composition of arbitral tribunal

CHANAKYA NATIONAL LAW UNIVERSITY

COMPOSITION OF ARBITRAL TRIBUNAL Subject: ALTERNATE DISPUTE RESOLUTION

Submitted to:

Submitted by:

Mr. Hrishikesh Manu

Nayan Kanwar Roll no.- 947 (6th Semester)

1

TABLE OF CONTENTS

1. 2. 3. 4. 5. 6. 7.

Number of arbitrators............................................................................................... 5 Appointment of arbitrators.........................................................................................8 Grounds for challenge..............................................................................................14 Challenge procedure.................................................................................................16 Failure or impossibility to act.....................................................................................18 Termination of mandate and substitution of arbitrator,.............................................20 Conclusion ..................................................................................................................23

Bibliography......................................................................................................................25

RESEARCH METHODOLOGY

2

Method of Research: For the purpose of research, the researcher has used the Doctrinal Method of Research. The Research is entirely a Library-based Research, where the researcher has made use of books, law journals, magazines, law reports, legislations, internet websites, etc., for the purpose of research. Hypothesis: The researcher believes that the arbitral tribunal are composed of the arbitrators appointed by the parties to the dispute as the mechanism of arbitration is for speedy and satisfactory outside the court settlement. Aims and Objectives: The researcher aims to study about the composition of arbitral tribunal and the challenges that can be made regarding it. Sources of Data: Both primary and secondary sources are used for collection of the relevant data:   

Books Bare act Internet Method of Writing: The method of writing followed in the course of this research paper is primarily analytical. Mode of Citation The researcher has followed the bluebook method of citation throughout the course of this research paper.

NUMBER OF ARBITRATORS 3

The parties are free to determine the number of arbitrators, provided that such number shall not be an even number. Failing the determination, the arbitral tribunal shall consist of a sole arbitrator. Section 10 provides for the appointment of a sole arbitrator or more than one arbitrator but such arbitrators shall not be even in number. The provision relating to appointment of Umpire as existed in the old Arbitration Act 1 of 1940 has been dropped in the new Act of 1996. But where the number of arbitrator is three, the third arbitrator will be appointed by the two arbitrators nominated by one each of the two parties. The 'third arbitrator' shall act, not as an Umpire but as 'Presiding Arbitrator2." The two arbitrators will appoint the third arbitrator called the Presiding Arbitrator within a period of thirty days from the date of their appointment. The three arbitrators will participate is the decision making process of the tribunal and the award of majority shall prevail. The Supreme Court has held that an arbitration agreement specifying even number of arbitrators cannot be a sole ground to render arbitration agreement invalid3. The High Court of Bombay in Atul R. Shah v. M/s. V. Vrij Lal Lallobhai & Co and Another4, has observed that the fact that an Arbitral Tribunal is not properly constituted and objection has not been raised by the petitioner before the Arbitral Tribunal, cannot justify exercise of its jurisdiction if its constitution was in contravention of Section 10 of the Arbitration and Conciliation Act, 1996, The Court further clarified that just as courts cannot confer jurisdiction on themselves, by consent of the parties, and clothe themselves with jurisdiction, the same is also true of Arbitral Tribunal and the award has to be set aside by that court alone. It may, therefore, be concluded that like the Court, the Arbitral Tribunal which has no jurisdiction cannot assume jurisdiction in itself merely because no objection in this regard was raised by the parties. It must be stated that arbitration being a creation of an agreement, there can be no arbitration unless there is an arbitration agreement in writing between the parties. The provision contained in Section 10 that the number of arbitrators shall 1 Section 10, Para 2 of the 111,4 Schedule of the old Arbitration Act, 1940. 2 Section 11 (3) Arbitration & Conciliation Act, 1996. 3M. M. T. C. Ltd.v Sterlite Industries (India) Ltd., AIR 1997 SC 605. 4 AIR 1999 Born 67 4

