# SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL & ORS, ETC., ETC

- **Citation:** [2022] 7 S.C.R. 901
- **Court:** Supreme Court of India
- **Decided:** 2022-05-05
- **Case number:** Civil Appeal Nos. 2935-2938 of 2022
- **Bench:** M. R. Shah, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/swadesh-kumar-agarwal-v-dinesh-kumar-agarwal-ors-etc-etc-36357
- **Pages:** 27

## Headnote

Arbitration and Conciliation Act, 1996: ss. 11(5), 11(6), 14 -
Termination of the mandate of the arbitrator - Procedure to follow
- Parties-respondent no. 1 to 3 appointed a sole arbitrator by mutual
consent and later revoked the mandate of the sole arbitrator -
Thereafter, the respondent no. 1 and 3 filed applications u/s. 14(1)(a)
to terminate the mandate of the sole arbitrator on the ground of
delay in concluding the arbitration proceedings - During the
pendency thereof, the appellant filed an application u/ord. 7 r. 11
for rejection of the application u/s. 14 - Trial Court dismissed the
appellant's application - Thereagainst, the appellant filed writ
petition and respondent no. 1 filed an arbitration case u/s. 11(6) to
terminate the mandate of the sole arbitrator and appoint a fresh
arbitrator - High Court allowed the arbitration case and appointed
a fresh arbitration and dismissed the writ petition - On appeal,
held: An application u/s. 11(6) shall be maintainable only in a case
where there is a contract between the parties containing the
arbitration agreement and the appointment procedure is prescribed
and is agreed upon in writing - s.11(5) would be attracted in a case
where there is no procedure for appointment of an arbitrator agreed
upon as per s.11(2) - On facts, the sole arbitrator was appointed
by the parties themselves by mutual consent and in the absence of
any written contract containing the arbitration agreement - Thus,
an application u/s.11(6) in absence of any written agreement
containing arbitration agreement was not maintainable at all -
Dispute regarding the termination of the mandate of the arbitrator
u/s. 14(1)(a) can be raised before the court as defined u/s.2(e) and
it cannot be decided by the High Court on an application made u/
s.11(6) - Thus, the judgement and order of the High Court is
unsustainable and is quashed and set aside - Further, an application
u/Ord.7 r.11 is decided only after considering the averments and
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allegation in the application/plaint and not the written statement/
reply to the application/defence - Trial court rightly dismissed the
application u/Ord.7 r.11 - Civil Procedure Code, 1908 - Ord. 7 r.
11.
Disposing of the appeals, the Court
HELD: 1.1 The sole Arbitrator was appointed by the parties
themselves by mutual consent. There was no written agreement/
contract containing the arbitration clause. [Para 6.1][911-G]
1.2 Sub-section (5) of section 11 of the Arbitration and
Conciliation Act, 1996 shall be attracted in a case where there is
no procedure for appointment of an arbitrator agreed upon as
per sub-section (2) of section 11 and sub-section (6) of section 11
shall be applicable in a case where there is a contract containing
an arbitration agreement and the appointment procedure is
agreed upon. Thus, while referring the matter for arbitration there
need not be any written contract containing any arbitration
agreement. But the parties may themselves decide to refer the
dispute for arbitration to the sole arbitrator by mutual consent.
In that case or eventuality, sub-section (6) of section 11 shall not
be attracted at all and therefore, in such a situation, the application
under sub-section (6) of section 11 shall not be maintainable. An
application under sub-section (6) of section 11 shall be
maintainable only in a case where there is a contract between the
parties containing the arbitration agreement and the appointment
procedure is prescribed and is agreed upon in writing. In the
instant case, the sole arbitrator was appointed by the parties
themselves by mutual consent and in the absence of any written
contract containing the arbitration agreement. Therefore,
application under section 11(6) of the Act, 1996 in absence of any
written agreement containing arbitration agreement was not
maintainable at all. [Paras 6.2 & 6.3][912-C-F]
1.3 Except sections 13, 14 and 15, there is no other
provision under the Act, 1996 de

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 [2022] 7 S.C.R. 901
901
SWADESH KUMAR AGARWAL
v.
DINESH KUMAR AGARWAL & ORS, ETC., ETC.
