Arbitrators can be substituted only if they unduly delay proceedings: Delhi High Court

The Delhi High Court recently reiterated that an arbitrator can be substituted only when he causes an undue delay in conducting proceedings. [Poonam Mittal v. M/s Creat Ed Pvt Ltd].

Justice C Hari Shankar allowed a plea seeking extension of arbitration proceedings by six months, but rejected a prayer for substitution of the sole arbitrator after finding that he had not caused undue delay in completion of proceedings.

Interpreting the law on substitution of an arbitrator under Section 29A(6) of the Arbitration Act, the Court said,

“The substitution of an Arbitrator cannot be resorted to at the drop of a hat, else no arbitration would ever proceed to a conclusion. It is only where a clear and substantial case for substitution is made out that a court should resort to it. Substitution of an arbitrator is an extreme measure. It has, in fact, negative connotations even for the Arbitrator concerned.”

Counsel for the petitioner argued that the Court has absolute power under Section 29A(6) to substitute the arbitrator in the interests of justice and on reasonable grounds.

The Court rejected this argument, holding,

“Sub-section (6), when read in context, would indicate that the substitution of one or more of the Arbitrators is to be undertaken, under the said sub-section, only where the court is of the view that the proceedings are being unduly delayed by the Arbitrator who is presently in seisin of the proceedings. The obvious intent is to ensure that the exercise of discretion by the Court while extending the mandate of the Arbitral Tribunal is not frustrated by an arbitrator who is unduly delaying the proceedings for no justifiable reason.”

The Court was hearing a case arising out of a franchise agreement signed between the parties. For resolution of the dispute, the parties were referred to the Delhi International Arbitration Centre.

The petitioner contended that the arbitrator was biased in favour of the respondent company. However, the Court noted that the petitioner failed to make out a case of bias in her pleadings.

It was further contended that the arbitrator should be substituted on the ground that he needlessly prolonged the proceedings by allowing the respondent-company to cross-examine witnesses for over eight hearings even after the company’s defence was closed.

The Court rejected this argument, saying,

“This is not a case in which the Arbitrator has been merely adjourning the matter without any good reason, thereby delaying the proceedings. On the other hand, the Arbitrator has been proceeding with the matter with all due sincerity. The extent to which a party should be permitted cross examination of the witness of the opposite party is a matter for the discretion of the court - or, in arbitral proceedings of the arbitrator. There is no hard and fast rule on the number of hearings for which cross-examination can be permitted to continue."

It also held that even if the company’s defence is closed, the right to cross-examine the petitioner’s witness is always open.

On the petitioner's contention that arbitration is a matter in which trust is essential, and that she had lost trust in the arbitrator, the Court said,

"If such a submission were to be even countenanced, it would throw the entire arbitral system into disarray and, would provide a carte blanche for parties to come to court and seek substitution of the Arbitrator on the ground that they had trust issues with the arbitrator. It is but logical that a party may not be comfortable with a judge or an arbitrator who is expressing an opinion which is against the party's case.”

Advocates Suruchi Mittal and Naman Pandey appeared for the petitioner.

Advocates Nikhilesh Krishnan and Abhishek Bhushan Singh represented the respondent company.

[Read order]