Termination of Arbitrator- Grounds for Challenging the Appointment of an Arbitrator
Termination of Arbitrator- Grounds for Challenging the Appointment of an Arbitrator

Termination of Arbitrator- Grounds for Challenging the Appointment of an Arbitrator

 

Introduction

The Alternative Dispute Resolution method particularly arbitration has gained an enviable position in the legal system of India. This is due to the perceived delay and technicalities common in litigation.

Irrespective of any mode of dispute resolution adopted by parties or imposed by law as the appropriate fora for determination of the rights of parties, the overriding principle is the advancement of justice. The law usually frowns at the reliance of speedy determination of case which will ultimately lead to a miscarriage of justice.

The basic step towards ensuring that justice is done in a given case is deeply rooted in the impartiality of the presiding authority of the case i.e the Judge or Arbitrator for litigation and Arbitration, respectively.

This study is centred on Arbitration particularly, the termination of the mandate of an arbitrator.

In discussing this topic, the appointment of an arbitrator, the grounds for challenging such an appointment as well as the procedure for challenging the appointment shall be briefly highlighted.

Also, the circumstances which shall operate to terminate the appointment of an arbitrator shall be discussed and finally, the attitude of the court towards terminating the appointment of an arbitrator shall be examined through case law.

Appointment and Grounds for Challenging the Appointment of an Arbitrator

Parties to a contract are at liberty to include an arbitration clause in the contract. The arbitration clause may include the appointment of a person as an arbitrator in the event of a dispute which may arise between the parties in the execution of the contract.

The parties may go ahead to vest the power to appoint an arbitrator in another person and or alternatively incorporate an arbitration guideline which may include the list of arbitrators in the contract (under the arbitration clause).

From the entire provisions of Section 12 of the Arbitration and Conciliation (Amended) Act of 2015, it is right to say that the appointment of an arbitrator can be challenged; if it is seen that such a prospective arbitrator cannot impartially determine the case before the arbitral tribunal or where it is obvious that he may not be able to afford the necessary time and facility to conclude the entire arbitration proceedings within twelve (12) months.

See the instructive decision of the Supreme Court of India in the case of Voestalpine Schienen v. Delhi Metro Rail Corporation

Procedure for Challenging an Arbitrator

The Arbitration Act of 2015 had in Section 13 of the Act, given the parties the freedom to contest the competence of an arbitrator in any form.

Where the parties fail to agree on any procedure to be adopted in challenging the appointment of an arbitrator, an aggrieved party who intends to challenge an arbitrator shall, within fifteen days challenge the constitution of the tribunal.

The aggrieved party shall be a written statement addressed to the tribunal contest the appointment of any or all the members of the arbitral panel/tribunal. The basis of challenging the mandate of the arbitrator must fall within the contemplation of Section 12 of the Act.

The Arbitral Tribunal shall make its decision on the contest, if the arbitrator does not withdraw from his appointment or if the other party does not concede to the objection raised by the aggrieved party.

Where the competence of an arbitrator is not contested the tribunal shall continue and determine the case.

Termination of the Mandate of an Arbitrator and Substitution of the Arbitrator

The provisions of Section 14 of the Act dictate the circumstances under which the mandate of an arbitrator may be terminated and accordingly substituted by another arbitrator. These circumstances are:

  1. Where the arbitrator is unable to perform the duties assigned to him by virtue of his position as an arbitrator.
  2. Where the arbitrator fails to perform his duty for a period exceeding twelve (12) months; and
  3. Where due to a challenge to his mandate by an aggrieved party, the arbitrator withdraws from performing his roles or the parties agree to the termination of his mandate as an arbitrator in the case.

The additional provisions of Section 15 of the Act are a mere restatement of the provisions of Section 14 above.

Irrespective of the replacement of an arbitrator, the rulings made in the previous proceedings are subsisting.

The Attitude of the Court towards the Termination of the Mandate of an Arbitrator

It has always been said that the law intends that every proceeding which determines the legal rights of the party be it litigation or an alternative dispute resolution must be fair and just.

With the objective of maintaining fairness in the arbitration proceedings, the Arbitration and Conciliation Act of 1996 was amended in 2015. On the 31st day of August 2017, the Supreme Court of India gave judgement in the case HRD Corporation V. GAIL (India) Limited.

The court used the case a medium to analyze the provisions of the Arbitration and Conciliation Act (amended) 2015 with the guidelines of the International Bar Association. The above case will be discussed below:

Facts: On the 1st day of April 1999, the parties entered into a contract. In the contract, it was agreed that GAIL will supply wax generated at its plant situate at Uttar Pradesh. The lifespan of the contract was fixed at a period 20 years from the commencement of the contract.