(Civil Appeal Nos. 2935-2938 of 2022)
MAY 05, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Arbitration and Conciliation Act, 1996: ss. 11(5), 11(6), 14 -
Termination of the mandate of the arbitrator - Procedure to follow
- Parties-respondent no. 1 to 3 appointed a sole arbitrator by mutual
consent and later revoked the mandate of the sole arbitrator -
Thereafter, the respondent no. 1 and 3 filed applications u/s. 14(1)(a)
to terminate the mandate of the sole arbitrator on the ground of
delay in concluding the arbitration proceedings - During the
pendency thereof, the appellant filed an application u/ord. 7 r. 11
for rejection of the application u/s. 14 - Trial Court dismissed the
appellant's application - Thereagainst, the appellant filed writ
petition and respondent no. 1 filed an arbitration case u/s. 11(6) to
terminate the mandate of the sole arbitrator and appoint a fresh
arbitrator - High Court allowed the arbitration case and appointed
a fresh arbitration and dismissed the writ petition - On appeal,
held: An application u/s. 11(6) shall be maintainable only in a case
where there is a contract between the parties containing the
arbitration agreement and the appointment procedure is prescribed
and is agreed upon in writing - s.11(5) would be attracted in a case
where there is no procedure for appointment of an arbitrator agreed
upon as per s.11(2) - On facts, the sole arbitrator was appointed
by the parties themselves by mutual consent and in the absence of
any written contract containing the arbitration agreement - Thus,
an application u/s.11(6) in absence of any written agreement
containing arbitration agreement was not maintainable at all -
Dispute regarding the termination of the mandate of the arbitrator
u/s. 14(1)(a) can be raised before the court as defined u/s.2(e) and
it cannot be decided by the High Court on an application made u/
s.11(6) - Thus, the judgement and order of the High Court is
unsustainable and is quashed and set aside - Further, an application
u/Ord.7 r.11 is decided only after considering the averments and
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allegation in the application/plaint and not the written statement/
reply to the application/defence - Trial court rightly dismissed the
application u/Ord.7 r.11 - Civil Procedure Code, 1908 - Ord. 7 r.
11.
Disposing of the appeals, the Court
HELD: 1.1 The sole Arbitrator was appointed by the parties
themselves by mutual consent. There was no written agreement/
contract containing the arbitration clause. [Para 6.1][911-G]
1.2 Sub-section (5) of section 11 of the Arbitration and
Conciliation Act, 1996 shall be attracted in a case where there is
no procedure for appointment of an arbitrator agreed upon as
per sub-section (2) of section 11 and sub-section (6) of section 11
shall be applicable in a case where there is a contract containing
an arbitration agreement and the appointment procedure is
agreed upon. Thus, while referring the matter for arbitration there
need not be any written contract containing any arbitration
agreement. But the parties may themselves decide to refer the
dispute for arbitration to the sole arbitrator by mutual consent.
In that case or eventuality, sub-section (6) of section 11 shall not
be attracted at all and therefore, in such a situation, the application
under sub-section (6) of section 11 shall not be maintainable. An
application under sub-section (6) of section 11 shall be
maintainable only in a case where there is a contract between the
parties containing the arbitration agreement and the appointment
procedure is prescribed and is agreed upon in writing. In the
instant case, the sole arbitrator was appointed by the parties
themselves by mutual consent and in the absence of any written
contract containing the arbitration agreement. Therefore,
application under section 11(6) of the Act, 1996 in absence of any
written agreement containing arbitration agreement was not
maintainable at all. [Paras 6.2 & 6.3][912-C-F]
1.3 Except sections 13, 14 and 15, there is no other
provision under the Act, 1996 dealing with termination of the
mandate of the arbitrator and/or termination of the arbitral
proceedings. Section 13 of the Act, 1996 shall be applicable only
in a case where the arbitrator is challenged on the grounds
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mentioned in section 12 of the Act, 1996. Sections 14 and 15
provide for termination of the mandate of the arbitrator. On a
conjoint reading of section 13, 14 and 15 of the Act, if the challenge
to the arbitrator is made on any of the grounds mentioned in
section 12 of the Act, the party aggrieved has to submit an
appropriate application before the Arbitral Tribunal itself.
However, in case of any of the eventualities mentioned in section
14(1)(a) of the Act, 1996 and the mandate of the arbitrator is
sought to be terminated on the ground that the sole arbitrator
has become de jure and/or de facto unable to perform his functions
or for other reasons fails to act without undue delay, the aggrieved
party has to approach the concerned "court" as defined under
section 2(e) of the Act, 1996. The concerned court has to
adjudicate on whether, in fact, the sole arbitrator/arbitrators has/
have become de jure and de facto unable to perform his/their
functions or for other reasons he fails to act without undue delay.
