Section 14 of the Arbitration & Conciliation Act, 1996

Table of Contents

  1. Amendments and Corresponding Provisions
  2. Scope and Applicability 
  3. “De jure” & “De Facto”
  4. “Fails to act without undue delay”
  5. Termination of Mandate
  6. Interaction of Sections 13 and 14

14. Failure or impossibility to act.– (1) [The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if]— 

(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and 

(b) he withdraws from his office or the parties agree to the termination of his mandate. 

(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate. 

(3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.

Amendments and Corresponding Provisions

Under the Arbitration Act, 19401, the court could, on an application filed by any party to a reference under Section 11(1), remove an arbitrator or umpire who failed to use all reasonable dispatch (i) in entering on and (ii) proceeding with the reference, including where the reference to the umpire was necessary by giving notice of that fact to the parties and the umpire and (iii) in making the award.

The Arbitration and Conciliation Act, 1996 adopts a different approach to the matter. Section 14 of the Act provides for the circumstances in which the mandate of the arbitrator stands terminated. It stipulates that the mandate of an arbitrator will end when it becomes impossible for him to perform his functions de facto or de jure or, for some other reasons, he fails to act without undue delay or withdraws from office or if the parties agree to terminate his mandate. If such a dispute arises as to his inability to de facto or de jure act or as to his failure to act without undue delay, the parties may, unless otherwise agreed between the parties, apply to the court to decide upon such termination.

The Arbitration and Conciliation (Amendment) Act, 20152 made only one change. Instead of the words “The mandate of an arbitrator shall terminate if,”, the words “The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if” were substituted. Therefore, the mandate of the arbitrator shall terminate and he shall be substituted by another arbitrator if he falls within any of the categories identified under this sub-Section. This change has been introduced to effect a harmonious reading of Sections 12 and 14. 

This Section is based on Article 14 of the UNCITRAL Model Law on International Commercial Arbitration.3 The provisions of Section 14(1)(b) of the Act, in turn, materially corresponds to Section 23(3)(a) of the English Arbitration Act, 1996.4 

Scope and Applicability 

In Bharat Broadband Network Limited v. United Telecoms Limited5, the court discussed the scheme of Sections 12, 13, and 14. These provisions lay out the procedure to address concerns regarding an arbitrator’s independence or impartiality. If an arbitrator makes a written disclosure that raises justifiable doubts about their independence or impartiality, their appointment can be challenged under Sections 12(1) to 12(4) read with Section 13. 

Before proceeding any further, it becomes essential to clarify that recourse to Section 14(1)(a) may only be taken when the person has become de jure ineligible to act as an arbitrator under Section 12(5). However, as explained by the Hon’ble Supreme Court in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited6, the recourse to Section 14 would not be available pursuant to a challenge to an arbitral tribunal in terms of Section 12(3). While ineligibility as per the Seventh Schedule would justify the direct invocation of Section 14, justifiable doubts as to his independence and impartiality under the Fifth Schedule would require a factual determination of the challenge under Section 13, failing which the unsuccessful party can take recourse to Section 34 of the Act in case the arbitrator continues and passes an arbitral award. The aforesaid legal position was endorsed in Sacheerome Advanced Technologies (Sat) v. Nec Technologies Pvt. Ltd. (Neci).7 This distinction becomes useful in limiting the scope of Section 14 to cases falling under Section 12(5) read with the Seventh Schedule only.

In light of the abovementioned backdrop, if the arbitrator becomes “ineligible” as defined in Section 12(5), the remedy lies in invoking Section 14(1)(a), which de jure prevents the arbitrator from performing their duties, resulting in the automatic termination of their mandate and their replacement. Most recently, the Hon’ble Delhi High Court, in North East Centre of Technology Application & Reach (NECTAR) v. Divine Bamboo Mat Manufacturing Pvt. Ltd. & Anr.8, reiterated that the limitation period for filing an application under Section 14 was three years from the date when the right to apply accrues, after which the right to seek substitution of the arbitrator would be lost. 

If there is a dispute over whether the arbitrator has become legally unable to perform their functions, a party must apply to the Court to decide on the termination of the mandate, unless the parties have agreed otherwise. Consequently, in all cases falling under Section 12(5), there is no conventional procedure of challenge. Instead, if an arbitrator continues to serve while being ineligible as specified in Section 12(5) read with the Seventh Schedule, a party may apply to the Court seeking termination of the arbitrator’s mandate. Therefore, a petition under Section 14 would lie in all cases in which Section 12(5) is applicable. In Union of India v. APS Constructions Pvt. Ltd.9, the Hon’ble Delhi High Court held that recourse under Section 14 could be taken only when the arbitrator was found to be ineligible under Section 12(5) in light of the circumstances enumerated in the Seventh Schedule. Moreover, in Yves Saint Laurent v. Brompton Lifestyle Brands Private Limited and Ors.10, the Hon’ble Delhi High Court also clarified that no party would be denuded of the benefit of Section 14 merely because it had previously filed an unsuccessful petition under Section 16 of the Act.

