare that against what the pleading actually asks for. Where a claim is being brought, the same exercise done in advance removes the point from the case.
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| Disclaimer: this page is general information on Indian law as it stands on the date of last review. It is not legal advice and no lawyer and client relationship arises from reading it. The law stated is subject to change, and the application of any proposition to a particular agreement or dispute depends on its own facts and documents. |