The reason why such a dispute is to be raised before the court is
that eventualities mentioned in section 14(1)(a) can be said to be
a disqualification of the sole arbitrator and therefore, such a
dispute/controversy will have to be adjudicated before the
concerned court as provided under section 14(2) of the Act, 1996.
So far as the termination of the mandate of the arbitrator and/or
termination of the proceedings mentioned in other provisions
like in section 15(1)(a) where he withdraws from office for any
reason; or (b) by or pursuant to an agreement of the parties, the
dispute need not be raised before the concerned court. [Paras
6.4.1, 6.4.2, 6.5 & 6.7][919-B, F-G; 920-F-H; 921-A-C]
1.4 Once the arbitrator was appointed by mutual consent
and it was alleged that the mandate of the sole arbitrator stood
terminated in view of section 14(1)(a) of the Act, 1996, the
application under section 11(6) of the Act, 1996 to terminate the
mandate of the arbitrator in view of section 14(1)(a) of the Act
shall not be maintainable. Once the appointment of the arbitrator
is made, the dispute whether the mandate of the arbitrator has
been terminated on the grounds set out in section 14(1)(a) of the
Act, shall not have to be decided in an application under section
11(6) of the Act, 1996. Such a dispute cannot be decided on an
application under section 11(6) of the Act and the aggrieved party
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
& ORS, ETC., ETC.
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has to approach the concerned "court" as per sub-section (2) of
section 14 of the Act. [Para 8][922-H; 923-A-B]
1.5 There is a difference and distinction between section
11(5) and section 11(6) of the Act, 1996. In a case where there is
no written agreement between the parties on the procedure for
appointing an arbitrator or arbitrators, parties are free to agree
on a procedure by mutual consent and/or agreement and the
dispute can be referred to a sole arbitrator/arbitrators who can
be appointed by mutual consent and failing any agreement
referred to section 11(2), section 11(5) of the Act shall be attracted
and in such a situation, the application for appointment of arbitrator
or arbitrators shall be maintainable under section 11(5) of the
Act and not under section 11(6) of the Act. In a case where there
is a written agreement and/or contract containing the arbitration
agreement and the appointment or procedure is agreed upon by
the parties, an application under section 11(6) of the Act shall be
maintainable and the High Court or its nominee can appoint an
arbitrator or arbitrators in case any of the eventualities occurring
under section 11(6) (a) to (c) of the Act. Once the dispute is
referred to arbitration and the sole arbitrator is appointed by the
parties by mutual consent and the arbitrator/arbitrators is/are so
appointed, the arbitration agreement cannot be invoked for the
second time. In a case where there is a dispute/controversy on
the mandate of the arbitrator being terminated on the ground
mentioned in section 14(1)(a), such a dispute has to be raised
before the "court", defined under section 2(e) of the Act, 1996
and such a dispute cannot be decided on an application filed under
section 11(6) of the Act, 1996. [Para 11][924-H; 925-A-F]
1.6 It appears and it is not in dispute that the application
under section 14(2) of the Act was sought to be rejected on the
ground that there was no undue delay on the part of the arbitrator
and therefore, his mandate is not required to be terminated under
section 14(1)(a) of the Act, 1996. However, such a dispute is to
be adjudicated on merits by the concerned court before whom
the proceedings under section 14(2) of the Act were initiated
and at the most, it can be said to be the defence, which was to be
adjudicated by the concerned court. As per the settled position
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of law, at the stage of deciding the application under Order VII
Rule 11 CPC only the averments and allegations in the application/
plaint are to be considered and not the written statement and/or
reply to the application and/or the defence. Therefore, as such
the trial court rightly dismissed the application under Order VII
Rule 11 of CPC. [Para 12][925-G-H; 926-A-B]
1.7 The impugned judgment and order passed by the High
Court is unsustainable and the same is quashed and set aside.
The controversy and/or the dispute, whether the mandate of the
sole arbitrator under section 14(1)(a) of the Act, 1996 stands
terminated or not would have to be considered by the court on
an application filed under section 14(2) of the Act, 1996. After
the impugned order passed by the High Court, respondent Nos.