not be an even number is a derogable provision. Therefore, any agreement which permits parties to appoint an even number of arbitrators would not be contrary to provision of Section 10 and such an agreement would not be invalid and void. 'Where the parties agreed upon an even number of arbitrators and objection as to the composition of Arbitral Tribunal is not taken before the Tribunal itself or within the prescribed time limit under Section 16 (2) of the Act, it will be deemed as a waiver of objection under Section 4 and consequently the award so passed by the Arbitral Tribunal cannot be set aside under Section 34 (2) (a)(v) because the composition of tribunal was in accordance with agreement between the parties. Judicial trend: 1. Narayan Prasad & Others v. Nikunj Kumar Lohia5 Supreme Court has inter-alia observed that even as a matter of public policy it cannot be said that Section 10 compulsorily preclude the appointment of an even number of arbitrators. Where the parties agree to even number of arbitrators and the composition of the Arbitral Tribunal or the arbitration procedure are in accordance with the agreement of the parties, they cannot allowed to resile the award if it is not to their liking. 2. Head, National Jute Manufacturers Corporation Ltd. v. Saraoj Agarwal6 There was no mention of the number of arbitrators to be appointed, nor was any procedure for appointment of arbitrator was provided. Director (Personnel) of the Corporation was not willing to act as an arbitrator. In such a situation, Sub-Judge himself had appointed the arbitrators. The validity of such appointment was challenged before the High Court. The Court held that there was nothing on record to show that the Sub-Judge was designated by Chief Justice to appoint arbitrators. Therefore, the appointment was patently illegal and liable to be set aside. 3. Citibank N. A. v. TLC Marketing PLC7

5 AIR 2002 SC 1139. 6 AIR 2008 Pat 25 7 AIR 2008 SC 118. 5

The arbitration clause imported in itself all disputes arising between the parties. The appellants asserted certain claims against the respondents by writing letters and notices to them which were not denied or rejected by the respondents at any point of time. Since the parties failed to determine the number of arbitrators to be appointed as per Section 10 (1) of the Arbitration & Conciliation Act, 1996, the Court appointed a sole arbitrator to resolve the disputes between parties as required under clause (2) of Section 10 which the Supreme Court held to be justified in accordance with the law of arbitration. 4. Sime Darby Engineering S.D.N. v. Engineering India Ltd8. The Supreme Court that where arbitration clause in the agreement is silent as to the number of arbitrators to be appointed, the provision of sub-clause (21 of Section 10 would apply and only one arbitrator should be appointed and reference to expression 'arbitrators' in some other clause in the agreement would not affect the intention of parties as expressed by them in the arbitration clause.

8 AIR 2009 SC 3158 6

APPOINTMENT OF ARBITRATORS A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. The parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Although failing any such agreement in arbitration with three arbitrators, each party shall appoint one arbitrinator, and the two appointed arbitrators shall appoint the third arbitrator and he shall act as the presiding arbitrator. If a party fails to appoint an arbitrator within thirty 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 thirty 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. Failing any agreement, in arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 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.

7

A decision on the above matters by Chief Justice or the person or institution designated by him shall be final. Although the Chief Justice or the person or institution designated by him, in appointing an arbitrator, 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. 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. The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted to him. Where more than one request has been made to the Chief Justice of different High Courts or their designates the Chief Justice or his designate, to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request. In case of International Commercial Arbitration: Where the matters arise in an international commercial arbitration, the reference to "Chief Justice" shall be construed as a reference to the "Chief Justice of India". In case of any other arbitration: Where the matters arise in any other arbitration, the reference to 'Chief Justice" 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 situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. The right of parties to choose their own arbitrator is recognised as one of the pillars of the principle of 'party autonomy' as envisaged by the UNITRAL model law and incorporated under Section 11 of the Arbitration and Conciliation Act, 1996. Where the parties fail to adhere to the terms of their agreement in appointing the arbitrator, the approval of arbitrator 8

may be made by the Chief Justice or any person or institution designated by him upon the request of a party to the arbitration agreement as contemplated by sub-sections (5) & (6) of Section 11 of the Act. Arbitrator/arbitrators are appointed in pursuance of the arbitration agreement. The appointment of arbitrator/arbitrators may be made 1. by the parties, or 2. by designated authority, or 3. Arbitral Institution. 

