Termination of Arbitrator’s Mandate and Substitution: Legal Review and Court’s Ruling

This case revolves around the dispute regarding the termination of the mandate of the sole arbitrator and his substitution, as per the provisions of the Arbitration and Conciliation Act, 1996. The appeals were filed by the appellant, Swadesh Kumar Agarwal, challenging the order passed by the High Court of Madhya Pradesh, which had terminated the mandate of the sole arbitrator appointed by mutual consent of the parties and appointed a new arbitrator. The issue arose from the arbitration proceedings related to a family dispute over partitioning properties.

Petitioner’s Arguments
The appellant, represented by learned counsel Shri Divyakant Lahoti, argued that the High Court erred in terminating the mandate of the sole arbitrator and substituting him with another arbitrator. The appellant contended that the termination of the arbitrator’s mandate under Section 14(1)(a) of the Arbitration and Conciliation Act, 1996, for undue delay was not justified in the present case. The appellant further pointed out that the parties had mutually agreed on the appointment of the sole arbitrator, and therefore, no application under Section 11(6) of the Act should have been entertained to terminate the mandate and appoint a new arbitrator. The appellant emphasized that the delay in the arbitration process was not attributable to the sole arbitrator but due to the failure of the parties to cooperate and proceed with the hearings in a timely manner.

The appellant also submitted that the application for the termination of the arbitrator’s mandate under Section 14 of the Act was not maintainable in the absence of a written agreement between the parties containing the arbitration clause. The appellant cited previous judgments to support the argument that the appointment procedure for the arbitrator should have been followed strictly as per the agreement between the parties, and any dispute about the appointment should be raised in accordance with the prescribed legal provisions. The appellant argued that the High Court’s decision was wrong in terminating the arbitrator’s mandate based on undue delay, which could have been resolved within the arbitration process itself, without resorting to judicial intervention.

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Respondent’s Arguments
The respondent, Dinesh Kumar Agarwal, represented by learned counsel Shri Ashok Lalwani, argued that the High Court was justified in terminating the mandate of the sole arbitrator due to undue delay in proceeding with the arbitration. The respondent emphasized that the parties had revoked the mandate of the arbitrator in 2009 due to delays in the proceedings, and the application under Section 11(6) of the Act was filed to appoint a new arbitrator. The respondent submitted that Section 14(1)(a) of the Act provides that the mandate of the arbitrator is to be terminated if there is undue delay, and the same should have been applied in this case as the arbitrator failed to complete the proceedings in a reasonable time frame.

The respondent further argued that there was no written arbitration agreement, and therefore, the arbitration could be referred to the High Court for appointment of a new arbitrator under Section 11(6) of the Act. The respondent emphasized that the appointment of an arbitrator, once done, can be challenged if the appointed arbitrator fails to act without undue delay, and in this case, the proceedings were not progressing, which caused hardship and prolonged the dispute. The respondent urged that the High Court was well within its rights to appoint a new arbitrator and terminate the mandate of the previous one.

Court’s Analysis and Conclusion
The Supreme Court carefully reviewed the arguments presented by both parties and analyzed the provisions of the Arbitration and Conciliation Act, 1996, particularly Section 14(1)(a), which deals with the termination of an arbitrator’s mandate due to undue delay. The Court noted that the parties had mutually agreed to appoint a sole arbitrator and that the arbitration proceedings had been pending for a significant amount of time. However, the Court also observed that the delay was not solely attributable to the arbitrator, and there were instances where the parties did not cooperate in progressing the arbitration hearings.

The Court found that the High Court had rightly relied on the provisions of Section 14(1)(a) of the Act, which provides for the termination of the arbitrator’s mandate if there is undue delay in the arbitration proceedings. The Court emphasized that it was essential for the parties to comply with the arbitration process and ensure that the proceedings are conducted in a timely manner. The Court also noted that the appointment of an arbitrator under Section 11(6) of the Act can be invoked if there is a failure to act in accordance with the agreed-upon procedure, and in the absence of a written arbitration agreement, the High Court was justified in intervening to ensure that the dispute was resolved through arbitration.

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The Court further addressed the appellant’s claim that the application under Section 11(6) was not maintainable in the absence of a written agreement. The Court clarified that while the presence of a written agreement is essential in certain cases, the parties’ mutual consent to refer the matter to arbitration was sufficient to invoke Section 11(6). The Court also discussed the procedure for challenging an arbitrator’s appointment and concluded that the procedure followed by the High Court was in accordance with the provisions of the Act. The Court held that the termination of the arbitrator’s mandate and the appointment of a new arbitrator were both justified in the circumstances of the case.

Final Decision
The Supreme Court dismissed the appeal filed by the appellant, affirming the High Court’s decision to terminate the mandate of the sole arbitrator and appoint a new arbitrator. The Court concluded that the High Court had acted within its jurisdiction and in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The Court also upheld the decision to dismiss the appellant’s writ petitions challenging the order of the Trial Court rejecting the application under Order VII Rule 11 of the CPC. The appeals were dismissed with no order as to costs.

Petitioner Name: Swadesh Kumar Agarwal.
Respondent Name: Dinesh Kumar Agarwal & Ors..
Judgment By: Justice M.R. Shah, Justice B.V. Nagarathna.
Place Of Incident: Jabalpur, Madhya Pradesh.
Judgment Date: 05-05-2022.

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