Case Note & Summary
The appeals arose from a partnership dispute between the appellants (husband and wife) and the respondents (M/s Bharat Textiles and others). A partnership deed dated 18.05.1992 contained an arbitration clause. Disputes arose, and the Delhi High Court by order dated 13.03.2020 appointed Mr. Anjum Javed, Advocate, as sole arbitrator. The arbitrator entered reference on 20.05.2020 and issued directions on various dates demanding administrative expenses. Respondent nos. 2 and 3 challenged the arbitrator's demand by filing applications under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 seeking termination of his mandate. These applications were dismissed by a common order dated 28.01.2022. The arbitrator thereafter failed to proceed with the arbitration. The appellants filed applications under Section 29A(6) for extension of the arbitrator's mandate. The High Court by order dated 22.04.2025 extended the mandate for four months but declined to substitute the arbitrator. The Supreme Court held that the arbitrator's conduct in demanding administrative expenses and failing to proceed constituted de jure inability to perform his functions, terminating his mandate under Section 14. Once the mandate terminates, the court cannot extend it under Section 29A(6) but must substitute the arbitrator under Section 15. The Supreme Court set aside the High Court's order, terminated the mandate of the sole arbitrator, and appointed a new arbitrator to adjudicate the disputes.
Headnote
A) Arbitration - Substitution of Arbitrator - Sections 14, 15, 29A(6) Arbitration and Conciliation Act, 1996 - De jure inability - The High Court extended the mandate of the sole arbitrator under Section 29A(6) despite the arbitrator having become de jure unable to perform his functions due to his own conduct in demanding administrative expenses and failing to proceed. The Supreme Court held that once the mandate of an arbitrator terminates under Section 14, the court must substitute the arbitrator under Section 15 and cannot extend the mandate under Section 29A(6). The High Court's order was set aside and the arbitrator was substituted. (Paras 1-10) B) Arbitration - Termination of Mandate - Section 14 Arbitration and Conciliation Act, 1996 - De jure inability - The arbitrator's conduct in demanding administrative expenses and failing to proceed with the arbitration despite the respondents' objections constituted de jure inability to perform his functions. The Supreme Court held that the arbitrator had become incapable of performing his functions and his mandate stood terminated. (Paras 5-9) C) Arbitration - Extension of Mandate - Section 29A(6) Arbitration and Conciliation Act, 1996 - Scope - The power to extend the mandate under Section 29A(6) is available only when the mandate has not already terminated. Once the mandate terminates under Section 14, the court cannot extend it under Section 29A(6) but must proceed to substitute the arbitrator under Section 15. (Paras 8-10)
Issue of Consideration
Whether the High Court was justified in extending the mandate of the sole arbitrator under Section 29A(6) of the Arbitration and Conciliation Act, 1996, instead of substituting him under Section 15 of the Act, when the arbitrator had become de jure unable to perform his functions due to his own conduct.
Final Decision
The Supreme Court allowed the appeals, set aside the High Court's order dated 22.04.2025, terminated the mandate of the sole arbitrator Mr. Anjum Javed, and appointed a new arbitrator to adjudicate the disputes between the parties.
Law Points
- Substitution of arbitrator under Section 15 of Arbitration and Conciliation Act
- 1996
- Termination of mandate under Section 14 of Arbitration and Conciliation Act
- Extension of mandate under Section 29A(6) of Arbitration and Conciliation Act
- De jure inability to act as arbitrator
- Partnership dispute arbitration