1 and 3 have withdrawn their applications under section 14(2) of
the Act, 1996. To do substantial justice between the parties and
to ensure that respondent Nos. 1 and 3 are not left remediless,
the application/applications submitted by respondent Nos. 1 and
3 before the concerned court under section 14(2) of the Act, 1996
would stand revived. Now the concerned court before whom, the
application/applications under section 14(2) of the Act, 1996 were
filed, would consider the same in accordance with law and on
their own merits at the earliest and preferably within the stipulated
period from the date of receipt of the present order. If, ultimately,
it is held that the mandate of the sole arbitrator is terminated as
per section 14(1)(a) of the Act, 1996 and more particularly on the
ground that there was undue delay on the part of the arbitrator in
concluding the arbitration proceedings, the arbitrator has to be
substituted and a fresh arbitrator has to be appointed by following
the same procedure which was followed earlier while appointing
the present sole arbitrator. In case the parties do not agree to
the name of the sole arbitrator, the aggrieved party may approach
the appropriate court for appointment of an arbitrator under
section 11(5) of the Act. In case application(s) under section 14(2)
of the Act is/are dismissed and it is held that the mandate of the
sole arbitrator is not terminated and there was no undue delay
on his part, in such a situation the sole arbitrator to conclude the
arbitration proceedings and declare the award within a period of
nine months from the decision of the court that will be taken
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
& ORS, ETC., ETC.
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under section 14(2) of the Act, 1996. The impugned judgment
and order passed by the High Court is quashed and set aside.
[Para 13][926-C-H; 927-A-B]
Antrix Corporation Limited v. Devas Multimedia Private
Ltd. (2014) 11 SCC 560 : [2013] 6 SCR 453; S.P. Singla
Constructions Private Limited v. State of Himachal
Pradesh and Anr. (2019) 2 SCC 488 : [2018] 14 SCR
1005; ACC Limited v. Global Cements Limited (2012) 7
SCC 71 : [2012] 6 SCR 215; Union of India and Ors.
v. Uttar Pradesh State Bridge Corporation Limited
(2015) 2 SCC 52 : [2014] 13 SCR 1180 - referred to.
Case Law Reference
[2013] 6 SCR 453
relied on
Para 3.9
[2018] 14 SCR 1005
relied on
Para 3.9
[2012] 6 SCR 215
referred to
Para 4.1
[2014] 13 SCR 1180
referred to
Para 4.1
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.29352938 of 2022.
From the Judgment and Order dated 07.09.2017 of the High Court
of Madhya Pradesh, Principal Seat at Jabalpur, Madhya Pradesh in WP
Nos.11258 and 11259 of 2010 and AC No.29 of 2015 and Order dated
17.11.2017 in RP No.655 of 2017.
Divyakant Lahoti, Ms. Praveena Bisht, Parikshit Ahuja, Ms.
Madhur Jhavar, Ms. Vindhya Mehra, Kartik Lahoti, Advs. for the
Appellant.
Ashok Lalwani, Prashant Kumar, Rajesh Inamdar, Siddhant Singh,
Aditya Bhat, Ms. Ripul Swati, Pai Amit, Sunil Singh Parihar, Ms. Charu
Ambwani, Rameshwar Prasad Goyal, Advs. for the Respondents.
The Judgment of the Court was delivered by
M. R. SHAH, J.
1. The present appeals arise out of impugned common judgment
and order dated 07.09.2017 passed by the High Court of Madhya Pradesh
Principal Seat at Jabalpur in Arbitration Case (AC) No. 29/2015 and in
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Writ Petition Nos. 11258/2010 and 11259/2010 and the order dated
17.11.2017 passed in Review Petition No. 655/2017, by which, the High
Court in exercise of powers under section 11(6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the Act, 1996) has
terminated the mandate of sole Arbitrator appointed by the parties
themselves and has substituted the sole Arbitrator and has appointed a
fresh Arbitrator on the ground that the mandate of the sole Arbitrator
stood terminated in view of section 14(1)(a) of the Act, 1996. This is on
the basis that there was undue and unreasonable delay in proceeding
with the arbitration proceeding by the Sole Arbitrator. By the impugned
judgment and order, the High Court has also confirmed the order passed
by the learned Trial Court dismissing the application filed under Order
VII Rule 11 of Code of Civil Procedure (CPC) preferred by the appellant
herein.
2. The facts leading to the present appeals in a nutshell are as
under: -
2.1 That a dispute between the parties which as such is a family
dispute for partition of the properties arose. It was referred to the sole
Arbitrator. The learned Arbitrator was appointed as a sole Arbitrator by
the parties themselves on 04.08.2008. The learned Arbitrator directed
the parties to appear on 14.03.2009 for deciding the pending applications.
