A Single Bench of the Delhi High Court in the case of, Sacheerome Advanced Technologies (SAT) v. NEC Technologies Private Limited (NECI), [O.M.P. (T) (COMM) 34 of 2022, dated March 29, 2022] has held that, petition under Section 14 of the Arbitration and Conciliation Act, 1996 (“Act”) cannot be filed to challenge the appointment of an arbitral tribunal on the grounds mentioned under Section 12(3) of the Act, i.e. on the ground of justifiable doubts as to the independence or impartiality of an arbitrator and noted that, such a challenge must be initiated in accordance with the procedure laid down under Section 13 of the Act.

Brief facts: 

The petitioner filed a petition under Section 11 of the Act, seeking appointment of an arbitrator.  The said petition was allowed, and an arbitrator was appointed to adjudicate the dispute between the parties.  As the said arbitrator expired during the pendency of the arbitral proceedings, the Court on an application filed by the petitioner appointed another arbitrator to decide the disputes between the parties. The newly appointed arbitrator made disclosures as required under Schedule V and VII of the Act. The parties accepted the disclosure and unreservedly participated in the arbitration proceedings.  Subsequently, the said arbitrator disclosed that she had worked as junior to one of the senior counsels appearing for the petitioner.  She had also worked with the law firm which had subsequently split and after the split she was associated with the resultant firm as a Partner (not representing the respondent). The other resultant firm, pursuant to split was representing the respondent. 

The petitioner being aggrieved by the manner in which the arbitral tribunal had conducted the arbitral proceedings, filed an application under Section 14 of the Act seeking removal of the said arbitrator on the following grounds as mentioned hereinbelow:

1. the arbitral tribunal did not inspire any confidence since the arbitrator found the petitioner guilty of inordinate delays and had also imposed costs, even though the alleged delay had occurred prior to the appointment of the arbitrator; and 
2. there had been an inordinate delay on the part of the arbitrator in conducting the arbitration proceedings and therefore she has failed to act with due despatch. 

Issue:

Whether Section 14 of the Act provides a separate remedy available to parties to challenge the appointment of an arbitrator?

Decision of the Court:

The court held that the said petition filed by the petitioner under Section 14 (1) of the Act challenging the appointment of the arbitral tribunal was not maintainable.  According to the Court, a petition under Section 14(1) of Act cannot be filed to challenge the appointment of the arbitral tribunal on the grounds set out under Section 12(3) of the Act and any party seeking to challenge the appointment of the arbitrator is required to do so in accordance with the procedure set out in Section 13 of the Act. In the first instance, the said challenge is required to be considered by the arbitral tribunal. In terms of sub-section (3) of Section 13 of the Act, the learned arbitrator could either withdraw from the office failing which the arbitral tribunal is required to decide the said challenge. In terms of Sub-section (4) of Section 13 of the Act, if the challenge is not successful, the arbitral tribunal is required to continue with the arbitral proceedings and make an award. In such circumstances, the only recourse available to a party challenging the appointment of an arbitrator under Section 13 of the Act, is to wait for the arbitral award and if aggrieved, take recourse to the provisions as set out under Section 34 of the Act.

Conclusion:

Insofar as a challenge to the arbitral tribunal in the circumstances referred to in Section 12(3) of the Act is concerned, recourse to Section 14 of the Act would be available only on two grounds; first, where the arbitrator becomes de jure or de facto unable to perform his functions or for others fails to act without undue delay and second, where the arbitrator withdraws from his office, or the parties agree to the termination of his mandate. As opposed to this, in a challenge where grounds stated in Schedule V are disclosed giving rise to the justifiable doubts as to the arbitrator’s independence or impartiality, the same needs to be determined with due regard to the facts of the particular challenge by the arbitral tribunal under Section 13 of the Act. The Court thus ruled that, the contention that Section 14 of the Act provides a separate remedy to the parties to challenge the appointment of an arbitrator, notwithstanding the provisions of Section 13 of the Act, is without any merit. The Delhi High Court thus, dismissed the petition filed by the petitioner and imposed a cost of Rs. 25,000 on the petitioner.

Please find attached a copy of the judgment.

This update has been contributed by Murtaza Kachwalla (Partner) and Jaisha Sabavala (Associate).

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