Calcutta High Court: Court can appoint new Arbitrator after setting aside Arbitral award for deciding claims afresh

Calcutta High Court: Court can appoint new Arbitrator after setting aside Arbitral award for deciding claims afresh

The Calcutta High Court (HC) has ruled in the case titled Jagdish Kishinchand Valecha v. Srei Equipment Finance Ltd. that in fit cases, there is no bar on the Court to appoint a new Arbitrator for deciding the claims afresh after setting aside an arbitral award.

Justice Moushumi Bhattacharya of the Calcutta HC ruled that "The parties who have come to the Court cannot be without a remedy when they have agreed that the matter should go before a different arbitrator."

Issue before the HC

Whether a Court can appoint an Arbitrator different from the one who has passed the award challenged when the award-debtor and the award-holder both desired it?

The background of the litigation in the instant case is that a petition was filed u/s 34 of the Arbitration & Conciliation Act (Arbitration Act), and the petitioner, who was the award-debtor, challenged the arbitral award passed by the Sole Arbitrator based on the ground that he was not given an opportunity to represent himself in the arbitration proceedings.

Both the parties to the Arbitration Agreement agreed that a different Arbitrator should be appointed to decide the claim between the parties afresh and that the matter should not be remanded to the same Arbitrator who delivered the Award.

It was observed by the Court that since both the parties were agreeable to a different Arbitrator being appointed, Section 11 of the Act would have no manner of application. It further stated that the arena of decision-making under Section 34 was also limited only to whether an award should be set aside or sustained.

The Court noted that "The language used in Section 34 "Application for Setting aside Arbitral Award" particularly in Section 34(2)(b) is "if the Court finds that" and is repeated in Section 34(2A) indicating that the mandate on the Court is to test the award against the available grounds under Section 34 for deciding whether the recourse against the award should fail or succeed. It also means that the arena of decision-making is limited only to whether an award should be set aside or sustained."

The HC observed that the Arbitrator had admittedly acted as arbitrator in other arbitration proceedings instituted at the instance of the respondent i.e. award-holder, and had also been engaged as counsel for the respondent group of companies in several other instances.

The Court put emphasis on the Amendment Act of 2016 precisely sought to address such instances and eliminate all possible apprehension of bias and conflict of interest.

It added that "Section 12(1)(a) requires an Arbitrator to disclose in writing any direct or indirect relationship with or interest in any of the parties or the subject matter in dispute. The fine print in this regard has been codified in the Seventh Schedule to the Act, clauses 2 and 3 of which take into account an Arbitrator's relationship with the parties to the arbitration. Read together, the fundamental objective is to ensure that the arbitrator is impartial and independent."

Regarding the issue of appointing a new arbitrator, the HC reiterated that the Arbitration Act ensured party autonomy at all levels right through the dispute resolution process and even to the procedure for a challenge to the award.

The HC referred to Section 43(4) of the Arbitration Act and Section 89 of Code of Civil Procedure Code stated that the Arbitration Act did not curtail the power of a Court to 'mold the relief in fit cases' provided the relief is not repugnant to the law as existing on that date.

Reliance was placed on the judgment of the case titled Sulaikha Clay Mines v. Alpha Clays, AIR 2005 Ker 3 wherein a Division Bench of the Kerala High Court considered a situation where an award is to be set aside for procedural violation and whether the Court has the power to remit the award to a different Arbitrator de hors the power under Section 34(4) of the Act. The Court in that decision was reluctant to remit the matter to the same Arbitrator in view of the unequal treatment meted out to the parties.

The HC set aside the arbitral award and stated that a different and independent Arbitrator should be appointed to decide the claim of the award holder afresh.