Arbitration- Mere Delay in Passing Award not a Point to Substitute Arbitrator- Supreme Court

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January 24, 2019

Appointment of Arbitrator- In this recent case, the Two-Judge Bench of the Supreme Court in view of the facts and circumstances of the case opined that mere neglect of an arbitrator to act or delay in passing the award by itself cannot be the ground to appoint another arbitrator in deviation from the terms agreed to by the parties.

Case name: Rajasthan Small Industries Corporation Limited v. M/S Ganesh Containers Movers Syndicate

This appeal arises out of High Court of Rajasthan’s order, whereby the Court allowed respondent’s application under Section 11 and Section 15 of the Arbitration and Conciliation Act, 1996 i.e. termination of mandate and substitution of arbitrator.

Hence, the issue that fell for consideration before the Supreme Court in the case was whether when the proceedings before the arbitrator was pending, whether the respondent was right in filing arbitration petition approaching the High Court under Section 11 and Section 15 of the Arbitration Act, 1996 for appointment of a substitute arbitrator?

Here it would be relevant to mention that the High Court in its order considered delay caused in arbitral proceedings as one of the reasons to accept Respondent’s application for termination of mandate and substitution of arbitrator in the case.

The Two-Judge Bench of the Supreme Court in view of the facts and circumstances of the case and the prevailing law set aside High Court’s order and allowed the appeal. While pronouncing it’s verdict, the Supreme Court ruled that mere neglect of an arbitrator to act or delay in passing the award by itself cannot be the ground to appoint another arbitrator in deviation from the terms agreed to by the parties.

The Supreme Court in the aforesaid context made reference to RUSSELL ON ARBITRATION, 20th Edition which states that:

“Mere neglect of an arbitrator to act, as distinct from refusal or incapacity, does not of itself give the court power to appoint another arbitrator in his place. It does, however, give the court power to remove him, whereupon there is a power to replace him.”

Reference was also made to Supreme Court’s decision in the case of S.B.P. and Company v. Patel Engineering Limited and Another[1], wherein the Court held that the legislature has repeatedly laid emphasis on the necessity of adherence to the terms of agreement between the parties in the matter of appointment of arbitrators and procedure to be followed for such appointment.

The entire case can be accessed here.

 

[1] (2009) 10 SCC 293