0% found this document useful (0 votes)
64 views9 pages

Arbitration and ADR Chapter 3 Composition of ArbCHAPTER3COM759293

The document discusses the composition of arbitral tribunals under the Arbitration and Conciliation Act of 1996. It outlines the procedures for determining the number of arbitrators and appointing arbitrators. The key points are: 1) The parties are free to determine the number of arbitrators, which cannot be an even number, otherwise there will be a sole arbitrator. 2) The procedure for appointing arbitrators depends on whether there are one, three, or an uneven number. If the parties cannot agree, the Chief Justice or their designate will appoint arbitrators. 3) For international commercial arbitrations, the reference is to the Chief Justice of India, otherwise it is the local

Uploaded by

Saket Rao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
64 views9 pages

Arbitration and ADR Chapter 3 Composition of ArbCHAPTER3COM759293

The document discusses the composition of arbitral tribunals under the Arbitration and Conciliation Act of 1996. It outlines the procedures for determining the number of arbitrators and appointing arbitrators. The key points are: 1) The parties are free to determine the number of arbitrators, which cannot be an even number, otherwise there will be a sole arbitrator. 2) The procedure for appointing arbitrators depends on whether there are one, three, or an uneven number. If the parties cannot agree, the Chief Justice or their designate will appoint arbitrators. 3) For international commercial arbitrations, the reference is to the Chief Justice of India, otherwise it is the local

Uploaded by

Saket Rao
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 9

Chapter 3

COMPOSITION OF ARBITRAL TRIBUNAL

I. NUMBER OF ARBITRATORS

What should be the number of arbitrators to be appointed for an arbitration proceeding under the Arbitration and
Conciliation Act, 1996?

Section 10(1) of the Arbitration and Conciliation Act provides that the parties to an arbitration agreement are free to
determine the number of arbitrators, provided that such number shall not be an even number.

Section 10(2) of the Act lays down that failing the determination referred to in section 10(1), the arbitral tribunal
shall consist of a sole arbitrator.

The number of arbitrator is dealt with in section 10 of the Act which is a part of machinery provided for the working
of arbitration agreement. Section 10 leaves it to the parties to determine the number of arbitrators subject to the
condition that such number shall not be an even number. In case the parties fail to determine the number of
arbitrators, the arbitral tribunal shall consist of a sole arbitrator.

In M.M.T.C. Ltd. v. Sterlite Industries Ltd., MANU/SC/1298/1996 : (1996) 6 SCC 716: AIR 1997 SC 605, an
arbitration clause in a contract provides that each party shall nominate one arbitrator and the two arbitrators shall
then appoint an umpire before proceeding with the reference. Disputes arose between the parties whereupon the
respondent appointed an arbitrator under the agreement after the coming into force of the Arbitration and
Conciliation Act, 1996. But the appellant contended that the arbitration clause providing for the appointment of even
number of arbitrators was not a valid arbitration agreement in view of section 10(1) of the Act and that the only
remedy in such a case was by way of suit and not by arbitration. It was further contended that there was no failure
to determine the number of arbitrators in the arbitration agreement and as such section 10(2) of the Act providing
that the arbitral tribunal shall consist of a sole arbitrator was not attracted.

The Supreme Court held that there is noting in section 7 of the Act which defines arbitration agreement to indicate
that the requirement of the number of arbitrators is a part of the arbitration agreement and therefore, the validity of
an arbitration agreement does not depend on the number of arbitrators

specified therein. An arbitration agreement specifying an even number of arbitrators cannot be a ground to render
the arbitration agreement invalid. In the instant case, in view of the term in the arbitration agreement that the two
arbitrators would appoint an umpire, the requirement of section 10(1) was satisfied i.e., the arbitration agreement
was not for an even number of arbitrators and sub-section 2 of section 10 was not attracted. The arbitration
agreement was deemed to be one providing for three arbitrators. As each of the parties had appointed their own
arbitrators, section 11(3) was attracted, according to which the two arbitrators were required to appoint a third
arbitrator to act as the presiding arbitrator.

Since in the instant case, both the arbitrators had failed to appoint a third arbitrator, the Supreme Court directed
the Chief Justice of Bombay High Court to appoint the third arbitrator under section 11(4)(b) of the Act.