In case of arbitrator named by parties, the arbitrator so appointed - enter on the reference forthwith and proceed with the arbitration proceedings A person of any nationality may be appointed as arbitrator but where the dispute involves an international commercial transaction,

Relevant cases: 1. Patitapazvan Mahapatra v. S. E. Eastern Circle9 The High Court of Orissa observed that expression 'arbitration agreement' need not be specifically mentioned in arbitration clause. The term arbitration agreement has been given wide import in its definition and therefore, it could be in one single document or could be gathered from several documents. It could also be gathered from correspondence in the form of letters, fax messages, telegrams and even telex messages. Any clause in the agreement/document which mentions about resolution of dispute only, could be interpreted as an arbitration clause for the purpose of application of the provisions of the Arbitration Act. 2. Bharat Sanchar Nigam Ltd. & another v. Motorola India Ltd.10 There was arbitration clause in the agreement providing for excepted matters, i.e., those matters the decision to which is specifically provided in agreement. The appellant claimed liquidated damages from the respondent for delay in supply of goods and services whereupon the respondent revoked arbitration clause on ground that there was no delay on its part. The appointing authority having tailed to appoint an arbitrator within the prescribed period under the Arbitration Act, the respondent filed petition under Section 11 before the High Court of Kerala at Ernakulam. Appellant thus lost the right to appoint any arbitrator for settling 9 AIR 2008 Ori 80 10 AIR 2009 SC 357 9

disputes specified in the arbitration agreement. In response to the petition, the High Court appointed an arbitrator, to which the appellant raised his objection only in the first arbitration hearing. The Supreme Court held that appellant having failed to raise objection prior to first arbitral hearing he is deemed to have waived his right to object to such appointment. Dismissing the appeal, the Apex Court further noted that a clause in the agreement giving unilateral right to determine liquidated damages to purchaser (i.e., appellant) and providing that quantification of said liquidated damages shall be final and cannot be challenged by the Supplier (i.e respondent), was clearly in restraint of legal proceedings under Section 28 of the Contract Act, 1872 and therefore, contrary to law. 

Vacancy of Arbitrator due to death or withdrawal of consent.—

A situation may arise where the parties may have appointed the arbitrator or arbitrators by consent but subsequently a vacancy may occur due to death of the arbitrator or withdrawal of consent by him. In such a contingency the provisions of Section 14 of the Act would apply. Relevant cases: 1. M. Subramanya v. Dr. Chandra Sekhar11 The arbitrator, who was appointed one of the parties, withdrew his consent in midproceedings when several witnesses and documents had already been examined during three years of the proceedings. The Court held that the arbitrator could not be allowed to withdraw at that stage. 2. In Himmat La! v. Keshav La112 One of the two arbitrators appointed by the parties died before filing the award. The Court held that unless the arbitration agreement does not show that the vacancy so caused should not be filled, the party appointing the deceased arbitrator may serve a written notice on the other party or the arbitrators to concur in the appointment of new arbitrator to fill up the vacancy 

Scope of Court's Power under Section 11 of the Act

11 AIR 1995 Kar. 115. 12 (1994). 1 Arb. LR 59 (Guj). 10

Section 11 of the Act enables the parties to approach the Chief Justice of the concerned High Court in the case of domestic arbitration and the Chief Justice of India (CJI) in case of international commercial arbitration for appointment of arbitrators when there is a disagreement on constitution of the Arbitral Tribunal between the parties. The power which the CJ or CJI, as the case may be, exercises invokes controversy many a times which the Supreme Court is often called upon to decide. LEADING DECISIONS: 1. Konkan Railway Corporation Ltd. v. M/s. Mehul Construction Co. The Supreme court held that Section 11 (6) aims at removing any dead-lock or undue delay in the process of appointment of arbitrator. Therefore, it is reasonable to hold that while discharging the functions under section 11(6) by Chief Justice or his nominee will be acting in his administrative capacity. The nature of the function performed by the Chief Justice being essentially to aid the constitution of Arbitral Tribunal immediately and the Legislature having consciously chosen to confer the power on Chief Justice and not a Court, it is apparent that the order passed by the Chief Justice or his nominee is an administrative order. This being the position, even an order refusing to appoint an arbitrator would not be amenable to the jurisdiction of the Supreme Court under Article 136 of the Constitution. However, it being an act of non-performance of a duty, mandamus would lie. 2. Konkan Railway Corporation v. Rani Construction (Pvt.) Ltd.13, The Supreme Court has clarified that the order of the Chief Justice or his designate under section 11 nominating an arbitrator is not an adjudicatory order and the chief justice or his designate is not a tribunal. Sub-sections (3) to (6) of section 11 prescribe the events when a party may request the chief justice or his designate to nominate an arbitrator and his decisions in this regard will final. The section does not contemplate a notice to be served by the party making such request to the other party nor does it contemplate decision by the chief justice or his designate on any controversy that the other party may raise. In short, the decision to nominate the an arbitrator/arbitrators by the chief justice or his designate is not adjudicatory but is purely administrative in nature. However, while making an appointment of arbitrator the chief justice or his designate shall take into account the qualifications required of the