On the request of the parties, the Arbitrator adjourned the hearing on
30.03.2009. No proceedings were undertaken on 30.03.2009 due to the
fact that the sole Arbitrator was not available in town. Respondent No.
1 and 3 herein - parties to the arbitration proceedings revoked the
mandate of the sole Arbitrator vide letters dated 11.07.2009. The letters
were replied to by the sole Arbitrator. Thereafter, respondent No. 1 and
3 herein, parties to the arbitration proceedings filed applications under
section 14(1)(a) of the Act, 1996 before the concerned Court (District
Court) to terminate the mandate of the sole Arbitrator on the ground of
delay in concluding the arbitration proceedings. The appellant herein
filed an application under order VII Rule 11 of CPC for dismissal of the
said applications under section 14 of the Act, 1996, submitting that there
was no delay at all on the part of the sole Arbitrator and therefore, there
was no question of terminating the mandate of sole Arbitrator under
section 14(1)(a) of the Act, 1996. Vide order dated 15.07.2010, the learned
Trial Court dismissed the application filed under order VII Rule 11 of
CPC preferred by the appellant herein.
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
& ORS, ETC., ETC. [M. R. SHAH, J.]
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2.2 Feeling aggrieved by the order passed by the learned Trial
Court, rejecting the application under order VII Rule 11 of CPC, the
appellant herein preferred present writ petition Nos. 11259/2010 and
11258/2010 before the High Court and pending the applications under
section 14(1)(a) of the Act, 1996 one of the parties - Dinesh Kumar
Agarwal preferred an arbitration case before the High Court under
section 11(6) of the Act, 1996 and requested to terminate the mandate
of the sole Arbitrator and to appoint a fresh Arbitrator. By the impugned
judgment and order, the High Court has allowed Arbitration Case No.
29/2015 and has observed and held that there was undue and unreasonable
delay on the part of the sole Arbitrator in concluding the arbitrating
proceedings and his mandate stood terminated under section 14(1)(a) of
the Act, 1996. Consequently, the High Court has appointed a fresh
Arbitrator. By the impugned judgment and order, the High Court has
also dismissed the writ petitions preferred by the appellant herein, in
which the appellant challenged the order passed by the learned Trial
Court rejecting the application under Order VII Rule 11 of CPC.
2.3 Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the High Court terminating the mandate
of sole Arbitrator under section 14(1)(a) of the Act, 1996, on an application
filed under section 11(6) of the Act, 1996 and dismissing the writ petitions
confirming the order passed by the learned Trial Court rejecting the
application under Order VII Rule 11 of CPC, the appellant has preferred
the present appeals.
3. Shri Divyakant Lahoti, learned counsel appearing on behalf of
the appellant has strenuously submitted that in the facts and circumstances
of the case the High Court has materially erred in terminating the mandate
of the Arbitrator under section 14(1)(a) of the Act, 1996on an application
filed under section 11(6) of the Act, 1996.
3.1 It is further submitted that in a case, where an Arbitrator was
already appointed by the parties themselves, subsequently, no application
under section 11(6) of the Act, 1996 was maintainable either to terminate
the mandate of the sole Arbitrator and/or to substitute the Arbitrator.
3.2 It is contended by Shri Lahoti, learned counsel that the mandate
of the Arbitrator can be terminated and/or may come to an end only as
per the provisions of the Arbitration and Conciliation Act, 1996. Reliance
is placed upon sections13, 14, 15, 25(a), 30 and 32 of the Act, 1996. It is
submitted that other than the aforesaid provisions under the Act, 1996,
there is no provision to terminate the mandate of the Arbitrator.
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3.3 It is submitted that in case of the eventualities mentioned in
section 14(1)(a) of the Act, 1996, the remedy available to the aggrieved
party would be to approach the "court" as defined under section 2(e) of
the Act, 1996.
3.4 Shri Lahoti, learned counsel appearing on behalf of the appellant
further submitted that in the present case as such respondent No. 1 and
3 herein - parties to the arbitration proceedings, in fact, did submit the
applications under section 14(2) of the Act, 1996, which were pending
before the concerned court at the time when the present applications
under section 11(6) of the Act, 1996 was filed.
3.5 It is further urged that in fact, there is a difference and distinction
between section 11(5) and section 11(6) of the Act, 1996.
3.6 That in the absence of any written contract containing the
arbitration agreement, section 11(6) of the Act, 1996shall not be applicable
and therefore, an application under that provision shall not be maintainable.
3.7 That even otherwise, there was no undue delay in the arbitration
proceedings on the part of the sole Arbitrator which could have led to
termination of his mandate that too, in exercise of powers under section
11(5) and section 11(6) of the Act, 1996.
