Substitute arbitrator appointment must follow the original agreed procedure, and past employment alone does not establish bias.
Section 15(2) of the Arbitration and Conciliation Act, 1996 requires a substitute arbitrator to be appointed under the same rules that governed the original appointment, so a party-agreed nomination procedure continues to apply on replacement. A former employee is not automatically disqualified from acting as an arbitrator; disqualification depends on whether the past relationship gives rise to justifiable doubts about independence or impartiality. A remote employment history, without concrete material showing bias, is insufficient to invalidate the appointment.
Issues: (i) Whether, on termination of an arbitrator's mandate, a substitute arbitrator had to be appointed according to the same rules applicable to the appointment of the arbitrator being replaced. (ii) Whether a former employee of a party was disqualified from acting as an arbitrator merely because of the past employment relationship.
Issue (i): Whether, on termination of an arbitrator's mandate, a substitute arbitrator had to be appointed according to the same rules applicable to the appointment of the arbitrator being replaced.
Analysis: Section 15(2) of the Arbitration and Conciliation Act, 1996 requires a substitute arbitrator to be appointed according to the rules applicable to the appointment of the arbitrator being replaced. The appointment mechanism agreed by the parties for the original tribunal therefore continues to govern substitution as well. Since the agreement provided a party-wise nomination process, the institutional body could not assume the power to appoint the State's nominee before the time sought by the State to fill the vacancy had expired.
Conclusion: The substitute arbitrator had to be appointed under the same agreed procedure, and the institutional appointment of the State's nominee was unjustified.
Issue (ii): Whether a former employee of a party was disqualified from acting as an arbitrator merely because of the past employment relationship.
Analysis: The Act does not disqualify a former employee as such. The test is whether there are justifiable doubts as to independence and impartiality. A past employment relationship, especially one that ended many years earlier, does not by itself establish bias. The objection raised was unsupported by any concrete material and was insufficient to show a real likelihood of bias.
Conclusion: The nominee arbitrator was not disqualified merely because he had earlier served the State, and the objection to his appointment was untenable.
Final Conclusion: The impugned judgment was set aside and the arbitral constitution proceeded on the basis of the parties' subsequent agreement to appoint a sole arbitrator, with the earlier three-member tribunal ceasing to continue.
Ratio Decidendi: Under Section 15(2), a substitute arbitrator must be appointed in accordance with the same rules that governed the original appointment, and a prior employment relationship does not by itself disqualify an arbitrator unless it gives rise to justifiable doubts about independence or impartiality.
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