Fresh Notice Under Section 21 Not Required To Be Issued For Appointment Of Substitute Arbitrator: Jharkhand High Court

The Jharkhand High Court has ruled that a party is not required to make a fresh request for appointment of substitute arbitrator by issuing a notice under Section 21 of the Arbitration and Conciliation Act, 1996 (A&C Act), if notice under Section 21 was issued for appointment of the arbitrator sought to be substituted. The bench of Justice Sujit Narayan Prasad held that once an application under Section 11(6) is filed by the party before the High Court, seeking appointment of arbitrator, the jurisdiction of the parties to appoint the arbitrator as per the arbitration clause is seized. Therefore, once the mandate of the arbitrator appointed by the High Court under Section 11(6) terminates, for appointment of a substitute arbitrator, the party is not required to again make a request by issuing a notice under Section 21. The applicant can directly file an application before the High Court under Section 11(6), seeking appointment of the substitute arbitrator. The applicant- Coal India Limited, and the respondent- Eastern India Powertech Ltd., entered into an agreement. After certain disputes arose between the parties, the applicant invoked the arbitration clause contained in the agreement and issued a notice under Section 21 of the A&C Act to the respondent. After the respondent failed to act upon the notice, the applicant filed an application under Section 11(6) of the A&C Act before the Jharkhand High Court. The High Court appointed a Sole Arbitrator and referred the parties to arbitration. During the course of the arbitration proceeding, the Sole Arbitrator died. Subsequently, the applicant filed a fresh application under Section 11(6) before the Jharkhand High Court for appointment of a substitute Arbitrator. The respondent Eastern India submitted before the High Court that as per Section 15(2) of the A&C Act, when the mandate of the arbitrator gets terminated, a substitute arbitrator is required to be appointed according to the rules applicable to the appointment of the arbitrator being substituted. The respondent argued that the applicant had failed to make a request before the respondent, as required under Section 21 of the A&C Act, for seeking appointment of the substitute arbitrator. It added that the procedure for appointment of arbitrator, as contained in the arbitration clause, was not followed. Thus, the respondent averred that the application directly filed by the applicant under Section 11(6) before the High Court, seeking appointment of substitute arbitrator, was premature and filed in contravention of the provisions of Section 15(2). To this, the applicant Central Coalfields submitted that once the mandate of the arbitrator appointed by the High Court under Section 11(6) of the A&C Act is terminated due to the arbitrator's death, a fresh application under Section 11(6) can be directly filed before the High Court seeking appointment of substitute arbitrator. It added that there is no requirement to again follow the procedure prescribed in the arbitration clause or issue a notice under Section 21 of the A&C Act on the opposite party. The Court observed that once a party makes request for appointment of Arbitrator as per Section 21 of the A&C Act, if the opposite party fails to appoint the Arbitrator within the statutory period, the party would have the right to make an application under Section 11(6) before the Supreme Court/High Court for appointment of the Arbitrator. Further, the Court noted that as per Section 15(2) of the A&C Act, where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator sought to be substituted. The Court referred to the decision of the Apex Court in Yashwith Constructions (P) Ltd. versus Simplex Concrete Piles India Ltd. & Anr. (2006), where the Supreme Court had ruled that the term "rules", as contained in Section 15(2), refer to the terms and conditions relating to the appointment of arbitrator, as contained in the arbitration agreement, as well as the rules of any institution under which the disputes were referred to arbitration. The Supreme Court in Yashwith Constructions (P) Ltd. (2006) had held that appointment of the substitute arbitrator under Section 15(2), must be done according to the provisions relating to appointment of the arbitrator sought to be replaced, as provided in the arbitration agreement. Thus, the High Court ruled that the application under Section 11(6) is required to be filed only after the parties have exhausted the arbitration mechanism contained in the agreement. The Court noted that the applicant had followed the terms and conditions of the arbitration clause and had issued a notice under Section 21 to the respondent, seeking appointment of the arbitrator sought to be replaced. It took into account that after the...

Fresh Notice Under Section 21 Not Required To Be Issued For Appointment Of Substitute Arbitrator: Jharkhand High Court

Parina Katyal

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