Allahabad High Court Upholds The Termination Of The Arbitrator's Mandate, Citing An Unjustified Eight-Year Delay In Proceedings

The Allahabad High Court has upheld the termination of the Arbitrator's mandate, citing an unjustified eight-year delay in proceedings.

The bench of Justice Rohit Ranjan Agarwal observed that the arbitrator sat over the arbitral proceedings for 8 long years without any progress and passed the award in haste after the application seeking its removal was made. Ergo, the Court held that the arbitrator acted in breach of Section 14 and its mandate stands terminated under the said provision.

Facts of the Case

Two writ petitions were filed under Article 227 challenging the judgment of Commercial Court No.1, Meerut, allowing the application under Section 14(2) of the Arbitration & Conciliation Act, 1996 (the "Act").

The dispute arose in 2006 between the petitioner (Amit Agrawal) and respondent No.1. The matter was referred to the sole arbitrator, Pradeep Sharma, on 25.01.2007. An interim award was challenged by respondent No.1 under Section 34 of the Act, and the application was allowed in 2018.

Respondent No.1 challenged three other cases under Section 9 of the Act, which were dismissed in 2007. The sole arbitrator, on 03.10.2014, passed an order under Section 17 of the Act. Respondent No.1, on 13.10.2014, informed the arbitrator that, as per Section 14(1)(a) of the Act, the mandate had ended.

The arbitrator kept the matter pending until 13.08.2015, and on 13.08.2015, respondent No.1 received a notice fixing 30.08.2015 for the final award. Respondent No.1 filed an application under Section 14(2) on 20.08.2015 before the District Judge, Meerut, which was numbered as Arbitration Case No.72 of 2015.

The arbitrator delivered the final award on 24.09.2015. Respondent No.1 filed another application under Section 14(2) on 31.05.2016, numbered as Arbitration Case No.22 of 2016, later renumbered as Arbitration Case No.142 of 2022. The Ld. District Judge allowed both the applications under Section 14 of the A&C Act and terminated the mandate of the arbitrator. Aggrieved thereby, the petitioner filed two writ petition under Article 227 challenging the judgment of Commercial Court No.1, Meerut, allowing the application under Section 14(2) of the Arbitration & Conciliation Act, 1996 (the "Act").

Submissions of the Parties

Petitioner's Submissions:

• Section 14(2) of the Act allows a party to apply to the court for termination of the arbitrator's mandate.
• The application was moved on 20.08.2015, before the 2016 amendment to Section 14(1). Therefore, the amended act would not apply.
• The delay must be "undue" to justify termination; mere delay is not enough.
• The petitioner contested the interim award of 2007, and the matter is still pending in court.
• The seat of arbitration was at Pune or Mumbai, not Meerut.

Respondent's Submissions

• The arbitral seat was Meerut, as confirmed by correspondence and decisions like BGS SGS Soma JV vs. NHPC Limited.
• The application under Section 14(2) was maintainable due to the arbitrator's inordinate delay.
• The delay between 2007 and 2014, with no progress, justifies termination.
• The arbitrator proceeded hastily after the application under Section 14(2) was filed.

Court Analysis and Observations

The court considered two main issues: the arbitral seat and the maintainability of the Section 14(2) application. The court affirmed that Meerut was the arbitral seat based on correspondence and legal precedents.

The court found the application under Section 14(2) maintainable due to the arbitrator's prolonged inaction. The arbitrator's delay from 2007 to 2014 without fixing dates and subsequent haste after the Section 14(2) application supported the finding of undue delay.

The court upheld the order terminating the arbitrator's mandate on grounds of undue delay. The Court emphasized that 'undue delay' is not a mere delay but requires a demonstration of inordinate, unjustified, or unwarranted delay. The Arbitrator's failure to act promptly, coupled with a specific mention in the final award subject to the pending Section 14(2) decision, affirmed the termination of the mandate.

Case Title: Amit Agarwal vs. Atul Gupta 2023 LiveLaw (AB) 478, Matters under Article 227 No. 11263 of 2023

Citation: 2023 LiveLaw (AB) 478

Counsel for the Petitioner: Ravi Kand and Prabhakar Dwivedi, Senior Advocates

Counsel for the Respondent: Manish Goyal, Senior Advocate with Pankaj Dubey.

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