Supreme Court Allows Appeal Against High Court Order Appointing Substitute Arbitrator in Contract Dispute. Court Holds That High Court Erred in Terminating Mandate of Arbitrator Appointed by Consent and in Deviating from Arbitration Clause Without Justification.

A) Arbitration Law - Appointment of Substitute Arbitrator - Sections 11, 15 Arbitration and Conciliation Act, 1996 - High Court's power to appoint arbitrator when mandate of existing arbitrator is terminated - The respondent filed application under Section 11(6) and Section 15 for appointment of independent arbitrator after prolonged delay in arbitration proceedings. The High Court allowed the application and appointed a retired District Judge as sole arbitrator, holding that the arbitrator had hurried to pass an ex-parte award to frustrate the application. The Supreme Court held that the High Court erred in terminating the mandate of the arbitrator appointed by consent of parties and in deviating from the arbitration agreement without proper justification. The arbitrator had passed an ex-parte award before the High Court's order, and the respondent's remedy lay in challenging the award under Section 34, not seeking appointment of a new arbitrator. (Paras 11-18)

B) Arbitration Law - Deviation from Arbitration Agreement - Section 11 Arbitration and Conciliation Act, 1996 - Clause 4.20.1 of Schedule-4 (General Conditions) - The arbitration agreement provided that disputes shall be referred to the Managing Director or his nominee for sole arbitration. The High Court appointed an independent arbitrator, deviating from the agreed procedure. The Supreme Court held that the High Court should not have deviated from the terms of the agreement unless the agreed mechanism was unworkable or the arbitrator was ineligible. The mere delay in proceedings did not justify deviation, especially when the arbitrator was proceeding and had passed an award. (Paras 11-18)

C) Arbitration Law - Ineligibility of Arbitrator - Section 12, Seventh Schedule Arbitration and Conciliation (Amendment) Act, 2015 - The respondent argued that the Chairman-cum-Managing Director was ineligible to act as arbitrator under the Seventh Schedule. The Supreme Court noted that the amendment was prospective and the arbitrator was appointed by consent before the amendment. The Court did not decide this issue as the appeal was allowed on other grounds, but observed that the High Court did not consider this aspect. (Para 9, 18)

D) Arbitration Law - Delay in Arbitration Proceedings - Termination of Mandate - Section 15 Arbitration and Conciliation Act, 1996 - The respondent contended that the arbitrator failed to act and there was inordinate delay of about ten years. The Supreme Court held that the delay was not solely attributable to the arbitrator; the respondent had also sought adjournments and raised doubts about impartiality. The arbitrator had passed an ex-parte award before the High Court's order, indicating that the mandate had not terminated. The High Court's termination of mandate was not justified. (Paras 12-18)

Whether the High Court was justified in appointing a substitute arbitrator under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 when an arbitrator was already in place and had passed an ex-parte award, and whether the High Court could deviate from the arbitration agreement which provided for arbitration by the Managing Director or his nominee.

• Arbitration
• Appointment of arbitrator
• Termination of mandate
• Section 11
• Section 15
• Arbitration and Conciliation Act
• 1996
• Deviation from arbitration agreement
• Delay in arbitration proceedings
• Ex-parte award
• Section 12
• Seventh Schedule
• Ineligibility of arbitrator