Challenge Against Arbitrator Appointment, Can't Be Under Section 14 Of The A&C Act ; Delhi High Court

The Single Bench of Justice Vibhu Bakhru held that a party can challenge the appointment of an arbitrator only according to the procedure set out in Section 13 of the Arbitration and Conciliation Act and that a petition under Section 14(1) could not be filed to challenge the appointment of an Arbitral Tribunal on the grounds mentioned under Section 12(3) of the Act, i.e., on the ground of justifiable doubts as to the independence or impartiality of the Arbitrator.

The Petitioner Sacheerome Advanced Technologies, after invoking Arbitration Agreement against the Respondent NEC Technologies Pvt Ltd, filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an Arbitrator. After the Sole Arbitrator appointed by the Court expired, the Court appointed a new Arbitrator. Thereafter, the Petitioner filed an application before the Arbitrator under Section 15 read with Section 14(1)(a) of the Arbitration and Conciliation Act (A&C Act) seeking termination of her mandate, which was rejected by the Arbitrator. The Petitioner, thereafter, filed a petition under Section 14 (2) of the A&C Act before the Delhi High Court, requesting the mandate of the Arbitrator be terminated on the ground that the Arbitrator did not make a complete disclosure as required under Section 12(1) of the A&C Act at the time of accepting her appointment.

The Petitioner averred before the High Court that the Arbitrator after her appointment had subsequently disclosed her association with a law firm. It was contended that after the subsequent split of the said law firm, the Arbitrator was associated with one of the resultant law firms as a partner. The Counsel for the Petitioner submitted before the High Court that the fact that the other resultant firm was representing the Respondents before the Arbitral Tribunal was subsequently disclosed by the Arbitrator. The Counsel added that the conduct of the Arbitral Tribunal did not inspire confidence and that it was guilty of inordinate delays in conducting the arbitral proceedings. The Counsel submitted that the conduct of the Arbitrator gave rise to apprehension of real likelihood of bias and thus the Arbitrator was de jure incapable of performing her functions.

Section 13 of the A&C Act provides the procedure for challenging the appointment of an arbitrator. Section 13(3) provides that unless the arbitrator challenged withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. If the challenge is not successful, under Section 13(4) the Arbitral Tribunal is required to continue with the arbitral proceedings and make an award. Also, Section 14(1)(a) of the A&C Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if he becomes de jure or de facto unable to perform his functions or if he fails to act without undue delay. Schedule V to the A&C Act enumerates the grounds which give rise to justifiable doubts as to the independence or impartiality of an arbitrator in order to challenge the appointment of an arbitrator under the Act.

The Court observed that the circumstances disclosed by the Arbitrator did not fall within the scope of the Fifth Schedule of the A&C Act. Also, the Court noted that the Petitioner did not express any reservations and had participated in the arbitral proceedings after the disclosure made by the Arbitrator.

The Court held that the appointment of an arbitrator can be challenged by a party only in accordance with the procedure set out in Section 13 of the A&C Act. The Court added that a petition under Section 14(1) of the Act could not be filed to challenge the appointment of the Arbitral Tribunal on the grounds set out under Section 12(3) of the A&C Act, i.e., on the ground that circumstances giving rise to justifiable doubts as to the independence or impartiality of the Arbitrator exist. The Court noted that the Petitioner did not make any application challenging the appointment of the Arbitrator under Section 13 of the A&C Act and the challenge made by the Petitioner to the appointment of the Arbitrator was rejected by the Arbitrator. The Court held that the only recourse available to the Petitioner was to proceed with the arbitral proceedings and challenge the arbitral award under Section 34 of the A&C Act.

The Court ruled that the contention that Section 14 of the A&C Act provides a separate remedy to the parties to challenge the appointment of an arbitrator, notwithstanding the provisions of Section 13, is unmerited.

The High Court thus dismissed the Petition filed by the Petitioner Sacheerome Advanced Technologies and imposed a cost of Rs. 25,000 on the Petitioner.

Case Title: Sacheerome Advanced Technologies (SAT) versus NEC Technologies Pvt. Ltd. (NECI)

Citation: 2022 LiveLaw (Del) 266

Dated: 29.03.2022 (Delhi High Court)

Counsel for the Petitioner: Ms Geeta Luthra, Senior Advocate with Ms Kamakshi Gupta, Ms Manas Agrawal, Advocates.

Counsel for the Respondent: Mr Ramesh Singh, Senior Advocate with Mr Arjun Pall, Ms Satya Jha, Advocates.

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