Questions which may typically arise under Section 14 include whether such person falls within any of the categories mentioned in the Seventh Schedule, or whether there is a waiver as provided in the proviso to Section 12(5). As a matter of law, it is important to note that the proviso to Section 12(5) must be contrasted with Section 4 of the Act. Section 4 deals with cases of deemed waiver by conduct; whereas the proviso to Section 12(5) deals with waiver by express agreement in writing between the parties in cases where such doubts have arisen subsequent to disputes having arisen between the contesting parties. 

In Chennai Metro Rail Ltd. v. Transtonnelstro Afcons11, the Hon’ble Supreme Court held that an attempt to invoke de jure ineligibility based on justifiable doubts about the impartiality or independence of the Tribunal, on grounds other than those specifically outlined as statutory ineligibility conditions under Section 12(5), was unsustainable. It further stated that the de jure condition is not the mechanism to unlock mid-stream challenges, and should not be misused so as to flood the courts with challenges during the course of arbitral proceedings, which would be beyond the scope of the Act and contrary to its spirit.

“De jure” & “De Facto”

Section 14(1)(a) of the Act provides for the termination of an arbitrator’s mandate if they become unable to perform their functions, either de jure or de facto. These terms refer to two distinct situations:

De jure Inability

The term de jure means a legal incapacity to perform one’s functions. This situation arises when the arbitrator loses the authority to act as per the applicable law. For instance, if an arbitrator violates a statutory provision such as the eligibility criteria set out in Section 12(5), their mandate stands automatically terminated, since they are de jure unable to continue in their role. This legal disability is grounded in statutory or contractual provisions and does not require any further inquiry into the arbitrator’s conduct or performance. For example, in Shubham Garg v Ajay Kumar Maheshwari12, the arbitrator was a witness to the agreement executed between the parties. Moreover, the MoU and the agreement in question mentioned his name. It was held that such a person had de jure become unable to perform his function as an arbitrator.

De Facto Inability

On the other hand, de facto refers to the factual incapacity of the arbitrators to carry out their duties. This could arise from physical inability, such as severe illness, or practical circumstances that prevent arbitrators from effectively fulfilling their roles. Unlike de jure incapacity, de facto inability requires a factual assessment of whether the arbitrator can still perform their duties. For example, in Neeta Lalitkumar Sanghavi v Bakulaben Dharamadas Sanghavi13, the learned arbitrator dismissed an application filed by the petitioners to bring on record the legal heirs of the original Claimant. In passing such an order, he effectively terminated the arbitration proceedings because there was only one Claimant when the arbitral proceedings were initiated and, upon his death, since the legal heirs were not brought on record, the arbitral proceedings could not continue. The arbitrator had, by his own order, rendered himself de facto unable to perform his functions. The Court held that in such a situation, Section 14(2) provides a remedy to apply to the court to decide upon the termination of the mandate.

“Fails to act without undue delay”

In Section 14(1)(a), the word “delay” is qualified by the word “undue”. ‘Undue delay’, and not mere delay, would alone justify the court terminating the mandate of the arbitrator. The word “undue” connotes an act which is ‘unjustified’, ‘unwarranted’, ‘unreasonable’, ‘excessive’ or ‘inordinate’. In order to declare the mandate of the arbitrator stands terminated, the court must be satisfied that the delay, indeed, is ‘undue’.

In Sirius Global Ltd v South Eastern Railway14, the arbitral proceedings were continuing at a slow pace insofar as the deciding of claims and the devotion of sufficient time to the arbitral proceedings were concerned. It thus became clear that the arbitrator would not be able to decide the dispute in the near future. The Court held that the mandate of the arbitrator deserved to be terminated.

In Jayesh H Pandya v Subhtex India Ltd15, it was held that if a time limit had been fixed by a court for concluding arbitration proceedings and the arbitrator, without any concrete reasons, failed to conclude the proceedings within the said time, then his mandate was liable to be terminated under sub-Section 14(1)(a) and also stood automatically terminated under sub-Section 1(b) of this Section. 

