APPEAL SHALL NOT LIE AGAINST THE ORDER OF APPOINTMENT OF ARBITRATOR IN PLACE OF RESIGNED ARBITRATOR.

[Mr. M. GOVINDARAJAN]

                        Sec. 11 of the Arbitration and Conciliation Act, 1996 (‘Act’ for short) deals with the appointment of arbitrator.  Sec. 11(1) provides that a person of any nationality may be an arbitrator unless otherwise agreed by the parties.  The parties are free to agree on a procedure to appoint the arbitrator or arbitrators.  Where under an appointment procedure agreed upon by the parties-

• A party fails to act as required under the procedure; or
• The parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
• 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.

                        The power to appoint a new substitute arbitrator arises in circumstances enumerated in Sections 13, 14 and 15.  Under Section 13 of the Act the office of the arbitrator may become vacated if his appointment was challenged and the challenge being successful he either withdrew or had to bow out.   Under Section 14 of the Act the mandate of an arbitrator terminates if he becomes unable to perform his function de jure or de facto, or for some reasons fails to act without undue delay or he either withdraws from his office or the parties agree to terminate his mandate.   If any dispute arises on the inability of the arbitrator the same can be decided by the court on the application of the party.

                        Thus an arbitrator may resign from his office for the reasons mentioned above.   A substituted arbitrator has to be appointed in the place of the arbitrator whose mandate has come to an end.  The procedure for appointment of arbitrator of the substitute has to be the same as has been followed in the original appointment or who has resigned.   In ‘In Maheswari Engineers & Associates V. Union of India’ – AIR 2000 AP 57 it was held that where the arbitrator becomes functus officio after his resignation and there was a clause in the general conditions of the contract empowering the designated authority to fill in the vacancy, the appointment of the second arbitrator by the authority was held to be valid.

                        A person so appointed shall have the same powers in respect of the reference and award as if he were appointed in accordance with the agreement.  Arbitration must be confined to disputes which were the subject matter of reference before the first arbitrator.  

                        Whether the appointment of new arbitrator appointed after the resignation of the arbitrator by the designated authority can be challenged?  The answer to his question is found in the case law ‘Crown Buildtech Private Limited V. Bhupinder Lal Ghai’ (DEL) – LW117.10.2011.  The facts of the said case run as follows:

                        The appellant and the respondent were parties to arbitration proceedings under which an arbitrator was appointed by the Chief Justice of the High Court.  In the course of the arbitration proceedings the appellant raised some objections and alleged bias against the arbitrator and also has withdrawn his consent given for the payment of additional fee to the arbitrator.  By the act of the appellant the arbitrator resigned his office. The single Judge of the High Court after going through the records and conduct of the applicant dismissed the application and appointed a retired judge of the High Court as new arbitrator to continue the arbitration proceedings.  This appointment order has been challenged by the appellant.

                        Section 37 of the Act provides for filing appeal.  According to this Section an appeal shall lie from the following orders (and from no others) to the court authorised by law to hear appeals from original decrees of the Court passing the order namely:-

• Granting or refusing to grant any measure under Section 9;
• Setting aside or refusing to set aside an arbitral award under Section 34.

The respondent contended that Section 37 of the Act provides for an appeal and if the language employed therein is properly understood it would be graphically clear that no appeal is maintainable against these orders.  The respondent relied on the judgment of Supreme Court in ‘SBP & Co. V. Patel Engineering Limited & another’ – (2006) 5 SCC 618.  He urged that the Single Judge has exercised the power under Section 11 of the Act and hence the same was not appealable.  He also urged that the tenor of the order should be appreciated in entirety and, therefore, the present order cannot be treated to be an order under the Letters of Patent or under Section 10 of the Delhi High Court Act.

                        The appellant contended that the direction given by the Single Judge directs that the proceeding shall continue from the stage left by the earlier arbitrator and such a decision is contrary to the mandate of Section 15(3) of the Act and therefore the appeal is maintainable.

                        The Court held that no appeal shall lie against an order appointing an arbitrator.  Since the appeal is not maintainable the Court dismissed the appeal.