Swadesh Kumar Agarwal vs Dinesh Kumar Agarwal & Ors., etc., etc.

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 & ORS, ETC., ETC.

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 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 & ORS, ETC., ETC.

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 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.