Arbitrators: qualities, appointment, challenge and substitution

1. Qualities and qualifications

The Act prescribes no fixed qualification. Section 11(1) allows a person of any nationality, unless the parties agree otherwise, and the parties may agree on qualifications (section 12(3)(b) makes their absence a ground of challenge). The 2019 amendment had introduced an Eighth Schedule listing qualifications, but the 2021 amendment omitted it and substituted section 43J, which leaves qualifications, experience and norms for accreditation to regulations. Qualities expected of a good arbitrator:

• Independence and impartiality, the only qualities the Act itself insists on (section 12);
• knowledge of the subject matter and of arbitration law and procedure;
• availability: section 12(1)(b) requires disclosure of anything affecting his ability to devote sufficient time and complete the arbitration within twelve months;
• fairness: equal treatment and full opportunity to each party (section 18);
• integrity, patience, decisiveness and the ability to write a reasoned award (section 31(3));
• confidentiality (section 42A).

2. Number of arbitrators: section 10

The parties may fix the number, but it shall not be an even number. Failing agreement, the tribunal consists of a sole arbitrator.

3. Appointment: section 11

• Party autonomy (section 11(2)): the parties are free to agree on a procedure.
• Three arbitrators, no agreed procedure (section 11(3) and (4)): each party appoints one, and the two appoint the third, who presides. If a party fails to appoint within 30 days of a request, or the two fail to agree on the third within 30 days, the appointment is made on request by the Supreme Court or the High Court, or a person or institution designated by it.
• Sole arbitrator, no agreed procedure (section 11(5)): if the parties fail to agree within 30 days of a request, the court appoints.
• Agreed procedure fails (section 11(6)): where a party, the two arbitrators, or an institution fails to act under the agreed procedure, a party may request the court to take the necessary measure.
• Scope of inquiry (section 11(6A)): the court confines itself to examining the existence of an arbitration agreement.
• Which court (section 11(12)): the Supreme Court in an international commercial arbitration; otherwise the High Court within whose limits the principal civil court is situated.
• The court seeks the written disclosure under section 12(1) and has regard to the agreed qualifications and to securing an independent and impartial arbitrator (section 11(8)). The application should be disposed of within 60 days of notice (section 11(13)). The decision is final; no appeal, including a Letters Patent appeal, lies (section 11(7)).

The 2019 amendment rewrites section 11 to transfer appointments to arbitral institutions designated by the Supreme Court and High Courts. That provision (section 3 of the 2019 Act) was not among those brought into force on 30 August 2019, and a later notification could not be confirmed; the text above is the one in force.

4. Disclosure, challenge grounds and ineligibility: section 12

• Disclosure (section 12(1) and (2)): a prospective arbitrator must disclose in writing, in the form in the Sixth Schedule, any past or present relationship with or interest in a party or the subject matter likely to give rise to justifiable doubts as to his independence or impartiality, and anything affecting his time. The duty continues throughout the proceedings. The Fifth Schedule lists 34 grounds that guide the inquiry.
• Challenge (section 12(3)): only if circumstances give rise to justifiable doubts about independence or impartiality, or he lacks the agreed qualifications. A party may challenge his own nominee only for reasons learnt after the appointment (section 12(4)).
• Ineligibility (section 12(5)): notwithstanding any prior agreement, a person whose relationship with the parties, counsel or subject matter falls in the Seventh Schedule (for example an employee, consultant or adviser of a party, or a manager or director of a party) is ineligible. The parties may waive this only by an express agreement in writing made after the dispute has arisen.

