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

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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

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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

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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

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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

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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

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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

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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?

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(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?

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(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

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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,

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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.] 

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(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

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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

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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

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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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