Introduction
Section 29A(6) of the Arbitration and Conciliation Act, 1996 ("the Act") empowers courts to substitute arbitrators while extending the time for arbitration proceedings under Section 29A(4). A recent ruling by the Delhi High Court in Poonam Mittal vs. Created Pvt. Ltd. [2024 SCC OnLine Del 6621] has clarified that this power of substitution can only be invoked in cases of undue delay caused by the arbitrator. This interpretation affirms the position of various High Courts on this issue.
Background
The Petitioner, in this case filed an application under Section 29A(4) and (6) of the Act seeking an extension of the arbitrator's mandate and the substitution of the Arbitrator on the grounds of bias. The dispute arose between the Petitioner and the Respondent over certain contractual obligations, which had been referred to Arbitration in terms of the Dispute Resolution clause of the Agreement.
The averment of the Petitioner was that the Arbitrator had allowed the respondent to cross-examine the Petitioner's witness over eight separate hearings. This extended duration, was unwarranted and prejudicial to their interests, causing unnecessary delay in the arbitration proceedings.
The Petitioner contended that Section 29A(6) of the Act gives courts broad powers to substitute an Arbitrator while extending the timeline of the proceedings. They argued that the provision does not set out specific criteria or limitations for such substitution, allowing the court to exercise discretion based on any reasonable ground, including bias or inefficiency on the part of the arbitrator. In their view, the Arbitrator's decision to allow repeated cross-examinations was indicative of bias and thus warranted their replacement.
Issue
The key issue before the Court was whether an Arbitrator could be substituted under Section 29A(6) of the Act based on allegations of bias.
Court’s Finding
The Hon’ble Delhi High Court, rejecting Petitioner’s arguments, held that Section 29A(6) must be interpreted in the context of Section 29A as a whole. Section 29A is primarily concerned with ensuring the timely completion of arbitration proceedings. The provision for substitution of an Arbitrator under Section 29A(6) is not meant to provide parties with a tool, to challenge the Arbitrator based on dissatisfaction with procedural decisions. Rather, this provision is to be used only in cases of undue delay caused by the Arbitrator, thereby impeding the expeditious completion of Arbitration. It is only where a clear and substantial case for substitution is made out that a court should resort to it.
The court emphasized that while Section 29A(6) confers the power to substitute Arbitrators, such a drastic step should only be taken by Courts where a clear and substantial case for substitution is made out. In this case, the Arbitrator’s decision to allow extended cross-examination did not, in the court’s view, constitute undue delay. The Arbitrator had not adjourned the proceedings without valid reasons, nor had they taken any actions that could be deemed to deliberately delay the arbitration process.
Further, the Hon’ble Court relying on the precedent set by the division bench in Red Roses Public School vs. Reshmawat [2019 SCC OnLine Del 10937], rejected the Petitioner’s plea of biasness. The Court reiterated that allegations of bias must be supported by specific, factual allegations that establish a reasonable likelihood of bias. Such claims cannot be based on speculative or subjective concerns about the arbitrator’s decisions. In this case, the petitioner had failed to substantiate the claim of bias with any concrete evidence. The Court found that the arbitrator’s conduct in allowing the cross-examinations did not reflect bias but rather exercised discretion in managing the proceedings.
To further, support its reasoning, the Court also refer the decision of Coordinate Bench in NCC Ltd. vs. UOI [2018 SCC OnLine Del 12699], where it was held that the primary intent of Section 29A is to promote the expeditious conclusion of arbitration proceedings. The Court stressed that substituting an Arbitrator under Section 29A(6) is an extreme measure and should only be resorted to when there is clear evidence that the arbitrator has failed to act expeditiously in adjudication process.
Judicial Precedents
The Court’s interpretation in this case is consistent with similar rulings from other High Courts, which have taken a narrow view of Section 29A(6). That, in Ramnik Kaur Dhillon vs. Arrow Engineering Ltd. [2020 SCC OnLine Bom 7557], the Bombay High Court rejected the plea for substitution of the arbitrator, which was based on the excessive fees charged by the arbitrator. The Court clarified that substitution under Section 29A(6) should not be invoked for reasons unrelated to undue delay in the arbitration proceedings. The mere dissatisfaction with the arbitrator's conduct or charges is insufficient to justify such substitution.
Similarly, in Barasat Krishnagar Expressways Ltd. vs. National Highways Authority of India [2023 SCC OnLine Del 243], the Delhi High Court reaffirmed that a delay in pronouncing the award alone does not warrant the exercise of the court’s powers under Section 29A(6). The court made it clear that this provision is meant to address situations where the arbitrator’s conduct has led to an unjustifiable delay in the proceedings, not to penalize mere delays in issuing the final award.
In yet another case, Flemingo Duty Free Shop Pvt. Ltd. vs. Airports Authority of India [2022 SCC OnLine Ker 3459], the Kerala High Court emphasized that issues of bias or allegations against the arbitrator's impartiality must be addressed under Sections 12, 13, and 15 of the Arbitration Act. The court stressed that Section 29A(6) is not intended to serve as a mechanism for challenging an arbitrator’s impartiality or conduct but is strictly concerned with undue delays caused by the arbitrator. The court held that parties have clear legal avenues under other sections of the Act to raise such issues, and Section 29A cannot be used as a substitute for those established remedies.
Conclusion
The stance of the Courts is unequivocal: An Arbitrator can only be substituted under Section 29A(6) at the court's discretion, and only in cases where the Arbitrator is responsible for undue delay in the proceedings. This interpretation aligns with the principle of party autonomy in the nomination of Arbitrators, which should not be undermined without compelling reasons. If there are genuine concerns about the credibility of an arbitrator, Section 15 of the Act provides the appropriate legal recourse, allowing parties to seek substitution in specific, well-defined circumstances.
The courts have made it clear that Section 29A(6) cannot be misused as a loophole to circumvent the provisions of Section 15. Parties dissatisfied with the progress of the arbitration or the Arbitrator’s conduct cannot rely on Section 29A(6) to make unreasonable substitution claims simply because the proceedings are not unfolding to their preference.
The above article is authored by Sonali Khanna(Senior Associate) and Vanshika Gupta(Fellow).
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