Substitute Co-Arbitrator Can't Be Appointed U/S 15(2) A&C Act In Case Of Termination Of Mandate Of Arbitrator By Operation Of Law: Gujarat HC

The Gujarat High Court observed that a substitute Co-Arbitrator cannot be appointed under Section 15(2) of the Arbitration and Conciliation Act, 1996 (A&C Act) when it is the case of termination of the mandate of the arbitrator by the operation of law.  

The Court observed thus in a petition filed by an LLP (Limited Liability Partnership) with the prayer to appoint a co-arbitrator on behalf of the private company in respect of the arbitration proceedings between the parties.

A Single Bench of Chief Justice Sunita Agarwal held, "As discussed above, it is not a case of withdrawal from the office by the Arbitrator, rather a case of termination of the mandate of the arbitrator by operation of law. The result is that the arguments of the learned counsel for the petitioner on the interpretation of Section 15 (2) of the Arbitration Act, 1996 for appointment of substitute co-arbitrator by invoking Clause 11.12 of the Agreement, are liable to be turned down."

Advocate Parth Contractor represented the petitioner while Advocate Shrijit G Pillai represented the respondents.

Factual Background -

The petitioner LLP and the respondent company were privity to a share purchase and Share Subscription Agreement (SPA) and Share Holders Agreement (SHA). On a dispute between the parties, a notice was sent by the petitioner invoking arbitration/dispute resolution clause, nominating a mediator and calling upon the respondent to appoint its nominee mediator within 15 days to proceed with the mediation in respect of the disputes arising out of the said agreement. The notice also stipulated that in case of failure of the parties to resolve the dispute through mediation, the petitioner would nominate its sole arbitrator for adjudicating the dispute between the parties, and, in case, the respondent is not agreeable to appointment of petitioner’s nominee as the sole arbitrator, they would be called upon to appoint their co-arbitrator.

As the parties could not agree on the question of appointment of arbitrator, the petitioner approached the High Court in a petition under Section 11 of the A&C Act seeking for appointment of the arbitrator. The High Court via an order appointed a sole arbitrator for adjudication of the dispute and the Arbitral Tribunal entered upon the reference leading to the commencement of the arbitral proceedings. The petitioner filed an application under Section 17 of A&C Act seeking ad-interim relief and the statement of objection was filed by the respondent. The Tribunal partly allowed the said application and such order was assailed under Section 34 of A&C Act before the Commercial Court. Another application under Section 16 was filed by the petitioner challenging the filing of counter claims by the respondent. The Tribunal reserved its order but no proceedings were held thereafter.

The High Court in the above regard said, “In any case, by mere passing of the Order dated 06.11.2023, the present case cannot be treated as the case of termination of mandate of the arbitrator by withdrawal from his office under Section 14(1)(b) of the Act, for the simple reason that with the expiry of the mandate on 24.10.2023, the arbitrator was not holding the office on the date of passing of the said order and, as such, there is no question of application of Section 15 of the Act 1996, in the facts of the instant case.”

The Court noted that in any case, as the parties have not reached at a consensus for extension of the mandate of the Arbitral Tribunal as per Sub-Section (3) of Section 29 A, another option before any of the parties was to move an application seeking intervention of this Court for extension of time.

“Lastly, on the asking of the Court as to whether the petitioner would prefer to move an application under Section 29 A (4) of the Act, 1996 or is agreeable for appointment of arbitrator by this Court, the learned counsel for the petitioner insisted that only a co-arbitrator can be appointed by this Court to constitute an arbitration panel by including the nominated arbitrator of the petitioner and the petitioner is not agreeable to any other proposition for the appointment of arbitrator", it further said.

The Court observed that in the result, it has no option but to dismiss the petition, inasmuch as, the case does not fall under Section 15 (2) of the Act 1996 and no substitute co-arbitrator can be appointed, as claimed by the petitioner.

“No such application under Section 29 A has been moved by any of the parties to the arbitration proceedings. The instant petition moved by the petitioner cannot be treated as the petition invoking Section 15 (2) of the Arbitration Act 1996 for appointment of substitute arbitrator, on the premise of the Order dated 06.11.2023 passed by the arbitrator that he withdraws from his office by invoking Section 14 (1) (b) of the Act 1996”, it added.

Accordingly, the High Court dismissed the petition.

Cause Title- C2R Projects LLP v. Kinetix Solutions Private Limited & Ors.

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