Swadesh Kumar Agarwal vs Dinesh Kumar Agarwal

Swadesh Kumar Agarwal vs Dinesh Kumar Agarwal


Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 2935­2938 OF 2022
Swadesh Kumar Agarwal            ..Appellant (S)
Versus
Dinesh Kumar Agarwal & Ors, etc., etc.               ..Respondent (S)
J U D G M E N T 
M. R. Shah, J.
1. The   present   appeals   arise   out   of   impugned   common
judgment and order dated 07.09.2017 passed by the High
Court of Madhya Pradesh Principal Seat at Jabalpur in
Arbitration Case (AC) No. 29/2015 and in Writ Petition
Nos. 11258/2010 and 11259/2010 and the order dated
17.11.2017 passed in Review Petition No. 655/2017, by
which, the High Court in exercise of powers under section
11(6)   of   the   Arbitration   and   Conciliation   Act,   1996
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(hereinafter referred to as the Act, 1996) has terminated
the mandate of sole Arbitrator appointed by the parties
themselves and has substituted the sole Arbitrator and
has appointed a fresh Arbitrator on the ground that the
mandate of the sole Arbitrator stood terminated in view of
section 14(1)(a) of the Act, 1996.  This is on the basis that
there was undue and unreasonable delay in proceeding
with the arbitration proceeding by the Sole Arbitrator. By
the impugned judgment and order, the High Court has
also confirmed the order passed by the learned Trial Court
dismissing the application filed under Order VII Rule 11 of
Code of Civil Procedure (CPC) preferred by the appellant
herein.   
2. The facts leading to the present appeals in a nutshell are
as under: ­
2.1 That a dispute between the parties which as such is a
family dispute for partition of the properties arose. It was
referred to the sole Arbitrator. The learned Arbitrator was
appointed as a sole Arbitrator by the parties themselves on
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04.08.2008. The learned Arbitrator directed the parties to
appear   on   14.03.2009   for   deciding   the   pending
applications. On the request of the parties, the Arbitrator
adjourned the hearing on 30.03.2009. No proceedings were
undertaken on 30.03.2009 due to the fact that the sole
Arbitrator was not available in town. Respondent No. 1
and   3   herein   –   parties   to   the   arbitration   proceedings
revoked   the   mandate   of   the   sole   Arbitrator   vide   letters
dated 11.07.2009. The letters were replied to by the sole
Arbitrator.   Thereafter,   respondent   No.   1   and   3   herein,
parties   to   the   arbitration   proceedings   filed   applications
under   section   14(1)(a)   of   the   Act,   1996   before   the
concerned Court (District Court) to terminate the mandate
of the sole Arbitrator on the ground of delay in concluding
the arbitration proceedings. The appellant herein filed an
application under order VII Rule 11 of CPC for dismissal of
the said applications under section 14 of the Act, 1996,
submitting that there was no delay at all on the part of the
sole Arbitrator and therefore, there was no question of
terminating the mandate of sole Arbitrator under section
14(1)(a) of the Act, 1996. Vide order dated 15.07.2010, the
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learned Trial Court dismissed the application filed under
order VII Rule 11 of CPC preferred by the appellant herein.
2.2 Feeling aggrieved by the order passed by the learned Trial
Court, rejecting the application under order VII Rule 11 of
CPC, the appellant herein preferred present writ petition
Nos. 11259/2010 and 11258/2010 before the High Court
and pending the applications under section 14(1)(a) of the
Act,   1996   one   of   the   parties   –   Dinesh   Kumar   Agarwal
preferred an arbitration case before the High Court under
section 11(6) of the Act, 1996 and requested to terminate
the mandate of the sole Arbitrator and to appoint a fresh
Arbitrator. By the impugned judgment and order, the High
Court has allowed Arbitration Case No. 29/2015 and has
observed and held that there was undue and unreasonable
delay on the part of the sole Arbitrator in concluding the
arbitrating proceedings and his mandate stood terminated
under section 14(1)(a) of the Act, 1996. Consequently, the
High   Court   has   appointed   a   fresh   Arbitrator.   By   the
impugned judgment and order, the High Court has also
dismissed   the   writ   petitions   preferred   by   the   appellant
herein, in which the appellant challenged the order passed
4
by the learned Trial Court rejecting the application under
Order VII Rule 11 of CPC.
2.3 Feeling   aggrieved   and   dissatisfied   with   the   impugned
common judgment and order passed by the High Court
terminating the mandate of sole Arbitrator under section
14(1)(a) of the Act, 1996, on an application filed under
section  11(6) of  the Act,  1996 and  dismissing the  writ
petitions confirming the order passed by the learned Trial
Court rejecting the application under Order VII Rule 11 of
CPC, the appellant has preferred the present appeals. 
3. Shri   Divyakant   Lahoti,   learned   counsel   appearing   on
behalf of the appellant has strenuously submitted that in
the facts and circumstances of the case the High Court
has materially erred in terminating the mandate of the
Arbitrator under section 14(1)(a) of the Act, 1996 on an
application filed under section 11(6) of the Act, 1996. 
3.1 It is further submitted that in a case, where an Arbitrator
was   already   appointed   by   the   parties   themselves,
subsequently, no application under section 11(6) of the
5
Act,   1996   was   maintainable   either   to   terminate   the
mandate of the sole Arbitrator and/or to substitute the
Arbitrator. 
3.2 It is contended by Shri Lahoti, learned counsel that the
mandate of the Arbitrator can be terminated and/or may
come   to   an   end   only   as   per   the   provisions   of   the
Arbitration and Conciliation Act, 1996. Reliance is placed
upon sections 13, 14, 15, 25(a), 30 and 32 of the Act,
1996.   It   is   submitted   that   other   than   the   aforesaid
provisions under the Act, 1996, there is no provision to
terminate the mandate of the Arbitrator.
