Shant Chadha v. Kesho Ram Industries Ltd

1. This petition under Section 11 of the Arbitration and Conciliation Act (hereinafter referred to as ‘the Act”) has been filed for appointment of an arbitrator. It is submitted that an agreement dated 01.02.2009 was entered into between the parties. In the said agreement the petitioner was appointed as a Canvassing Agent upon certain terms and conditions and the period of appointment was of 12 months with effect from 01.02.2009. During the existence of this agreement certain disputes had arisen between the parties. As per clause 16 of the agreement, parties had agreed to the appointment of Sole arbitrator Sh.N.G.Khaitan. A letter dated 01.06.2013 was 2014:DHC:7012 written to the respondent wherein the respondent was informed that the petitioner doubts the integrity of named arbitrator Mr.N.G.Kaitan who is an advocate and handling the legal matters of the respondent.

2. A reply dated 26.07.2013 had been received from the respondent. In the reply the respondent has stated that Sh.N.G.Khaitan, Advocate had been accepted by both the parties at the time of entering into the contract and therefore he cannot be changed.

3. The present petition has been filed by the petitioner with the prayer to appoint a sole arbitrator and to refer the dispute to him on the ground that Mr.N.G.Khaitan, Advocate is working with M/s S.Andersons & Morgans, Advocates and Solicitors, a legal firm which is handling all the matters of the respondent company and the petitioner apprehends that he would not be able to adjudicate the dispute between the parties fairly and shall be biased towards the respondent.

4. I have heard arguments and perused the record.

5. The present petition has been filed under Section 11 of the Act. Section 11 of the Act empowers the court to appoint an arbitrator where the arbitration clause is invoked and the opposite party fails to appoint an arbitrator in terms of arbitral agreement.

6. In the present case, the parties by mutual agreement had agreed to the name of arbitrator. Where, thus, the arbitrator has already been named in the agreement, the courts have no jurisdiction to appoint an arbitrator under Section 11 of the Act, because there is no failure of appointment of an arbitrator.

7. The petitioner has come up with the request to change the named arbitrator as he doubts his integrity. Now the question is if this court under Section 11 of the Act has jurisdiction to change the named arbitrator and appoint another one, on the ground that one of the party has no faith in named arbitrator? The answer is NO. 8. Sections 12, 13, 14 & 15 of the Act deal with such situation. Section 12 of the Act clearly requires that an arbitrator who has been appointed is required in writing to disclose to the parties any circumstances likely to give rise to the justifiable doubts as to his independence or impartiality. Clause (3) of Section 12 of the Act is reproduced as under: Section 12 (3) An arbitrator may be challenged only if— (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties.

9. Plain reading shows that it is this clause which deals with the situation where one party doubts the integrity of arbitrator. Clause (3) of Section 12 provides the procedure to such challenge and also the remedies available, in case arbitrator refuses to recuse. Section 13 of the Act reproduces as under:

13. Challenge procedure.— (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.

10. Thus, where one of the party challenges the appointment of an arbitrator, he can do so before the arbitrator only and the arbitrator if decides the challenge against him and continue with the arbitral proceedings and make an arbitral award, such an award is challengeable under Section 34 of the Act.

11. Section 14 deals with the circumstances under which the mandate of an arbitrator can be terminated by the court. It can be terminated only when the arbitrator has become de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to the termination of his mandate.

12. The petitioner has not approached this court under Section 14 of the Act. He has also not contended any facts which can show that arbitrator has become dejure or defacto unable to perfom his function, rather the arbitrator in this case has not yet started functioning as the petitioner has not submitted to his jurisdiction.

13. Section 15 of the Act deals with another situation where the mandate of the arbitrator can be terminated. Section 15 (1) of the Act is reproduced as under:

15. Termination of mandate and substitution of arbitrator.— (1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate— (a) where he withdraws from office for any reason; or (b) by or pursuant to agreement of the parties.

14. As is apparent none of the situations mentioned therein exists in this case.