1.1 Background and Legislative Intent

The Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards. The Act is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985, and aims to minimize the supervisory role of courts in the arbitral process.¹

One of the fundamental principles underlying the Act is ensuring that arbitrators are independent and impartial. This principle is crucial because parties choose arbitration expecting a fair and unbiased resolution of their disputes. To safeguard this principle, the Act provides mechanisms for challenging arbitrators when their independence or impartiality is compromised.²

1.2 Evolution of Challenge Provisions

The challenge mechanism has undergone significant evolution through amendments. The original Act of 1996 had limited provisions regarding arbitrator qualifications and disclosure requirements. However, the Arbitration and Conciliation (Amendment) Act, 2015 introduced comprehensive changes, including:

• Enhanced Disclosure Requirements: Section 12 was substantially amended to mandate disclosure of circumstances that could give rise to justifiable doubts about an arbitrator's independence or impartiality. The amendment introduced the Fifth and Seventh Schedules, which list specific categories of relationships and interests requiring disclosure or leading to automatic disqualification.³
• Stricter Timelines: The 2015 amendments tightened timelines for raising challenges, reducing the period from 30 days to 15 days after becoming aware of circumstances justifying the challenge. This change was aimed at preventing dilatory tactics and ensuring expedition in arbitration proceedings.⁴
• Streamlined Procedure: Section 13 was refined to provide a clearer procedure for challenges, including the role of the arbitral tribunal in deciding challenges and the limited circumstances under which courts can intervene.⁵

1.3 Objectives of the Challenge Mechanism

The provisions relating to challenge of arbitrators serve multiple objectives:

• Protecting Party Autonomy: While parties have the freedom to appoint arbitrators of their choice, this autonomy must be balanced with the need for fairness. The challenge mechanism ensures that parties can contest appointments that compromise the integrity of the process without completely negating their initial choice.⁶
• Maintaining Institutional Integrity: Arbitration derives its legitimacy from being a credible alternative to court litigation. If arbitrators can act with bias or conflict of interest without consequences, the entire institution of arbitration loses credibility. The challenge provisions help maintain public confidence in arbitration.⁷
• Preventing Abuse: The mechanism is designed to prevent both biased arbitration and frivolous challenges. It sets high thresholds for successful challenges while providing clear procedures, thus discouraging baseless objections meant merely to delay proceedings.⁸
• International Harmonization: By aligning with the UNCITRAL Model Law, India's challenge provisions facilitate international commercial arbitration, making awards more readily enforceable across jurisdictions.⁹

1.4 Constitutional Foundations

The right to an impartial tribunal is rooted in principles of natural justice, which form part of the constitutional guarantee under Article 14 (equality before law) and Article 21 (right to life and personal liberty) of the Constitution of India. The Supreme Court has consistently held that these principles apply to arbitration, which, though consensual, must adhere to fundamental notions of fairness and due process.¹⁰

Example: Consider a scenario where Company A appoints an arbitrator who is secretly a shareholder in Company A's parent company. Even though the arbitrator may be a reputed professional, this undisclosed relationship creates a justifiable doubt about their impartiality. Company B, the opposing party, has the right to challenge this appointment under Section 12 read with the Fifth Schedule of the Act.

1.5 Scope of the Present Study

This project examines the statutory framework governing challenges to arbitrator appointments under Sections 12 to 15 of the Act. The analysis includes:

• Detailed examination of grounds for challenge under Section 12
• Procedural aspects of raising and deciding challenges under Section 13
• Provisions relating to failure or impossibility to act under Section 14
• Termination of mandate and substitution under Section 15
• Judicial interpretation through landmark case laws
• Comparative analysis with international practices
• Practical challenges and suggestions for reform

2.1 Overview of Section 12

Section 12 of the Arbitration and Conciliation Act, 1996, establishes the framework for determining when an arbitrator can be challenged. This section creates a dual obligation: first, arbitrators must disclose certain circumstances; second, parties may challenge arbitrators based on justifiable doubts about their independence or impartiality.¹¹

The section reads as follows (relevant portions):

2.2 Disclosure Requirements

The disclosure requirement under Section 12(1) is mandatory and continuous. It applies at three stages:

• Pre-Appointment Disclosure: When a person is first approached for possible appointment as an arbitrator, they must disclose all relevant circumstances. This initial disclosure helps parties make informed decisions about whether to proceed with the appointment.¹³
• Ongoing Disclosure: Under Section 12(1), arbitrators have a continuing duty throughout the arbitral proceedings to disclose any new circumstances that may affect their independence or impartiality. This ensures transparency as situations evolve during the course of arbitration.¹⁴
• Scope of Disclosure: The disclosure must be in writing and should cover both direct and indirect relationships or interests. The test is whether the circumstances are "likely to give rise to justifiable doubts" about independence or impartiality, which is an objective standard.¹⁵

Example: Suppose Mr. Sharma is approached to serve as an arbitrator in a dispute between Company X and Company Y. Mr. Sharma must disclose that:

• He previously represented Company X in an unrelated matter five years ago
• His law firm currently represents a subsidiary of Company Y in another arbitration
• He owns shares worth ₹50,000 in Company X (which is a publicly traded company with market cap of ₹10,000 crores)

Each of these circumstances must be disclosed, and the parties can then decide whether these create justifiable doubts about his independence.

