Section 26 and 27 of Arbitration and Conciliation Act
Section 26 and Section 27 of Arbitration and Conciliation Act, 1996
Overview
The Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") governs arbitration proceedings in India. Sections 26 and 27 specifically deal with the appointment and removal of arbitrators and the termination of mandate of arbitrators, respectively.
Section 26: Appointment and Termination of Mandate of Arbitrator
1. Appointment of Arbitrator
Section 26 empowers the parties to appoint arbitrators as per the agreement between them.
If the parties fail to agree on an arbitrator, the court or the appointing authority designated in the arbitration agreement may appoint one.
The appointment process is designed to ensure that arbitrators are independent, impartial, and competent to adjudicate disputes.
2. Termination of Mandate of Arbitrator
The arbitrator’s mandate (authority) can be terminated under this section for reasons such as:
Death or incapacity of the arbitrator.
Resignation by the arbitrator.
Justifiable doubts as to the arbitrator’s impartiality or independence.
Failure or refusal to act without sufficient cause.
Upon termination, a substitute arbitrator may be appointed.
3. Case Law on Section 26
a) TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd. (2017) 9 SCC 729
The Supreme Court held that an arbitrator's mandate may be terminated only for justifiable reasons, and courts should not interfere lightly with the arbitrator’s appointment.
It emphasized that removal should be exceptional, ensuring the integrity and independence of arbitration.
b) McDermott International Inc. v. Burn Standard Co. Ltd. AIR 2006 SC 1889
The court held that failure of an arbitrator to conduct proceedings expeditiously can be ground for termination of mandate.
Arbitrators must perform their duties diligently and impartially.
Section 27: Termination of Mandate of Arbitrator by the Court
1. Power of the Court to Terminate Mandate
Section 27 specifically empowers the court to terminate the mandate of an arbitrator if:
The arbitrator becomes de jure or de facto unable to perform his functions.
The arbitrator refuses to act or fails to act without sufficient cause.
The arbitrator is guilty of misconduct.
There are justifiable doubts about the arbitrator's independence or impartiality.
The court can also appoint a substitute arbitrator in place of the terminated arbitrator.
2. Judicial Approach
Courts exercise this power sparingly and only where strong grounds exist.
The mandate of the arbitrator should not be terminated merely due to disagreement with the arbitrator’s views or procedural delays unless they amount to a breach of duty.
3. Case Law on Section 27
a) Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105
The Supreme Court recognized the court's power to intervene under Section 27 to remove an arbitrator only for valid reasons such as misconduct or incapacity.
The court cautioned against undue interference with arbitration proceedings.
b) Percept D’ Mark (India) Pvt. Ltd. v. Zaheer Khan (2014) 8 SCC 637
The court held that Section 27 empowers courts to remove an arbitrator when there is a justifiable cause.
The arbitrator’s mandate can be terminated if there are reasonable grounds to believe bias or partiality.
Summary Table
| Section | Subject | Key Points |
|---|---|---|
| Section 26 | Appointment and Termination of Arbitrator | Parties appoint arbitrators; termination on grounds like death, incapacity, bias, refusal to act |
| Section 27 | Termination of Arbitrator’s Mandate by Court | Court can remove arbitrator on justifiable grounds; appoint substitute arbitrator |
Conclusion
Sections 26 and 27 of the Arbitration and Conciliation Act empower parties and courts to ensure that arbitrators appointed to resolve disputes are independent, impartial, and capable. While the appointment aims to respect party autonomy, termination of arbitrators’ mandates is allowed only for valid and serious reasons, preserving the integrity and efficacy of arbitration proceedings.
The judiciary has been careful to balance the finality and autonomy of arbitration with the need to prevent misconduct or incapacity of arbitrators, ensuring that arbitration remains a credible alternative dispute resolution mechanism.
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