5. Unilateral appointment: from TRF to the Constitution Bench

• Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., 2017 INSC 1264, (2017) 4 SCC 665: where a public body offers a panel from which the other side must choose, the panel must be broad-based, not confined to its own former employees.
• TRF Ltd. v. Energo Engineering Projects Ltd., 2017 INSC 577, (2017) 8 SCC 377: the managing director of a party, being ineligible under section 12(5), cannot nominate another person as sole arbitrator. A person who cannot act cannot appoint.
• Bharat Broadband Network Limited v. United Telecoms Limited, 2019 INSC 537, (2019) 5 SCC 755: an ineligible arbitrator's mandate terminates de jure; waiver under the proviso to section 12(5) requires an express written agreement and cannot be inferred from conduct such as filing a statement of claim.
• Perkins Eastman Architects DPC v. HSCC (India) Ltd., 2019 INSC 1285, (2020) 20 SCC 760: extending TRF, a party or its official who has an interest in the outcome cannot unilaterally appoint a sole arbitrator, because the person who appoints shapes the tribunal.
• Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), 2024 INSC 857, decided by five judges on 8 November 2024. By majority, the Court held that the principle of equal treatment of parties applies at the stage of appointment; that a clause allowing a party with an interest in the dispute to appoint a sole arbitrator unilaterally, or to compel the other side to choose its arbitrator from a panel curated by it, offends that principle; and that in public-private contracts such a clause is also arbitrary under Article 14. The law so declared was made prospective, applying to arbitrator appointments made after the date of the judgment. Two judges wrote separate opinions differing in part.

6. Challenge procedure: section 13

The parties may agree on a procedure. Failing that, the challenging party sends a written statement of reasons to the tribunal within 15 days of learning of its constitution or of the circumstances (section 13(2)). Unless the arbitrator withdraws or the other party agrees, the tribunal decides (section 13(3)). If the challenge fails, the tribunal continues and makes the award (section 13(4)), and the challenger may attack the award under section 34 (section 13(5)). There is no immediate court remedy. The position is different under section 12(5): an ineligible person's mandate terminates de jure under section 14, and a party may go to court under section 14(2).

7. Termination and substitution: sections 14 and 15

• Section 14(1): the mandate terminates and the arbitrator is substituted if he becomes de jure or de facto unable to perform his functions or fails to act without undue delay, and he withdraws or the parties agree to terminate. Any controversy goes to the court (section 14(2)).
• Section 15(1): the mandate also terminates (a) where he withdraws from office for any reason, or (b) by or pursuant to agreement of the parties.
• Section 15(2): a substitute is appointed according to the rules that applied to the appointment being replaced.
• Section 15(3) and (4): unless the parties agree otherwise, hearings already held may be repeated at the tribunal's discretion, and earlier orders are not invalid merely because the composition changed.

8. Problem

C is appointed arbitrator in a dispute between A and B. After examining several witnesses and documents, and before giving the award, C declares that he withdraws his consent to act. Is C's act valid? (December 2019)

Issue. Whether an arbitrator may withdraw midway, and what happens to the proceedings.

Law. Section 15(1)(a) provides that the mandate of an arbitrator terminates where he withdraws from office for any reason. Section 14(1) and section 13(3) also contemplate withdrawal. Section 15(2) to (4) govern substitution and the effect on earlier proceedings.

Application. The Act does not compel an arbitrator to continue. C's withdrawal is therefore valid in law and his mandate ends on withdrawal; his reasons need not be accepted by the parties, and his withdrawal does not admit any ground of challenge (section 14(3)). A and B do not lose the arbitration: a substitute is appointed by the same method used for C (section 15(2)), and if they cannot agree, either may apply under section 11. The new tribunal may, in its discretion, repeat the hearings already held, unless A and B agree otherwise (section 15(3)), and orders made by C remain valid (section 15(4)). If time under section 29A is running short, the court may extend it.

Conclusion. C's withdrawal is valid and terminates his mandate. The arbitration continues before a substitute appointed under section 15(2), who may rely on the record or rehear the witnesses.

How this is examined

“Explain the procedure for appointment of arbitrator” was asked in November 2021 and June 2019. Write section 10, then section 11(2) to (6) in order, (6A), (8) and (12), then disclosure and ineligibility under section 12. Add TRF, Perkins Eastman and the 2024 Constitution Bench for full marks; examiners now expect them. The withdrawing arbitrator problem (December 2019) is answered from section 15 as above.