Mandatory arbitrator ineligibility bars appointment and permits tribunal substitution to complete stalled arbitration.

Section 12(5) read with the Seventh Schedule imposes a mandatory bar on appointing an arbitrator who falls within the statutory ineligibility regime, and an appointment made despite that bar is invalid; the nominee arbitrator here was treated as ineligible because of the office held and its connection with the appointing party. The Court also exercised Section 29A(6) power to substitute the tribunal where the arbitration had remained pending for an unduly long period, with the parties consenting to replacement by a sole arbitrator. The proceedings were directed to continue from the existing stage and be completed within the stipulated time, subject to independence, impartiality, and the applicable fee structure.

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Issues: (i) Whether the appointment of the nominee arbitrator, being the Principal Secretary to the Government of Haryana, was invalid under the ineligibility regime in the Arbitration and Conciliation Act, 1996. (ii) Whether, in the facts of the case, the arbitral tribunal deserved to be substituted and time extended for completion of the proceedings and pronouncement of the award.

Issue (i): Whether the appointment of the nominee arbitrator, being the Principal Secretary to the Government of Haryana, was invalid under the ineligibility regime in the Arbitration and Conciliation Act, 1996.

Analysis: The ineligibility under Section 12(5) read with the Seventh Schedule applies notwithstanding any prior agreement to the contrary. A person having a relationship falling within the Seventh Schedule cannot be appointed as an arbitrator. Since the nominee arbitrator was a senior of the State connected with the appointing party, the Court treated the appointment as hit by the statutory bar because of the controlling influence attributable to the office held.

Conclusion: The appointment of the existing nominee arbitrator was held to be invalid and ineligible.

Issue (ii): Whether, in the facts of the case, the arbitral tribunal deserved to be substituted and time extended for completion of the proceedings and pronouncement of the award.

Analysis: The proceedings had remained pending for an unduly long period despite the tribunal recording that it was ready to pronounce the award. The parties consented to substitution of the existing tribunal by a sole arbitrator. Exercising power under Section 29A(6), the Court considered it appropriate to replace the tribunal with a substitute arbitrator and direct completion of the arbitration within a fixed period, subject to the usual declaration of independence and impartiality and the applicable fee structure.

Conclusion: The tribunal was substituted by a sole arbitrator and the arbitral proceedings were directed to continue from the existing stage for completion within the stipulated period.

Final Conclusion: The dispute was not finally adjudicated on the merits of the contractual claims, but the arbitral forum was reconstituted by setting aside the ineligible appointment and directing completion of the arbitration before a substitute arbitrator.

Ratio Decidendi: Section 12(5) with the Seventh Schedule creates a mandatory bar to appointment of an ineligible arbitrator, and where such ineligibility exists the Court may, in appropriate cases, substitute the tribunal under Section 29A(6) to secure completion of the arbitral process.

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