Chapter III, Section 14 of the Arbitration and Conciliation Act of 1996 provides the grounds to terminate an arbitrator’s authority in case of failure or impossibility of an arbitrator to adjudicate. This section ensures a fair process of arbitration by laying down the framework to question an arbitrator's capability. It protects parties’ interests and ensures the integrity of arbitration selection.
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Grounds of Challenge for Arbitrators
Section 14 provides two situation where a party can challenge an arbitrators authority
Impossibility to perform duties Section 14(1)(a):—The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if—(a) he becomes de jure or de facto unable to perform his functions or, for other reasons, fails to act without undue delay. This is typically assessed based on an arbitrator’s physical or legal incapacity, their unwillingness, or circumstances that prevent them from fulfilling their obligations.
Resignation or Termination Section 14(1)(b): he withdraws from his office or the parties agree to the termination of his mandate.
If both parties agree, an arbitrator can resign. However, Section 14 of the Arbitration and Conciliation Act also allows termination of their mandate if they fail to meet the standards required for an unbiased dispute resolution process.
If there is a disagreement about any of the reasons mentioned in clause (a) of sub-section (1), a party may, unless both parties have agreed otherwise, ask the Court to decide on ending the arbitrator’s role.
If an arbitrator resigns, or if both parties agree to end the arbitrator's role, this does not mean they accept any specific reason or claim made against the arbitrator.
Procedure for Challenging an Arbitrator Under Section 14 of the Act
Parties to arbitration may challenge an arbitrator if there are valid reasons under the criteria outlined above. Here’s an overview of the procedure:
The party must communicate the ground of the challenge to the tribunal and arbitrator as soon as possible.
In case the arbitrator does not voluntarily step down, the parties can seek the halp of the court. The court, after examining the evidence, will judge the merit of the challenge.
If the court finds the grounds valid, it will terminate the arbitrator's mandate. Following this, a replacement arbitrator is appointed
Appropriate Forum to Challenge Under Section 14
Traditionally, the belief was that applications under Section 14 of the Arbitration Act could only be submitted to the High Court or the Supreme Court. This interpretation aligned with Section 2(1)(e) of the Act, as it was perceived that only higher courts could oversee arbitrator appointments or substitutions. Earlier High Court decisions, such as Raksha Vigyan Karamchari Sahkari Awas Samiti Ltd. v. Proto Developers and Technologies Pvt. Ltd. and DDA v. Tara Chand Sumit Construction Co., upheld this view, restricting the substitution power to the High Court for domestic arbitration and the Supreme Court for international arbitration. Similar views were taken by various High Courts, including Gujarat, Bombay, Kerala, Allahabad, and Calcutta, emphasizing the higher court's exclusive role in certain arbitration matters.
Shift in Legal Landscape: Swadesh Kumar Agarwal v. Dinesh Kumar Agarwal (2022)
The Supreme Court’s decision in Swadesh Kumar Agarwal introduced a shift, stating that applications under Section 14(1)(a) could be brought before the "court" as defined under Section 2(1)(e), including District Courts when appropriate. The Supreme Court clarified that challenges to an arbitrator's mandate on grounds like undue delay should be addressed by the relevant District Court, rather than restricting it to the High Court or Supreme Court. Although considered obiter dicta, these observations have guided recent High Court rulings.
Post Swadesh Kumar Agarwal: High Court Perspectives
Subsequent High Court rulings, including the Delhi and Calcutta High Courts in cases like National Highways Authority of India v. Third Rock Consultants (P) Ltd. and Gammon Engineers & Contractors (P) Ltd. v. State of W.B. [6]., have aligned with the Supreme Court’s stance, affirming that applications under Section 14 may be entertained by District Courts where relevant. This interpretation helps prevent procedural conflicts and respects the hierarchy of jurisdiction.
The Swadesh Kumar Agarwal decision has clarified the jurisdictional interpretation of Section 14, potentially overruling prior views of several High Courts. This evolving perspective allows for greater consistency in arbitration law and promotes efficient dispute resolution by empowering District Courts to address certain Section 14 applications directly. Further clarity from the Supreme Court could help solidify this approach.
