Substitution Of Arbitrator Is Not Mandatory On Termination Of Arbitral Tribunal's Mandate Under S. 29A : Supreme Court

The Supreme Court recently clarified that there cannot be an automatic substitution of an arbitrator upon termination of the arbitral tribunal's mandate. A bench of Justices Sanjay Kumar and Alok Aradhe set aside the Madhya Pradesh High Court's ruling, which had proceeded for a substitution of an arbitrator under Section 29A (6) of the Arbitration & Conciliation Act, upon termination of the mandate of an arbitrator under Section 29A (4) of the Act. The controversy arose from the High Court's reliance on Mohan Lal Fatehpuria v. Bharat Textiles, where the Supreme Court had observed that Section 29A(6) “empowers and obligates” the Court to substitute an arbitrator. Treating this observation as laying down a rule of universal application, the High Court declared that once the arbitrator's mandate stood terminated under Section 29A(4), substitution was inevitable. Disagreeing with the High Court's decision, the bench noted that termination of the arbitral tribunal's mandate would not automatically empower the courts to substitute an arbitrator. Clarifying the true import of Mohan Lal Fatehpuria decision, the Bench observed that the word “obligates” was used in the factual context of that case, where the arbitrator had failed to conduct even a single hearing for nearly two years and had effectively stalled the arbitration. The direction to substitute was fact-specific, not a statement of inflexible law.In Mohan Lal Fatehpuria, the Supreme Court was dealing with a case where the arbitral proceedings had seen prolonged delay. The sole arbitrator had not rendered an award within the prescribed period, no extension by consent had been obtained, and the proceedings had effectively come to a standstill. In this factual context, the Court held that the arbitrator had become functus officio by operation of law and that the High Court erred in extending the mandate without considering the consequences of its expiry.“When this Court used the expression 'obligates', it only meant that a substitute Arbitrator would be appointed if the situation so warranted. It is not an inference which would necessarily follow the mandate of the Arbitrator standing terminated under Section 29A(4) of the Arbitration Act.”, the court observed while interpreting Mohan Lal Fatehpuria.It may be noted that Section 29A of the Act sets a definitive timeline for adjudication of the dispute by an arbitral tribunal and passing of an award. The provision fixes a 12-month timeline for passing of an award, which can be extended further up to 6 months with the consent of the parties. This means, ideally, an award has to be passed within a total timeline of 18 months. When an award is not passed within the maximum timeline of 18 months, a mandate of an arbitral tribunal stands terminated under Section 29A (4) unless extended by a concerned civil court under Section 29A (5) on an application filed by any of the parties. Section 29A(6) of the Act empowers courts, when extending the time for an arbitral award, to substitute one or all arbitrators if the previous mandate was terminated due to undue delay on account of an arbitrator. Interpreting the true purport of Section 29A(6) of the Act, the Court said that the provision does not make it mandatory for the Court to substitute an arbitrator, rather it is a discretionary power vested with the court to decide on the facts and circumstances of the case. The Court essentially meant to say that the court empowered to decide on applications filed under Section 29A has two options upon termination of the arbitral tribunal's mandate, i.e., either to extend the existing arbitral tribunal's mandate or to extend the mandate on appointing a substituted arbitrator. Distinguishing Mohan Lal Fatehpuria with the facts of this case, the Court held that the High Court erred in proceeding under Section 29A (6) for substitution of an arbitrator, when no material was put in the record to justify the undue delay on account of an arbitrator. The decision also draws support from C. Velusamy v. K. Indhera, where a coordinate Bench had already clarified that Mohan Lal Fatehpuria does not mandate substitution as an inevitable consequence of mandate expiry. “It is pertinent to note that the decision rendered by this Court in Mohan Lal Fatehpuria (supra) was considered by a coordinate Bench of this Court in C Velusamy vs. K. Indhera [2026 INSC 112], wherein it was clarified that the decision in Mohan Lal Fatehpuria (supra) does not mandate the substitution of an Arbitrator as an inevitable consequence, when the Court is considering the extension of mandate that has already expired.”, the court observed. Accordingly, the appeal was allowed, and the application for extension of an arbitral tribunal's mandate was directed to be revived, with a direction to decide on the application seeking extension of the Arbitrator's mandate expeditiously. Cause Title: VIVA HIGHWAYS LTD VERSUS MADHYA PRADESH ROAD DEVELOPMENT...

Substitution Of Arbitrator Is Not Mandatory On Termination Of Arbitral Tribunal's Mandate Under S. 29A : Supreme Court

Yash Mittal

Upon termination of the arbitral tribunal’s mandate, the Court has the discretion either to extend the mandate of the existing tribunal or to appoint a substitute arbitrator while granting such extension.

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