TaxTMI 
TaxTMI 
2022 (5) TMI 306
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....Sole Arbitrator. By the impugned judgment and order, the High Court has also confirmed the order passed by the learned Trial Court dismissing the application filed under Order VII Rule 11 of Code of Civil Procedure (CPC) preferred by the appellant herein. 2. The facts leading to the present appeals in a nutshell are as under: 2.1 That a dispute between the parties which as such is a family dispute for partition of the properties arose. It was referred to the sole Arbitrator. The learned Arbitrator was appointed as a sole Arbitrator by the parties themselves on 04.08.2008. The learned Arbitrator directed the parties to appear on 14.03.2009 for deciding the pending applications. On the request of the parties, the Arbitrator adjourned the hearing on 30.03.2009. No proceedings were undertaken on 30.03.2009 due to the fact that the sole Arbitrator was not available in town. Respondent No. 1 and 3 herein - parties to the arbitration proceedings revoked the mandate of the sole Arbitrator vide letters dated 11.07.2009. The letters were replied to by the sole Arbitrator. Thereafter, respondent No. 1 and 3 herein, parties to the arbitration proceedings filed applications under section ....
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....ly submitted that in the facts and circumstances of the case the High Court has materially erred in terminating the mandate of the Arbitrator under section 14(1)(a) of the Act, 1996 on an application filed under section 11(6) of the Act, 1996. 3.1 It is further submitted that in a case, where an Arbitrator was already appointed by the parties themselves, subsequently, no application under section 11(6) of the Act, 1996 was maintainable either to terminate the mandate of the sole Arbitrator and/or to substitute the Arbitrator. 3.2 It is contended by Shri Lahoti, learned counsel that the mandate of the Arbitrator can be terminated and/or may come to an end only as per the provisions of the Arbitration and Conciliation Act, 1996. Reliance is placed upon sections 13, 14, 15, 25(a), 30 and 32 of the Act, 1996. It is submitted that other than the aforesaid provisions under the Act, 1996, there is no provision to terminate the mandate of the Arbitrator. 3.3 It is submitted that in case of the eventualities mentioned in section 14(1)(a) of the Act, 1996, the remedy available to the aggrieved party would be to approach the "court" as defined under section 2(e) of the Act, 1996. ....
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.... Ashok Lalwani, learned counsel appearing on behalf of respondent No. 1 and Shri Rajesh Inamdar, learned counsel appearing on behalf of respondent No. 2. Shri Lalwani, learned counsel appearing on behalf of respondent No. 1 has vehemently submitted that in the facts and circumstances of the case, when it was found that there was an undue delay on the part of the Arbitrator in concluding the arbitration proceedings, his mandate was rightly terminated considering section 14(1)(a) of the Act, 1996. 4.1 It is submitted that as per section 14(1) of the said Act, the word used is "shall". It is submitted that it provides that the mandate of an arbitrator "shall" terminate and he shall be substituted by another arbitrator, if he, de jure or de facto is unable to perform his functions or for other reasons fails to act without undue delay. It is submitted that therefore, once it is found that the arbitrator is unable to perform his functions due to eventualities mentioned in section 14(1) of the Act, 1996, there shall be an automatic termination of the mandate of the arbitrator and he shall be substituted by another arbitrator. Reliance is placed upon the decisions of this Court in the c....
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....e sole arbitrator in concluding the arbitration proceedings which would lead to the termination of his mandate, in an application under section 11(6) of the Act, 1996? (vi) Whether in the facts and circumstances of the case, the learned Trial Court was justified in dismissing the application submitted by the appellant, submitted to reject the application under section 14(2) of the Act, 1996 in exercise of powers under Order VII Rule 11 of CPC? Question No. (i) to (v) are interconnected. Therefore, all are considered and decided together. 6.1 In the present case the sole Arbitrator was appointed by the parties themselves by mutual consent. There was no written agreement/contract containing the arbitration clause. 6.2 As per subsection (2) of section 11, subject to subsection (6), the parties are free to agree on a procedure for appointment of the arbitrator or arbitrators. Subsection (5) of section 11 provides that in an arbitration with a sole arbitrator, failing any agreement referred to in subsection (2), if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree, the court may appoin....
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....ion of the mandate of the arbitrator and the procedure to be followed are required to be referred to: "11. Appointment of arbitrators( 1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to subsection (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in subsection (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (3A) The Supreme Court and the High Court shall have the power to designate, arbitral institutions, from time to time, which have been graded by the Council under section 43I, for the purposes of this Act: Provided that in respect of those High Court jurisdictions, where no graded arbitral institution are available, then, the Chief Justice of the concerned High Court may maintain a panel of arbitrators for discharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution ....
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.... before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of subsection (1) of section 12, and have due regard to (a) any qualifications required for the arbitrator by the agreement of the parties; and (b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, 16[the arbitral institution designated by the Supreme Court] may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (11) Where more than one request has been made under subsection (4) or subsection (5) or subsection (6) to different arbitral institutions, the arbitral institution to which the request has been first made under the relevant subsection shall be competent to appoint. (12) Where the matter referred to in subsections (4), (5), (6) and (8) arise in an international commercial arbitration or any other arbitration, the reference to the arbitral institution in thos....
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....m, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. [(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subjectmatter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this subsection by an express agreement in writing.] 13. Challenge procedure.- (1) Subject to subsection (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in subsection (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in subsection (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under subsection (2) withdraws from his office or the other party agrees to the....