Termination of Mandate

In Central Organisation for Railway Electrification v. ECI SPIC SMO MCML16, the Hon’ble Supreme Court held that Section 14 protects party autonomy as it allows parties to mutually terminate the mandate of an arbitrator. The mandate of an arbitrator is automatically terminated if any of the conditions mentioned in Section 14(1)(a) of the Act are met. If the parties agree on the termination of the mandate of the arbitrator, they are free to do so under Section 15(1)(b). 

Section 14(2) provides for a situation where a dispute arises over the grounds mentioned in Section 14(1)(a). If one party believes that the arbitrator has become unable to perform their functions or has failed to act without undue delay, they may apply to the court to decide whether the mandate of the arbitrator ought to be terminated. This intervention is necessary when there is no consensus between the parties on whether the arbitrator’s mandate has, in fact, ended. Unless agreed otherwise, any party can apply to ‘Court’ to decide on the termination of a mandate. It is crucial to note that the term ‘Court’ herein is not the Section 11 Court.17

Interaction of Sections 13 and 14

Section 12(5), in conjunction with the Seventh Schedule, specifies categories of ineligibility. When an arbitrator falls into any of these categories, they are de jure disqualified from performing their duties. Consequently, their mandate stands automatically terminated, and a substitute arbitrator is appointed. In such instances, the matter directly falls under Section 14(1)(a) of the Act, whereby the aggrieved party can approach the court for the termination of the arbitrator’s mandate. For cases involving conflicts of interest other than circumstances mentioned in the Seventh Schedule, such as those outlined in the Fifth Schedule, the arbitrator does not stand automatically disqualified.. Instead, if a challenge is raised under Section 13, then – (1) the arbitrator must rule on the challenge, or (2) if the challenge is unsuccessful, arbitration proceedings continue. For more serious challenges to the arbitrator, Sections 14 and 15 come into play, requiring a higher threshold to sustain a petition. This was discussed in Clarke Energy India Pvt Ltd v. SAS EPC Solutions Pvt Ltd18 and Chennai Metro Rail Ltd. v. Transtonnelstro Afcons.19 

 

  1. Arbitration Act, 1940, No. 10 of 1940, India Code (1940). ↩︎
  2. Arbitration and Conciliation (Amendment) Act, 2015, No. 3, Acts of Parliament, 2016 (India). ↩︎
  3. UNCITRAL Model Law on International Commercial Arbitration, art. 16, U.N. Doc. A/40/17, Annex I (1985), as amended by U.N. Doc. A/61/17 (2006). ↩︎
  4. Arbitration Act 1996, c. 23 (UK). ↩︎
  5. Bharat Broadband Network Ltd. v .United Telecoms Ltd., 2019 SCC OnLine SC 547. Quoted with approval in Central Organisation for Railway Electrification v. ECI SPIC SMO MCML, 2024 SCC OnLine SC 3219.  ↩︎
  6. HRD Corporation v. Gail (India) Ltd., (2018) 12 SCC 471.  ↩︎
  7. Sacheerome Advanced Technologies v. Nec Technologies Pvt. Ltd., 2022 SCC OnLine Del 910. ↩︎
  8. NECTAR v. Divine Bamboo Mat Manufacturing Pvt. Ltd., 2024 SCC OnLine Del 2618. ↩︎
  9. Union of India v. APS Constructions Pvt. Ltd., 2022 SCC OnLine Del 79. ↩︎
  10. Yves Saint Laurent v. Brompton Lifestyle Brands Pvt. Ltd., 2024 SCC OnLine Del 6519. ↩︎
  11. Chennai Metro Rail Ltd. v. Transtonnelstro Afcons, 2023 SCC OnLine SC 1370.   ↩︎
  12. Shubham Garg v. Ajay Kumar Maheshwari, 2019 SCC OnLine All 4712.  ↩︎
  13. Neeta Lalitkumar v. Bakulaben Dharamdas, 2019 SCC OnLine Bom 250.  ↩︎
  14. Sirius Global Ltd. v. South Eastern Railway, 2020 SCC OnLine Del 2811.  ↩︎
  15. Jayesh H. Pandya v. Subhtex India Ltd., 2024 SCC OnLine SC 3219.  ↩︎
  16. Central Organisation for Railway Electrification v. ECI SPIC SMO MCML, 2024 SCC OnLine SC 3219.  ↩︎
  17. ibid.  ↩︎
  18. Clarke Energy India Pvt. Ltd. v. SAS EPC Solutions Pvt. Ltd., 2021 SCC OnLine Mad 6121.  ↩︎
  19. supra note 7.    ↩︎