3.3 It is submitted that in case of the eventualities mentioned
in section 14(1)(a) of the Act, 1996, the remedy available to
the aggrieved party would be to approach the “court” as
defined under section 2(e) of the Act, 1996. 
3.4 Shri Lahoti, learned counsel appearing on behalf of the
appellant further submitted that in the present case as
such   respondent   No.   1   and   3   herein   –   parties   to   the
arbitration   proceedings,   in   fact,   did   submit   the
6
applications under section 14(2) of the Act, 1996, which
were pending before the concerned court at the time when
the present applications under section 11(6) of the Act,
1996 was filed.
3.5 It is further urged that in fact, there is a difference and
distinction between section 11(5) and section 11(6) of the
Act, 1996.
3.6 That in the absence of any written contract containing the
arbitration agreement, section 11(6) of the Act, 1996 shall
not be applicable and therefore, an application under that
provision shall not be maintainable. 
3.7 That even otherwise, there was no undue delay in the
arbitration proceedings on the part of the sole Arbitrator
which could have led to termination of his mandate that
too, in exercise of powers under section 11(5) and section
11(6) of the Act, 1996. 
3.8 It is further submitted by Shri Lahoti, learned counsel
appearing on behalf of the appellant that as there was no
7
undue delay on the part of the sole Arbitrator therefore,
section   14(1)(a)   would   not   be   attracted.     Therefore,
application under section 14 of the Act, 1996 was liable to
be dismissed and the learned Trial Court ought to have
allowed the application filed by the appellant, to reject the
application under section 14 of the Act, 1996 in exercise of
powers under Order VII Rule 11 of CPC. It is submitted
that the High Court committed a grave error in dismissing
the writ petitions and confirming the order passed by the
learned Trial Court in dismissing the application under
Order VII Rule 11 of CPC.
3.9 Shri Lahoti, learned counsel appearing on behalf of the
appellant heavily relied upon the decision of this Court in
the   case   of  Antrix   Corporation   Limited   v.   Devas
Multimedia Private Ltd.; (2014) 11 SCC 560 (para 31 &
33) and the subsequent decision of this Court in the case
of S.P. Singla Constructions Private Limited v. State of
Himachal Pradesh and Anr.; (2019) 2 SCC 488 in support
of his submissions that once the parties have invoked the
arbitration   proceedings   and   the   Arbitrator   has   been
8
appointed, subsequent application under section 11(6) of
the Act, 1996 shall not be maintainable.
4. The present appeal is vehemently opposed by Shri Ashok
Lalwani,   learned   counsel   appearing   on   behalf   of
respondent   No.   1   and   Shri   Rajesh   Inamdar,   learned
counsel  appearing  on   behalf  of   respondent   No.   2.   Shri
Lalwani,   learned   counsel   appearing   on   behalf   of
respondent No. 1 has vehemently submitted that in the
facts and circumstances of the case, when it was found
that there was an undue delay on the part of the Arbitrator
in   concluding   the   arbitration   proceedings,   his   mandate
was rightly terminated considering section 14(1)(a) of the
Act, 1996. 
4.1 It is submitted that as per section 14(1) of the said Act, the
word used is “shall”. It is submitted that it provides that
the mandate of an arbitrator  “shall”  terminate and he
shall be substituted by another arbitrator, if he, de jure or
de facto  is unable to perform his functions or for other
reasons fails to act without undue delay. It is submitted
9
that therefore, once it is found that the arbitrator is unable
to perform his functions due to eventualities mentioned in
section 14(1) of the Act, 1996, there shall be an automatic
termination of the mandate of the arbitrator and he shall
be substituted by another arbitrator. Reliance is placed
upon   the   decisions   of   this   Court   in   the   cases   of  ACC
Limited   v.   Global   Cements   Limited; (2012) 7 SCC 71
and  Union   of   India   and   Ors.   v.   Uttar   Pradesh   State
Bridge Corporation Limited; (2015) 2 SCC 52.
4.2 Shri   Lalwani,   learned   counsel   appearing   on   behalf   of
respondent No. 1 has further submitted that in the facts
and circumstances of the case, the learned Trial Court did
not commit any error in rejecting the application under
Order VII Rule 11 of CPC. It is urged that whether or not
there was undue delay on the part of the sole Arbitrator is
a question which is to be adjudicated by the Court and at
the most the same can be said to be a defence.  That as
per the settled position of law at the stage of deciding the
application   under   Order   VII   Rule   11   of   CPC   only   the
averments   in   the   application/plaint   are   required   to   be
10
considered and not the defence and/or the case stated in
the written statement and/or reply to any application. It is
submitted that therefore, the learned Trial Court rightly
rejected the application under Order VII Rule 11 of CPC
and   rightly   refused   to   reject   the   application   submitted
under section 14 of the Act, 1996. That in any case, after
passing   the   impugned   order,   the   original   applicants   ­
respondents   have   already   withdrawn   their   applications
under section 14(2) of the Act, 1996. 
4.3 Making the above submissions and relying upon the above
decisions, it is prayed to dismiss the present appeals.     
5. We have heard learned counsel appearing on behalf of the
respective parties at length.
6. The following questions arise for our consideration: ­
(i) Whether the High Court in exercise of powers under
section   11(6)   of   the   Act,   1996,   can   terminate   the
mandate of the sole arbitrator?
