Arbitrator substitution must follow the agreed appointment procedure; refusal before reference does not trigger Section 15(2).

The Arbitration and Conciliation Act, 1996 requires strict compliance with the parties' agreed arbitrator-appointment procedure. Section 15(2) permits substitution only where an arbitrator's mandate has terminated under Section 15(1), which covers withdrawal from office or termination by agreement; it does not apply when a nominated arbitrator merely refuses the appointment before entering upon the reference. The term "rules" in Section 15(2) includes the contractual appointment mechanism itself. In the absence of any contractual provision authorising substitution in that situation, a party cannot bypass the agreed procedure and seek appointment of a third arbitrator under Section 11.

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Issues: Whether, on the nominated arbitrator's refusal to accept the appointment before entering upon the reference, the opposite party could invoke Section 15(2) of the Arbitration and Conciliation Act, 1996 to appoint a substitute arbitrator, and whether the designated Judge was justified in appointing a third arbitrator.

Analysis: The statutory scheme emphasises adherence to the parties' agreed procedure for appointment of arbitrators. Section 15(2) permits substitution only when the mandate of an arbitrator terminates according to Section 15(1), which contemplates withdrawal from office or termination by agreement, not a mere refusal to accept the appointment before the arbitrator has entered upon the reference. The term "rules" in Section 15(2) includes the contractual appointment mechanism itself. Since the agreement in question contained no provision authorising a substitute appointment in such a situation, the opposite party could not bypass the agreed procedure and seek appointment of a third arbitrator under Section 11.

Conclusion: The appointment of the substitute arbitrator was impermissible, the designated Judge's order appointing the third arbitrator was unsustainable, and the appellant succeeded.

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