In the course of giving effect to the contract, disputes arose between the parties. In line with the terms of the contract, the parties resorted to arbitration. The arbitral tribunal at the first instance comprised of Justices A. B. Rohtagi (as the presiding arbitrator), J. K. Mehra and N. N. Goswamy.

At the third stage of the tribunal, Justice Goswamy term effluxed which led to his replacement with Justice T. Doabia. Upon the resignation of Justice Rohtagi, Justice. S. S. Chadha was appointed to act in his stead. The third arbitration tribunal delivered two separate awards on the same day being the 22nd day of July 2015.

HRD instituted a fourth arbitration proceeding in 2016. HRD which led to the nomination of  Justice K. Ramamoorthy as a member of the tribunal, he later withdrew from the arbitration proceeding and Justice Mukul Mudgal was appointed as his replacement. The respondent in the petition had also nominated Justice Doabia, who with Mukul J., appointed Justice K.K. Lahoti as a member of the tribunal and the presiding arbitrator.

Justice Lahoti made a declaration as required by Section 12 of the Act, where he disclosed that he had previously rendered a legal opinion to GAIL. The petitioner based on this declaration filed two applications contesting the mandate/appointment of Justices Doabia and Lahoti.

The tribunal first heard the application filed by HRD. The tribunal i.e Lahoti and Doabia ruled that they were entitled to continue hearing the dispute in their view there was no conflict of interest or likelihood of partiality.

Justice Mudgal agreed to the extent that the continuation of Justice Lahoti will not be unfair on the part of the petitioners but held to the contrary that Justice Doabia’a appointment is in contradiction with the intention of the Arbitration and Conciliation Act.

HRD still dissatisfied with the decision of the tribunal on their objection, petitioned High Court of Delhi praying the court to terminate the appointment of Justices Doabia and Lahoti as members of the arbitral tribunal. The court accordingly dismissed the petition of HRD.

HRD dissatisfied with the decision of Delhi High Court further approached the Supreme Court of India seeking the same relief i.e the termination of the appointment of the two arbitrators.

Argument of Parties

HRD argued as follows before the Supreme Court of India:

  • On the appointment of Justice Doabia, it was the contention of HRD that the object of amending the Act is to enshrine neutrality which can only be done by appointing independent and unbiased arbitrators. They further argued that Justice Doabia had participated in the previous arbitration proceeding for the Respondent, GAIL. HRD, therefore submitted that Justice Doabia having participated in the earlier proceedings is not qualified to be appointed as an arbitrator bearing in mind the contents of the Seventh Schedule.
    HRD had further contended that the Seventh Schedule also prohibits Justice Doabia from acting as an arbitrator since he had rendered legal advice including the award rendered in the Third Tribunal.
    Finally, HRD vehemently contended that Justice Doabia failed to disclose in a written declaration al the circumstances which are likely to affect his ability to devote sufficient time and facility for the entire arbitration proceedings as required by Section 12(1)(b) of the Act.
  • On the appointment of Justice Lahoti, the Petitioner/Appellant contended that it invokes three grounds as contained in the Seventh Schedule and an additional two grounds of the Fifth Schedule. As was argued in (a) above, they insisted that the act of rendering legal opinion by the learned justice amounts to a business relationship between a prospective arbitrator and parties.
    Further, they argued inter alia the role played by Justice Lahoti as member in the previous panel of arbitrators for GAIL, amounts to giving regular advice to GAIL and acting as their adviser within the last three years, thereby divesting him of the competence to be an arbitrator in the current proceeding.
    GAIL on the hand argued that neither Justice Lahoti nor Justice Doabia was ineligible to be an arbitrator in the instant case contrary to the submission of the Petitioner/Appellant. The grounds relied upon by HRD does not in any manner affect their competence as giving a legal opinion or delivering an arbitral award does not disqualify a person from acting as arbitrators.
    Further, GAIL argued that Justice Doabia had no previous involvement in the very dispute and in the circumstance the membership of both justices cannot occasion a bias or injustice on the part of HRD.

Decision

At the conclusion of the argument by both parties, the Supreme Court held that the participation of both justices in the arbitral tribunal does not occasion injustice on HRD. Accordingly, the mandate of Justices Lahoti and Doabia was affirmed by the Supreme Court of India.

Conclusion

It is has been observed from the discussion above that an arbitrator mandate in an arbitral proceeding are subject to the watchful eyes of the law. This is to ensure that the overriding principle of justice is attained even under the alternative dispute resolution method, particularly Arbitration.

However, the provision of the Act which first empowers the tribunal to rule on its competence may seem adequate but it is pertinent to say that relying on the entire length of time and the resources expended in HRD v. GAIL supra.

It is suggested that an application contending the competence or the mandate of an arbitration shall first lie before a High Court. The arbitrators cannot be allowed to be a judge in their own case because surely at the stage of challenging their competence, the case is between them and the petitioner.

 

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