In Narayan Prasad Lohia v. Nikunj Kumar Lohia, 2002 (1) Arb LR 493 (SC): 2002 AIR SCW 898, the parties agreed to
resolve their disputes through two named arbitrators. Both the parties participated in the arbitral proceedings. But
after award was given, the respondents applied to the Calcutta High Court for setting aside the award, inter alia, on
the ground that arbitration by two arbitrators was invalid as it was inconsistent with the mandatory requirements of
section 10(1). The High Court accepted this contention but the Supreme Court in appeal overturned the decision of
the High Court. The Supreme Court held that the provision of section 10 providing that the number of arbitrators
shall not be an even number, is a derogable provision and objection based on it could be waived. Thus, an award is
not liable to be set aside on the mere ground that the number of arbitrators was an even number, when the parties
had agreed upon an even number.

11-02-2020 (Page 1 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


II. APPOINTMENT OF ARBITRATORS

What is the procedure for the appointment of arbitrators under the Arbitration and Conciliation Act, 1996?

Section 11(1) of the Arbitration and Conciliation Act, 1996 provides that a person of any nationality may be an
arbitrator, unless otherwise agreed by the parties.

Regarding the procedure for appointment of an arbitrator, Section 11(2) of the Act lays down that the parties are
free to agree on a procedure for appointing the arbitrator or arbitrators.

Section 11(3) of the Act provides that in an arbitration with three arbitrators, if the parties fail to agree on a
procedure for appointment of arbitrator or arbitrators, each party shall appoint one arbitrator and the two appointed
arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. But if a party fails to appoint an
arbitrator within 30 days from the receipt of a request to do so from the other party; or the two appointed
arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment, the appointment
shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.1

_______

1. Section 11(4).

Section 11(5) of the Act then lays down that in an arbitration with a sole arbitrator, if the parties fail to agree on
the arbitrator within 30 days from receipt of a request by one party from the other party to so agree, then upon
request of a party, the appointment shall be made by the Chief Justice or any person or institution designated by
him.

Section 11(6) of the Act provides that where under an appointment procedure agreed upon by the parties,-

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that
procedure; or

(c) a person, including an institution, fails to perform any function entrusted to him or it under that
procedure,

a party may request the Chief Justice or any person or institution designated by him to take the necessary
measure, unless the agreement on the appointment procedure provides other means for securing the
appointment.

Section 11(7) lays down that a matter entrusted by sub-section (4) or subsection (5) or sub-section (6) of section
11 of the Act to the Chief Justice or the person or institution designated by him is final.

For dealing with the matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) of section 11, the
Chief Justice may make such scheme as he may deem appropriate.1

In appointing an arbitrator, the Chief Justice or the person or institution designated by him shall have due regard to-

(a) any qualifications required of the arbitrator by the agreement of the parties; and

(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.2

Section 11(11) of the Act provides that where more than one request has been made under sub-section (4) or sub-
section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or
his designate to whom the request has been first made shall alone be competent to decide on the request.

Section 11(12)(a) of the Act lays down that in case of an international commercial arbitration, the reference to Chief
Justice under section 11 shall be construed as a reference to the Chief Justice of India.

11-02-2020 (Page 2 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


In any other arbitration, the reference to Chief Justice under section 11 shall be construed as a reference to the
Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-
section (1) of section 2 is situated and, where the High Court itself is the Court referred to in that clause, to the
Chief Justice of that High Court.3

_________

1. Section 11(10).

2. Section 11(8).

3. Section 11(12)(b).

Section 11(9) of the Act provides that in the case of appointment of sole or third arbitrator in an international
commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an
arbitrator of a nationality other than the nationalities of the parties where the parties belong to different
nationalities.

Bar of Limitation

There is right to apply for appointment of arbitrator for seeking reference to arbitration on receipt of respondent's
reply to notice. The period of limitation of 3 years would start running from that date. Hence it was held that the
application filed under section 11 beyond 3 years would be barred by limitation (A.P. Beverages Corpn. Ltd. v. M/s.
IBM Global Services India Ltd., MANU/AP/0026/2011 : AIR 2011 AP 122).

Requirements of a Valid Appointment

What are the requirements of a valid appointment of an arbitrator?

The following are the requirements of a valid appointment of arbitrator/s-

1. The party appointing an arbitrator must give proper notice of appointment of the arbitrator to the other
party or parties. If the party appointing an arbitrator, do not give notice to the other party informing about
the appointment of an arbitrator, the appointment of the arbitral tribunal will be invalid and the resulting
award void.