13 AIR 2002SC 778 11

arbitrator and other such considerations which may ensure nomination of an - independent and impartial person as an arbitrator. 3. SBP & Co. v. Patel Engineering Ltd 14 The seven-Judge Constitution Bench of the Supreme Court settled the law in regard to appointment of Arbitrator by Chief Justice of High Court or CJI, as the case may be, in this case. The Court in this case held that the power exercised by Chief Justice of High Court or Chief Justice of India is judicial powers and not merely administrative power, but this decision would have prospective application so as not to disturb the earlier decisions in this regard. Thus the Supreme Court overruled the earlier decision by a fiveJudge Bench given in Konkan Railway Co. Ltd. v. Rani Constructions.

14 (2005) 8 SCC 618 12

GROUNDS FOR CHALLENGE 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 o impartiality. An arbitrator, from the time of his appointment and throughout the proceeding, shall, without delay, disclose to the parties, in writing, any circumstances referred to in sub sections (1) unless they have already been informed of them by him. An arbitrator may be challenged only if: a. Circumstances exists that give rise to justifiable doubts as to his impartiality and independence, b. He does not passes the qualifications agreed to by the parties. A party may challenge an an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. This section enumerates the grounds on which the appointment of arbitrator can be challenged by a party or parties whereas the succeeding section i.e, Section 13 prescribes the procedure to be adopted for challenging the appointment of an arbitrator. Both the sections are therefore cognate sections. Sub-sections (1) and (2) of Section 12 enjoin a duty upon the arbitrator to disclose at the time of his appointment or after appointment throughout the arbitral proceedings, any circumstances which are likely to give rise e reasonable apprehension as to his impartiality or independence. Sub-section (3) lays down vet another ground, namely, lack of qualifications on which th: appointment of an arbitrator may he challenged by a party to arbitration dispute. Sub-section (4) of the section enables a party who has participated in the appointment of the arbitrator or appointed an arbitrator to challenge such appointment if he becomes aware of 13

any reason which may have rendered the arbitrator disqualified to act as such, any time during the arbitration proceedings. The object of the provisions of this section obviously is to cast a duty upon the parties to make sure that the person or persons whom they propose to appoint as arbitrator/arbitrators are willing to be so appointed and do not suffer from any disqualification or position which is likely to impair their independent and impartial decision in the dispute under arbitration. The section, however, does not contemplate any written consent or approval by the arbitrator. In Keshav Singh v. Indian Engineering Corporation15, The Supreme Court has affirmed that the process of appointment of an arbitrator is complete as soon as the appointment is made. Thus where both the parties have named their arbitrator, the persons so appointed would be deemed to be arbitrators even before they have accepted the office and formally communicated their consent to the parties concerned. 

