Case Update: M/s P.N. Garg, Engineers & Contractors v. Chief Engineer, Bhopal Zone, Sultania Infantry Lines Bhopal

(Application U/S 11(4) No. 92 of 2021, decided on 16-11-2021)

A single Judge bench of the Hon’ble High Court of Allahabad (“the Court”) comprising of Justice Jayant Banerji, on 16 November 2021, passed orders in an Application under Section 11(4) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the A&C Act”) seeking appointment of an independent Arbitrator. The Court also decided on an important point of law i.e. whether Sections 14 and 15 of the A&C Act can be invoked to appoint a substitute Arbitrator if an Arbitrator becomes functus officio (once the mandate of the Arbitral tribunal ends/the Arbitrator is no longer qualified to be an Arbitrator as per the contract/law, they have no jurisdiction).

Facts of the case:

M/s P.N. Garg, Engineers & Contractors ( “the applicant”) and the Chief Engineer, Bhopal Zone, Sultania Infantry Lines, Bhopal (hereinafter referred to as “the respondent”) had entered into a contract that contained an arbitration clause.

When a dispute arose, they invoked the arbitration clause, and an Arbitrator appointed by the competent authority, passed a final award but the same was challenged under Section 34 of the A&C Act. The lower Court held that an arbitrator’s decision cannot be modified. The Court set aside the award and held that the subject needed to be reconsidered in light of the contract’s conditions and remanded the case back to arbitration.

The Arbitrator appointed by the competent authority recused himself from the case citing his retirement and the fact only a serving officer could be an Arbitrator according to the agreement. Despite sending repeated reminders to the respondents, the applicant’s counsel claimed that no alternative Arbitrator had been appointed, therefore this application was filed.

The Court had asked the applicant’s counsel whether the Court, exercising jurisdiction under Section 34 of the Act, had the authority to remand the matter to the Arbitrator after setting aside the arbitral judgement, and if not, whether the current application would be maintainable. The Counsel argued that because the matter was remanded and the Arbitrator withdrew from his office, his mandate had expired, and a substitute Arbitrator was necessary to be appointed under Section 15(2) of the Act.

Court’s Observation:

The Allahabad HC observed that Sections 14 and 15 provide for the termination of the arbitrator’s mandate and the replacement of the arbitrator. Clearly, an arbitrator’s mandate is derived from an arbitration agreement made pursuant to Section 7 of the Act and his appointment pursuant to Section 11.

Sections 14 and 15 would only apply if the arbitral proceedings were still in progress. In this case, the arbitral proceedings were concluded by the final arbitral award, and the mandate of the arbitral tribunal was terminated by the conclusion of the arbitral proceedings, as provided for in sub-section (1) of Section 32.

Comment:

The Court clarified the Arbitrator can be replaced during the pendency of proceedings but when the final award is passed, the arbitral tribunal stands terminated. After setting aside of Award by the competent Court, the aggrieved party is free to issue notice to the other party to initiate arbitration proceedings afresh.

India has been synonymous with its arts in various forms. From the time of our

Shreyas Jayasimha and Tushar Tyagi The Ministry of Corporate Affairs (“MCA“) issued a notification dated