11
(ii) Whether   in   the   absence   of   any   written   contract
containing the arbitration agreement, the application
under   section   11(6)   of   the   Act,   1996   would   be
maintainable?
(iii) Is there any difference and distinction between subsection (5) of section 11 and sub­section (6) of section
11 of the Act, 1996?
(iv) Whether   the   application   under   sub­section   (6)   of
section 11 shall be maintainable in a case where the
parties themselves appointed a sole arbitrator with
mutual consent?
(v) Whether in the facts and circumstances of the case
the   High   Court   was   justified   in   terminating   the
mandate of the sole arbitrator on the ground that
there   was   undue   delay   on   the   part   of   the   sole
arbitrator in concluding the arbitration proceedings
which would lead to the termination of his mandate,
in   an   application   under   section   11(6)   of   the   Act,
1996?
12
(vi) Whether in the facts and circumstances of the case,
the learned Trial Court was justified in dismissing the
application submitted by the appellant, submitted to
reject the application under section 14(2) of the Act,
1996 in exercise of powers under Order VII Rule 11 of
CPC?   
Question No. (i) to (v) are interconnected. Therefore, all
are considered and decided together.  
6.1 In the present case the sole Arbitrator was appointed by
the parties themselves by mutual consent. There was no
written   agreement/contract   containing   the   arbitration
clause. 
6.2 As per sub­section (2) of section 11, subject to sub­section
(6),   the   parties   are   free   to   agree   on   a   procedure   for
appointment of the arbitrator or arbitrators. Sub­section
(5) of section 11 provides that in an arbitration with a sole
arbitrator, failing any agreement referred to in sub­section
(2), if the parties fail to agree on the arbitrator within thirty
days from receipt of a request by one party from the other
13
party to so agree, the court may appoint an arbitrator.
However, in a case where there is an arbitration agreement
and the written contract and the appointment procedure is
agreed upon by the parties, sub­section (6) of section 11 of
the Act, 1996 shall be attracted and on the eventualities
occurring in sub­section (6) of section 11, a party may
approach the High Court and request for appointment of
an arbitrator, in exercise of powers under sub­section (6)
of section 11 of the Act, 1996. Therefore, sub­section (5) of
section 11 shall be attracted in a case where there is no
procedure for appointment of an arbitrator agreed upon as
per sub­section (2) of section 11 and sub­section (6) of
section 11 shall be applicable in a case where there is a
contract   containing   an   arbitration   agreement   and   the
appointment   procedure   is   agreed   upon.   Thus,   while
referring the matter for arbitration there need not be any
written contract containing any arbitration agreement. But
the parties may themselves decide to refer the dispute for
arbitration to the sole arbitrator by mutual consent. In
that case or eventuality, sub­section (6) of section 11 shall
not be attracted at all and therefore, in such a situation,
14
the application under sub­section (6) of section 11 shall
not be maintainable. An application under sub­section (6)
of section 11 shall be maintainable only in a case where
there   is   a   contract   between   the   parties   containing   the
arbitration agreement and the appointment procedure is
prescribed and is agreed upon in writing. 
6.3 In the present case, the sole arbitrator was appointed by
the   parties   themselves   by   mutual   consent   and   in   the
absence of any written contract containing the arbitration
agreement. Therefore, application under section 11(6) of
the   Act,   1996   in   absence   of   any   written   agreement
containing arbitration agreement was not maintainable at
all. 
6.4 Now the next question which is posed for consideration of
this Court is, whether, in exercise of powers under subsection (6) of section 11 of the Act, 1996, the High Court
can   terminate   the   mandate   of   the   sole   arbitrator   and
substitute the arbitrator in view of section 14(1)(a) of the
Act, 1996 on the ground that he has failed to act without
15
undue delay and in such a situation aggrieved party has to
approach the “court” to terminate his mandate.
6.4.1 While answering the aforesaid question/issue, the relevant
provisions of the Act, 1996 on termination of the mandate
of   the   arbitrator   and   the   procedure   to   be   followed   are
required to be referred to: ­ 
“11. Appointment of arbitrators­ (1) A person of any
nationality   may   be   an   arbitrator,   unless   otherwise
agreed by the parties. 
(2) Subject to sub­section (6), the parties are free to
agree on a procedure for appointing the arbitrator or
arbitrators. 
(3) Failing any agreement referred to in sub­section (2),
in   an  arbitration   with   three   arbitrators,  each  party
shall appoint one arbitrator, and the two appointed
arbitrators shall appoint the third arbitrator who shall
act as the presiding arbitrator. 
(3A) The Supreme Court and the High Court shall have
the power to designate, arbitral institutions, from time
to time, which have been graded by the Council under
section 43­I, for the purposes of this Act: 
Provided   that   in   respect   of   those   High   Court
jurisdictions, where no graded arbitral institution are
available,   then,   the   Chief   Justice   of   the   concerned
High Court may maintain a panel of arbitrators for
discharging   the   functions   and   duties   of   arbitral
institution and any reference to the arbitrator shall be
deemed to be an arbitral institution for the purposes of
this section and the arbitrator appointed by a party
shall be entitled to such fee at the rate as specified in
the Fourth Schedule: Provided further that the Chief
Justice of the concerned High Court may, from time to
time, review the panel of arbitrators.] 
