Substitution of sole arbitrator warranted once mandate ends: SC
The Supreme Court of India has recently made a significant ruling regarding the substitution of a sole arbitrator in arbitration proceedings. The Court has held that the substitution of a sole arbitrator is warranted when their mandate ceases to exist. This judgment has far-reaching implications for arbitration proceedings in India and provides clarity on the role of the arbitrator and the court’s powers in such cases.
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 has ended, they can no longer continue with the arbitration proceedings, and a new arbitrator must be appointed to take their place.
The Supreme Court’s ruling is based on the principles of fairness and impartiality that underlie arbitration proceedings. The Court recognized that an arbitrator’s mandate is limited to a specific period, and once that period has expired, the arbitrator can no longer continue to act as a neutral and impartial decision-maker. The substitution of a sole arbitrator is therefore necessary to ensure that the arbitration proceedings are conducted in a fair and impartial manner.
The Court’s decision is also consistent with the provisions of the Arbitration and Conciliation Act, which provides for the termination of an arbitrator’s mandate in certain circumstances. Section 29A(4) of the Act states that the mandate of an arbitrator shall terminate if the arbitrator fails to deliver an award within the time limit specified in the agreement or any extension thereof. The Court’s ruling makes it clear that once the arbitrator’s mandate has terminated, a new arbitrator must be appointed to take their place.
The implications of the Supreme Court’s ruling are significant. It means that parties to an arbitration agreement must be aware of the time limits within which the arbitrator must deliver an award and must take steps to ensure that a new arbitrator is appointed if the initial arbitrator’s mandate ceases to exist. Failure to do so could result in significant delays and costs, and could potentially undermine the integrity of the arbitration process.
The ruling also highlights the importance of careful drafting of arbitration agreements. Parties must ensure that their agreements provide for the appointment of a new arbitrator in the event that the initial arbitrator’s mandate ceases to exist. This can be achieved by including provisions that specify the procedure for appointing a new arbitrator and the time limits within which the new arbitrator must deliver an award.
In addition, the Supreme Court’s ruling underscores the need for parties to be proactive in managing the arbitration process. Parties must be aware of the time limits and deadlines that apply to the arbitration proceedings and must take steps to ensure that the proceedings are conducted in a timely and efficient manner. This may involve seeking the assistance of the court or other authorities to ensure that the arbitration process is completed as quickly as possible.
In conclusion, the Supreme Court’s ruling on the substitution of a sole arbitrator once their mandate ends is a significant development in the field of arbitration law in India. The ruling provides clarity on the role of the arbitrator and the court’s powers in arbitration proceedings and highlights the importance of careful drafting of arbitration agreements and proactive management of the arbitration process. Parties to an arbitration agreement must be aware of the time limits and deadlines that apply to the arbitration proceedings and must take steps to ensure that the proceedings are conducted in a fair and impartial manner.
The Supreme Court’s judgment in the case of Mohan Lal Fatehpuria v. MS Bharat Textiles & Ors. (2025 INSC 1409) can be accessed at the following link: https://www.verdictum.in/court-updates/supreme-court/mohan-lal-fatehpuria-v-ms-bharat-textiles-ors-2025-insc-1409-substitution-sole-arbitrator-mandate-ceases-exist-1600780.
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