2. The person who is to be appointed as the arbitrator must be informed about his appointment. This is
necessary because, before giving his consent, he has to consider whether he should accept the appointment.

3. The consent of the person who is to be appointed as arbitrator to act as the arbitrator must be obtained
before his appointment. He has to review all aspects before accepting appointment. [Trader Export S.A. v.
Valkswagenwerk AG, La Loma, (1970) 1 Lloyd's Rep 62 (64)]

Appointment of an arbitrator will not be made unless there is an arbitration agreement between the parties. If the
arbitration agreement is denied, the court must decide that question before passing an order for appointment of an
arbitrator [Chhogalal v. N.G. Finance and Co., AIR 1966 Raj 181].

In I.S. Rekhi v. Delhi Development Authority, MANU/SC/0271/1988 : AIR 1988 SC 1007, the Supreme Court held that
the existence of a dispute is essential for appointment of an arbitrator.

A plea at the time of appointment of an arbitrator that the claims that would be referred to arbitrator are barred by
limitation or are covered within excepted matters, is not entertained. Whether the claims are barred by limitation or
are covered by excepted matters will be matters for consideration of the arbitrator when he is appointed. At the
time of the appointment of an arbitrator, it is not for the court to decide such question [Wazir Chand v. Union of
India, MANU/SC/0262/1966 : AIR 1967 SC 990].

Appointment of the Arbitrator as per the Agreement between the Parties

11-02-2020 (Page 3 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


One of the advantages of arbitration is that it allows parties to submit a dispute to judges of their own choice. The
parties are free to determine any odd number of arbitrators. Failing such determination, the arbitral tribunal shall
consist of a sole arbitrator. The parties may mention the name of a person who is to be appointed as the arbitrator.
In cases of arbitration with more than one arbitrator, the parties may agree on all the arbitrators to be appointed or
each of the parties may appoint one arbitrator who in turn appoint a third arbitrator. Usually it is difficult to reach an
agreement upon a sole arbitrator. In cases where the agreement is silent as to the constitution of the tribunal, it will
be presumed that the reference is to the single arbitrator. Appointment of an arbitrator is a contract between the
arbitrator on the one side, and the parties on the other and therefore, if the appointment of the arbitrator is not
consensual, the arbitrator has no power to make a binding order or award and if he makes any award it will be a
nullity.

In Dharma Prathishthanam v. Madhok Construction Pvt. Ltd., (2004) 3 Arb LR 432 (SC), the respondent appointed an
arbitrator and gave notice to the appellant of the appointment to which the appellant did not respond. Then, the
respondent referred certain disputes to the arbitrator who heard the matter and made an arbitral award. But the
appellant did not participate in the arbitration proceedings. After the making of award by the arbitrator, the
respondent filed an application to the court for making the award rule of the court to which the appellant filed
objection. The Supreme Court held that the impugned award was a nullity, and hence liable to be set aside.

In case of consensual appointment of an arbitrator by parties, there is no particular formalities or procedure to be


followed. However, usually one of the parties submit to his opponent a name or list of names, for choice of
arbitrator. If the opponent agrees with the choice, one or both of the parties may approach the person for his
appointment. If he consents, they send to him a written invitation to accept the reference, in response to which he
sends a written acceptance. However, acceptance of the offer to be appointed as an arbitrator is not necessary to
complete the appointment [K.S. Dwarka Dass Kapadia v. Indian Engineering Co., MANU/MH/0035/1969 : AIR 1969
Bom 227, affirmed by Supreme Court in K.S. Dwarka Das Kapadia v. Indian Engineering Co., AIR 1972 SC 1528]. The
appointment is complete as soon as it is made. Appointment of an arbitrator by a party is complete only on its
communication to the other party. Thus, if a party makes the appointment within the statutory period of 30 days on
receipt of a request from the other party, but does not communicate it to the other party within 30 days, he cannot
be said to have appointed his arbitrator within 30 days of receipt of the request from the other party to appoint an
arbitrator.

Appointment of Arbitrator by Chief Justice

When an arbitrator is appointed by the Chief Justice?

Section 11(4) of the Act provides that in case of an arbitration with three arbitrators under section 11(3),-

i. if a party fails to appoint an arbitrator within 30 days from the receipt of a request to do so from the other
party; or

ii. the two appointed arbitrators fail to agree on the third arbitrator within 30 days from the date of their
appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or
institution designated by him.

