Section 12(3) of the Arbitration and Conciliation (Amendment) Act, 2015 states the circumstances in which an arbitrator may be challenged. These include circumstances that give rise to justifiable doubts as to his independence or impartiality or he does not possess the qualifications agreed to by the parties.
However, a party who has appointed an arbitrator or participated in the appointment of an arbitrator is allowed to challenge such an arbitrator only for reasons of which he becomes aware after the appointment has been made.1
Fifth Schedule to the Act (Annexure-A) contains a list of grounds giving rise to justifiable doubts as to the independence or impartiality of an arbitrator. Seventh Schedule to the Act (Annexure-B) lists the grounds which make a person ineligible to be appointed as an arbitrator. Section 12(5) provides that if a person’s relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule, such a person shall be ineligible to be appointed as an arbitrator, irrespective of any prior agreement to the contrary. However, the parties may, subsequent to disputes having arisen between them, waive the applicability to this provision by an express agreement in writing.
Procedure for challenging an arbitrator:
Section 13 of the Act provides liberty to the parties to agree on a procedure for challenging an arbitrator. However, if the parties are unable to reach an agreement for the said purpose, a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware that circumstances exist that give rise to justifiable doubts as to his independence or impartiality or he does not possess the qualifications agreed to by the parties, send a written statement of the reasons for the challenge to the arbitral tribunal. The arbitral tribunal is required to decide on the challenge, if the arbitrator does not withdraw from his office or the other party does not agree to the challenge. In case of failure of challenge, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. Where such an award is made, the party challenging the arbitrator may make an application for setting aside such an award in accordance with Section 34 of the Act and if the award is set aside on such an application, the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.
Termination of mandate of an arbitrator and substitution of arbitrator:
Further, Section 14 of the Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if-
- He becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and
- He withdraws from his office or the parties agree to the termination of his mandate.
Section 15 provides additional circumstances under which the mandate of an arbitrator shall terminate. These include-
- Where the arbitrator withdraws from office for any reason; or
- By or pursuant to agreement of the parties.
It is further provided that where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed. The same rules shall be followed in appointing a substitute arbitrator which were applicable to the appointment of the arbitrator being replaced. Where an arbitrator is replaced, any hearing previously held may be repeated at the discretion of the arbitral tribunal, unless otherwise agreed by the parties. However, it is provided that an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator shall not be invalid solely because there has been a change in the composition of the arbitral tribunal, unless otherwise agreed by the parties.
1 Section 12(4) of the Arbitration and Conciliation(Amendment) Act, 2015