16
(4)   If  the  appointment   procedure   in  sub­section   (3)
applies and— (a) a party fails to appoint an arbitrator
within thirty days from the receipt of a request to do so
from   the   other   party;   or (b)   the   two   appointed
arbitrators fail to agree on the third arbitrator within
thirty days from the date of their appointment, [the
appointment shall be made, on an application of the
party,   by   the   arbitral   institution   designated   by   the
Supreme Court, in case of international commercial
arbitration,   or   by   the   High   Court,   in   case   of
arbitrations   other   than   international   commercial
arbitration, as the case may be;]
(5) Failing any agreement referred to in sub­section (2),
in an arbitration with a sole arbitrator, if the parties
fail to agree on the arbitrator within thirty days from
receipt of a request by one party from the other party
to so agree 11[the appointment shall be made on an
application   of   the   party   in   accordance   with   the
provisions contained in sub­section (4);] 
(6)  Where,  under  an appointment   procedure  agreed
upon by the parties,­ (a) a party fails to act as required
under that procedure; or (b) the parties, or the two
appointed   arbitrators,   fail   to   reach   an   agreement
expected   of   them   under   that   procedure;   or   (c)   a
person, including an institution, fails to perform any
function entrusted to him or it under that procedure, a
[the appointment shall be made, on an application of
the party, by the arbitral institution designated by the
Supreme Court, in case of international commercial
arbitration,   or   by   the   High   Court,   in   case   of
arbitrations   other   than   international   commercial
arbitration, as the case may be] to take the necessary
measure, unless the agreement on the appointment
procedure   provides   other   means   for   securing   the
appointment. 
(6B) The designation of any person or institution by
the Supreme Court or, as the case may be, the High
Court, for the purposes of this section shall not be
regarded   as   a   delegation   of   judicial   power   by   the
Supreme Court or the High Court.]
(8) The arbitral institution referred to in sub­sections
(4), (5) and (6)], before appointing an arbitrator, shall
seek   a   disclosure   in   writing   from   the   prospective
17
arbitrator in terms of sub­section (1) of section 12, and
have due regard to­­ (a) any qualifications required for
the arbitrator by the agreement of the parties; and (b)
the contents of the disclosure and other considerations
as   are   likely   to   secure   the   appointment   of   an
independent and impartial arbitrator.
(9)   In   the   case   of   appointment   of   sole   or   third
arbitrator in an international commercial arbitration,
16[the arbitral institution designated by the Supreme
Court] may appoint an arbitrator of a nationality other
than the nationalities of the parties where the parties
belong to different nationalities.
(11)   Where   more   than   one   request   has   been   made
under sub­section (4) or sub­section (5) or sub­section
(6)   to   different   arbitral   institutions,   the   arbitral
institution to which the request has been first made
under the relevant sub­section shall be competent to
appoint.
(12) Where the matter referred to in sub­sections (4),
(5), (6) and (8) arise in an international commercial
arbitration or any other arbitration, the reference to
the arbitral institution in those subsections shall be
construed   as   a   reference   to   the   arbitral   institution
designated under sub­section (3A). 
(13)   An   application   made   under   this   section   for
appointment of an arbitrator or arbitrators shall be
disposed of by the arbitral institution within a period
of thirty days from the date of service of notice on the
opposite party. 
(14) The arbitral institution shall determine the fees of
the arbitral tribunal and the manner of its payment to
the arbitral tribunal subject to the rates specified in
the Fourth Schedule. 
Explanation.­­ For the removal of doubts, it is hereby
clarified   that   this   sub­section   shall   not   apply   to
international   commercial   arbitration   and   in
arbitrations   (other   than   international   commercial
arbitration)   where   parties   have   agreed   for
determination of fees as per the rules of an arbitral
institution.]
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12.   Grounds   for   challenge­  (1)   When   a   person   is
approached   in   connection   with   his   possible
appointment   as   an   arbitrator,   he   shall   disclose   in
writing any circumstances,­­ (a) such as the existence
either   direct   or   indirect,   of   any   past   or   present
relationship with or interest in any of the parties or in
relation   to   the   subject­matter   in   dispute,   whether
financial, business, professional or other kind, which
is  likely to  give rise to  justifiable doubts  as to his
independence or impartiality; and (b) which are likely
to affect  his ability  to devote  sufficient  time  to the
arbitration and in particular his ability to complete the
entire arbitration within a period of twelve months.
Explanation   1.­­   The   grounds   stated   in   the   Fifth
Schedule   shall   guide   in   determining   whether
circumstances   exist   which   give   rise   to   justifiable
doubts as to the independence or impartiality of an
arbitrator.   Explanation   2.­­   The   disclosure   shall   be
made by such person in the form specified in the Sixth
Schedule.] 
(2) An arbitrator, from the time of his appointment and
throughout   the   arbitral   proceedings,   shall,   without
delay,   disclose   to   the   parties   in   writing   any
circumstances   referred   to   in   sub­section   (1)   unless
they have already been informed of them by him.
(3)   An   arbitrator   may   be   challenged   only   if­   (a)
circumstances exist that give rise to justifiable doubts
as to his independence or impartiality, or (b) he does
not possess the qualifications agreed to by the parties. 
(4) A party may challenge an arbitrator appointed by
him,  or  in  whose appointment  he has participated,
only for reasons of which he becomes aware after the
appointment has been made. 
[(5)   Notwithstanding   any   prior   agreement   to   the
contrary,   any   person   whose   relationship,   with   the
parties or counsel or the subject­matter of the dispute,
falls   under   any   of   the   categories   specified   in   the
Seventh Schedule shall be ineligible to be appointed as
an arbitrator: Provided that parties may, subsequent
to   disputes   having   arisen   between   them,   waive   the
applicability   of   this   sub­section   by   an   express
agreement in writing.]
19
13. Challenge procedure.— (1) Subject to sub­section
(4), the parties are free to agree on a procedure for
challenging an arbitrator. 