Refusal to act as Arbitrator.—

After an appointment as arbitrator is offered to a person, he can decline the offer by express or implied refusal Explaining the meaning of the term 'refusal' the Supreme Court in State of West Bengal v. National Builders16 observed, "refusal to act means denial to do something which one is obliged to do under law". Obviously, a reluctant arbitrator cannot be forced to act. Therefore, where the arbitrator refused to extend time and closed the arbitration proceedings and leaves parties to decide their future course of action, it would be reasonable to presume that he has refused to continue as arbitrator any further.17 The section makes it obligatory for the arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubts as to his inability or circumstances which are likely to affect his independence or impartiality unless the parties are already aware of the circumstances. The law expects utmost honesty, impartiality and confidentiality from the arbitrators.18 15 AIR 1972 SC 1528 16 AIR 1994 SC 200 17 State of U.P. v Sardul Singh, AIR 1985 All. 67 18 Nandyal co-operative spinning mills v K. V. Mohan Rao, (1993) 2 SCC 654 14

CHALLENGE PROCEDURE The parties are free to agree on a procedure for challenging an arbitrator. Failing any such agreement, a party who intends to challenge an arbitrator shall within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal19. Unless the arbitrator challenged withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge20. The freedom of the parties is subject to the following condition: If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.21 Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34.22

19 Section 13(2) 20 Section 13(3) 21 Section 13(4) 22 Section 13(5) 15

Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.23 This section provides that the parties are free to agree on a procedure for challenging an arbitrator. In case the parties have not prescribed any procedure, the provision of sub-section (2) would be attracted and the party challenging the appointment of arbitrator shall send to the arbitral tribunal a written statement of reasons within 15 days after becoming aware of the circumstances or after becoming aware of the constitution of the arbitral tribunal. After the expiry of 15 days, the right to challenge would be deemed to have been waived by the party. On receipt of the written statement from the party as referred to in sub-section (2) the arbitral tribunal will decide the challenge unless the arbitrator so challenged himself withdraws from his office or the other party also agrees to the challenge in which case the arbitrator has no option but to relinquish the office. In case of sole arbitrator, where one party has challenged his appointment and the other party also joins it, the sole arbitrator will have to vacate the office. But where the arbitral tribunal consists of more than one arbitrators and one of the arbitrator's appointment is challenged by a party and the tribunal has rejected the plea of challenge, there is no option for the challenging party but to accept the decision of the arbitral tribunal because there is no provision in this section for review by the court. Sub-section (4) provides that if the challenge is rejected, the arbitral tribunal shall continue the arbitral proceedings and make the award. There is no provision for appeal against rejection of challenge by the arbitral tribunal. Sub-section (5), however, permits the challenging party to make an application to the court for setting aside the award under Section 34 of the Act. Where the court has set aside the award, it also has the power to decide whether the arbitrator whose appointment was under challenge is entitled to any fees or not [Section 13 (6)]. A reading of the various clauses of Section 13 would make it clear that in cases where the arbitral tribunal consists of one sole arbitrator and only one of the two parties have challenged his appointment and the other has not agreed with the challenge, the arbitrator becomes a judge in his own cause' and decides his own fate. This is rather unfortunate and contrary to accepted principles of natural justice. In such a situation if the sole arbitrator 23 Section 13(6) 16

decides to withdraw, no problem would arise but in case he decides otherwise and rejects the challenge, then he would continue the arbitral proceedings and make the award which would be binding on the parties including the one who had objected to his appointment. This creates a rather unhappy situation, which the framers of the 1996 Act should have taken into consideration. The only remedy available to the aggrieved party in such a situation is to make art application to the court to set aside the arbitrator's award under Sections 34 and 37 of the Act.

FAILURE OR IMPOSSIBILTY TO ACT The mandate of an arbitrator shall terminate if: he becomes de jure or de facto unable to perform his fuctions or for other reasons fails to act without undue delay, and he withdraws from his office or a the parties agree to the termination of his mandate. If a controversy remains concerning any of the grounds referred above , a party may, unless otherwise agreed by the parties, apply to the court to decide on the terminate of the mandate. If, under section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub section (3) of section 12. An arbitrator who leaves India to settle abroad or an arbitrator appointed ex-officio but his office having been abolished would be deemed to have become incapable of acting de facto as arbitrator. De facto incapacity may also be caused due to withdrawal of arbitrator from the arbitral tribunal or where he expresses inability to proceed with the arbitration after entering upon the reference. It may be stated that death of the arbitrator should not be interpreted his inability or incapacity to perform his function as arbitrator because it results into impossibility of performance rather than inability to perform In case of death of arbitrator, a substitute arbitrator shall be appointed under Section 15 (2). 17

