– Challenge and termination of authority of arbitrators.
Challenge and Termination of Authority of Arbitrators
1. Challenge to Arbitrator
Parties may challenge the appointment or continued authority of an arbitrator in certain circumstances to ensure impartiality and fairness in the arbitration process.
Grounds for Challenge
Under Section 12 of the Arbitration and Conciliation Act, 1996, a party can challenge an arbitrator if:
The arbitrator has a direct or indirect interest in the dispute.
The arbitrator is related to a party or their counsel by blood or marriage.
There is reasonable doubt about the arbitrator’s independence or impartiality.
Any circumstances exist that give rise to justifiable doubts as to the arbitrator’s neutrality.
Procedure for Challenge (Section 13)
The party challenging the arbitrator must send a written statement of the reasons for the challenge within 15 days of:
Appointment of the arbitrator, or
Becoming aware of circumstances giving rise to challenge.
The challenge is decided by:
The appointing authority if appointed by such authority, or
The arbitral tribunal itself if it has more than one arbitrator,
Or by the Chief Justice or their designate if parties fail to agree.
Effect of Challenge (Section 14)
When an arbitrator is challenged, they must refrain from acting until the challenge is decided.
The appointment of the arbitrator is terminated if the challenge is accepted.
2. Termination of Authority of Arbitrators
Besides challenge, an arbitrator’s authority may be terminated by:
a) Resignation (Section 15(1))
An arbitrator may resign by giving a written notice to the parties and appointing authority.
Resignation takes effect upon receipt of notice.
b) Removal by Parties or Appointing Authority (Section 15(2))
An arbitrator can be removed if there are justifiable grounds to doubt their ability to act independently or impartially.
Removal usually requires:
Consent of all parties, or
An order by the appointing authority or court, depending on the case.
c) Failure to Act or Unavailability (Section 15(3))
If an arbitrator fails to act or becomes incapable of acting, the appointing authority may remove and replace them.
d) Completion of Mandate
Authority terminates when:
The arbitral award is made.
The arbitration proceedings are terminated.
Case Law on Challenge and Termination
1. S.B.P. & Co. v. Patel Engineering Ltd., AIR 2005 SC 450
Facts: Challenge to arbitrator on grounds of bias.
Held: Reasonable doubt about impartiality is sufficient ground for challenge. Even if no actual bias is proved, justifiable doubts must be removed to maintain confidence in arbitration.
2. McDermott International Inc. v. Burn Standard Co. Ltd., AIR 2006 SC 13
The Supreme Court emphasized strict adherence to the time limits for challenging an arbitrator and the importance of disclosure by arbitrators of any potential conflicts.
3. Peru Engineering Construction Ltd. v. Ministry of Railways (2009) 2 SCC 603
The Court held that non-disclosure of a prior relationship with one party was sufficient ground for removal of the arbitrator.
Summary Table
| Aspect | Details |
|---|---|
| Grounds for challenge | Bias, interest, relation, reasonable doubts about impartiality |
| Time for challenge | 15 days from appointment or awareness of grounds |
| Effect of challenge | Arbitrator refrains from acting pending decision; appointment terminated if challenge upheld |
| Termination by resignation | Arbitrator can resign anytime in writing |
| Termination by removal | On justifiable grounds by parties or appointing authority |
| Failure to act or incapacity | Arbitrator may be removed by appointing authority |
| Completion | Authority ends after award or termination of proceedings |
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