3.8 It is further submitted by Shri Lahoti, learned counsel appearing
on behalf of the appellant that as there was no undue delay on the part
of the sole Arbitrator therefore, section 14(1)(a) would not be attracted.
Therefore, application under section 14 of the Act, 1996 was liable to be
dismissed and the learned Trial Court ought to have allowed the application
filed by the appellant, to reject the application under section 14 of the
Act, 1996 in exercise of powers under Order VII Rule 11 of CPC. It is
submitted that the High Court committed a grave error in dismissing the
writ petitions and confirming the order passed by the learned Trial Court
in dismissing the application under Order VII Rule 11 of CPC.
3.9 Shri Lahoti, learned counsel appearing on behalf of the appellant
heavily relied upon the decision of this Court in the case of Antrix
Corporation Limited v. Devas Multimedia Private Ltd.; (2014) 11
SCC 560 (para 31 & 33) and the subsequent decision of this Court in the
case of S.P. Singla Constructions Private Limited v. State of
Himachal Pradesh and Anr.; (2019) 2 SCC 488 in support of his
submissions that once the parties have invoked the arbitration proceedings
and the Arbitrator has been appointed, subsequent application under
section 11(6) of the Act, 1996 shall not be maintainable.
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
& ORS, ETC., ETC. [M. R. SHAH, J.]
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4. The present appeal is vehemently opposed by Shri Ashok
Lalwani, learned counsel appearing on behalf of respondent No.1 and
Shri Rajesh Inamdar, learned counsel appearing on behalf of respondent
No. 2. Shri Lalwani, learned counsel appearing on behalf of respondent
No. 1 has vehemently submitted that in the facts and circumstances of
the case, when it was found that there was an undue delay on the part of
the Arbitrator in concluding the arbitration proceedings, his mandate was
rightly terminated considering section 14(1)(a) of the Act, 1996.
4.1 It is submitted that as per section 14(1) of the said Act, the
word used is "shall". It is submitted that it provides that the mandate of
an arbitrator "shall" terminate and he shall be substituted by another
arbitrator, if he, de jure or de facto is unable to perform his functions or
for other reasons fails to act without undue delay. It is submitted that
therefore, once it is found that the arbitrator is unable to perform his
functions due to eventualities mentioned in section 14(1) of the Act,
1996, there shall be an automatic termination of the mandate of the
arbitrator and he shall be substituted by another arbitrator. Reliance is
placed upon the decisions of this Court in the cases of ACC Limited v.
Global Cements Limited; (2012) 7 SCC 71and Union of India and
Ors. v. Uttar Pradesh State Bridge Corporation Limited; (2015) 2
SCC 52.
4.2 Shri Lalwani, learned counsel appearing on behalf of respondent
No. 1 has further submitted that in the facts and circumstances of the
case, the learned Trial Court did not commit any error in rejecting the
application under Order VII Rule 11 of CPC. It is urged that whether or
not there was undue delay on the part of the sole Arbitrator is a question
which is to be adjudicated by the Court and at the most the same can be
said to be a defence. That as per the settled position of law at the stage
of deciding the application under Order VII Rule 11 of CPC only the
averments in the application/plaint are required to be considered and not
the defence and/or the case stated in the written statement and/or reply
to any application. It is submitted that therefore, the learned Trial Court
rightly rejected the application under Order VII Rule 11 of CPC and
rightly refused to reject the application submitted under section 14 of the
Act, 1996. That in any case, after passing the impugned order, the original
applicants- respondents have already withdrawn their applications under
section 14(2) of the Act, 1996.
4.3 Making the above submissions and relying upon the above
decisions, it is prayed to dismiss the present appeals.
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5. We have heard learned counsel appearing on behalf of the
respective parties at length.
6. The following questions arise for our consideration: -
(i)
Whether the High Court in exercise of powers under section
11(6) of the Act, 1996, can terminate the mandate of the
sole arbitrator?
(ii)
Whether in the absence of any written contract containing
the arbitration agreement, the application under section 11(6)
of the Act, 1996 would be maintainable?
(iii)
Is there any difference and distinction between sub-section
(5) of section 11 and sub-section (6) of section 11 of the
Act, 1996?
(iv)
Whether the application under sub-section (6) of section 11
shall be maintainable in a case where the parties themselves
appointed a sole arbitrator with mutual consent?
