TMI Blog2022 (5) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... the mandate of the sole arbitrator and substitute the arbitrator in view of section 14(1)(a) of the Act, 1996 on the ground that he has failed to act without undue delay and in such a situation aggrieved party has to approach the court to terminate his mandate? - HELD THAT:- Section 13 of the Act, 1996 shall be applicable only in a case where the arbitrator is challenged on the grounds mentioned in section 12 of the Act, 1996 - Sections 14 and 15 provide for termination of the mandate of the arbitrator. Section 14 of the Act, 1996 provides that the mandate of the arbitrator shall terminate and he shall be substituted by another arbitrator in case of any eventuality mentioned in section 14(1)(a). As per subsection (2) of section 14, if a controversy remains concerning any of the grounds referred to in clause (a) of 24 subsection (1), a party may, apply to the court to decide on the termination of the mandate. On a conjoint reading of section 13, 14 and 15 of the Act, if the challenge to the arbitrator is made on any of the grounds mentioned in section 12 of the Act, the party aggrieved has to submit an appropriate application before the Arbitral Tribunal itself. However, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication submitted by the appellant, which was filed to reject the applications under section 14 of the Act, in exercise of powers under Order VII Rule 11 of CPC is concerned? - HELD THAT:- It appears and it is not in dispute that the application under section 14(2) of the Act was sought to be rejected on the ground that there was no undue delay on the part of the arbitrator and therefore, his mandate is not required to be terminated under section 14(1)(a) of the Act, 1996. However, such a dispute is to be adjudicated on merits by the concerned court before whom the proceedings under section 14(2) of the Act were initiated and at the most, it can be said to be the defence, which was to be adjudicated by the concerned court. As per the settled position of law, at the stage of deciding the application under Order VII Rule 11 of CPC only the averments and allegations in the application/plaint are to be considered and not the written statement and/or reply to the application and/or the defence. Therefore, as such the learned Trial Court rightly dismissed the application under Order VII Rule 11 of CPC. The impugned judgment and order passed by the High Court is unsustainable and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009. The letters were replied to by the sole Arbitrator. Thereafter, respondent No. 1 and 3 herein, parties to the arbitration proceedings filed applications under section 14(1)(a) of the Act, 1996 before the concerned Court (District Court) to terminate the mandate of the sole Arbitrator on the ground of delay in concluding the arbitration proceedings. The appellant herein filed an application under order VII Rule 11 of CPC for dismissal of the said applications under section 14 of the Act, 1996, submitting that there was no delay at all on the part of the sole Arbitrator and therefore, there was no question of terminating the mandate of sole Arbitrator under section 14(1)(a) of the Act, 1996. Vide order dated 15.07.2010, the learned Trial Court dismissed the application filed under order VII Rule 11 of CPC preferred by the appellant herein. 2.2 Feeling aggrieved by the order passed by the learned Trial Court, rejecting the application under order VII Rule 11 of CPC, the appellant herein preferred present writ petition Nos. 11259/2010 and 11258/2010 before the High Court and pending the applications under section 14(1)(a) of the Act, 1996 one of the parties Dinesh Kumar Agar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in section 14(1)(a) of the Act, 1996, the remedy available to the aggrieved party would be to approach the court as defined under section 2(e) of the Act, 1996. 3.4 Shri Lahoti, learned counsel appearing on behalf of the appellant further submitted that in the present case as such respondent No. 1 and 3 herein parties to the arbitration proceedings, in fact, did submit the applications under section 14(2) of the Act, 1996, which were pending before the concerned court at the time when the present applications under section 11(6) of the Act, 1996 was filed. 3.5 It is further urged that in fact, there is a difference and distinction between section 11(5) and section 11(6) of the Act, 1996. 3.6 That in the absence of any written contract containing the arbitration agreement, section 11(6) of the Act, 1996 shall not be applicable and therefore, an application under that provision shall not be maintainable. 3.7 That even otherwise, there was no undue delay in the arbitration proceedings on the part of the sole Arbitrator which could have led to termination of his mandate that too, in exercise of powers under section 11(5) and section 11(6) of the Act, 1996. 3.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be an automatic termination of the mandate of the arbitrator and he shall be substituted by another arbitrator. Reliance is placed upon the decisions of this Court in the cases of ACC Limited v. Global Cements Limited; (2012) 7 SCC 71 and Union of India and Ors. v. Uttar Pradesh State Bridge Corporation Limited; (2015) 2 SCC 52. 