Introduction
India being a country with a population of roughly 1400 million, the legal system and the courts in the country are overburdened with pending civil and criminal cases and there is a lengthy wait time for obtaining a final decision in civil disputes. The problem becomes more severe if it’s a matter of commercial dispute involving complicated questions of facts as well as the law requiring greater time to be spent by the court.
Parties to a commercial agreement therefore normally prefer to have the dispute resolved through the proceedings of arbitration. Such proceedings can be under the Indian Arbitration and Conciliation Act, 1996(“A & C Act”) or under a Foreign Arbitration act in a foreign seated arbitration. For the purpose of this article, we are confining our discussion to the process and provisions of the A & C Act for and regarding Indian seated arbitration only.
Amendments in the A & C Act in 2015 for instilling confidence in appointment of Arbitrators
The A & C Act was amended in 2015, which brought multiple positive changes with one of them being the introduction of provisions of Section 12 (5) and the introduction of Schedule 7 to A & C Act.
Section 12 (5) of the A & C Act provides that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject matter of the dispute felt under any of the categories specified in the 7th Schedule shall be ineligible to be appointed as an arbitrator.
Schedule 7 to the Arbitration Conciliation Act provides for various different relationships of one of the parties or counsels of one of the parties with the arbitrator and makes such arbitrator ineligible. Owing to this, the parties to the arbitration Conciliation Act are no longer required to worry about real or perceived bias of the arbitrator.
In terms of judicial pronouncements (TRF Limited v. Energo Engineering Projects Ltd. [(2017) 8 SCC 377]and Perkins Eastman Architects DPC v. HSCC (India) Limited [2019 (9) SCC OnLine SC 1517]), unilateral appointments of arbitrator by one of the parties is also invalid. If the agreement between the parties provides for the appointment of an arbitrator by one of the parties to the arbitration agreement, such agreement also will be invalid as being hit by the provisions of Section 12 (5) of the Arbitration Act irrespective of whether such arbitrator has relationship with such party falling within ambit of schedule 7 to the A & C Act.
Need to Remove an Arbitrator even after Amendments
While Section 12(5) and Schedule 7 of the Arbitration Act take care of all reasonably probable situations for real or perceived bias of the arbitrator to be appointed and makes such person ineligible to act as arbitrator, it is possible that one of the parties may come to know about the circumstances as specified in Section 12(5), or about any other circumstances giving rise to doubts regarding arbitrator or regarding his suitability and qualifications to adjudicate upon the disputes and wishes to have the appointed arbitrator removed from the ongoing proceedings. In the present article, we seek to explore the landscape of remedies for such party willing to remove the arbitrator from ongoing proceedings.
The mandate of the arbitrator
Under normal circumstances and without any process for removal of an arbitrator, mandate the arbitrator in terms of Section 32 of the Arbitration Act terminates with the termination of the arbitral proceedings with a final award in terms of Section 32(1) of the Arbitration Act, or on the count of the award not being made within the period specified in Section 29A (1) of the Arbitration Act, or any extended period specified under Section 29A (3) of the arbitration act.
However, parties can avail other remedies for termination of the mandate of the arbitrator and his removal in line with the discussion hereinafter.
Challenge under Section 12(3) and 13 of A & C Act
In terms of Section 12 (3) of the Arbitration Act, the arbitrator may be challenged only if: –
- Circumstances exist giving rise to justifiable doubts as to his independence or impartiality;
- Does not possess the qualifications agreed upon by the parties.
While the 7th Schedule of the Arbitration Act provides a detailed look into the grounds which may be considered to be justifiable doubts regarding the impartiality or independence of an arbitrator, Section 12(3) can be applied even in a situation where a party to arbitration proceedings come to know about the reasons or grounds other than those specified in Schedule 7 to the Arbitration Act.
Section 13 of the Arbitration Act contains challenge procedure provisions and it provides that the parties are free to agree on a procedure for challenging the arbitrator; absent any agreement between the parties, the party intending to challenge the arbitrator shall come up with such challenge through a written statement of reasons for challenge within 15 days after becoming aware of the constitution of the tribunal or after becoming aware of any circumstances referred to in Section 12(3) of the Arbitration Act.
However, in terms of the provisions of Section 13, the arbitral tribunal will have jurisdiction to decide the challenge on its own and if the challenge is not successful, the tribunal shall continue the arbitral proceedings and make the arbitral award, in which case, remedy for the aggrieved party will be to continue participating in the arbitration proceedings and later on challenge the award on the ground of lack of independence or impartiality in an application under Section 34.
Though an arbitrator himself will decide the challenge, importance of making such a challenge will be that unless a party challenges the arbitrator on the ground of lack of independence or impartiality, such grounds cannot be raised in an application to Section 34 for challenging the award.
Challenge procedure u/s.14 of A & C Act
In terms of Section 14 of the Arbitration Act, the mandate of the arbitrator shall terminate and he shall be substituted by another arbitrator if the arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay.
Section 14 (2) of the Arbitration Act also provides that if any controversy relating to the grounds of de jure or de facto inability or failure to act without undue delay, a party can apply to the court to decide on termination of the mandate. This Section can be used by aggrieved party in various situations.
De facto inability of an arbitrator can happen because of multiple factual reasons, including personal reasons concerning the arbitrator or any other thing happening during the arbitration process.
The de jure inability of the arbitrator may arise if a party to the arbitration proceedings comes to know about the existence of the circumstances referred to in Section 12(5) with Schedule 7 of the Arbitration Act after the commencement of the arbitration proceedings or if the arbitrator suffers from other ineligibility like becoming bankrupt or being convicted of a crime.
Removal of an Arbitrator without any Specific Reasons through Mutual Consent
Section 15 of the Arbitration Act can be taken recourse to when both the parties are not happy with the Arbitrator for any reasons whatsoever. Section 15 provides that in addition to the circumstance referred to in Sections 13 & 14 of the Arbitration Act, the mandate of the Arbitrator shall terminate by or pursuant to the agreement of the parties.
This means that irrespective of whether an Arbitrator is appointed by the Court, or is appointed by the parties, or by any institution, parties by mutual agreement can terminate the mandate of the Arbitrator.
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*The content of this article is intended to provide general information. No reader or user should act or refrain from acting on the basis of the information written above without first seeking legal advice from a qualified law practitioner.
Author: Ravish Bhatt, Managing Partner, R&D Law Chambers LLP.
*R & D Law Chambers is a firm providing Legal advisory and International and Domestic Tax Advisory services. To know more visit https://rdlawchambers.com/