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....nder this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal. xxx xxx xxx 25. Default of a party.-Unless otherwise agreed by the parties, where, without showing sufficient cause,- (a) the claimant fails to communicate his statement of claim in accordance with subsection (1) of section 23, the arbitral tribunal shall terminate the proceedings; (b) the respondent fails to communicate his statement of defence in accordance with subsection (1) of section 23, the arbitral tribunal shall continue the proceedings without treating that failure in itself as an admission of the allegations by the claimant 3 [and shall have the discretion to treat the right of the respondent to file such statement of defence as having been forfeited]. (c) a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it. xxx xxx xxx 30. Settlement.-(1) It is not incompatible with an arbitration agreement for an arbitral tribunal to encourage settlement of the dispute and,....
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....3, unless the arbitrator challenged under subsection (2) withdraws from his office 23 or the other party agrees to the challenge, it is for the arbitral tribunal to decide on the challenge. If a challenge to the arbitrator is not successful in that case, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award and when an arbitral award is made under subsection (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34 of the Act, 1996. Therefore, as per section 13 of the Act, the challenge to the arbitrator shall be made before the arbitral tribunal itself. However, section 13 of the Act, 1996 shall be applicable only in a case where the arbitrator is challenged on the grounds mentioned in section 12 of the Act, 1996. 6.5 Sections 14 and 15 provide for termination of the mandate of the arbitrator. Section 14 of the Act, 1996 provides that the mandate of the arbitrator shall terminate and he shall be substituted by another arbitrator in case of any eventuality mentioned in section 14(1)(a). As per subsection (2) of section 14, if a controversy remains concerning any o....
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.... party has to approach the concerned "court" as defined under section 2(e) of the Act, 1996. The concerned court has to adjudicate on whether, in fact, the sole arbitrator/arbitrators has/have become de jure and de facto unable to perform his/their functions or for other reasons he fails to act without undue delay. The reason why such a dispute is to be raised before the court is that eventualities mentioned in section 14(1)(a) can be said to be a disqualification of the sole arbitrator and therefore, such a dispute/controversy will have to be adjudicated before the concerned court as provided under section 14(2) of the Act, 1996. So far as the termination of the mandate of the arbitrator and/or termination of the proceedings mentioned in other provisions like in section 15(1)(a) where he withdraws from office for any reason; or (b) by or pursuant to an agreement of the parties, the dispute need not be raised before the concerned court. For example, where the sole arbitrator himself withdraws from office for any reason or when both the parties agree to terminate the mandate of the arbitrator and for substitution of the arbitrator, thereafter, there is no further controversy as e....
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....or/arbitrators by mutual consent and parties may agree mutually on a procedure for appointing an arbitrator or arbitrators even in the absence of any written agreement. In such a situation and failing an agreement referred to subsection (2), the aggrieved party may approach the High Court for appointment of an arbitrator under subsection (5) of section 11 and in such a situation subsection (5) of section 11 shall be attracted. However, where there is a written agreement on the appointment procedure agreed upon by the parties and there is a failure to appoint an arbitrator or arbitrators, in that case, subsection (6) of section 11 shall be attracted and an aggrieved party may approach the High Court for appointment of an arbitrator under subsection (6) of section 11 of the Act, 1996. Therefore, an application under section 11(6) of the Act, 1996 shall be maintainable only in a case where there is a written agreement and/or the contract containing the arbitration agreement and the appointment procedure agreed upon by the parties, application under section 11(6) of the Act, 1996 shall be maintainable. Otherwise, the application under section 11(6) of the Act, 1996 shall not be maintai....
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....l to act in terms of a procedure agreed upon by them, the provisions of subsection (6) may be invoked by any of the parties. Where in terms of the agreement, the arbitration clause has already been invoked by one of the parties thereto under the ICC Rules, the provisions of subsection (6) cannot be invoked again, and, in case the other party is dissatisfied or aggrieved by the appointment of an arbitrator in terms of the agreement, his/its remedy would be by way of a petition under Section 13, and, thereafter, under Section 34 of the 1996 Act." 9. Following the aforesaid decision in the subsequent decision of this Court in the case of S.P. Singla Constructions Private Limited (supra), it is observed and held by this Court that once the arbitrator had been appointed as per clause 65 of the agreement (in that case) and as per provisions of the law, the arbitration agreement could not have been invoked for second time. 9.1 Now so far as reliance being placed upon the decisions of this Court by learned counsel appearing on behalf of respondent No. 1 in the cases of ACC Limited (supra) and Uttar Pradesh State Bridge Corporation Limited (supra) are concerned as such there cannot be....
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.... the Act; (iii) In a case where there is a written agreement and/or contract containing the arbitration agreement and the appointment or procedure is agreed upon by the parties, an application under section 11(6) of the Act shall be maintainable and the High Court or its nominee can appoint an arbitrator or arbitrators in case any of the eventualities occurring under section 11(6) (a) to (c) of the Act; (iv) Once the dispute is referred to arbitration and the sole arbitrator is appointed by the parties by mutual consent and the arbitrator/arbitrators is/are so appointed, the arbitration agreement cannot be invoked for the second time; (v) In a case where there is a dispute/controversy on the mandate of the arbitrator being terminated on the ground mentioned in section 14(1)(a), such a dispute has to be raised before the "court", defined under section 2(e) of the Act, 1996 and such a dispute cannot be decided on an application filed under section 11(6) of the Act, 1996. 12. Now the next question which is posed for consideration of this Court is whether the learned Trial Court was justified in rejecting the application submitted by the appellant, which w....