1. Petitioners have prayed for appointment of an Arbitrator to resolve the disputes between the petitioners and respondents. The facts leading to this petition are some what peculiar.
2. The petitioners and respondents had entered into a partnership agreement by a Deed dated 4.1.1995. During the course of working of such partnership, disputes arose between the parties. In view of arbitration clause contained in the partnership deed, the present petitioners approached this Court by filing Arbitration Petition No.9 of 2008 and prayed that the Court may appoint an arbitrator to resolve the disputes. On such petition, designate of the Chief Justice passed an order dated 12.3.2012, accepted the HC-NIC Page 1 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 2/10 ORDER request of the petitioners and appointed Justice R.A. Mehta (Retired Judge of the High Court) as a sole arbitrator. While doing so, the learned Judge provided that the arbitrator shall declare the award at the earliest and preferably within a period of one month from the date of the first sitting.
3. On a Note for Speaking to Minutes, by order dated 17.9.2010, such period was ordered to read as one year instead of one month. Accordingly, the learned arbitrator took charge of the proceedings. However, since for over a period of one year, the proceedings could not be completed, he passed an order dated 15th July, 2011 in which he observed as under:-
"4. since, the time has already expired, it is not possible to continue with the arbitration, and the arbitration proceedings is terminated under section 32 [2] [c] of the Arbitration and Conciliation Act, 1996."
4. After such order was passed, the present petitioners moved Misc. Civil Application No.166 of 2011 and requested the learned Judge to extend the time for completion of the arbitral proceedings. The HC-NIC Page 2 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 3/10 ORDER said petition came be withdrawn on 25.11.2011 in following terms.
"In view of the fact that learned Arbitrator has passed terminating the arbitration proceedings under Section 32 of the Arbitration and Conciliation Act, 1996, Shri Raval, learned advocate for the applicants seeks permission to withdraw the applications as the applicants propose to initiate appropriate proceeding for appointment of Arbitrator afresh. Permission is accordingly, granted. Applications are dismissed as withdrawn. As and when, such an applications are filed, same may be considered in accordance with law and on merits, for which this Court has not expressed anything on merits."
5. The present petition has been moved now for appointment of a sole arbitrator in above factual background. Counsel for the petitioners submitted that in terms of the provisions contained in Sections 13, 14, and 15 of the Arbitration and Conciliation Act, 1996, fresh appointment of arbitrator in the present case would be justified. On the other hand, learned counsel for the respondents submitted that once the arbitral proceedings have been terminated in terms of HC-NIC Page 3 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 4/10 ORDER Section 32 of the Act, there would thereafter, be no question of appointment of new arbitrator.
6. Relevant provisions contained in the Act read as under:-
"Section 13. Challenge Procedure.- (1) subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred in sub- section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the chalelnge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
HC-NIC Page 4 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 5/10 ORDER (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.
(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees." "Section 14. Failure or impossibility to act.- (1) The mandate of an arbitrator shall terminate if-
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fail to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to clause (a) of sub- section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3) If, under this section or sub-section HC-NIC Page 5 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 6/10 ORDER (3) of Section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12."
"15. Termination of mandate and substitution of arbitrator.- (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate-
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) 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 being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section
92), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under HC-NIC Page 6 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 7/10 ORDER this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal."
"Section 32. Termination of proceedings.- (1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).
(2) The arbitral tribunal shall issue an order for termination of the arbitral proceedings where-
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute.
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the proceedings has or for any other reasons become unnecessary or impossible.
(3) Subject to section 33 and sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of HC-NIC Page 7 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 8/10 ORDER the arbitral proceedings."
7. From the above, it can be seen that in terms of sub-section (3) of Section 32, the mandate of the Arbitral Tribunal would terminate with the termination of the arbitral proceedings. In the present case, the arbitrator terminated the proceedings in terms of Section 32 (2)(c) which provides that the Arbitral Tribunal shall issue an order of termination of the proceedings where the Tribunal finds that the continuation of the proceedings has for any reasons other than those mentioned in clause (a) and (b) become unnecessary or impossible. Thus, according to the arbitrator for want of any extension of time limit, his authority had come to an end and it was therefore, not possible to proceed further.
8. Upon such order being passed by the arbitrator, in terms of sub-section (3) of Section 32 the mandate stood terminated. Sub-section (1) of Section 15 provides that in addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate in the situations envisaged in clause (a) and (b) of sub-section (1).
Sub-section (2) of Section 15 further provides that 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 being replaced. Sub-section (3) further provides that unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
9. Sub-section (1) of Section 14 provides that the mandate of an Arbitrator shall terminate for the reasons mentioned in clause (a) and (b) thereof.
10. From the above, it can be seen that even in case where the mandate of an arbitrator terminates, section 15 (2) of the Act, a substitute arbitrator can be appointed. Such arbitrator would have the discretion either to proceed further from the stage where the previous proceedings were being left off or the same be repeated.
11. In the present case, since the arbitrator had already passed an order terminating the proceedings, HC-NIC Page 9 of 10 Created On Tue Jan 12 01:57:55 IST 2016 IAAP/27/2012 10/10 ORDER this Court did not entertain the application of the present petitioners for extension of time. It was, therefore, in view of the order passed by the arbitrator terminating the proceedings, the counsel sought permission to withdraw the application for making application for fresh appointment of an arbitrator.
In view of the above circumstances, I request Justice R.A. Mehta (Retired Judge of the High Court) to act as a sole arbitrator to resolve disputes between the parties.
The petition is disposed of, accordingly.
(AKIL KURESHI, J.) piyush HC-NIC Page 10 of 10 Created On Tue Jan 12 01:57:55 IST 2016