Filling up vacancy caused due to retirement or withdrawal by Arbitrator: The law provides for filling the vacancy caused due to resignation or withdrawal of the previously appointed arbitrator. This section (i.e., Section 14) provides that mandate of the arbitrator whether dead or alive shall terminate on his inability to act as arbitrator after he has entered upon the reference. The vacancy might have been caused by whatever reason but the same can be filled up by appointing another substitute arbitrator in his place. 1. V. K. Constructions v. Army Welfare Organisation24 In this case the arbitrator resigned soon after entering upon the reference by giving notice to V. K. Constructions. The Army Welfare Organisation appointed another person as arbitrator whose appointment was challenged by the appellants. After hearing both the parties, the Court held that the appointment of arbitrator by respondents Army Welfare Association to fill up the vacancy caused by resignation of the previous arbitrator was in accordance with the provisions of Section 8 (1) of the Old Act (i.e., Arbitration Act 1940) which are now contained in Section 14 of the new Arbitration and Conciliation Act, 1996. The Court further observed that the Court's power to supply the vacancy caused on account of resignation of the previous arbitrator could only be invoked where the party (Army Welfare Organisation in this case) failed or neglected to fill up the vacancy. Ex-officio arbitrator Where an ex-officio is appointed as arbitrator because of the office which he holds, on his transfer, retirement, resignation or death, his successor will be arbitrator who occupies that office. But where a person holding an office is specifically appointed as arbitrator by name, then barring his death, he will continue to act an arbitrator even after his transfer, resignation or retirement i.e. even after he quits that office25. An award given by an ex-officio arbitrator after his quitting the office consequent to his retirement from service was held to be void for want of jurisdiction as the said officer ceased to exercise jurisdiction after his retirement from the office26. 24 (1995) 1 Arb. LR 184 25 Construction India v. Secretary, Works Deptt, Orissa Government, AIR 1998 SC 717 26 Union of India v. Jagat Ram Tehran, AIR 1996 Del 191 18

TERMINATION OF MANDATE AND SUBSTITUTION OF ARBITRATOR (SECTION 15) 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. 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. Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearing previously held may be repeated at the discretion of the arbitral tribunal. Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal. This section is complimentary to preceding Sections 13 and 14 inasmuch as arbitrator withdrawing from his office for any reason may be replaced unless otherwise agreed by the parties. Sub-section (4) provides the procedure for appointment of the substitute arbitrator. Though apparently the provisions contained in Section 14 (1) (b) and Section 15 (1) (a) 19

appear to be overlapping but in fact it is not so. While Section 14 (1) (b) provides for the termination of the mandate of an arbitrator when he withdraws from his office, Section 15 (1) (a) will apply when the reason of termination is any other than specified in Section 14 (1) (a) i.e., de jure or de facto inability or neglect. In M/s. Yashwith Constructions (P) Ltd. v. M/s. Simplex Concrete P. les India Ltd. & another27 The Supreme Court in this case made it clear that where the arbitrator originally appointed in terms of the arbitration agreement withdrew for health reasons and the Managing Director of respondent company as authorised originally by the arbitration agreement, promptly appointed a substitute arbitrator though in arbitration agreement there was no specific provision authorising him to appoint a substitute arbitrator, such an omission in the arbitration agreement would be said to have been made up by the specific provision of subclause (2) of Section 15 of the Act and appointment of the substitute arbitration would be valid. In such a case, the withdrawal of an arbitrator from the office for any reason has to be treated as within the purview of Section 15 (1) (a) of the Act. The Court further observed that the term 'Rules' used in Section 15 (2) obviously refers to the provision for appointment of arbitrator as contained in the arbitration agreement or Rules y institution to which disputes were referred for arbitration. The written petition challenging the validity of appointment of a substitute arbitrator by the Managing Director of the respondents was, therefore, dismissed by the Apex Court. In Budhraja Mining & Construction Ltd., Bhubneswar v. Union of India28 The Court held that Arbitral Tribunal is competent to decide on question of its own jurisdiction. In this case, the objection of jurisdiction was overruled by the arbitral tribunal and the award was passed. On an application for setting aside the award could be permissible under Section 34 of the Act and the Coin may set aside the award passed by the Arbitral Tribunal if the Tribunal lacked jurisdiction or exceeded its jurisdiction. In M/s. Eastern Mineral and Trading Agency v. Steel Authority of India Ltd.29,

27 AIR 2006 SC 2798 28 AIR 2008 Ori 98 20

The arbitrator may go ahead with the proceedings and conclude it but will not sign the award, which shall be subject to the order to be passed either in appeal which is pending. 

