After Arbitral Award Is Set Aside, Can The Court Appoint A New Arbitrator With Parties' Assent? Yes, Rules Calcutta High Court

Justice Moushumi Bhattacharya, after holding that the arbitral award under challenge was liable to be set aside, drew from the emphasis of the Arbitration and Conciliation Act, 1996 (the Act) upon the autonomy of parties to find that a different arbitrator could be appointed.

Drawing from Section 43(4) of the Act which recognises that all redressal-doors were to be kept open and from Section 89 of the Civil Procedure Code, which encourages the Court to participate in the formulation of the settlement terms, the Court said,

"The above provisions have been highlighted as enablers for the Court to chart the future course of action where parties consent to a particular way forward. The basic premise is that the parties who have come to the Court cannot be without a remedy when they have agreed that the matter should go before a different Arbitrator. The 1996 Act does not curtail the power of a Court to mould the relief in fit cases provided the relief is not repugnant to the law as existing on that date."

Prior to coming to this conclusion, the Court discussed how the provision in the Act for the appointment of arbitrators, Section 11, and Section 34(4) could not apply to the question before it.

While Section 11 lays out a roadmap to for a Court to choose an arbitrator when the parties were in disagreement about their choice for arbitrator, Section 34(4) allows a Court to remand a matter to the same arbitrator upon an application being made by the award-holder and before the award is set aside under Section 34, to give an opportunity to the Arbitrator to eliminate the grounds for setting aside the arbitral award.

Since both these provisions would not apply, the Court had to decide how a new arbitrator could be chosen to decide the matter afresh. In this backdrop, the Court adopted the principle of party autonomy.

" The Arbitration and Conciliation Act, 1996, ensures party autonomy at all levels right through the dispute resolution process and even to the procedure for challenge to the award. The freedom of the parties to decide on the next course of action must therefore be preserved in the facts of the present case", the Court stated.

On the facts, the Bench deemed it fit to set aside the order citing instances of bias.

The petitioner, the award-debtor, had alleged that it was not allowed an opportunity to address the arbitrator. Though the award-holder averred that the award-debtor had participated in all proceedings, the Court stated that the ground on the perception of bias needed to be addressed.

The Court, from material, found that the arbitrator had arbitrated other proceedings involving the award-holder and had also been engaged as a counsel as well as consultant for the respondent in the past.

Pointing to Section 12(1)(a) of the Act, which requires an arbitrator to disclose in writing any direct or indirect relationship with or interest in any of the parties or the subject- matter in dispute as well as clauses 2 and 3 of the Seventh Schedule to the Act, the Court said,

"Read together, the fundamental objective is to ensure that the arbitrator is impartial and independent. The facts in the present case fall directly within the safeguards introduced in Section 12 read with the Seventh Schedule and the impugned award is thus liable to be set aside on this ground alone."

Therefore, the award was set aside and a new arbitrator, retired Judge of the Calcutta High Court Justice Sahidullah Munshi, appointed.

CASE: Jagdish Kishinchand Valecha v Srei Equipment Finance Limited And Anr.

COUNSEL: Senior Advocate Tilak Kumar Bose, Advocates Urmila Chakraborty, Amit Meharia, Paramita Banerjee, Subika Paul, Ishika Chattopadhyay for the petitioner

Advocates Raghunath Ghose, Pritha Ghosh, for the respondents

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