Delhi High Court: Substitute Arbitrator Should be Appointed Within Three Years From The Date Of Right To Apply

Delhi High Court: Substitute Arbitrator Should be Appointed Within Three Years From The Date Of Right To Apply

Allows the petition and appoints retired Justice R.S. Endlaw as arbitrator

The Delhi High Court has held that the limitation period for a substitute arbitrator’s appointment is three years from the date of the right to apply for it.

The bench comprising Justice Pratibha M. Singh held that since the Act did not provide any explicit period for the substitute arbitrator’s appointment, the limitation would be governed by the residual provision under Article 137 of the Limitation Act. The Act provides a three-year limitation period.

The court stated that when the initial arbitrator is appointed under Section 11(6), axiomatically the substitute arbitrator’s appointment would also be undertaken under the Section.

The matter pertains to the parties involved in the Lahore Timber House business.

They entered an agreement to sell on 04 July 2010, relating to a plot of land and the rights and interests in the business. Clause 12 of the agreement provided for the resolution of disputes through arbitration.

A dispute arose between the parties and the petitioners filed an application under Section 11(6) of the Arbitration and Conciliation (A&C) Act.

Later, they expressed an interest in mutual settlement before the court, which appointed an arbitrator and directed the parties to mediate. The court cleared that if they failed to arrive at a settlement, the arbitrator shall commence, and the arbitration would enter reference.

However, before the arbitrator could formally begin the proceedings, he passed away on 03 March 2022 due to the Covid-19 pandemic. Before that, on 20 July 2021, the original respondent had also expired due to the virus.

Accordingly, the petitioner had filed applications under Sections 11, 14 & 15 of the A&C Act, seeking the appointment of a substitute arbitrator. It also applied under Section 9 seeking an injunction against the creation of any third-party interest in the property.

The parties contended:

• The arbitration proceedings have been abated as the arbitrator entered reference in June 2021. However, it did not take any action till his death in March 2022. Even the petitioners did not proceed with the arbitral proceedings till the filing of the petitions.

• The arbitrator cannot be substituted under Section 11 of the A&C Act.

The bench observed that few SMS messages were exchanged between the parties and the arbitrator. However, the informal communication did not mean that the arbitrator entered a reference, as no written order was passed by him.

It noted that in terms of the orders passed by the Supreme Court till 30 May 2022, it would not be counted for calculating limitation. Thus, it could not be said that due to non-action, the arbitration abated.

It ruled that the limitation period for the appointment of the substitute arbitrator would be three years from the date when the right to apply for such an appointment accrued.

Justice Singh held that after the death of the arbitrator, the petitioners had moved the application for the substitution within the permissible time. She stated that when the initial arbitrator was appointed under Section 11(6), axiomatically the appointment of the substitute arbitrator was undertaken.

Thus, while allowing the petition, the court-appointed retired Justice R.S. Endlaw as the substitute arbitrator.