Court has no jurisdiction to remove arbitrator while arbitral proceedings are going on

In the instant case, the petition was directed against the order of the Division Bench of the Calcutta High Court dated 30th March, 2000 which had stayed operation of the interim order passed by the learned Single Judge and directed - the arbitration proceedings to go on. The Division Bench simultaneously referred the question to Full Bench, requiring clarification whether under Section 15 of the Arbitration and Conciliation Act, 1996, the Court has any jurisdiction to remove any arbitrator while arbitration proceedings are going on. Answering in the negative, the Supreme Court in its decision held that it is not appropriate to stay proceedings before arbitrator. He will conclude proceedings but will not sign the award which shall be subject to order passed in appeal which is pending before the Division Bench of the High Court.

29 AIR 2000 SC 3579(1) 21

CONCLUSION The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. The arbitration agreement shall be deemed to be independent of the contract containing the arbitration clause, and invalidity of the contract shall not render the arbitration agreement void. Hence, the arbitrators shall have jurisdiction even if the contract in which the arbitration agreement is contained is vitiated by fraud and/or any other legal infirmity. Further, any objection as to jurisdiction of the arbitrators should be raised by as party at the first instance, i.e., either prior to or along with the filing of the statement of defence. If the plea of jurisdiction is rejected, the arbitrators can proceed with the arbitration and make the arbitral award. Any party aggrieved by such an award may apply for having it set aside under Section 34 of the Act. Hence, the scheme is that, in the first instance, the objections are to be taken up by the arbitral tribunal and in the event of an adverse order, it is open to the aggrieved party to challenge the award. An arbitrator may be challenged only in two situations. First, if circumstances exists that give rise to justifiable grounds as to his independence or impartiality; second, if he does not posses the qualifications agreed to by the parties. A challenge is required to be made within 15 days 22

of the petitioner becoming aware of the constitution of the arbitral tribunal or of the circumstances furnishing grounds for challenge. Further, subject to the parties agreement, it is the arbitral tribunal (and not the court - unlike under the old Act of 1940) which shall decide on the challenge. If the challenge is not successful the tribunal shall continue with the arbitral proceedings and render the award, which can be challenged by an aggrieved party at that stage. This is another significant departure from the Model Law, which envisages recourse to a court of law in the event the arbitral tribunal rejects the challenge Normally in any judicial system a first appeal against a Court Judgment is a right of the party and hence the first appellate court needs to once again look into the merits of the case and pass a reasoned judgment. This is because the parties never have the right to choose their judge or their qualification or knowledge on particular filed of business. But in the arbitration cases the parties choose their arbitrators, knowledge and qualification and hence there need not be another appreciation of merits of the case. That is why the UNICITRAL model law as well as Indian Arbitration & Conciliation Act, 1996 restrict the scope of the appeal against an arbitral award. The objective of such a restriction is to avoid wastage of time by once again looking into the merits of the case and re-appreciate the evidence and to ensure finality of an arbitral award.

23

BIBLIOGRAPHY

Books: 1. Paranjpe, V.N., Law relating to Arbitaration and Conciliation in India, 2013 (5 th edition), Central Law Agency. 2. Singh, Avatar, law of Arbitaration and Conciliation.

Research papers: 1. THE ARBITRATION LAW OF INDIA: A CRITICAL ANALYSIS by Sumeet Kachwaha published in Asia International Arbitrational Journal, Volume 1, Number 2, Pages 105-126 2. India: Law Of And Procedure For Appointment Of Arbitrator(S) by Article by Ginny J. Rautray and Saurendra Rautray.

24