Does the Arbitration Deadline Reset When an Arbitrator is Substituted?

The Gujarat High Court recently addressed the issue of whether the time frame for passing an arbitral award resets when an arbitrator on the arbitration panel is substituted [Kamal Sewaram Jadhwani v. Manbhupinder Singh Atwal and Ors].

A Division Bench, consisting of Chief Justice Sunita Agarwal and Justice Pranav Trivedi, examined this question during a hearing on September 26. The case involved a challenge to the validity of an arbitral award.

Representing the appellant, Senior Advocate Kapil Sibal argued that the arbitral reference commenced on February 1, 2018, and the arbitration period should have ended on January 31, 2019. However, the arbitration process continued despite objections being raised.

The Court acknowledged that several arbitrators had resigned during the course of the proceedings. The Bench then raised the question of whether the substitution of arbitrators could renew the time frame for arbitration.

Chief Justice Agarwal noted that once an arbitrator resigns or is unable to perform their duties, the mandate of that arbitrator is terminated. However, the Chief Justice questioned whether the mandate of the arbitration itself would continue with the newly appointed arbitrator, suggesting that the proceedings should not reset entirely.

Sibal contended that although the mandate of an individual arbitrator might end, the arbitration itself should not receive a fresh timeline. He emphasized that Section 14 of the Arbitration and Conciliation Act, which deals with the termination of an arbitrator’s mandate due to inability or withdrawal, does not invalidate the time limit set by Section 29A. According to Sibal, arbitrators resigning before the deadline should not restart the arbitration timeline, as this could lead to arbitrators being forced to resign to reset the process.

He further argued that the substitution of an arbitrator does not give the arbitration a new start. Otherwise, parties could manipulate the process to extend deadlines indefinitely by orchestrating resignations. Sibal maintained that the original time limit should hold, regardless of any resignations.

The Court inquired whether the appellant had withdrawn from arbitration after the time limit expired, to which Sibal responded that a letter had been sent to the presiding arbitrator requesting the cessation of proceedings. Sibal also clarified that no consensus was reached among the parties to continue the proceedings following the reconstitution of the arbitral tribunal.

Sibal also stressed that, even if there had been consensus, the law still applies, and arbitration begins with the first sitting.

Section 29A of the Arbitration and Conciliation Act, 1996, establishes the timeline for arbitral awards. Before its 2019 amendment, arbitrations were required to be completed within twelve months of the arbitral reference. Following the amendment, the deadline starts twelve months after the completion of pleadings, extendable by six months with mutual consent or by a court order. Sibal argued that the 2019 amendment does not apply in this case.

The Court will continue to hear the case on September 30. Senior Advocates Kapil Sibal and Masoom K Shah represented the appellant, while Senior Advocate S Muralidhar and Parth Contractor appeared for the respondents.