4.2 Shri Lalwani, learned counsel appearing on behalf of respondent No. 1 has further submitted that in the facts and circumstances of the case, the learned Trial Court did not commit any error in rejecting the application under Order VII Rule 11 of CPC. It is urged that whether or not there was undue delay on the part of the sole Arbitrator is a question which is to be adjudicated by the Court and at the most the same can be said to be a defence. That as per the settled position of law at the stage of deciding the application under Order VII Rule 11 of CPC only the averments in the application/plaint are required to be considered and not the defence and/or the case stated in the written statement and/or reply to any application. It is submitted that therefore, the learned Trial Court rightly rejected the application under Order VII Rule 11 of CPC and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree, the court may appoint an arbitrator. However, in a case where there is an arbitration agreement and the written contract and the appointment procedure is agreed upon by the parties, subsection (6) of section 11 of the Act, 1996 shall be attracted and on the eventualities occurring in subsection (6) of section 11, a party may approach the High Court and request for appointment of an arbitrator, in exercise of powers under subsection (6) of section 11 of the Act, 1996. Therefore, subsection (5) of section 11 shall be attracted in a case where there is no procedure for appointment of an arbitrator agreed upon as per subsection (2) of section 11 and subsection (6) of section 11 shall be applicable in a case where there is a contract containing an arbitration agreement and the appointment procedure is agreed upon. Thus, while referring the matter for arbitration there need not be any written contract containing any arbitration agreement. But the parties may themselves decide to refer the dispute for arbitration to the sole arbitrator by mutual consent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharging the functions and duties of arbitral institution and any reference to the arbitrator shall be deemed to be an arbitral institution for the purposes of this section and the arbitrator appointed by a party shall be entitled to such fee at the rate as specified in the Fourth Schedule: Provided further that the Chief Justice of the concerned High Court may, from time to time, review the panel of arbitrators.] (4) If the appointment procedure in subsection (3) applies and- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, [the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be;] (5) Failing any agreement referred to in subsection (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... international commercial arbitration or any other arbitration, the reference to the arbitral institution in those subsections shall be construed as a reference to the arbitral institution designated under subsection (3A). (13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the arbitral institution within a period of thirty days from the date of service of notice on the opposite party. (14) The arbitral institution shall determine the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal subject to the rates specified in the Fourth Schedule. Explanation. For the removal of doubts, it is hereby clarified that this subsection shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) where parties have agreed for determination of fees as per the rules of an arbitral institution.] 12. Grounds for challenge( 1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances, (a) such as the existence either direct or indirect, of any pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r challenged under subsection (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (4) If a challenge under any procedure agreed upon by the parties or under the procedure under subsection (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under subsection (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34. (6) Where an arbitral award is set aside on an application made under subsection (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. 14. Failure or impossibility to act.-(1) 3 [The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if]- (a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and (b) he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal to encourage settlement of the dispute and, with the agreement of the parties, the arbitral tribunal may use mediation, conciliation or other procedures at any time during the arbitral proceedings to encourage settlement. (2) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral award on agreed terms. (3) An arbitral award on agreed terms shall be made in accordance with section 31 and shall state that it is an arbitral award. (4) An arbitral award on agreed terms shall have the same status and effect as any other arbitral award on the substance of the dispute. xxx xxx xxx 32. Termination of proceedings.