Substitution Of Arbitrator On Ground Of Bias Will Not Come Within The Scope Of Substitution Under Section 29A (6) Of A&C Act: Kerala High Court

The Single Bench of Justice Sathish Ninan held that there is a stark difference between the substitution of an Arbitrator under Section 15(2) and the substitution of the Arbitrator under Section 29A (6) and hence, the request for substitution of an Arbitrator on the ground of bias will not come within the scope of substitution under Section 29A (6) of the A&C Act.

Certain disputes arose between the petitioner Flemingo Duty Free Shop Private Ltd. and the respondent Airports Authority of India under an agreement, leading to the conduct of arbitral proceedings. The period for completion of arbitration, as provided under Section 29A (1) and (3) of the A&C Act, expired and the arbitral proceedings between the parties continued.

Thereafter, the petitioner, alleging that the Sole Arbitrator was biased, filed a petition before the Kerala High Court seeking substitution of the Arbitrator under Section 29A (6), and for extending the period for completion of arbitral proceedings in terms of Section 29A (4) of the A&C Act.

Section 29A (1) of the A&C Act provides that in domestic arbitration, an award shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings.

Under Section 29A (3), the parties may, by consent, extend the period for making award for a further period not exceeding six months. However, as per Section 29A (4), if the award is not made within the said period of 12 months or the extended period, the mandate of the arbitrator(s) shall terminate unless the Court has extended the period, either prior to or after the expiry of the period.

Section 29 A (6) provides that while extending the period, it shall be open to the Court to substitute one or all of the Arbitrators.

Section 15 of the A&C Act deals with the termination of the mandate and substitution of Arbitrator. Section 15(2) provides for appointment of a substitute Arbitrator on the termination of the mandate of Arbitrator.

The Court observed that there is a specific provision in the A&C Act for challenging an Arbitrator on the ground of bias, i.e., Section 12, and that Sections 13, 14 and 15 of the A&C Act provide for various situations enabling substitution of Arbitrator.

The Court added that Section 29A fixes a time limit for completion of arbitration proceedings and for passing the award and that the Court, while extending the mandate of the Arbitrator under Section 29A (4), can order substitution of the Arbitrator.

Noting that the grounds of challenge against the Arbitrator, especially on the ground of bias, and the consequential substitution of the Arbitrator are dealt with under specific provisions of the A&C Act, the Court held that when specific provisions are incorporated in the A&C Act for challenge against an Arbitrator and for substitution of an Arbitrator, allegation of bias cannot be raised as a ground to seek substitution of Arbitrator under Section 29A.

The Bench added that when an Arbitrator is substituted under Section 29A (6), the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and materials already on record; further, the substituted Arbitrator shall be deemed to have received the said evidence and materials on record.

However, the Court added that, in view of Section 15(3), when an Arbitrator is substituted under other situations, including on the ground of bias, the previous hearings held by the Arbitrator may be repeated at the discretion of the substituted Arbitrator, unless otherwise agreed to by the parties.

Hence, the Court ruled that there is a stark difference between the substitution of an Arbitrator under Section 15(2) and the substitution of the Arbitrator under Section 29A (6).

"This fortifies the view that the request for substitution of an Arbitrator alleging bias will not come within the scope of substitution under Section 29A (6) of the Act.", the Court said.

The Court further observed that the Delhi High Court in the case of NCC Ltd. versus Union of India (2018) had ruled that Section 29A cannot be used by a party to seek substitution of an Arbitrator only because the party has apprehension about the conduct of the arbitration proceedings by the Arbitrator. The High Court had held that the only ground for removal of the Arbitrator under Section 29A is the failure of the Arbitrator to proceed expeditiously in the adjudication process.

After the petitioner submitted before the Court that it was not seeking extension of time without grant of the prayer for substitution of Arbitrator, the Court held that in the absence of grant of extension by the Court the mandate of the Arbitrator had terminated.

Holding that the request of the petitioner for substitution of the Arbitrator cannot be accepted, the Court dismissed the petition.

Case Title: Flemingo Duty Free Shop Private Ltd. versus Airports Authority of India

Citation: 2022 LiveLaw(Ker) 445

Dated: 28.06.2022 (Kerala High Court)

Counsel for the Petitioner: G. Harikumar (Gopinathan Nair), Akhil Suresh, Jayaprakash P. Sen (SR.)

Counsel for the Respondent: S. Sujin, V. Santharam

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