Summary
An arbitrator nominated by a managing director who was himself statutorily ineligible could not continue merely because the appointing party participated or the opponent filed a claim. Waiver of Section 12(5) required an express written agreement after disputes arose, made with knowledge of the ineligibility. The Supreme Court held the appointment void, terminated the mandate, set aside intervening awards and enabled substitution through the High Court.
Issues
- Whether an ineligible named arbitrator could nominate a substitute under the contractual clause.
- Whether participation, appointment correspondence or a statement of claim waived statutory ineligibility.
- Which procedure and consequential relief applied to the invalid appointment.
Provisions considered
- Section 12(5) and proviso, Arbitration and Conciliation Act, 1996Statutory ineligibility overrides prior agreement and is waivable only by an express written agreement after disputes have arisen. (¶¶ 10, 15–20)
- Section 14(1)(a) and (2), Arbitration and Conciliation Act, 1996Ineligibility creates de jure inability; a controversy over termination is for the court rather than the ordinary arbitrator-challenge procedure. (¶¶ 10, 17, 19, 22)
- Section 4, Arbitration and Conciliation Act, 1996Deemed waiver by conduct does not replace the express post-dispute written waiver required by Section 12(5). (¶¶ 10, 17, 20)
Held
- The ineligible managing director’s nomination was void under the rule in TRF. That declaration was not prospective only; the arbitration and appointment here followed commencement of the 2015 amendments. (¶¶ 13, 18)
- Section 12(5) ineligibility differs from a factual challenge based on justifiable doubts. Sections 12(4) and 13 do not bar an application under Section 14(2) concerning statutory inability and termination of mandate. (¶¶ 14–17, 19)
- The required waiver must express both parties’ informed agreement in writing after disputes arise. The appointment letter and filing of a claim did not establish that agreement; implied consent or participation was insufficient. (¶¶ 15, 17, 20–21)
- The mandate had terminated and the High Court could appoint a substitute with both parties’ consent. Awards rendered during the pending challenge were subject to its outcome and had to be set aside, rendering the related Section 34 proceedings infructuous. (¶ 22–23)
Result
Appeals allowed and High Court judgment set aside. Arbitrator’s mandate terminated; intervening awards set aside. High Court may appoint a substitute with parties’ consent. Appellant at liberty to seek return of deposits made in the now-infructuous Section 34 proceedings.