(v)
Whether in the facts and circumstances of the case the
High Court was justified in terminating the mandate of the
sole arbitrator on the ground that there was undue delay on
the part of the sole arbitrator in concluding the arbitration
proceedings which would lead to the termination of his
mandate, in an application under section 11(6) of the Act,
1996?
(vi)
Whether in the facts and circumstances of the case, the
learned Trial Court was justified in dismissing the application
submitted by the appellant, submitted to reject the
application under section 14(2) of the Act, 1996 in exercise
of powers under Order VII Rule 11 of CPC?
Question No. (i) to (v) are interconnected. Therefore, all are
considered and decided together.
6.1 In the present case the sole Arbitrator was appointed by the
parties themselves by mutual consent. There was no written agreement/
contract containing the arbitration clause.
6.2 As per sub-section (2) of section 11, subject to sub-section
(6), the parties are free to agree on a procedure for appointment of the
arbitrator or arbitrators. Sub-section (5) of section 11 provides that in an
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
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arbitration with a sole arbitrator, failing any agreement referred to in
sub-section (2), if the parties fail to agree on the arbitrator within thirty
days from receipt of a request by one party from the other party to so
agree, the court may appoint an arbitrator. However, in a case where
there is an arbitration agreement and the written contract and the
appointment procedure is agreed upon by the parties, sub-section (6) of
section 11 of the Act, 1996 shall be attracted and on the eventualities
occurring in sub-section (6) of section 11, a party may approach the
High Court and request for appointment of an arbitrator, in exercise of
powers under sub-section (6) of section 11 of the Act, 1996. Therefore,
sub-section (5) of section 11 shall be attracted in a case where there is
no procedure for appointment of an arbitrator agreed upon as per subsection (2) of section 11 and sub-section (6) of section 11 shall be
applicable in a case where there is a contract containing an arbitration
agreement and the appointment procedure is agreed upon. Thus, while
referring the matter for arbitration there need not be any written contract
containing any arbitration agreement. But the parties may themselves
decide to refer the dispute for arbitration to the sole arbitrator by mutual
consent. In that case or eventuality, sub-section (6) of section 11 shall
not be attracted at all and therefore, in such a situation, the application
under sub-section (6) of section 11 shall not be maintainable. An
application under sub-section (6) of section 11 shall be maintainable only
in a case where there is a contract between the parties containing the
arbitration agreement and the appointment procedure is prescribed and
is agreed upon in writing.
6.3 In the present case, the sole arbitrator was appointed by the
parties themselves by mutual consent and in the absence of any written
contract containing the arbitration agreement. Therefore, application under
section 11(6) of the Act, 1996 in absence of any written agreement
containing arbitration agreement was not maintainable at all.
6.4 Now the next question which is posed for consideration of
this Court is, whether, in exercise of powers under sub-section (6) of
section 11 of the Act, 1996, the High Court can terminate the mandate
of the sole arbitrator and substitute the arbitrator in view of section
14(1)(a) of the Act, 1996 on the ground that he has failed to act without
undue delay and in such a situation aggrieved party has to approach the
"court" to terminate his mandate.
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6.4.1 While answering the aforesaid question/issue, the relevant
provisions of the Act, 1996 on termination of the mandate of the arbitrator
and the procedure to be followed are required to be referred to: -
"11. Appointment of arbitrators-(1) A person of any nationality
may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a
procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an
arbitration with three arbitrators, each party shall appoint one
arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.
(3A) The Supreme Court and the High Court shall have the power
to designate, arbitral institutions, from time to time, which have
been graded by the Council under section 43-I, for the purposes
of this Act:
Provided that in respect of those High Court jurisdictions, where
no graded arbitral institution are available, then, the Chief Justice
of the concerned High Court may maintain a panel of arbitrators
for discharging the functions and duties of arbitral institution and
any reference to the arbitrator shall be deemed to be an arbitral
institution for the purposes of this section and the arbitrator
appointed by a party shall be entitled to such fee at the rate as
specified in the Fourth Schedule: Provided further that the Chief
Justice of the concerned High Court may, from time to time, review
the panel of arbitrators.]