(2) Failing any agreement referred to in sub­section (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 sub­section
(3)   of   section   12,   send   a   written   statement   of   the
reasons for the challenge to the arbitral tribunal. 
(3) Unless the arbitrator challenged under sub­section
(2) withdraws from his office or the other party agrees
to the challenge, 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 sub­section
(2)   is   not   successful,   the   arbitral   tribunal   shall
continue the arbitral proceedings and make an arbitral
award. 
(5) Where an arbitral award is made under sub­section
(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 sub­section (5), the Court may
decide as to whether the arbitrator who is challenged
is entitled to any fees.
14.   Failure   or   impossibility   to   act.—(1)   3   [The
mandate of an arbitrator shall terminate and he shall
be   substituted   by   another   arbitrator,   if]—   (a)   he
becomes de jure or de facto unable to perform his
functions   or   for   other   reasons   fails   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 in clause (a) of sub­section (1), a
party  may,   unless   otherwise   agreed   by   the   parties,
apply to the Court to decide on the termination of the
mandate. 
20
(3) If, under this section or sub­section (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 sub­section
(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   sub­section   (2),   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 this section shall
not be invalid solely because there has been a change
in the composition of the arbitral tribunal.
xxx xxx xxx
25. Default of  a  party.—Unless otherwise agreed by
the parties, where, without showing sufficient cause,—
(a)  the claimant fails to communicate his statement
of claim in accordance with sub­section (1) of
section 23, the arbitral tribunal shall terminate
the proceedings; 
(b)  the   respondent   fails   to   communicate   his
statement of defence in accordance with subsection (1) of section 23, the arbitral tribunal
shall continue the proceedings without treating
that   failure   in   itself   as   an   admission   of   the
allegations by the claimant 3 [and shall have the
discretion to treat the right of the respondent to
21
file such statement of defence as having been
forfeited]. 
(c)  a party fails to appear at an oral hearing or to
produce   documentary   evidence,   the   arbitral
tribunal   may   continue   the   proceedings   and
make the arbitral award on the evidence before
it.
xxx xxx xxx
30. Settlement.—(1) It is not incompatible with an
arbitration   agreement   for   an   arbitral   tribunal   to
encourage   settlement   of   the   dispute   and,   with   the
agreement of the parties, the arbitral tribunal may use
mediation, conciliation or other procedures at any time
during   the   arbitral   proceedings   to   encourage
settlement. 
(2) If, during arbitral proceedings, the parties settle the
dispute,   the   arbitral   tribunal   shall   terminate   the
proceedings and, if requested by the parties and not
objected   to   by   the   arbitral   tribunal,   record   the
settlement in the form of an arbitral award on agreed
terms. 
(3) An arbitral award on agreed terms shall be made in
accordance with section 31 and shall state that it is an
arbitral award. 
(4) An arbitral award on agreed terms shall have the
same status and effect as any other arbitral award on
the substance of the dispute.
xxx xxx xxx
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 sub­section (2). 
(2) The arbitral tribunal shall issue an order for the
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, 
22
(b)  the parties agree on the termination of the
proceedings, or 
(c)  the   arbitral   tribunal   finds   that   the
continuation   of   the   proceedings   has   for
any other reason become unnecessary or
impossible. 
(3) Subject to section 33 and sub­section (4) of section
34,   the   mandate   of   the   arbitral   tribunal   shall
terminate   with   the   termination   of   the   arbitral
proceedings.”
Except   the   aforesaid   provisions,   there   is   no   other
provision under the Act, 1996 dealing with termination of
the mandate of the arbitrator and/or termination of the
arbitral proceedings. 
6.4.2 Section 13 provides that subject to sub­section (4), the
parties are free to agree on a procedure for challenging an
arbitrator and failing any agreement on a procedure for
challenging an arbitrator, a party who intends to challenge
an   arbitration   shall,   within   fifteen   days   after   becoming
aware of the constitution of the arbitral tribunal or after
becoming aware of any circumstances referred to in subsection (3) of section 12, send a written statement of the
reasons for the challenge to the arbitral tribunal. As per
sub­section   (3)   of   section   13,   unless   the   arbitrator
challenged under sub­section (2) withdraws from his office
23
or the other party agrees to the challenge, it is for the
arbitral tribunal to decide on the challenge. If a challenge
to the arbitrator is not successful in that case, the arbitral
tribunal shall continue the arbitral proceedings and make
an arbitral award and when an arbitral award is made
under sub­section (4), the party challenging the arbitrator
may make an application for setting aside such an arbitral
award in accordance with section 34 of the Act, 1996.
Therefore, as per section 13 of the Act, the challenge to the
arbitrator shall be made before the arbitral tribunal itself. 
However,   section   13   of   the   Act,   1996   shall   be
applicable only in a case where the arbitrator is challenged
on the grounds mentioned in section 12 of the Act, 1996. 
6.5 Sections 14 and 15 provide for termination of the mandate
of the arbitrator. Section 14 of the Act, 1996 provides that
the mandate of the arbitrator shall terminate and he shall
be   substituted   by   another   arbitrator   in   case   of   any
eventuality   mentioned   in   section   14(1)(a).   As   per   subsection   (2)   of   section   14,   if   a   controversy   remains
concerning any of the grounds referred to in clause (a) of
24
sub­section (1), a party may, apply to the “court” to decide
on the termination of the mandate. The expression “court”
is defined under section 2(e) of the Act, 1996, which reads
as under:­  
“(e) “Court” means— 
(i)  in   the   case   of   an   arbitration   other   than
international   commercial   arbitration,   the
principal Civil Court of original jurisdiction in a
district, and includes the High Court in exercise
of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the
subject­matter of the arbitration if the same had
been the subject­matter of a suit, but does not
include any Civil Court of a grade inferior to
such principal Civil Court, or any Court of Small
Causes; 
(ii)  in   the   case   of   international   commercial
arbitration,   the   High   Court   in   exercise   of   its
ordinary   original   civil   jurisdiction,   having
jurisdiction to decide the questions forming the
subject­matter of the arbitration if the same had
been the subject­matter of a suit, and in other
cases, a High Court having jurisdiction to hear
appeals from decrees of courts subordinate to
that High Court;]”
6.6 Section 15 provides other grounds for termination of the
mandate of the arbitrator. It provides that 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 an agreement of the parties. 
