Citation Codes: (2022) 1 SCC 235 ; (2023) 1 SCC (Civ) 636 ; 2022 SCC OnLine SC 556

Date of Judgement: 5 May 2022

Court: Supreme Court of India

Coram:  Justice M. R. Shah & Justice B.V. Nagarathna

Link to the judgement

Factual Background

A family dispute on partition of properties arose between Swadesh Kumar (“Appellant”) and Dinesh Kumar & Ors (“Respondents”). The parties mutually agreed to refer the dispute to a sole arbitrator, who was appointed on 04 August 2008. The arbitrator for deciding pending applications sought the appearance on 14 March 2009, but on the request of parties, the arbitrator adjourned the hearing for 30 March 2009. However, that hearing was not conducted because of non-availability of sole arbitrator.

Respondent no. 1 and 3 (also parties to the arbitration) revoked the mandate of  sole arbitrator vide letters dated 11 July 2009, which was replied by the arbitrator. Then, these Respondents filed applications under Section 14(1)(a) of the Arbitration & Conciliation Act, 1996 (“A&C Act”), before the District Court for the Termination of the mandate of the arbitrator on ground of delay in concluding the proceedings. In response, the Appellant filed application under Order VII Rule 11 of Code of Civil Procedure (“CPC”) for dismissal of the applications under Section 14 of the A&C Act, contending that there was no delay on the arbitrator. However, the District Court dismissed the Appellant’s application. Pending the applications under Section 14 of the A&C Act, the Appellant preferred a writ petition before High Court, and Respondent (Dinesh Kumar Agarwal) filed an application before the High Court under Section 11(6) of the A&C Act, seeking Termination of the mandate of the Arbitrator and appointment of a fresh Arbitrator.

The High Court held that due to undue delay, the mandate of the arbitrator stood terminated under Section 14(1)(a) of the A&C Act, and appointed a fresh arbitrator. Further, High Court also dismissed the writ petitions filed by the Appellant.

Aggrieved by this decision of the High Court, the Appellant preferred the present appeal before the Supreme Court.

Issues

Whether the application under Section 11(6) of the A&C Act, is maintainable where the parties, in absence of a written contract, appointed an arbitrator with mutual consent?

Whether the High Court, in exercise of powers under Section 11(6) of the A&C Act, can terminate the mandate of the sole arbitrator?

Appellant’s Position

On Termination of mandate under Section 11(6)

The Appellant contended that the mandate of an arbitrator could not be terminated because the parties had appointed the arbitrator with mutual consent. Further, an arbitrator’s mandate cannot be brought to end through an application under Section 11(6) of the A&C Act as there are specific provisions for the same.

In case of allegations concerning Section 14(1)(a), the parties are free to approach the Court as defined under Section 2(e), which was pending at the time, the application under Section 11(6) was made.

On maintainability of Application under Section 11(6)  

They highlighted the distinction between Sections 11(6) and 11(5) by contending that in the absence of a written contract containing the arbitration agreement, application under Section 11(6) is not maintainable.

Thereafter, it was contended that even otherwise there was no undue delay on part of the arbitrator, and hence, Section 14(1)(a) could not be attracted. Thus, the application under Section 11(6) is not maintainable.  

The Appellant relied on Antrix Corporation Limited v. Devas Multimedia Private Ltd. (2013) as well as S.P. Singla Constructions Private Limited v. State of Himachal Pradesh and Anr. (2018) to contend that once the parties have invoked the arbitration proceedings and the Arbitrator has been appointed, a subsequent application under Section 11(6) is not maintainable.

Respondent’s Position

On contrary, the Respondent contended that in the given facts and circumstances of the case, there was undue delay on part of the sole arbitrator and thus the mandate is liable to be terminated by the virtue of Section 14(1)(a) of A&C Act. Moreover, the use of the word “shall” in the provision signifies the automatic Termination of the mandate if it is found that the arbitrator de jure or de facto fails to act without undue delay. They cited ACC Limited v. Global Cements Limited (2012) and Union of India v. Uttar Pradesh State Bridge Corporation limited (2014), in support of this argument.

They contended 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 can be said to be a defence. As per the settled position of law, during the stage of disposing applications under Order VII Rule 11, only the averments in the plaint ought to be considered and not the defence case made out in the written statement. As a result, the trial court was correct in rejecting the Order VII Rule 11 application, as well as correct in refusing to reject the application under Section 14 of the A&C Act.

Decision and Reasoning

On Issue 1                      

The court observed that there is a difference between Sections 11(5) and 11(6). Applications under Section 11(6) are maintainable only when there is a written contract containing an arbitration agreement and appointment procedure of the arbitrator has been agreed upon by the parties, whereas Section 11(5) is attracted  when no procedure for appointment of arbitrator has been agreed upon by the parties or in cases where there is no written contract containing an arbitration agreement and parties by mutual consent agree to refer the disputes to arbitration.

Since, in the present case, the parties themselves agreed to refer the disputes to arbitrator and there is no written contract containing an arbitration agreement, thus the application under Section 11(6) of the A&C Act was not maintainable at all [¶6.3].

On Issue 2

The Court observed that where the mandate is sought to be terminated under the Section 14(1)(a), because the arbitrator has failed to act without undue delay, the aggrieved party shall approach the “court” as defined under Section 2(e) of the A&C Act.   A dispute regarding the Termination of the arbitrator’s mandate, on the grounds set out in Section 14(1)(a), cannot be decided in an application under Section 11(6) of the A&C Act and has to be raised before a court under Section 2(e) of the A&C Act [¶8].

Author(s)