On Recusal Of Arbitrator Appointed By Court U/S 11 Of Arbitration Act, Substitute Arbitrator Can Be Appointed U/S 15(2): Uttarakhand HC

Brief Facts

The present application under section 11 read with section 15 of the Arbitration Act has been filed, seeking appointment of a substitute arbitrator after the recusal of the previously appointed arbitrator.

The previous Arbitrator was appointed by the court with the consent of both the parties as per clause 45.2 of the agreement executed on August 5, 2016. During the arbitration proceedings, the respondent filed an application, making personal allegations against the arbitrator which were rejected. Later, the arbitrator himself recused and the matter was referred back to the court for the appointment of a substitute.

It is contended by the petitioner that the respondent having compelled the recusal of the arbitrator by making baseless allegations cannot now object to the appointment of a substitute arbitrator under section 15 of the Arbitration Act which requires continuation of the arbitration upon the termination of the mandate of the Arbitrator.

It was further submitted that after giving consent for appointment of Arbitrator in earlier application, respondent cannot turn around and question applicant's competence to move application under Section 15(2) of the Act.

On the other hand, the respondent submitted that contract was awarded by Power Transmission Corporation of Uttarakhand Ltd. to a Joint Venture; since applicant is only one of the partner in the Joint Venture, therefore, the application made by him under Section 15(2) of the Act would not be maintainable.

It was also submitted that the consent of his client recorded by Coordinate Bench in the order dated 31.12.2021 was given under a false impression, therefore, the same is not binding upon the respondent.

Observations:

The court at the outset observed that Section 15(2) of the Act provides that a substitute Arbitrator shall be appointed according to the Rules that were applicable to the appointment of the Arbitrator, where the mandate of an Arbitrator terminates. Section 15(1)(a) of the Act provides that mandate of an Arbitrator shall terminate where he withdraws from office for any reason.

“Thus, on account of recusal of the sole Arbitrator, a substitute Arbitrator has to be appointed and if the agreement between the parties is silent regarding appointment of Arbitrator, then provision contained in Section 15(2) would be attracted and this Court will have to appoint the Arbitrator.”

The court also noted that in Tricolor Hotels Limited & others Vs. Dinesh Jain & others,2022 the Delhi High Court while noting the Judgment of the Bombay High Court in Sap India Private Limited v. Cox and Kings Limited, 2019 has held that once the Court appoints an arbitrator by an order passed on an application under Section 11 of the Act, and a vacancy arises on the arbitral tribunal on account of any of the circumstances as set out under Section 14(1) and/or Section 15(1) of the Act, then necessarily Section 15(2) becomes operational for appointment of a substitute arbitrator and it would be the Court which would be required to be approached to fill up the vacancy. The same procedure/rule would be required to be followed by an application under Section 15(2) of the Act to fill up the vacancy of the Court appointed arbitrator.

“The above position in law is implicit from the provisions of subsection 2 of Section 15 of the Act when the provision says that when the mandate of an arbitral tribunal terminates, a substitute arbitrator shall be appointed “according to the rules that were applicable to the appointment of an arbitrator being replaced”.”

It further added that respondent waived the right to raise the objection regarding legal capacity of the applicant to move application for appointment of Arbitrator, therefore, he cannot be permitted to raise this objection at this belated stage, when the Arbitrator earlier appointed recused and applicant has prayed for appointment of substitute Arbitrator.

Finally, the court observed that “in the present case, since the earlier Arbitrator was appointed by this Court under Section 11 of Arbitration & Conciliation Act and, in the Arbitration Agreement, there is no specific provision dealing with appointment of Arbitrator or substitute Arbitrator, therefore, this Court is of the considered opinion that the prayer made by the applicant deserves to be allowed.”

Case Title: Shri Rajendra Mimani Versus Power Transmission Corporation of Uttarakhand Limited

Case Number:Arbitration Application No. 7 of 2024

Judgment Date: 12/12/2024

Mr. Sanjeev Sahay & Mr. Harshit Sanwal Advocates for the applicant.

Mr. Amit Anand Tiwari, learned Senior Advocate assisted by Mr. Vinay Kumar, learned counsel for the respondent.