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 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 Court in such situations.
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 ends, they can no longer continue with the arbitration proceedings, and a new arbitrator needs to be appointed.
The Arbitration and Conciliation Act, 1996, is the primary legislation governing arbitration in India. The Act provides for the appointment of arbitrators, the conduct of arbitration proceedings, and the enforcement of arbitration awards. Section 29A of the Act deals with the time limit for making an award, and subsection (4) provides for the extension of the time limit in certain circumstances.
In the present case, the Supreme Court was dealing with an appeal filed by Mohan Lal Fatehpuria against an order passed by the High Court, which had allowed the substitution of the sole arbitrator. The appellant had argued that the substitution of the arbitrator was not warranted, as the arbitrator’s mandate had not ceased to exist. However, the Supreme Court rejected this argument, holding that the substitution of the sole arbitrator was indeed warranted once their mandate ended.
The Court’s judgment is based on the principle that an arbitrator’s mandate is limited to the period specified in the agreement or the law. Once this period expires, the arbitrator’s authority to act as an arbitrator comes to an end, and they cannot continue with the arbitration proceedings. The Court’s ruling is consistent with the provisions of the Arbitration and Conciliation Act, which provides for the termination of the arbitrator’s mandate on the expiry of the specified period.
The implications of this judgment are significant. It means that parties to an arbitration agreement must ensure that the arbitrator’s mandate is extended or a new arbitrator is appointed before the expiry of the initial or extended period. Failure to do so may result in the arbitration proceedings coming to a halt, and a new arbitrator may need to be appointed.
The judgment also highlights the importance of careful drafting of arbitration agreements. Parties must ensure that the agreement provides for the extension of the arbitrator’s mandate or the appointment of a new arbitrator in case the initial arbitrator is unable to continue with the proceedings.
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 in India. The judgment provides clarity on the role of the Court in arbitration proceedings and highlights the importance of careful drafting of arbitration agreements. Parties to an arbitration agreement must ensure that they comply with the provisions of the Arbitration and Conciliation Act and the principles laid down by the Supreme Court to avoid any disputes or delays in the arbitration proceedings.
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