25
Where the mandate of an arbitrator is terminated on
the aforesaid grounds mentioned in section 15(1)(a) and (b)
in such a situation a substitute arbitrator shall have to be
appointed and that too, according to the rules that were
applicable   to   the   appointment   of   the   arbitrator   being
replaced. 
6.7 Therefore, on a conjoint reading of section 13, 14 and 15 of
the Act, if the challenge to the arbitrator is made on any of
the grounds mentioned in section 12 of the Act, the party
aggrieved has to submit an appropriate application before
the Arbitral Tribunal itself. However, in case of any of the
eventualities mentioned in section 14(1)(a) of the Act, 1996
and   the   mandate   of   the   arbitrator   is   sought   to   be
terminated   on   the   ground   that   the   sole   arbitrator   has
become  de   jure  and/or  de   facto  unable  to   perform  his
functions or for other reasons fails to act without undue
delay, the aggrieved party has to approach the concerned
“court” as defined under section 2(e) of the Act, 1996.  The
concerned court has to adjudicate on whether, in fact, the
sole arbitrator/arbitrators has/have become  de jure  and
26
de facto unable to perform his/their functions or for other
reasons he fails to act without undue delay. The reason
why such a dispute is to be raised before the court is that
eventualities mentioned in section 14(1)(a) can be said to
be a disqualification of the sole arbitrator and therefore,
such a dispute/controversy will have to be adjudicated
before the concerned court as provided under section 14(2)
of the Act, 1996. 
So   far   as   the   termination   of   the   mandate   of   the
arbitrator   and/or   termination   of   the   proceedings
mentioned   in   other   provisions   like   in   section   15(1)(a)
where he withdraws from office for any reason; or (b) by or
pursuant to an agreement of the parties, the dispute need
not be raised before the concerned court. For example,
where the sole arbitrator himself withdraws from office for
any reason or when both the parties agree to terminate
the mandate of the arbitrator and for substitution of the
arbitrator, thereafter, there is no further controversy as
either   the   sole   arbitrator   himself   has   withdrawn   from
office   and/or   the   parties   themselves   have   agreed   to
terminate the mandate of the arbitrator and to substitute
27
the arbitrator. Thus, there is no question of raising such a
dispute before the court. Therefore, the legislation has
deliberately provided that the dispute with respect to the
termination of the mandate of the arbitrator under section
14(1)(a) alone will have to be raised before the “court”.
Hence, whenever there is a dispute and/or controversy
that the mandate of the arbitrator is to be terminated on
the   grounds   mentioned   in   section   14(1)(a),   such   a
controversy/dispute has to be raised before the concerned
“court”   only   and   after   the   decision   by   the   concerned
“court” as defined under section 2(e) of the Act, 1996 and
ultimately it is held that the mandate of the arbitrator is
terminated, thereafter, the arbitrator is to be substituted
accordingly, that too, according to the rules that were
applicable   to   the   initial   appointment   of   the   arbitrator.
Therefore, normally and generally, the same procedure is
required to be followed which was followed at the time of
appointment   of   the   sole   arbitrator   whose   mandate   is
terminated and/or who is replaced.            
28
7. Now the next question which is posed for consideration of
this   Court   is,   whether,   in   a   case   where   the   parties
themselves have referred the dispute for arbitration and
appointed and/or nominated the sole arbitrator by mutual
consent and in the absence of any arbitration agreement
and contract containing an arbitration agreement once the
arbitrator is appointed, an application under section 11(6)
of the Act, 1996 to terminate the mandate of the arbitrator
and to substitute the arbitrator would be maintainable.
7.1 It is to be noted that in the present case as such the
application   under   section   14(2)   of   the   Act,   1996   to
terminate   the   mandate   of   the   arbitrator   was   already
pending before the concerned court on the ground that his
mandate stood terminated in view of section 14(1)(a) of the
Act, 1996. 
7.2 As   observed   hereinabove,   there   is   a   difference   and
distinction between the arbitrator to be appointed under
section 11(5) and under section 11(6) of the Act, 1996. As
observed above, even in the absence of any arbitration
agreement in writing between the parties, with consent the
29
parties may refer the dispute for arbitration and appoint a
sole arbitrator/arbitrators by mutual consent and parties
may   agree   mutually   on   a   procedure   for   appointing   an
arbitrator or arbitrators even in the absence of any written
agreement. In such a situation and failing an agreement
referred   to   sub­section   (2),   the   aggrieved   party   may
approach the High Court for appointment of an arbitrator
under sub­section (5) of section 11 and in such a situation
sub­section (5) of section 11 shall be attracted. However,
where there is a written agreement on the appointment
procedure agreed upon by the parties and there is a failure
to appoint an arbitrator or arbitrators, in that case, subsection   (6)   of   section   11   shall   be   attracted   and   an
aggrieved   party   may   approach   the  High   Court  for
appointment   of   an   arbitrator   under   sub­section   (6)   of
section   11   of   the   Act,   1996.   Therefore,   an   application
under section 11(6) of the Act, 1996 shall be maintainable
only in a case where there is a written agreement and/or
the contract containing the arbitration agreement and the
appointment   procedure   agreed   upon   by   the   parties,
application under section 11(6) of the Act, 1996 shall be
30
maintainable.   Otherwise,   the   application   under   section
11(6) of the Act, 1996 shall not be maintainable. 
