Nihal Shaikh Dev Motta August 15 2023 Is the power to appoint an arbitrator that is given to the parties reinstated if the former arbitrator is unable to perform their duties? Clasis Law | Litigation - India Nihal Shaikh, Dev Motta Litigation FactsBackgroundDecisionSrei Equipment Finance Limited (the petitioner) filed an arbitration petition before the High Court of Calcutta, under section 14 and 15 of the Arbitration and Conciliation Act 1996 (the Act), seeking to replace the arbitrators that were appointed by the Court on 22 February 2022. The petitioner filed this petition as the previous arbitrators were unable to perform their duties.FactsThe petitioner had initially appointed an arbitrator. However, Seirra Infraventure Private Limited (the respondent) made a written request to the appointed arbitrator to withdraw on the ground of unilateral appointment. As the request was denied, the respondent approached the Court for termination of the arbitrator's mandate under section 14 of the Act. The Court consequently appointed two arbitrators. After this appointment, one of the arbitrators was elevated to the bench and the other was relocated outside India. Therefore, the arbitrators were unable to perform their duties as per section 14 (1) (a) of the Act. Thus, the petitioner filed the arbitration petition to appoint an arbitral tribunal under sections 14 and 15 of the Act.SubmissionsThe question before the Court was whether the Court should appoint an arbitrator, as they had appointed the previous arbitrator, or whether the parties should go back to the sequential steps in the proceedings. This would mean that the party would be required to accept the request from the other party for appointment of an arbitrator within 30 days from receiving the request.The petitioner submitted the following:The procedure for substitution of an arbitrator under section 15 of the Act must be the same as the initial appointment of the arbitrator whose mandate came to an end due to their inability to perform their duties..Once the respondent forfeits its right to appoint an arbitrator under section 11 of the Act in the earlier proceedings, the respondent cannot seek to revive that right. Thus, the Court has jurisdiction to appoint the arbitrator as appointed earlier.The respondent submitted the following:The counsel for the respondent placed emphasis on the concept of "party autonomy" to argue that the Court can only appoint an arbitrator under section 11(5) and (6) of the Act. The Court does not confer any power to make appointment under section 14 and 15 of the Act.In the present case, the "rules" mentioned in section 15(2) of the Act would be the rules as contained in section 11(5) of the Act. This would mean that the procedure for appointment should follow section 11(5) of the Act for appointment of a new arbitral tribunal.BackgroundSection 15(2) of the Act does not define "rules" applicable to appointing a replacement arbitrator. The Court referred to a judgment passed by Supreme Court, wherein it was held that the rules would be those referred to in the procedure for appointment contained in the arbitration agreement or any rules of institution under which disputes were referred to arbitration. Section 15(2) states that "where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced".Further, sections 15(3) and 15(4) of the Act envisage continuity of the arbitrator's duty to ensure that the arbitration remains uninterrupted and that the orders passed by previous arbitrators remain undisturbed, regardless of a change in the composition of the arbitral tribunal. The scheme of the Act does not support re-winding the clock every time an arbitration comes to a halt or is stalled for any reasons under sections 13, 14 and 15 of the Act.The concept of party autonomy is based on the restriction of the court's intervention in the arbitration proceedings. All the fundamentals of arbitration proceedings, including the appointment of an arbitrator, venue and procedure, are subject to the choice of the parties of the arbitration agreement. However, the right to choose an arbitrator stops at section 11(6) of the Act when the parties surrender their right to the High Court, or the Supreme Court, as the case may be.The Act has no provision to support the contention that the parties be relegated to the stage of section 11(5) every time the mandate of an arbitrator comes to an end and a substitute arbitrator is appointed.The respondent exhausted its right to choose an arbitrator when it filed an application for termination of mandate under section 14 of the Act. The respondent cannot retrieve this right when the arbitrator is unable to act under section 14 of the Act.DecisionThe Court held that there was no statutory basis to send the parties back to the section 11(5) step and it would appoint new arbitrators in same way that it did before. In light of this, the Court appointed new arbitrators in accordance with the statutory mandate of section 15 of the Act.For further information on this topic please contact Nihal Shaikh or Dev Motta at Clasis Law by telephone (+91 11 4213 0000) or email ([email protected] or [email protected]). The Clasis Law website can be accessed at www.clasislaw.com.