Whether the High Court can appoint a substituted arbitrator in a petition seeking termination of mandate of arbitrator?

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 Shubham Budhiraja[1]

 

Mr. A took a loan from the Bank. Due to non-payments of the EMI, Bank invoked the arbitration agreement and unilaterally appointed the arbitrator. Mr. A protested for such unilateral appointment. However, the Ld. arbitrator continued the proceedings. Mr. A filed section 12(5) petition seeking terminating the mandate of the arbitrator and to substitute the arbitrator to start afresh. The Bank agitated that the Court cannot appoint the arbitrator under section 12(5) and a separate petition is required under section 13 for this purpose. The Hon’ble High Court held that unilateral appointment of the arbitrator by the Bank cannot be sustained in law. It is not necessary for a party to make a challenge under Section 13 of the Act. A petition for terminating the mandate of an arbitrator who is ineligible under Section 12(5) of the Act and for appointment of a substitute arbitrator, would be maintainable.[2]

 

 

(I)                   It is no longer res-integra that unilateral appointment of an arbitrator is in the teeth of the law as laid down by Hon’ble Supreme Court in a catena of judgments. It has been held time and again by Supreme Court that unilateral appointment of arbitrator by an authority which is interested in the outcome or decision of the dispute is impermissible in law.

 

(II)                 As per settled law, fairness, transparency and impartiality are virtues which are important for effective adjudication of a dispute through arbitration. Applying the yardstick, if the appointing authority of an arbitrator is a head or an employee of a party to the agreement including a company, then its interest in the outcome of the arbitral proceedings is a fact that cannot be denied. Once such an authority or person appoints an arbitrator, as per the law as laid down by Supreme Court, the ineligibility would permeate to the arbitrator so appointed.

 

(III)              As per Hon’ble Supreme Court Judgment in Bharat Broadband Network Limited Vs United Telecoms Limited, (2019) 5 SCC 755, It is not necessary for a party to make a challenge under Section 13 of the Act. A petition for terminating the mandate of an arbitrator who is ineligible under Section 12(5) of the Act and for appointment of a substitute arbitrator, would be maintainable.

 


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], Budhirajalawchambers@gmail.com , +91-9654055315, Member, Legal Aid Committee-Bar Council of Delhi [2022-23], Member, Research Committee- NIRC ICSI [2021-2022], Secretary- NGO Shaura Ek Samman (Regd.)

[2] Atelier Automobiles Pvt. Ltd. v. Religare, Delhi High Court, Neutral Citation Number: 2022/DHC/005382, Judgment dated 07/12/2022

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