Case Analysis: DSC Ventures Pvt. Lmt. v/s Ministry of Road Transport and Railways
The judgment touches upon the virtue of the appointment of a substitute arbitrator within the purview of a petition filed under section 11 of the Arbitration´┐Ż & Conciliation Act, 1996 (more specifically section 11(6) of the Arbitration and Conciliation Act, 1996). Moreover, the requirement to issue notice under section 11(4) of the Act r/w a similar requirement in the agreement between the parties, then in such a scenario what would happen, the judgment also answers that question. The court has also upheld the concept of Party's Autonomy as enshrined under UNCITRAL Model Law. It is to be noted, that the court has dealt with a situation as to when one can resort to take refuge under section 11(6) while dealing with an appointment of a substitute arbitrator (only when there is a failure to appoint one under section 15(2) of the Act).
Facts: The petitioner and respondent entered into a Concession Agreement, dated 8th May, 2003, hereunder the respondent was to convert an existing 2-lane highway, (NH-6) in the state of Chhattisgarh, into a 4-lane highway. Disputes arose later. The Concession Agreement put forwards of disputes to a three-member arbitral tribunal, if efforts at resolution, by amicable settlement, were to fail.´┐Ż
Attempts at amicable settlement of the disputes between the parties failed. The learned arbitral tribunal commenced the hearing from 30th June, 2014. While the cross-examination of the respondent's witnesses was in progress, Mr B.P. Bhattacharya, the petitioner's arbitrator, resigned, on 23rd January, 2018, citing health reasons. The petitioner, thereupon, appointed N.K. Mody, J, a retired Judge of the High Court of Madhya Pradesh, as its substitute nominee arbitrator. Both parties agreed. On 24th February, 2020, before the award was announced, unfortunately, Mr. S.C. Sharma, the learned respondent's arbitrator expired. From this unfortunate occurrence, emerges the present dispute.´┐Ż´┐Ż
On 2nd March, 2020, the two learned surviving arbitrators, held an internal meeting and directed the respondent to appoint it's nominee arbitrator, as per Section 15 of the 1996 Act.´┐Ż
Issue : On the ground that, reading Section 15 (2), along with Section 11 (4) of the 1996 Act, the time of 30 days, for appointing a substitute arbitrator in place of Mr. S.C. Sharma, had expired, the petitioner has moved the present petition, under Section 11 (6) of the 1996 Act, praying that this Court should appoint a substitute arbitrator, in place of Mr. S.C. Sharma.´┐Ż
During the pendency of these proceedings, on 8th June, 2020, the respondent appointed Mr. Manoj Kumar, retired Director General (Road Development), Ministry of Road Transport and Highways, as it's substitute arbitrator, in place of Mr. S.C. Sharma.´┐Ż
Petitioner's Contentions :´┐Ż
´┐Ż It was contended that the appointment of Mr. Manoj Kumar, on 8th June, 2020, is totally illegal.´┐Ż
Respondent's Contentions: The respondent, disputes the applicability, to the present case, of the decisions, by pointing out that, according to the Concession Agreement between both parties made the giving of a notice, by petitioner, to the other, requiring the respondent to appoint a substitute arbitrator, mandatory. Respondent points out that, no notice has ever been issued, by the petitioner, requiring the respondent to appoint a substitute arbitrator, consequent to the demise of Mr. S.C. Sharma.´┐Ż
In the present case, neither has there been any request, by the petitioner, to the respondent, to appoint its substitute arbitrator, nor has there been any refusal, by the respondent, to do so. The arbitration clause, in the Concession Agreement specifically required issuance of a notice, by one party to the other, for appointment of an arbitrator. This procedure would, therefore, apply, equally, to the appointment of a substitute arbitrator, on the mandate of the arbitrator, of any one of the parties, standing terminated, on any of the grounds contemplated in Section 14 of the 1996 Act. Admittedly, no such notice was ever issued, from the side of the petitioner, to the respondent, to appoint a substitute arbitrator, consequent on the demise of Mr. S.C. Sharma. In the absence of any such notice, the petitioner is not entitled to plead confinement of the right, of the respondent, to appoint a substitute arbitrator, to any specific period of time, least of all to a period of 30 days from the date when the respondent came to know of the demise of Mr. S.C. Sharma, and of the requirement of appointing a substitute arbitrator.
´┐ŻIt cannot, therefore, be said that the right of the respondent, to appoint a substitute arbitrator, stood extinguished, on the date when the petitioner filed the present petition, before this Court, under Section 11 (6) of the Arbitration Act. In fact, there having been no failure, on the part of the petitioner, to appoint a substitute arbitrator, as per the procedure stated in Concession Agreement, Section 11 of the Arbitration Act did not apply, at all. Thus, the court held that, in appointing the substitute arbitrator, the respondent is guilty of any unconscionable delay, especially given the straitened (COVID ´┐Ż 19) circumstances in which the country finds itself at present, and the restrictions imposed as a consequence thereof. Rather, the appointment, of the substitute arbitrator, on 8 June, 2020, must be held as having been effected, in the circumstances, with commendable promptitude. The appointment of the substitute arbitrator, by the respondent, on 8 June, 2020 was regarded as eminently in accordance with the procedure contained in the Concession Agreement and, consequently, in keeping with Section 15 (2) of the Arbitration Act, as well. The court asserted that, no occasion, therefore, to appoint a substitute arbitrator in place of Mr. S.C. Sharma is invalidating, after the demise of the preceding arbitrator on February 24, 2020, cannot be regarded as an inordinate delay.´┐Ż
Thus, the petition was dismissed.
The Judgment touched upon the following sections of the Arbitration and Conciliation Act, 1996.
´┐Ż Section 11 (4) - Appointment of Arbitrators applies and´┐Ż´┐Ż
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by [the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court];
´┐Ż Section 11 (6) reed upon by the parties,´┐Ż
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request 1[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
´┐Ż Section 14: Failure or impossibility to act.
(1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if ´┐Ż
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.
´┐Ż Section 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´┐Ż
(a) where he withdraws from office for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.
(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.
´┐Ż SCC Online
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