Court’s power to terminate the mandate of an acting arbitrator

01/06/2017

Delhi High Court in its recent judgment upheld that the court has power to terminate mandate of arbitrators, if the arbitrator persists to act despite of disqualification under section 14 of the Arbitration and Conciliation Act, 1996.

The Hon’ble Delhi High Court in West Haryana Highways Project Pvt. Ltd. v National Highways Authority of India LNIND 2017 DEL 1668, held that a party to an arbitration proceeding can approach the court under section 14 of the Arbitration and Conciliation Act, 1996 to seek termination of the appointment of an arbitrator, on the ground that he is ineligible to be appointed as an arbitrator under Arbitration and Conciliation Act, 1996, s 12(5) read with Arbitration and Conciliation Act, 1996, Seventh Schedule.

The contention raised by the respondent was that in case the petitioner had a doubt regarding the eligibility of the arbitrator nominated by the respondent, the petitioner should have first challenged his appointment under Arbitration and Conciliation Act, 1996, s 13 before the arbitral tribunal and in case the arbitral tribunal did not agree with the challenge raised by the petitioner, the petitioner had no other option but to await the award and thereafter, should have raised the issue under Arbitration and Conciliation Act, 1996, s 34. However, it must be noted that as per the very first entry of the Arbitration and Conciliation Act, 1996, Seventh Schedule, a consultant or adviser of a party is ineligible from becoming an arbitrator in a proceeding relating to the said party. The Hon’ble Court hence rightly observed that the learned arbitrator on account of his being an adviser or consultant to the respondent company was manifestly ineligible for being appointed as an arbitrator.

The question that arose therefore, was as to whether a petition under Arbitration and Conciliation Act, 1996, s 14 would lie before the court to remove the said learned arbitrator or whether the remedy of the petitioner was to approach the arbitral tribunal under Arbitration and Conciliation Act, 1996, s 13(3) and in the eventuality where the arbitral tribunal did not accept the contention, the petitioner had to await the award of the tribunal and thereafter, take steps under Arbitration and Conciliation Act, 1996, s 34, if so required.

The Hon’ble Court referred to various case laws and observed that the scheme of the Arbitration and Conciliation Act, 1996 makes it clear that the legislature did not intend either to provide multiple remedies or to provide mutually exclusive concurrent remedies. The Court observed that Arbitration and Conciliation Act, 1996, s 13 operates in a field that is completely different from Arbitration and Conciliation Act, 1996, s 14; one has no connection with the other. That is why both sections stipulate the right as well as the remedy. The Court also made reference to the recommendations of the Law Commission with respect to the amendment of Arbitration and Conciliation Act, 1996, s 12 in 2015.

The Hon’ble Court concluded that under Arbitration and Conciliation Act, 1996, s 12(5), if a person’s relationship with the parties or counsel or subject matter of dispute falls in any of the categories specified in the Arbitration and Conciliation Act, 1996, Seventh Schedule, the said person would be ineligible to be appointed as an arbitrator. If a party still persisted in nominating any such person as an arbitrator, it would be completely futile and waste of efforts to permit the tribunal to continue to adjudicate the matter and permit a challenge after completion of the arbitration under Arbitration and Conciliation Act, 1996, s 34. The Court, hence, held that if an arbitrator is appointed contrary to Arbitration and Conciliation Act, 1996, s 12(5) read with Arbitration and Conciliation Act, 1996, Seventh Schedule, he/she is de jure ineligible to perform his/her functions and that the court would have the power to terminate the mandate of such an arbitrator under Arbitration and Conciliation Act, 1996, s 14(2)Arbitration and Conciliation Act, 1996, s 13(3) and Arbitration and Conciliation Act, 1996, s 13(5) would have no application in such circumstances.

– Updates powered by Singh & Associates, Founder- Manoj K. Singh, Advocates & Solicitors

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