7.3 In the present case, the parties themselves agreed on a
procedure for appointment of the arbitrator and appointed
and   nominated   an   arbitrator   by   mutual   consent.
Therefore, the application under section 11(6) of the Act,
1996 was not maintainable at all. 
8. Even   otherwise,   once   the   arbitrator   was   appointed   by
mutual consent and it was alleged that the mandate of the
sole arbitrator stood terminated in view of section 14(1)(a)
of the Act, 1996, the application under section 11(6) of the
Act, 1996 to terminate the mandate of the arbitrator in
view   of   section   14(1)(a)   of   the   Act   shall   not   be
maintainable. Once the appointment of the arbitrator is
made, the dispute whether the mandate of the arbitrator
has been terminated on the grounds set out in section
14(1)(a) of the Act, shall not have to be decided in an
application under section 11(6) of the Act, 1996. Such a
dispute cannot be decided on an application under section
31
11(6) of the Act and the aggrieved party has to approach
the concerned “court” as per sub­section (2) of section 14
of the Act. In the case of  Antrix   Corporation   Limited
(supra) in para 31 and 33, it is observed and held as
under: ­    
“31. The matter is not as complex as it seems and in
our  view,   once   the   arbitration   agreement   had   been
invoked by Devas and a nominee arbitrator had also
been appointed by it, the arbitration agreement could
not   have   been   invoked   for   a   second   time   by   the
petitioner, which was fully aware of the appointment
made   by   the   respondent.   It   would   lead   to   an
anomalous state of affairs if the appointment of an
arbitrator   once   made,   could   be   questioned   in   a
subsequent   proceeding   initiated   by   the   other   party
also for the appointment of an arbitrator. In our view,
while the petitioner was certainly entitled to challenge
the appointment of the arbitrator at the instance of
Devas, it could not do so by way of an independent
proceeding under Section 11(6) of the 1996 Act. While
power has been vested in the Chief Justice to appoint
an   arbitrator   under   Section   11(6)   of   the   1996   Act,
such appointment can be questioned under Section 13
thereof. In a proceeding under Section 11 of the 1996
Act, the Chief Justice cannot replace one arbitrator
already   appointed   in   exercise   of   the   arbitration
agreement.
33. Sub­section (6) of Section 11 of the 1996 Act, quite
categorically provides that where the parties fail to act
in terms of a procedure agreed upon by them, the
provisions of sub­section (6) may be invoked by any of
the   parties.   Where   in   terms   of   the   agreement,   the
arbitration clause has already been invoked by one of
the parties thereto under the ICC Rules, the provisions
of sub­section (6) cannot be invoked again, and, in
case the other party is dissatisfied or aggrieved by the
appointment   of   an   arbitrator   in   terms   of   the
agreement,   his/its   remedy   would   be   by   way   of   a
32
petition   under   Section   13,   and,   thereafter,   under
Section 34 of the 1996 Act.”
9. Following   the   aforesaid   decision   in   the   subsequent
decision   of   this   Court   in   the   case   of  S.P.   Singla
Constructions Private Limited (supra), it is observed and
held   by   this   Court   that   once   the   arbitrator   had   been
appointed as per clause 65 of the agreement (in that case)
and as per provisions of the law, the arbitration agreement
could not have been invoked for second time. 
9.1 Now so far as reliance being placed upon the decisions of
this   Court   by   learned   counsel   appearing   on   behalf   of
respondent No. 1 in the cases of ACC Limited (supra) and
Uttar Pradesh State Bridge Corporation Limited (supra)
are concerned as such there cannot be any dispute with
respect to the position of law laid down by this Court in
the aforesaid decisions to the effect that in case of any of
the eventualities occurring as mentioned in section 14 and
15 of the Act, 1996, the mandate of the arbitrator shall
stand terminated. However, the question is in a case where
there   is   a   dispute/controversy   on   the   mandate   of   the
33
arbitration   being   terminated   on   the   ground   set   out   in
section 14(1)(a) of the Act, whether such a dispute shall
have   to   be   raised  before  the   concerned  “court”   defined
under section 2(e) of the Act or such a dispute can be
considered on an application under section 11(6) of the
Act? Before this Court in the aforesaid decisions such a
controversy   was   not   raised.   Therefore,   the   aforesaid
decisions shall not be of any assistance to respondents
and/or the same shall not be applicable to the facts of the
case   on   hand,   while   deciding   the   issue,   whether
termination of the mandate of the arbitrator on the ground
mentioned under section 14(1)(a) of the Act, 1996 can be
decided under section 14(2) or under section 11(6) of the
Act, 1996. 
10. It is to be noted that as such in the present case the
proceedings   before   the   concerned   court   under   section
14(2) of the Act, 1996 at the instance of respondent No. 1
and   3   herein   to   terminate   the   mandate   of   the   sole
respondent under section 14(1)(a) of the Act were already
pending before the concerned court when respondent No. 1
moved an application under section 11(6) of the Act and
34
such   a   dispute   was   at   large   before   the   court   in   a
proceeding under section 14(2) of the Act. 
