If arbitrator becomes functus officio, can provisions under Ss. 14 and 15 of the A&C Act to appoint substitute arbitrator be invoked? Allahabad HC decides

Allahabad High Court: Noting the significance of Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, Jayant Banerji, J., expressed that,

If the arbitrator had been rendered functus officio, there existed no occasion to invoke the provisions of Sections 14 and 15 of the Act for appointing a substitute arbitrator.

Instant application was filed to seek the appointment of an independent arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

Factual Background

Applicants and OPs entered into a contract. Since a dispute arose between the parties under clause 70 of the general conditions of the stated agreement which provides for arbitration, the competent authority appointed Baljit Singh as the sole arbitrator who made the final award.

The stated award was challenged before the District Judge by means of an application under Section 34 of the Act for setting aside the award. Later the Court remitted the matter back to the Arbitrator to reconsider all the issues raised before the Court in light of the terms of the Contract as well as the issue regarding the extension of period for completion of work of 3rd phase and to pass the award fresh.

It was noted that the Arbitrator Mr Baljit Singh resigned and withdrew from the aforesaid arbitration proceedings citing his ineligibility to continue as Arbitrator as he had retired, and only a serving officer could be an Arbitrator as per the agreement.

Applicant’s counsel submitted that despite serving several reminders to OPs, no substitute Arbitrator was being appointed by them, hence the application was filed.

Court had made a query to the applicant’s counsel that:

Whether the Court exercising jurisdiction under Section 34 of the Act, had power to remand the matter to the Arbitrator after setting aside the arbitral award, and if not, whether the present application would be maintainable?

Counsel while referring to Section 14 and 15 of the Act, contended that since the matter was remanded and Arbitrator withdrew from his office, his mandate stood terminated, and therefore, under Section 15(2) of the Act, a substitute Arbitrator was required to be appointed.

Lower Court

Court below, while affirming that an award by the arbitrator cannot be modified, set aside the award, and proceeded to hold that the matter required reconsideration in light of the terms of the contract, and remitted the case to the arbitrator.

In Supreme Court’s decision of Kinnari Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328, it was held that no power had been invested by the Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in Section 34 (4) of the Act.

In the above decision it was also observed that,

Limited discretion available to the Court under Section 34(4) of the Act can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings.

Present Position:

Hence, the order passed by the Court under Section 34 of the Act remitting the matter back to the Arbitrator to reconsider all the issues would be beyond the statutory mandate conferred on the Court and was thus without jurisdiction.

In view of the facts of the present matter, after making the final arbitral award, given the provisions of Section 32(1) and subject to Section 32(3), the mandate of the arbitral tribunal stood terminated with the termination of the arbitral proceedings.

Thereafter, the Arbitrator became functus officio and therefore, remitting the matter back to him by the Court to reconsider all the issues was not permissible.

Pertinent observation of the Court:

Since the arbitrator had been rendered functus officio, there existed no occasion to invoke the provisions of Sections 14 and 15 of the Act for appointing a substitute arbitrator. 

Sections 14 and 15 of the Act provide for appointment of a substitute arbitrator where the specified conditions cause the mandate of an arbitrator to terminate.

Further, the Court elaborated its observations that, mandate of an arbitrator stems forth from an arbitration agreement under Section 7 of the Act and his appointment under Section 11 of the Act.

Sections 14 and 15 of the Act would only be applicable where the arbitral proceedings are pending.

In the present case, under Section 32(1) of the Act, the arbitral proceedings stood terminated by the final arbitral award, and, in view of Section 32 (3) of the Act, the mandate of the arbitral tribunal stood terminated with the termination of the arbitral proceedings.

High Court stated that, there was no averment in the present application that, after setting aside of the award passed by the arbitral tribunal, under the aforesaid provision of clause 70 of the agreement, any written notice had been given to the OPs regarding any dispute, to initiate arbitration proceedings de novo.

Therefore, there was no failure on part of the OPs to act or discharge a function which would entitle the applicants to invoke the powers conferred by Section 11 (4) (5) and (6) of the Act.

In view of the above discussion, present application was dismissed. [P.N. Garg, Engineers & Contractors v. Sultania Infantry Lines Bhopal, Appln. U/S 11(4) No. 92 of 2021, decided on 16-11-2021]


Advocates before the Court:

Counsel for Applicant: Aarushi Khare

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