Arbitrator Substitution Is An Extreme Measure; Cannot Be Resorted To At The Drop Of A Hat: Delhi HC

The Delhi High Court has reiterated that the substitution of an arbitrator can only be justified when there is clear evidence of undue delay in conducting arbitration proceedings, rejecting calls for substitution based on mere allegations of bias.

The Single-Judge Bench of Justice C Hari Shankar, while hearing a plea seeking a six-month extension of arbitration proceedings, refused the petitioner's request to substitute the sole arbitrator.

The Bench opined, "No case for substitution of the learned sole Arbitrator presently in seisin of the disputes between the parties is made out. The prayer for substitution of the Arbitrator is accordingly rejected."

The petitioner alleged that the arbitrator had prolonged the process and displayed bias towards the respondent company.

However, the Court found no undue delay caused by the arbitrator and emphasized that substitution should not be undertaken without a substantial case.

“The substitution of an arbitrator cannot be resorted to at the drop of a hat, else no arbitration would ever proceed to a conclusion. It is only where a clear and substantial case for substitution is made out that a court should resort to it. Substitution of an arbitrator is an extreme measure,” the Court observed.

The petitioner argued that under Section 29A(6) of the Arbitration and Conciliation Act, the Court has absolute discretion to substitute an arbitrator in the interests of justice. However, the Court clarified that substitution should only occur when the arbitrator is responsible for undue delays in proceedings, which was not the case here.

The dispute arose from a franchise agreement, and the petitioner contended that the arbitrator allowed excessive cross-examination by the respondent company despite the closure of their defense.

The Court rejected this claim, stating that the arbitrator was conducting proceedings sincerely and that there is no strict rule on the number of hearings allowed for cross-examination.

"This is not a case in which the Arbitrator has been merely adjourning the matter without any good reason, thereby delaying the proceedings. On the other hand, the Arbitrator has been proceeding with the matter with all due sincerity. The extent to which a party should be permitted cross examination of the witness of the opposite party is a matter for the discretion of the court - or, in arbitral proceedings of the arbitrator. There is no hard and fast rule on the number of hearings for which cross-examination can be permitted to continue," the Court said.

The petitioner also raised concerns about losing trust in the arbitrator. The Court dismissed this argument, noting that allowing such claims would lead to chaos in the arbitral system, enabling parties to challenge arbitrators based on subjective perceptions of bias. "If such a submission were to be even countenanced, it would throw the entire arbitral system into disarray and, would provide a carte blanche for parties to come to court and seek substitution of the Arbitrator on the ground that they had trust issues with the arbitrator. It is but logical that a party may not be comfortable with a judge or an arbitrator who is expressing an opinion which is against the party's case," the Court said.

Consequently, the Court allowed an extension of the arbitration process but upheld the arbitrator’s mandate, ensuring the proceedings would continue without substitution.

Cause Title: Poonam Mittal v. M/s Create Pvt Ltd [Neutral Citation No. 2024: DHC: 7312]

Appearance:-

Petitioner: Advocates Suruchi Mittal, Naman Pandey

Respondent: Advocates Nikhilesh Kirishnan, Abhishek Bhushan Singh

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