-(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under subsection (2). (2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where- (a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns concerning any of the grounds referred to in clause (a) of 24 subsection (1), a party may, apply to the court to decide on the termination of the mandate. The expression court is defined under section 2(e) of the Act, 1996, which reads as under: ( e) Court means- (i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subjectmatter of the arbitration if the same had been the subjectmatter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes; (ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subjectmatter of the arbitration if the same had been the subjectmatter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;] 6.6 Section 15 prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... versy as either the sole arbitrator himself has withdrawn from office and/or the parties themselves have agreed to terminate the mandate of the arbitrator and to substitute the arbitrator. Thus, there is no question of raising such a dispute before the court. Therefore, the legislation has deliberately provided that the dispute with respect to the termination of the mandate of the arbitrator under section 14(1)(a) alone will have to be raised before the court . Hence, whenever there is a dispute and/or controversy that the mandate of the arbitrator is to be terminated on the grounds mentioned in section 14(1)(a), such a controversy/dispute has to be raised before the concerned court only and after the decision by the concerned court as defined under section 2(e) of the Act, 1996 and ultimately it is held that the mandate of the arbitrator is terminated, thereafter, the arbitrator is to be substituted accordingly, that too, according to the rules that were applicable to the initial appointment of the arbitrator. Therefore, normally and generally, the same procedure is required to be followed which was followed at the time of appointment of the sole arbitrator whose mandate is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be maintainable. 7.3 In the present case, the parties themselves agreed on a procedure for appointment of the arbitrator and appointed and nominated an arbitrator by mutual consent. Therefore, the application under section 11(6) of the Act, 1996 was not maintainable at all. 8. Even otherwise, once the arbitrator was appointed by mutual consent and it was alleged that the mandate of the sole arbitrator stood terminated in view of section 14(1)(a) of the Act, 1996, the application under section 11(6) of the Act, 1996 to terminate the mandate of the arbitrator in view of section 14(1)(a) of the Act shall not be maintainable. Once the appointment of the arbitrator is made, the dispute whether the mandate of the arbitrator has been terminated on the grounds set out in section 14(1)(a) of the Act, shall not have to be decided in an application under section 11(6) of the Act, 1996. Such a dispute cannot be decided on an application under section 11(6) of the Act and the aggrieved party has to approach the concerned court as per subsection (2) of section 14 of the Act. In the case of Antrix Corporation Limited (supra) in para 31 and 33, it is observed and held as under: 31. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be any dispute with respect to the position of law laid down by this Court in the aforesaid decisions to the effect that in case of any of the eventualities occurring as mentioned in section 14 and 15 of the Act, 1996, the mandate of the arbitrator shall stand terminated. However, the question is in a case where there is a dispute/controversy on the mandate of the arbitration being terminated on the ground set out in section 14(1)(a) of the Act, whether such a dispute shall have to be raised before the concerned court defined under section 2(e) of the Act or such a dispute can be considered on an application under section 11(6) of the Act? Before this Court in the aforesaid decisions such a controversy was not raised. Therefore, the aforesaid decisions shall not be of any assistance to respondents and/or the same shall not be applicable to the facts of the case on hand, while deciding the issue, whether termination of the mandate of the arbitrator on the ground mentioned under section 14(1)(a) of the Act, 1996 can be decided under section 14(2) or under section 11(6) of the Act, 1996. 10. It is to be noted that as such in the present case the proceedings before the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reject the applications under section 14 of the Act, in exercise of powers under Order VII Rule 11 of CPC is concerned, having gone through the averments in the application under Order VII Rule 11 of CPC, it appears and it is not in dispute that the application under section 14(2) of the Act was sought to be rejected on the ground that there was no undue delay on the part of the arbitrator and therefore, his mandate is not required to be terminated under section 14(1)(a) of the Act, 1996. However, such a dispute is to be adjudicated on merits by the concerned court before whom the proceedings under section 14(2) of the Act were initiated and at the most, it can be said to be the defence, which was to be adjudicated by the concerned court. As per the settled position of law, at the stage of deciding the application under Order VII Rule 11 of CPC only the averments and allegations in the application/plaint are to be considered and not the written statement and/or reply to the application and/or the defence. Therefore, as such the learned Trial Court rightly dismissed the application under Order VII Rule 11 of CPC. 13. In view of the aforesaid discussion and for the reasons stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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