(4) If the appointment procedure in sub-section (3) applies and-
(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, on an application of the party, by the arbitral
institution designated by the Supreme Court, in case of international
commercial arbitration, or by the High Court, in case of arbitrations
other than international commercial arbitration, as the case may
be;]
(5) Failing any agreement referred to in sub-section (2), in an
arbitration with a sole arbitrator, if the parties fail to agree on the
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
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arbitrator within thirty days from receipt of a request by one party
from the other party to so agree 11[the appointment shall be made
on an application of the party in accordance with the provisions
contained in sub-section (4);]
(6) Where, under an appointment procedure agreed upon by the
parties,- (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 [the appointment shall be made,
on an application of the party, by the arbitral institution designated
by the Supreme Court, in case of international commercial
arbitration, or by the High Court, in case of arbitrations other than
international commercial arbitration, as the case may be] to take
the necessary measure, unless the agreement on the appointment
procedure provides other means for securing the appointment.
(6B) The designation of any person or institution by the Supreme
Court or, as the case may be, the High Court, for the purposes of
this section shall not be regarded as a delegation of judicial power
by the Supreme Court or the High Court.]
(8) The arbitral institution referred to in sub-sections (4), (5) and
(6)], before appointing an arbitrator, shall seek a disclosure in
writing from the prospective arbitrator in terms of sub-section (1)
of section 12, and have due regard to- (a) any qualifications
required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are
likely to secure the appointment of an independent and impartial
arbitrator.
(9) In the case of appointment of sole or third arbitrator in an
international commercial arbitration, 16[the arbitral institution
designated by the Supreme Court] may appoint an arbitrator of a
nationality other than the nationalities of the parties where the
parties belong to different nationalities.
(11) Where more than one request has been made under subsection (4) or sub-section (5) or sub-section (6) to different arbitral
institutions, the arbitral institution to which the request has been
first made under the relevant sub-section shall be competent to
appoint.
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(12) Where the matter referred to in sub-sections (4), (5), (6) and
(8) arise in an international commercial arbitration or any other
arbitration, the reference to the arbitral institution in those
subsections shall be construed as a reference to the arbitral
institution designated under sub-section (3A).
(13) An application made under this section for appointment of an
arbitrator or arbitrators shall be disposed of by the arbitral institution
within a period of thirty days from the date of service of notice on
the opposite party.
(14) The arbitral institution shall determine the fees of the arbitral
tribunal and the manner of its payment to the arbitral tribunal subject
to the rates specified in the Fourth Schedule.
Explanation.- For the removal of doubts, it is hereby clarified
that this sub-section shall not apply to international commercial
arbitration and in arbitrations (other than international commercial
arbitration) where parties have agreed for determination of fees
as per the rules of an arbitral institution.]
12. Grounds for challenge- (1) When a person is approached
in connection with his possible appointment as an arbitrator, he
shall disclose in writing any circumstances,- (a) such as the
existence either direct or indirect, of any past or present relationship
with or interest in any of the parties or in relation to the subjectmatter in dispute, whether financial, business, professional or other
kind, which is likely to give rise to justifiable doubts as to his
independence or impartiality; and (b) which are likely to affect his
ability to devote sufficient time to the arbitration and in particular
his ability to complete the entire arbitration within a period of twelve
months. Explanation 1.- The grounds stated in the Fifth Schedule
shall guide in determining whether circumstances exist which give
rise to justifiable doubts as to the independence or impartiality of
an arbitrator. Explanation 2.- The disclosure shall be made by
such person in the form specified in the Sixth Schedule.]
(2) An arbitrator, from the time of his appointment and throughout
the arbitral proceedings, shall, without delay, disclose to the parties
in writing any circumstances referred to in sub-section (1) unless
they have already been informed of them by him.
(3) An arbitrator may be challenged only if- (a) circumstances
exist that give rise to justifiable doubts as to his independence or
SWADESH KUMAR AGARWAL v. DINESH KUMAR AGARWAL
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impartiality, or (b) he does not possess the qualifications agreed to
by the parties.
(4) A party may challenge an arbitrator appointed by him, or in
whose appointment he has participated, only for reasons of which
he becomes aware after the appointment has been made.
[(5) Notwithstanding any prior agreement to the contrary, any
person whose relationship, with the parties or counsel or the
subject-matter of the dispute, falls under any of the categories
specified in the Seventh Schedule shall be ineligible to be appointed
as an arbitrator: Provided that parties may, subsequent to disputes
having arisen between them, waive the applicability of this subsection by an express agreement in writing.]
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 subsection (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.
(6) Where an arbitral award is set aside on an application made
under sub-section (5), the Court may decide as to whether the
arbitrator who is challenged is entitled to any fees.
14. Failure or impossibility to act.-(1) 3 [The mandate of an
arbitrator shall terminate and he shall be substituted by another
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arbitrator, if]- (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.
15.