Section 11(5) lays down that in case of an arbitration with a sole arbitrator, if the parties fail to agree on a
procedure or on the arbitrator within 30 days from receipt of a request by one party from the other party to so
agree, then on request of a party, the appointment shall be made by the Chief Justice or any person or institution
designated by him.

Section 11(6) provides that where under an appointment procedure agreed upon by the parties,-

i. a party fails to act as required under that procedure; or

ii. the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that
procedure; or

11-02-2020 (Page 4 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


iii. a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Chief Justice or any person or institution designated by him to take the necessary
measure, unless the agreement on the appointment procedure provides other means for securing the
appointment.

Appointment of Arbitrators by Designated Authority

An arbitration clause may provide that appointment of an arbitrator shall be made by a person designated in the
agreement either by name or as the holder for the time being of any office or appointment. Such a clause is usually
found in government & contracts. In cases where the persona designate defaults in making an appointment, the
case would be covered by the provisions of section 11(6)(c) and a party may request the Chief Justice or his
designate to take a necessary measure. If the appointment is made by any person other than the person designated
in the agreement, an award made by such arbitrator is null and void. It is to be noted that it is not necessary for the
designated authority conferred with the power to make appointment of an arbitrator, to consult the parties to the
agreement before appointing an arbitrator.

In P. Kumaran v. Executive Engineer, 1999 (3) Arb LR 98, there was a term in the arbitration clause that no person
other than a person appointed by Chief Engineer or Administrative Head of Goa, Daman and Diu P.W.D. should act as
arbitrator, and if for any reason, that was not possible, the matter was not to be referred to arbitration at all. It was
held that this term was inconsistent with the provision of section 11(6)(c) of the Arbitration and Conciliation Act,
1996, and therefore there is no hindrance to allowing the application for appointment of arbitrator. The application
for appointment of arbitrator was allowed and an arbitrator appointed.

In National Research Development Corporation of India v. Synthetic Industrial Chemicals Pvt. Ltd., 1998 (1) Arb LR
114, the arbitration clause provided for arbitration of dispute between the parties by the Chairman of National
Research Development Corporation or his nominee. The Chairman of NRDC, Mr. G.S. Sidhu accepted the reference
and proceeded with the arbitration. Meanwhile, he was transferred and consequently ceased to hold the office of
Chairman. One of the parties raised the objection that since he ceased to hold the office of Chairman his authority
as arbitrator had come to an end. But rejecting the objection, he proceeded with arbitration and gave an award. The
Delhi High Court held that crucial date to be seen was when the reference was made. Dr. Sidhu was the Chairman
when reference was made. The reference was validly made to him. Once an arbitrator validly entered upon the
reference, he alone was competent to continue the arbitration and take it to its logical end by giving the award. In
the circumstances of the present case, Dr. Sidhu, despite the fact that he ceased to hold the office of Chairman
subsequent to entering upon the reference, was competent to continue the arbitration proceedings.

Scheme made by the Chief Justice

Section 11(10) empowers the Chief Justice of India and Chief Justices of the High Courts to make such schemes as
they may deem appropriate for dealing with matters regarding appointment of arbitrator under sub-sections 4, 5 and
6 of section 11 of the Act. The Chief Justice of India, in exercise of this power has made the scheme.

The scheme provides the procedural machinery for processing the request for appointment of arbitrators. It also
empowers the Chief Justice to amend the scheme from time to time.

The Chief Justices of the High Courts have also made their own schemes for appointment of arbitrators when an
application is made for the purpose.

III. CHALLENGE TO ARBITRATOR

Grounds for Challenge

What are the grounds on the basis of which an arbitrator can be challenged?

An arbitrator may be challenged only if-

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or

11-02-2020 (Page 5 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


(b) he does not possess the qualification agreed to by the parties. [Section 12(3)]

When an arbitrator can be challenged?

The appointment cannot be challenged on any other ground.

Section 12(1) of the Act provides that when a person is approached in connection with his possible appointment as
an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his
independence or impartiality.

Section 12(2) then lays down that an arbitrator, from the time of his appointment and throughout the arbitral
proceedings, shall, without delay, disclose to the parties in writing any circumstances likely to give rise to justifiable
doubts as to his independence or impartiality.