11. In view of the aforesaid discussion and for the reasons
stated above, it is observed and held as under: ­ 
(i) That   there is  a  difference  and  distinction  between
section 11(5) and section 11(6) of the Act, 1996;
(ii) In   a   case   where   there   is   no   written   agreement
between the parties on the procedure for appointing
an arbitrator or arbitrators, parties are free to agree
on a procedure by mutual consent and/or agreement
and   the   dispute   can   be   referred   to   a   sole
arbitrator/arbitrators   who   can   be   appointed   by
mutual consent and failing any agreement referred to
section   11(2),   section   11(5)   of   the   Act   shall   be
attracted and in such a situation, the application for
appointment   of   arbitrator   or   arbitrators   shall   be
maintainable under section 11(5) of the Act and not
under section 11(6) of the Act; 
35
(iii) In a case where there is a written agreement and/or
contract containing the arbitration agreement and the
appointment   or   procedure   is   agreed   upon   by   the
parties, an application under section 11(6) of the Act
shall   be   maintainable   and   the   High   Court   or  its
nominee  can appoint an arbitrator or arbitrators in
case any of the eventualities occurring under section
11(6) (a) to (c) of the Act;
(iv) Once the dispute is referred to arbitration and the
sole arbitrator is appointed by the parties by mutual
consent   and   the   arbitrator/arbitrators   is/are   so
appointed,   the   arbitration   agreement   cannot   be
invoked for the second time;
(v) In a case where there is a dispute/controversy on the
mandate of the arbitrator being terminated on the
ground mentioned in section 14(1)(a), such a dispute
has to be raised before the  “court”, defined under
section   2(e)   of   the   Act,   1996   and   such   a   dispute
cannot   be   decided   on   an   application   filed   under
section 11(6) of the Act, 1996.           
36
12. Now the next question which is posed for consideration of
this Court is whether the learned Trial Court was justified
in rejecting the application submitted by the appellant,
which was filed to reject the applications under section 14
of the Act, in exercise of powers under Order VII Rule 11 of
CPC is concerned, having gone through the averments in
the application under Order VII Rule 11 of CPC, it appears
and it is not in dispute that the application under section
14(2) of the Act was sought to be rejected on the ground
that there was no undue delay on the part of the arbitrator
and   therefore,   his   mandate   is   not   required   to   be
terminated   under   section   14(1)(a)   of   the   Act,   1996.
However, such a dispute is to be adjudicated on merits by
the concerned court before whom the proceedings under
section 14(2) of the Act were initiated and at the most, it
can be said to be the defence, which was to be adjudicated
by the concerned court. As per the settled position of law,
at the stage of deciding the application under Order VII
Rule 11 of CPC only the averments and allegations in the
application/plaint are to be considered and not the written
37
statement   and/or   reply   to   the   application   and/or   the
defence. Therefore, as such the learned Trial Court rightly
dismissed the application under Order VII Rule 11 of CPC.
13. In view of the aforesaid discussion and for the reasons
stated above, the impugned judgment and order passed by
the High Court is unsustainable and the same deserves to
be quashed and set aside and is accordingly quashed and
set aside. The controversy and/or the dispute, whether the
mandate of the sole arbitrator under section 14(1)(a) of the
Act,   1996   stands   terminated   or   not   shall   have   to   be
considered   by   the   court   on   an   application   filed   under
section 14(2) of the Act, 1996. It is reported that after the
impugned  order  passed   by   the   High   Court,   respondent
Nos.  1 and  3 have  withdrawn  their  applications   under
section 14(2) of the Act, 1996. To do substantial justice
between the parties and to ensure that respondent Nos. 1
and   3   are   not   left   remediless,   we   direct   that   the
application/applications submitted by respondent Nos. 1
and 3 before the concerned court under section 14(2) of
the Act, 1996 shall stand revived. Now the concerned court
38
before whom, the application/applications under section
14(2) of the Act, 1996 were filed, shall consider the same
in accordance with law and on their own merits at the
earliest and preferably within a period of four months from
the date of receipt of the present order. It goes without
saying, that if, ultimately, it is held that the mandate of
the sole arbitrator is terminated as per section 14(1)(a) of
the Act, 1996 and more particularly on the ground that
there was undue delay on the part of the arbitrator in
concluding the arbitration proceedings, the arbitrator has
to   be   substituted   and   a   fresh   arbitrator   has   to   be
appointed   by   following   the   same   procedure   which   was
followed   earlier   while   appointing   the   present   sole
arbitrator.  In case the parties do not agree to the name of
the sole arbitrator, the aggrieved party may approach the
appropriate court for appointment of an arbitrator under
section   11(5)   of   the   Act.   In   case   application(s)   under
section 14(2) of the Act is/are dismissed and it is held that
the mandate of the sole arbitrator is not terminated and
there was no undue delay on his part, in such a situation
the sole arbitrator to conclude the arbitration proceedings
39
and declare the award within a period of nine months from
the decision of the court that will be taken under section
14(2) of  the Act,  1996. The  impugned judgment(s)  and
order(s) passed by the High Court in AC No. 29/2015 and
in Review Petition No. 655/2017 are hereby quashed and
set aside. The appeals arising out of the aforesaid orders
are   hereby   accordingly   Allowed.   However,   the   appeals
challenging the impugned judgment and order passed in
W.P.   No.   11258/2010   and   W.P.   No.   11259/2010,
confirming the order/orders passed by the learned Trial
Court rejecting the application under Order VII Rule 11 of
CPC are hereby dismissed. In the facts of the case, there
shall be no order as to costs. 
…………………………………J.
                (M. R. SHAH)
…………………………………J.
 (B.V. NAGARATHNA)
New Delhi, 
May 5, 2022.
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