Constitution of an Arbitral Tribunal- Number & Appointment of Arbitrators, their termination: Provisions under Arbitration and Conciliation Act, 1996

Synopsis

1. Introduction
2. Number of Arbitrators

III.  Appointment of Arbitrators

1. Challenge to Arbitrator’s appointment
2. Termination of Arbitrator’s mandate
3. Introduction

Litigation is not only expensive and time-consuming but also emotionally draining and unpredictable. In countries like India where legal battles stretch over several years taking up a lot of time, energy and money of the parties involved, alternative dispute resolution (ADR) has slowly emerged as a preferred mode of resolving legal disputes in comparison to litigation.

One of the main modes of ADR is arbitration wherein the parties get their legal dispute resolved by a neutral third party called the arbitrator which is chosen mutually by the parties. In India, arbitration is statutorily recognized and regulated by the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act“). The decision given by the arbitrator is known as an arbitral award which is made legally binding on the concerned parties by some statutory enactment such as, in case of India, the Act.

The Act makes provisions for the constitution of an arbitral tribunal in respect of an arbitration governed by the Act. This article discusses various provisions of the Act relating to the constitution of an arbitral tribunal, as provided under the Act.

1. Number of Arbitrators

Section 2(d) of the Act defines “arbitral tribunal” to mean a sole arbitrator or a panel of arbitrators.

Section 10(1) of the Act states that the parties, opting for arbitration, are free to determine the number of arbitrators which shall be constituting the arbitral tribunal provided that such number is not an even number. Further, section 10(2) states that in case the parties fail to decide the number of arbitrators in accordance with section 10(1), the arbitral tribunal shall consist only of a sole arbitrator.

III. Appointment of Arbitrators

Section 11 of the Act contains provisions relating to appointment of arbitrators who shall constitute the arbitral tribunal. Section 11(1) states that a person of any nationality may be appointed as the arbitrator unless the parties have agreed otherwise. Under section 11(2), the parties are free to mutually decide the procedure to be followed for appointing the arbitrators.

Section 11(3) of the Act states that if the parties have determined the number of arbitrators to be three but have not agreed upon for a procedure for their appointment, in such case, each party shall appoint one arbitrator and the two appointed arbitrators shall mutually appoint a third arbitrator to preside over the arbitral tribunal.

Section 11(4) of the Act states that in a case where the appointment procedure prescribed under section 11(3) is applicable but either party has failed to appoint their choice of arbitrator or the two appointed arbitrators have failed to agree on a third arbitrator, then the appointment of arbitrator may be done, upon either party’s request, by the Supreme Court of India or concerned High Court. Section 11(5) also empowers the said courts to appoint, in case of an arbitrator involving a sole arbitrator, the arbitrator upon either party’s request if the parties have failed to agree on the appointment of the sole arbitrator.

Section 11(6) of the Act states that in a case where a procedure for appointment of the arbitrator was agreed upon between the parties but either party has failed to act as per such procedure or the parties/the two appointed arbitrators have failed to reach an agreement expected of them under such procedure, then either party has the right to request the Supreme Court or concerned High Court to take necessary measures such as appointment of the concerned arbitrator. Such request can be made by the concerned party only if the agreement on the appointment procedure has made no other provisions for securing the arbitrator’s appointment in case of a deadlock contemplated under section 11(6).

Section 11(7) of the Act requires the concerned court, before whom an application has been filed under sections 11(4) or 11(5) or 11(6), to restrict itself to examination of existence of an arbitration agreement while deciding such application.

Section 11(8) of the Act mandates that before appointing an arbitrator, the concerned court must:

• seek a disclosure from the prospective arbitrator in terms of section 12(1) of the Act which covers existence of such present or past relationship (financial, professional, business or of any other kind) with either party which is likely to give rise to justifiable doubts about the arbitrator’s independence or impartiality or likely to affect his/her ability to devote sufficient time to the arbitration; and,
• have due regard to the arbitrator’s qualifications mandated under the agreement between the parties; and,
• have due regard to the disclosure made by the prospective arbitrator under section 12(1) and other considerations which are likely to secure appointment of an independent and impartial arbitrator.

In Konkan Railway Corporation Ltd. and Others vs. Mehul Construction Co, AIR 2000 SC 2821, the Supreme Court held that an order passed by a court under section 11(6) of the Act is administrative in nature and therefore not amendable to the jurisdiction of Supreme Court under Article 136 of the Constitution of India.

On March 7, 2018, the Press Information Bureau, Government of India issued a press release highlighting certain proposed amendments to the Act which are under consideration by the Parliament in form of the Arbitration and Conciliation (Amendment) Bill, 2018[1]. The proposed amendments include amendment to section 11 of the Act which will permit the parties to approach arbitral institutions, designated by the Supreme Court or High Court, for appointment of arbitrators instead of filing a formal application with the concerned court for this purpose. This move is likely to speed up the process of appointment of arbitrators in cases where the parties have failed to mutually agree on the arbitrator to be appointed.

1. The challenge to arbitrator’s appointment

Section 12 of the Act permits either party to challenge the appointment of an arbitrator on certain grounds. Section 12(3) states that the appointment of an arbitrator may be challenged in the following circumstances:

• if he/she does not possess the requisite qualifications agreed upon by the parties; or,
• such circumstances exist which give rise to justifiable doubts regarding the arbitrator’s independence or impartiality.

Section 13 of the Act prescribes the procedure for challenging the appointment of an arbitrator. Section 13(2) of the Act requires any party, who intends to challenge the appointment of concerned arbitrator, to send a written statement containing the grounds of challenge to the concerned arbitrator/arbitral tribunal within 15 days of becoming aware of the tribunal’s constitution or of any of the circumstances mentioned in section 12(3), as the case maybe.

Section 13(3) mandates the arbitral tribunal to decide on the challenge made under section 13(2) unless the challenged arbitrator has withdrawn from the tribunal or the other party has agreed to the challenge made by concerned party. Section 13(4) empowers the arbitral tribunal to continue the arbitration proceedings and pass an arbitral award if the challenge made under section 12(2) has been rejected as unsuccessful.

Section 13(5) allows an arbitral award, made under section 13(4), to be challenged by the aggrieved party on the grounds mentioned in section 34 of the Act.

1. Termination of arbitrator’s mandate

Section 14 of the Act lists out the situations in which an appointed arbitrator’s mandate shall be deemed to have ended. Section 14(1) of the Act states that the mandate of an arbitrator shall terminate, requiring his/her substitution by another arbitrator, in the following circumstances:

• if he/she becomes unable to perform his/her functions or fails to act without undue delay for other reasons;
• he/she withdraws from office; or,
• the parties mutually agree to the termination of his/her mandate.

Section 15(2) of the Act clarifies that upon termination of an arbitrator’s mandate, a new arbitrator shall have to be appointed by the parties as per the same rules which were applicable to the earlier appointment. In case of a replacement under section 15(2), section 15(3) of the Act allows the arbitral tribunal to repeat the hearings conducted previously as per its own discretion.

Section 15(4) of the Act clarifies that an order or ruling of an arbitral tribunal, which was made prior to the replacement of an arbitrator under section 15(2), shall not get invalidated merely due to the change in composition of the arbitral tribunal.