What is Section 15 of Arbitration and Conciliation Act

Section 15. Termination of mandate and substitution of arbitrator under Arbitration and Conciliation Act, 1996

CHAPTER III
Composition of arbitral tribunal of Arbitration and Conciliation Act, 1996

Section 15. Termination of mandate and substitution of arbitrator -

(1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate

     (a) where he withdraws from office for any reason; or

     (b) by or pursuant to agreement of the parties.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

Scope of Section 15 of Arbitration and Conciliation Act, 1996

While Section 14 of the Arbitration and Conciliation Act, 1996 governs the situation relating to termination of the mandate of the arbitrator because of his/her failure to act the Section 15 of the Act emphasises on the withdrawal of office by the arbitrator himself and thereafter substitution by way of appointment of another Arbitrator.

Any party all alone does not have the authority to revoke the appointment of the arbitrator. But both/all parties in the agreement together can do the same and do not need to file any petition in the court to enforce the decision of termination.

Important Case Laws on Section 15

In S.B.P. and Company v. Patel Engineering Limited and Another (2009), the Supreme Court analysed the scheme of Sections 11, 14 and 15, and noted that the legislature has repeatedly laid emphasis on the necessity of adherence to the terms of agreement between the parties in the matter of appointment of arbitrators and procedure to be followed for such appointment. It was held that:

“Even Section 15(2), which regulates appointment of a substitute arbitrator, requires that such an appointment shall be made according to the rules which were applicable to the appointment of an original arbitrator. The term “rules” used in this sub-section is not confined to statutory rules or the rules framed by the competent authority in exercise of the power of delegated legislation but also includes the terms of agreement entered into between the parties.”

In Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. and Another (2006 Latest Caselaw 359 SC), the Supreme Court was called upon to examine the scope of Section 15 of the Act in the backdrop of the fact that after resignation of the arbitrator appointed by the Managing Director of the respondent company, another arbitrator was appointed by him in accordance with the arbitration agreement. At that stage, the petitioner thereon filed an application under Section 11(5) read with Section 15(2) of the Act praying for appointment of a substitute arbitrator to resolve the disputes between the parties. The said application was dismissed by the Chief Justice holding that Section 15(2) refers not only to the statutory rules framed for regulating the appointment of arbitrators but also to contractual provisions for such appointment upholding the view taken by the Chief Justice. It was held as under:

“The withdrawal of an arbitrator from the office for any reason is within the purview of Section 15(1)(a) of the Act. Obviously, therefore, Section 15(2) would be attracted and a substitute arbitrator has to be appointed according to the rules that are applicable for the appointment of the arbitrator to be replaced. Therefore, what Section 15(2) contemplates is an appointment of the substituted arbitrator or the replacing of the arbitrator by another according to the rules that were applicable to the appointment of the original arbitrator who was being replaced. The term “rules” in Section 15(2) obviously referred to the provision for appointment contained in the arbitration agreement or any rules of any institution under which the disputes were referred to arbitration. There was no failure on the part of the party concerned as per the arbitration agreement, to fulfil his obligation in terms of Section 11 of the Act so as to attract the jurisdiction of the Chief Justice under Section 11(6) of the Act for appointing a substitute arbitrator.”

In Rajasthan Small Industries v. M/S Ganesh Containers Movers (2019 Latest Caselaw 52 SC), Supreme Court stated that Section 11(6) of the Act has application only when a party or the person concerned had failed to act in terms of the arbitration agreement. When Section 15(2) says that a substitute arbitrator can be appointed according to the rules that were applicable for the appointment of the arbitrator originally, it is not confined to an appointment under any statutory rule or rule framed under the Act or under the scheme. It only means that the appointment of the substitute arbitrator must be done according to the original agreement or provision applicable to the appointment of the arbitrator at the initial stage. In this case it was held, the High Court was not right in appointing an independent arbitrator without keeping in view the terms of the agreement between the parties and therefore, the impugned order appointing an independent arbitrator/retired District Judge was not sustainable.

In Shailesh Dhairyawan v. Mohan Balkrishna Lulla (2015 Latest Caselaw 712 SC) the Supreme Court enunciated that the provisions of Section 15(2) of the Act require purposive interpretation so that the aforesaid objective/ purpose of such a provision is achieved thereby. The principle of 'purposive interpretation' or 'purposive construction' is based on the understanding that the Court is supposed to attach that meaning to the provisions which serve the 'purpose' behind such a provision. The basic approach is to ascertain what is it designed to accomplish? To put it otherwise, by interpretative process the Court is supposed to realise the goal that the legal text is designed to realise.

Applying the purposive interpretation, the Apex Court expounded that,

“Once we keep in mind the aforesaid fundamental aspects of the arbitration, the irresistible conclusion would be that whenever parties agree for arbitration, and even name a specific arbitrator with no specific provision for appointment of another arbitrator on the recusal/withdrawal of the said arbitrator, the said omission is made up by Section 15(2) of the Act and unless arbitration agreement between the parties provides a categorical prohibition or debarment in resolving a question or dispute or difference between the parties by a substitute arbitrator in case of death or the named arbitrator or non-availability of the said arbitrator, Courts have the power to appoint substitute arbitrator, which power is given by Section 15(2) of the Act as this provision is to be given liberal interpretation so as to apply to all possible circumstances under which the mandate of the earlier arbitrator may be terminated.”