Substitution of sole arbitrator warranted once mandate ends: SC
The Supreme Court of India has recently passed a landmark judgment that has significant implications for the field of arbitration in the country. In a decision that is expected to bring clarity and consistency to the process of arbitration, the Court has held that the substitution of a sole arbitrator is warranted when their mandate ceases to exist. This ruling is a crucial development in the context of the Arbitration and Conciliation Act, 1996, and is likely to have far-reaching consequences for parties involved in arbitration proceedings.
The Court’s decision was delivered in the case of Mohan Lal Fatehpuria vs. MS Bharat Textiles & Ors., where the issue of substitution of a sole arbitrator was raised. The question before the Court was whether the arbitrator’s mandate terminates on the expiry of the initial or extended period, and if so, what are the consequences of such termination. The Court’s answer to this question has provided much-needed clarity on the issue and has settled the debate once and for all.
According to the Court, when the mandate of a sole arbitrator ceases to exist, it is imperative to substitute the arbitrator to ensure that the arbitration proceedings can continue uninterrupted. The Court explained that on the expiry of the initial or extended period, the arbitrator cannot proceed, and their mandate terminates, subject to a court order passed in a proceeding under Section 29A(4) of the Arbitration and Conciliation Act. This means that once the arbitrator’s mandate comes to an end, they are no longer authorized to continue with the arbitration proceedings, and a new arbitrator must be appointed to take their place.
The Court’s decision is based on the principle that the arbitrator’s mandate is limited to the period specified in the agreement or the extension granted by the court. Once this period expires, the arbitrator’s authority to act as an arbitrator comes to an end, and they can no longer continue with the proceedings. The Court has made it clear that the arbitrator’s mandate is not indefinite and that it is subject to the limitations imposed by the agreement or the court order.
The implications of this decision are significant. It means that parties to an arbitration agreement must be aware of the limitations of the arbitrator’s mandate and must take steps to ensure that the arbitration proceedings are completed within the specified period. If the proceedings are not completed within the initial or extended period, the parties must apply to the court for an extension or substitution of the arbitrator. Failure to do so may result in the arbitration proceedings coming to a halt, and the parties may be forced to start the process all over again.
The Court’s decision is also a reminder of the importance of carefully drafting arbitration agreements. Parties must ensure that the agreement specifies the period within which the arbitration proceedings must be completed and provides for the extension or substitution of the arbitrator in case the proceedings are not completed within the specified period. This will help to avoid disputes and ensure that the arbitration proceedings are conducted in a smooth and efficient manner.
In conclusion, the Supreme Court’s decision in the case of Mohan Lal Fatehpuria vs. MS Bharat Textiles & Ors. is a significant development in the field of arbitration in India. The Court’s ruling that the substitution of a sole arbitrator is warranted once their mandate ceases to exist provides much-needed clarity and consistency to the process of arbitration. Parties involved in arbitration proceedings must be aware of the limitations of the arbitrator’s mandate and must take steps to ensure that the proceedings are completed within the specified period. By doing so, they can avoid disputes and ensure that the arbitration proceedings are conducted in a fair, efficient, and effective manner.
About the Author
