Relevant Statutory Provisions and the Conflict
The issue of appointing a new arbitrator following the setting aside of an award stems from the interplay between two distinct sections of the Arbitration and Conciliation Act, 1996 (the Act).
1. Section 34 (Setting Aside the Award)
This section, used to challenge an award, grants limited power to the Court. Specifically, Section 34(4) allows the Court, upon request, to adjourn the proceedings to give the Arbitral Tribunal (AT) an opportunity to cure defects:
Section 34(4): On receipt of an application under sub-section (1), the Court may… adjourn the proceedings… to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as… will eliminate the grounds for setting aside the arbitral award.
Crucially, this provision only allows remission to the original AT; it does not explicitly grant the Section 34 Court the power to appoint a new arbitrator.
2. Section 11 (Appointment of Arbitrators)
This section outlines the judicial power for appointment when parties fail to agree:
Section 11(6): Where… the parties… fail to reach an agreement… the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
This vests the specific, independent power of appointment in the Chief Justice or their designate, creating a conflict with the judge hearing the Section 34 petition.
Views of Different Courts (The Initial Problem)
Due to the strict wording of the Act, especially the omission of appointment power in Section 34, courts adopted varying approaches, leading to the parties’ dilemma:
The Strict View:
Many courts initially held that since the Section 34 Court was dealing only with the validity of the award, it was functus officio (its duties completed) upon setting aside the award. They ruled that the parties were required to file a separate, formal application under Section 11 before the Chief Justice/designate to secure a new arbitrator, significantly delaying the process.
The Liberal Precursor:
Courts demonstrating a focus on practical dispute resolution and party agreement, such as the Kerala High Court (e.g., in Sulaikha Clay Mines v. Alpha Clays {[2]}), acknowledged the need for flexibility. They indicated that where parties were in mutual agreement, remission to a different arbitrator might be permissible, paving the way for the eventual acceptance of the consent principle.
The Final Solution: Upholding Party Autonomy
The issue was ultimately resolved by courts prioritizing the foundational principle of Party Autonomy over a rigid interpretation of Section 34.
The Bombay High Court’s Decisive Ruling
The Bombay High Court, in the definitive case of JKV Engineers & Contractors v. Sree Kaleswari Real Estates & Investments Pvt. Ltd. (2021) {[1]}, provided the authoritative solution. The Court observed that when the parties mutually consented to set aside the award and jointly requested the Section 34 Court to appoint a new arbitrator:
Ratio Decidendi:
The Court held that the unanimous consent of the parties to appoint a different arbitrator provides a sufficient legal basis for the Section 34 Court to pass a composite order. The judge, acting as the “Court,” can simultaneously set aside the award and appoint a new arbitrator, effectively treating the joint consent as an agreement to restart the arbitration before a new tribunal. This avoids procedural delays inherent in a separate Section 11 petition.
Alignment with the Supreme Court Principle
This ruling is firmly rooted in the Supreme Court’s consistent jurisprudence, which emphasizes Minimal Judicial Intervention and Party Autonomy (as established in cases like Hindustan Zinc Ltd. v. Friends Coal Carbonisation). The core principle is that the Court facilitates the continuance of the arbitration process as agreed upon by the parties, ensuring the spirit of the arbitration agreement is fulfilled.
Citations
[1] JKV Engineers & Contractors v. Sree Kaleswari Real Estates & Investments Pvt. Ltd. (2021) SCC OnLine Bom 1076.
[2] Sulaikha Clay Mines v. Alpha Clays, (Unreported Judgment).
