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Issues: (i) whether, after the named arbitrator expressed inability to act, a substitute arbitrator could be appointed under the Arbitration and Conciliation Act, 1996; (ii) whether pendency of proceedings before the Board for Industrial and Financial Reconstruction barred arbitration under the Sick Industrial Companies (Special Provisions) Act, 1985.
Issue (i): whether, after the named arbitrator expressed inability to act, a substitute arbitrator could be appointed under the Arbitration and Conciliation Act, 1996.
Analysis: The named arbitrator's withdrawal attracted the statutory scheme on termination of mandate and substitution of arbitrator. Where the agreement did not expressly prohibit replacement of the named arbitrator or provide any contrary procedure after his refusal to act, the arbitration agreement was not exhausted. A substitute was therefore permissible under the Act, and the Court could exercise its power to appoint an arbitrator.
Conclusion: A substitute arbitrator could be appointed and the objection that the arbitration clause had come to an end was rejected.
Issue (ii): whether pendency of proceedings before the Board for Industrial and Financial Reconstruction barred arbitration under the Sick Industrial Companies (Special Provisions) Act, 1985.
Analysis: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 protects sick industrial companies from winding up and coercive recovery measures such as execution, distress, or similar proceedings. Arbitration, being a process for adjudication of liability and not a coercive recovery proceeding or a suit within the meaning of that provision, was held not to fall within the statutory bar.
Conclusion: Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 did not bar the arbitration proceedings.
Final Conclusion: The applications were allowed and the named arbitrator was appointed to adjudicate the disputes between the parties.
Ratio Decidendi: Where a named arbitrator withdraws and the contract does not exclude replacement, the mandate can be substituted under the Act; and arbitration proceedings are not barred by Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 because they are not coercive recovery proceedings.
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