Case Note & Summary
The petitioners filed an arbitration petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of a substitute arbitrator after the two named arbitrators in the arbitration agreement refused to act. The parties had entered into an M.O.U. dated 16.4.2007 containing an arbitration clause (clause viii) which provided for a three-member arbitral tribunal, naming Retd. Justice B.C. Gadgil and Mr. S.L. Deshpande as party-appointed arbitrators, who would then appoint a presiding arbitrator. By letters dated 6.12.2007 and 11.1.2008, both named arbitrators stated they were unable to act. The petitioners nominated a substitute arbitrator, but the respondents contended that the arbitration clause had become infructuous and that the 1996 Act absolutely bars substitution of named arbitrators. The court examined Sections 14 and 15 of the Act, which deal with termination of mandate and appointment of substitute arbitrators. The court held that the named arbitrators' refusal to act constituted a de jure or de facto inability to perform their functions, terminating their mandate under Section 14. Section 15 then provides that a substitute arbitrator shall be appointed according to the rules applicable to the original appointment. The court found no indication in the arbitration agreement that the parties intended the vacancy not to be filled. Therefore, the court allowed the petition and appointed a substitute arbitrator, rejecting the respondents' argument that the arbitration agreement was exhausted.
Headnote
A) Arbitration Law - Appointment of Substitute Arbitrator - Sections 14, 15, 11 of the Arbitration and Conciliation Act, 1996 - The court considered whether the refusal of named arbitrators to act renders the arbitration agreement exhausted. Held that Sections 14 and 15 permit substitution of arbitrators and the court can appoint a substitute under Section 11 unless the agreement shows a contrary intention. The arbitration clause did not indicate that the vacancy should not be filled. (Paras 2, 7-8) B) Arbitration Law - Termination of Mandate - Section 14 of the Arbitration and Conciliation Act, 1996 - The mandate of an arbitrator terminates if he becomes de jure or de facto unable to perform his functions. The named arbitrators' refusal to act constitutes such inability, terminating their mandate. (Para 7) C) Arbitration Law - Filling Vacancy - Section 15 of the Arbitration and Conciliation Act, 1996 - When 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. The court can appoint a substitute under Section 11 if the parties fail to agree. (Paras 7-8)
Issue of Consideration
Whether the Arbitration and Conciliation Act, 1996 prohibits absolutely the appointment of a substitute arbitrator when an arbitrator named in the arbitration agreement refuses or is for any reason unable to act, even if the agreement does not show that it was intended that the vacancy should not be filled.
Final Decision
The court allowed the arbitration petition and appointed a substitute arbitrator, holding that the refusal of named arbitrators does not exhaust the arbitration agreement and that Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 permit substitution unless the agreement shows a contrary intention.
Law Points
- Substitution of arbitrator
- failure or impossibility to act
- mandate termination
- filling vacancy
- intention of parties
- Section 14
- Section 15
- Section 11
- Arbitration and Conciliation Act
- 1996