An arbitrator ought to be an indifferent and impartial person between the disputants. He must be disinterested and
unbiased. He should have no connection, direct or indirect, with a party so that it creates an appearance of
partiality. The test is whether a reasonable person who was not a party to the dispute would think it likely that the
connection was close enough to cause the arbitrator to be biased [Metropolitan Properties v. Lannon, (1969) 1 QB
577; Simmons v. Secy. of State for the Environment, 1985 JBL 253]. In International Airports Authority of India v.
K.D. Bali, MANU/SC/0197/1988 : (1988) 2 SCC 360, the Supreme Court held that it is not every suspicion felt by a
party which must lead to the conclusion that the authority hearing the proceedings is biased. The apprehension must
be judged from a healthy, reasonable and average point of view and not on mere apprehension of any whimsical
person.

In V.K. Dewan and Co. v. Delhi Jal Board, 2004 (2) Arb LR 444 (Del), it was held that mere suspicion cannot be made
a ground for concluding that the arbitrator would not act fairly or impartially. Only a well founded and justifiable
doubt about the arbitrator covered by this section can be made a ground for terminating the mandate of an
arbitrator.

In the Mission Insurance case,1 the presiding arbitrator was found to have spent two nights in a hotel room of a
female lawyer representing the successful party. This facts gave rise to a strong presumption of a justifiable doubt
as to the impartiality of the arbitrator and as a result the arbitral award of US $ 92 million made by the arbitrator was
overturned.

An arbitrator must be independent i.e., there must not be a dependant relationship between the parties and the
arbitrators, which may effect or at least appear to affect the arbitrators freedom of judgment. Impartiality denotes
that quality of the arbitrators' mind which enables him or her to decide the issues without a disposition to favour one
side over the other. Impartiality is the antonym of bias. The question whether an arbitrator is impartial, is a question
of fact, and depends on whether he can resolve the dispute objectively.

Regarding the qualification of the arbitrator, the parties may agree upon certain qualifications, required of an
arbitrator which may be necessary for the subject-matter of the dispute. Such qualification may be expressly
specified in the arbitration clause or the submission agreement.

Challenge Procedure

Discuss the procedure for challenging an arbitrator

Section 13(1) of the Arbitration and Conciliation Act, 1996, provides that the parties are free to agree on a
procedure for challenging an arbitrator.

Section 13(2) then lays down the if the parties fail to agree on a procedure for challenging an arbitrator, a party
who intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral
tribunal or after becoming aware of any circumstances that give rise to justifiable doubts as to his independence, or
impartiality, or that he does not possess the qualification agreed to by the parties, send a written statement of the
reasons for the challenge to the arbitral tribunal.

11-02-2020 (Page 6 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


Section 13(3) provides that unless the arbitrator who is challenged under section 13(2) withdraws from his office or
the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

Section 13(4) lays down that if a challenge under any procedure agreed upon by the parties or under the procedure
prescribed by sub-section (2) of section 13 is not successful, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award.

__________

1. Reported in W all Street Journal, 14 Feb, 1990.

Where an arbitral award is made under sub-section (4) of section 13, the party challenging the arbitrator may make
an application for setting aside such an arbitral award in accordance with section 34 of the Act, and if the arbitral
award is set aside on such an application, the court may decide as to whether the arbitrator who is challenged is
entitled to any fees.

In Asiatic Salvors v. Dodsal Pvt. Ltd., MANU/MH/0299/1987 : AIR 1987 Bom 335, it was held that where the parties
are aware of the bias of the arbitrator some months prior to the commencement of the arbitration, and although
they did not participate in the arbitration proceedings, yet allowed the proceedings to continue and culminate into
an award, it was held that the petitioners could not be allowed to raise objection and seek setting aside of the
award on the ground of bias.

In Ramsahai Sheduram v. Harishchandra Duttchandji, MANU/MP/0051/1963 : AIR 1963 MP 143, it was held that if a
party discovers that the arbitrator suffers from a personal disqualification which the party could not have
ascertained with due diligence at the time of reference, the party must take immediate steps to stop arbitration. If
the party fails to go to the court for revocation of reference and takes part in arbitration proceedings, he cannot
later on challenge the award on that ground.

