The Arbitration and Conciliation Act, 1996 provides India with a full legislation that establishes guidelines for conducting arbitration processes. According to Section 15 of Act the termination process for arbitrators allows parties to name replacement substitutes. The act maintains arbitration proceedings effectively by allowing arbitrator substitutions when one is unable to serve their role according to section 15.
Key Provisions of Section 15
Section 15 of Arbitration and Conciliation Act, 1996, addresses the situation in which the mandate of an arbitrator is revoked and how a replacement arbitrator is appointed. It provides for continuity in the arbitral process while ensuring flexibility if an arbitrator has to be replaced.
Sub-Section (1): Circumstances for Termination of Arbitrator’s Mandate
This sub-section specifies the situations in which the arbitrator's mandate comes to an end, in addition to the reasons provided under Section 13 (Challenge to the appointment of an arbitrator) and Section 14 (Failure or impossibility to act).
Clause (a): Withdrawal from Office
An arbitrator may withdraw voluntarily from office for any reason.
This could include personal reasons, health issues, conflict of interest, or any situation that impairs their ability to act impartially or effectively.
There is no requirement for approval from the parties unless there is an agreement to the contrary.
Clause (b): Agreement of the Parties
The arbitrator’s mandate may terminate by mutual consent of the parties.
This could happen if:
The arbitrator is found biased or incompetent.
The arbitrator fails to conduct proceedings in a timely manner.
Both parties decide to appoint a different arbitrator for any reason.
Sub-Section (2): Appointment of a Substitute Arbitrator
Where the mandate of an arbitrator is revoked, a replacement arbitrator shall be appointed.
The replacement must be done according to the same procedure and regulations that were utilized in appointing the initial arbitrator.
This provides continuity and equity in the arbitration process.
If the arbitrator was appointed by an institution, the same institution shall appoint the substitute.
In the event that the arbitrator had been appointed by the parties, they should pursue the same arrangement or procedure of appointing an alternate.
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Sub-Section (3): Repetition of Hearings
This provision gives the arbitral tribunal discretion to decide whether previously held hearings need to be repeated.
If the arbitrator is replaced, the tribunal may decide:
To continue the arbitration from the existing stage, considering the proceedings already conducted.
To redo the hearings to ensure the substitute arbitrator is fully informed.
However, if the parties agree, they can insist that hearings be repeated.
Sub-Section (4): Validity of Previous Orders and Rulings
Guarantees procedural consistency: Any prior order or decision issued by the tribunal is still valid even in case of the replacement of an arbitrator.
This prevents delays and unnecessary repetition of procedures.
Still, if the parties so decide otherwise, then they can reverse or cancel prior orders.
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Case Laws related to Section 15
Section 15 of Arbitration and Conciliation Act, 1996, addresses the termination of an arbitrator's mandate and the appointment of a substitute arbitrator. Courts in India have interpreted Section 15 of the Arbitration and Conciliation Act, 1996 through different cases to describe its application limits. The following section presents summaries of important judgments involving Section 15 of the Arbitration and Conciliation Act 1996:
1. Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd.
Facts: A dispute arose between Yashwith Constructions and Simplex Concrete Piles India Ltd., leading to the appointment of the managing director of Simplex as the sole arbitrator. The originally chosen arbitrator left the position but selected another person to fill the vacancy. Yashwith filed an objection against this appointment by arguing that the definition of rules in Section 15(2) must apply only to statutory rules and thus made the replacement invalid.
Issues:
Does the term "rules" in Section 15(2) pertain solely to statutory rules?
Was the appointment of the substitute arbitrator by the original arbitrator valid?
Judgment: The Supreme Court held that the term "rules" in Section 15(2) encompasses not only statutory rules but also the procedures agreed upon by the parties in the arbitration agreement. Consequently, the substitute arbitrator must be appointed following the same procedure applicable to the original arbitrator's appointment. The Court affirmed the validity of the substitute arbitrator's appointment in this context.
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2. National Highways Authority of India v. Bumihiway DDB Ltd.
Facts: A dispute between the National Highways Authority of India (NHAI) and Bumihiway DDB Ltd. led to the appointment of an arbitrator. Upon the termination of the arbitrator's mandate, a question arose regarding the procedure for appointing a substitute arbitrator.
Issues:
Can the High Court assume jurisdiction under Section 11(6) to appoint a substitute arbitrator without adhering to the agreed-upon procedure?
Judgment: The Supreme Court emphasized that the appointment of a substitute arbitrator should follow the procedure outlined in the arbitration agreement. The High Court cannot assume jurisdiction under Section 11(6) unless the conditions specified in clauses (a), (b), or (c) of Section 11(6) are met, such as a party's failure to act as required under the agreed procedure.
3. ACC Limited v. Global Cements Limited
Facts: In this case, the arbitrators named in the arbitration agreement between ACC Limited and Global Cements Limited died before any dispute arose. Global Cements sought the appointment of a substitute arbitrator under Section 15(2) read with Section 11 of the Act. ACC Limited contended that the arbitration agreement did not survive the death of the named arbitrators.
Issues:
Does the arbitration agreement become inoperative upon the death of the named arbitrators before the commencement of arbitration proceedings?
Can a substitute arbitrator be appointed under such circumstances?
Judgment: The Supreme Court held that the arbitration agreement does not become inoperative due to the death of the named arbitrators. The Supreme Court allowed a substitute arbitrator because agreements lack clear provisions for such appointments which required court intervention to maintain arbitration progress.
Summing Up
The easy operation of arbitration depends on Section 15 of Arbitration and Conciliation Act 1996 because it handles arbitrator replacement along with resignation procedures. The proper handling of procedures along with operational effectiveness supports the credibility of arbitration when it functions as India's conflict resolution system. Familiarity with this provision is vital for legal professionals, businesses, and parties entering into arbitration.
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Section 15 of Arbitration and Conciliation Act, 1996: FAQs
Q1. What is Section 15 of Arbitration and Conciliation Act, 1996 about?
Section 15 speaks about the expiration of an arbitrator's mandate and the process of substituting him.
Q2. When does the mandate of an arbitrator expire under Section 15?
The mandate of an arbitrator expires if they resign, are incapable of continuing their duties, withdraw, or if the parties agree to expire their mandate mutually.
Q3. How is a substitute arbitrator appointed under Section 15?
A substitute arbitrator is appointed by the same process as was followed for the initial appointment.
Q4. Does the arbitration process begin again if an arbitrator is replaced?
Not necessarily. The new arbitrator can take up where the last one left off, unless they choose to repeat some of the proceedings.
Q5. Why is Section 15 significant in arbitration?
It prevents disruption to arbitration proceedings as a result of an arbitrator's resignation or inability, keeping proceedings efficient procedurally.
