The challenge to the appointment of an arbitrator cannot be under section 14 of the A&C Act; Delhi High Court

the Delhi High Court ruled that section 14 of the Arbitration and Conciliation Act 1996 does not provide a separate remedy for parties to challenge the appointment of an arbitrator, notwithstanding the provisions of section 13 of the Act.

The single bench of Justice Vibhu Bakhrou held that a party may challenge the appointment of an arbitrator only in accordance with the procedure provided for in section 13 of the Arbitration and Conciliation Act and that a request under section 14(1 ) could not be filed to challenge the appointment of an arbitral tribunal on the grounds mentioned in Article 12(3) of the Law, i.e. due to justified doubts as to the independence or the impartiality of the arbitrator.

Claimant Sacheerome Advanced Technologies, after invoking an arbitration agreement against respondent NEC Technologies Pvt Ltd, brought a claim under section 11 of the Arbitration and Conciliation Act 1996 seeking the appointment of ‘a referee. After the expiration of the sole arbitrator appointed by the Court, the Court appointed a new arbitrator. Subsequently, the Claimant filed a request with the arbitrator pursuant to Section 15 read with Section 14(1)(a) of the Arbitration and Conciliation Act (A&C Act) requesting the termination of his mandate, which was rejected by the arbitrator. The petitioner, subsequently, filed a petition under Section 14(2) of the A&C Act in the Delhi High Court, seeking termination of the arbitrator’s retainer on the grounds that the arbitrator failed to did not make full disclosure as required by section 12(1) of the A&C Act at the time of accepting his appointment.

The claimant claimed before the High Court that the arbitrator, after his appointment, subsequently disclosed his association with a law firm. It was argued that after the subsequent split of said law firm, the arbitrator was associated with one of the resulting law firms as a partner. Counsel for the Claimant argued before the Tribunal de Grande Instance that the fact that the other resulting firm represented the Respondents before the Arbitral Tribunal was subsequently revealed by the Arbitrator. The Board added that the conduct of the Arbitral Tribunal did not inspire confidence and that it had been guilty of excessive delays in the conduct of the arbitral proceedings. Counsel argued that the arbitrator’s conduct gave rise to an apprehension of a real risk of bias and that the arbitrator was therefore de jure incapable of performing his duties.

Section 13 of the A&C Act provides the procedure for challenging the appointment of an arbitrator. Article 13(3) provides that unless the challenged arbitrator resigns or the other party accepts the challenge, the arbitral tribunal shall decide the challenge. If the challenge is unsuccessful, under Article 13(4), the arbitral tribunal is required to continue the arbitral proceedings and issue an award. Further, Section 14(1)(a) of the A&C Act provides that an arbitrator’s term of office shall terminate and he shall be replaced by another arbitrator, if he becomes de jure or de facto incapable of perform his duties or if he fails to act without undue delay. Schedule V of the A&C Act lists the grounds which give rise to justified 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. Furthermore, the Court noted that the Claimant had made no reservations and had participated in the arbitration proceedings after the disclosure made by the Arbitrator.

The Court ruled that the appointment of an arbitrator can only be challenged by a party in accordance with the procedure provided for in section 13 of the A&C Act. The Court added that a motion under Section 14(1) of the Act could not be filed challenging the appointment of the arbitral tribunal on the grounds set out in Section 12(3) of the A&C Act, c i.e. on the grounds that the circumstances giving rise to legitimate doubts as to the independence or impartiality of the arbitrator exist. The Court noted that the Claimant had not filed any claim challenging the appointment of the arbitrator under Section 13 of the A&C Act and that the claimant’s challenge to the appointment of the arbitrator had been dismissed by the referee. The Court held that the only remedy available to the claimant was to pursue the arbitration proceedings and challenge the arbitral award under Section 34 of the A&C Act.

The Court held that the assertion that Section 14 of the A&C Act provides a separate remedy for parties to challenge the appointment of an arbitrator, notwithstanding the provisions of Section 13, is unfounded.

The High Court therefore 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) v NEC Technologies Pvt. ltd. (NECI)

Quote: 2022 LiveLaw (Deleted) 266

Dated: 29.03.2022 (Delhi High Court)

Counsel for the applicant: Ms Geeta Luthra, lead counsel with Ms Kamakshi Gupta, Ms Manas Agrawal, lawyers.

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

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