Cases where Arbitrator is an Employee of one of the Parties

Usually in contracts with Government on Corporations, there is an arbitration clause which provides that in case of
any dispute arising between the parties it will be referred for arbitration to any officer of the Government or the
corporation. This by itself is no ground to hold that the officer will be biased in discharging his duty as an arbitrator.

In State of Andhra Pradesh v. Balineni Subba Reddy, 1990 (1) Andh LT 398, it was held that the general presumption
must be that all the officers are honest and they are discharging their duties lawfully, unless the contrary is proved.
The general presumption cannot be drawn that merely because a named arbitrator has already worked in that
department or is working, he is having a bias. There is no hard and fast rule that Government officials should not be
appointed as arbitrators. The parties are bound by the agreement under which they agree that an arbitrator from out
of the panel of arbitrators can be appointed.

In Union of India v. V.S. Ravindra Reddy, 1998 (2) Arb LR 557, where the procedure agreed for appointment of
arbitrators as incorporated in one of the clauses of a contract was that there would be two arbitrators who would be
railway officers, it was held that it was not open to a contractor to contend that as the two arbitrators were railway
officers, they were under the influence of the Railway and would be biased.

But there are certain circumstances under which a presumption can be drawn that the arbitrator who is an employee
of one of the parties is biased, e.g., in Union of India v. P.M. Imbichibi, MANU/KE/0383/1998 : AIR 1998 Ker 72, there
was dispute as to revision of rates for licence fee of railway lands. The designated arbitrator was the railway general
manager. In his capacity as general manager, he had filed a counter affidavit in the proceedings in which he had
taken a definite stand in favour of the enhancement of licence fee. It was held that the application for removal of
the arbitrator on this ground must have entertained a serious apprehension about the general manager's ability to
arrive at a fair decision. It was held that the court was justified in appointing another arbitrator.

IV. TERMINATION OF THE MANDATE OF AN ARBITRATOR

11-02-2020 (Page 7 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


When the mandate of an arbitrator terminates?

Section 14(1) of the Arbitration and Conciliation Act, 1996, provides that the mandate of an arbitrator shall
terminate if-

(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without
undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

Section 15(1) of the Act lays down that in addition to the circumstances referred to in section 13 or section 14, the
mandate of an arbitrator shall terminate-

(a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties. Section 14(2) lays down that if a controversy remains
concerning the arbitrator becoming de jure or de facto unable to perform his functions or for other reasons
failing to act without undue delay, a party may, unless otherwise agreed by the parties, apply to the Court to
decide on the termination of the mandate. Where the mandate of an arbitrator terminates, a substitute
arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator
being replaced. [Section 15(2)] Where an arbitrator is replaced under section 15(2), any hearings previously
held may be repeated at the discretion of the arbitral tribunal. [Section 15(3)] Unless otherwise agreed by
the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not
be invalid solely because there has been a change in the composition of the arbitral tribunal. [Section 15(4)]
An arbitrator is de jure unable to perform his functions when he is debarred by law from continuing in office.
An arbitrator is de facto unable to perform his function when due to certain fact situations he is unable to
perform his functions e.g., ill health etc. It is to be noted that termination of arbitral proceedings is different
from termination at the mandate of arbitrator or arbitrators. Termination of arbitral proceedings is governed
by section 32. In a given case, an arbitral proceeding may not come to an end though the mandate of the
arbitrator might have come to an end.

In Sarathy Engg. Corpn v. Municipal Corpn. of Delhi, 1988 (1) Arb LR 79, it was held that where the arbitrator does
not start arbitration proceedings with reasonable dispatch and so much so that he fails even to issue notice to the
parties, he is liable to be removed and another arbitrator should be appointed in his place.

In Assudomal Dwarkadas v. Jessmal Jethanand, AIR 1933 Sind 115, it was held that where an arbitrator did not act
for nearly three years, he neglected to act and it was open to the court to appoint another arbitrator in his place.

In Union of India v. Prabhat Kumar and Bros., 1995 Supp (4) SCC 525, an arbitration agreement provided for
reference to an engineer officer to be appointed by a third party. The arbitrator so appointed retired during the
pendency of the proceedings. It was held by the Supreme Court that the retirement resulted in the termination of
the authority of the arbitrator. A new arbitrator would be appointed and the proceedings would be deemed to have
continued before the new arbitrator.

11-02-2020 (Page 8 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL


© Universal law Publishing Co.

11-02-2020 (Page 9 of 9) www.manupatra.com NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

You might also like