2.3 The Test of "Justifiable Doubts"

The core ground for challenging an arbitrator under Section 12(2)(a) is the existence of circumstances that give rise to "justifiable doubts" about independence or impartiality. This test has both objective and subjective elements:

• Objective Test: The Supreme Court has held that the test is primarily objective—would a reasonable, fair-minded, and informed person have doubts about the arbitrator's impartiality? It is not enough for a party to subjectively feel uncomfortable; there must be objective circumstances supporting the doubt.¹⁶
• Independence vs. Impartiality: These are related but distinct concepts. Independence refers to the absence of external relationships or influences that could affect the arbitrator's judgment. Impartiality refers to the absence of bias or prejudice toward a particular party or outcome. An arbitrator might be independent but still biased (e.g., due to personal views), or dependent but impartial (e.g., appointed by an institution but still fair).¹⁷
• Timing of Assessment: The doubts must exist at the time the challenge is raised or become known afterward. Parties cannot sit on known circumstances and then raise them strategically at a later stage.¹⁸

2.4 The Fifth and Seventh Schedules

The 2015 amendments introduced the Fifth and Seventh Schedules to the Act, providing specific categories of relationships and circumstances that affect arbitrator appointments:

2.4.1 Fifth Schedule - Automatic Disqualification

The Fifth Schedule lists circumstances that render a person ineligible to be appointed as an arbitrator. These include situations where the arbitrator or their firm has a direct financial or business relationship with one of the parties. The key categories in the Fifth Schedule are:

Category	Description	Explanation
Financial Interest	Arbitrator has financial interest in subject matter	Direct ownership, shares, or financial stake in the dispute's outcome
Current Advisory Relationship	Arbitrator currently advises one of the parties	Ongoing legal, financial, or business advisory relationship
Managerial Relationship	Arbitrator is manager, director, or has controlling interest in a party	Executive or governance role in a party's organization
Family Relationship	Close family relationship with a party or their representative	Spouse, children, siblings, parents of parties or their counsel

Case Law - TRF Limited v. Energo Engineering Projects Limited: In this landmark 2017 case, the Supreme Court examined the application of the Fifth Schedule. The respondent challenged an arbitrator who was a retired judge and had previously represented one of the parties in an unrelated matter several years before his retirement. The Court held that the Fifth Schedule applies prospectively (from the 2015 amendment onwards) and emphasized that past relationships must be evaluated based on whether they create current justifiable doubts. The Court noted that the mere fact of a previous professional relationship does not automatically disqualify an arbitrator; the relationship must be of a nature and recency that would create justifiable doubts in the mind of a reasonable person.¹⁹

2.4.2 Seventh Schedule - Mandatory Disclosure

The Seventh Schedule lists relationships and circumstances that must be disclosed by arbitrators, though they do not result in automatic disqualification. These include:

• Past Services: The arbitrator or their firm having represented or advised one of the parties in the past three years
• Professional Relationships: Current or past professional relationships with parties' counsel or law firms
• Indirect Financial Interests: Holdings in parent companies, subsidiaries, or affiliated entities of parties
• Frequent Appointments: Regular appointments by one of the parties or their counsel

Upon disclosure of Seventh Schedule circumstances, parties can decide whether to proceed with the arbitrator or raise a challenge under Section 12(2)(a).²⁰

2.5 Qualifications Agreed by Parties

Section 12(2)(b) provides another ground for challenge: when the arbitrator does not possess qualifications agreed to by the parties. This provision respects party autonomy in setting criteria for arbitrators.

Example: Parties to a complex pharmaceutical patent dispute may agree that the arbitrator must be a patent attorney with at least 15 years of experience in pharmaceutical law. If the appointed arbitrator is a commercial lawyer without patent law expertise, either party can challenge the appointment on this ground, regardless of the arbitrator's general competence or impartiality.²¹

2.6 Ineligibility and Disqualification

Section 12(5) states that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel falls under the categories in the Seventh Schedule shall be ineligible to be appointed as an arbitrator. This is a mandatory provision that cannot be waived by party agreement.²²

2.7 Waiver of Right to Challenge

An important aspect of Section 12 is that parties may waive their right to challenge an arbitrator, but only after full disclosure. If an arbitrator discloses circumstances and parties proceed without objection, they generally cannot later challenge on those same grounds unless new facts emerge. However, waiver is not valid if disclosure was incomplete or misleading.²³

3.1 Overview of Section 13

Section 13 of the Arbitration and Conciliation Act, 1996, establishes the procedural framework for challenging arbitrators. This section balances efficiency with fairness, providing a structured process while preventing dilatory tactics. The procedure has been refined through the 2015 amendments to ensure expeditious resolution of challenges without compromising the rights of parties.²⁴

3.2 Party Autonomy in Challenge Procedure

Section 13(1) begins by affirming party autonomy. Parties are free to agree on their own procedure for challenging arbitrators, subject only to the limitation in Section 13(4) regarding unsuccessful challenges. This autonomy allows parties to tailor procedures to their specific needs and circumstances.²⁶

Example: In an international commercial arbitration, parties might agree that challenges will be decided by the arbitral institution (such as the London Court of International Arbitration or the International Chamber of Commerce) rather than by the arbitral tribunal itself. This institutional challenge procedure would override the default procedure in Section 13(2) and (3).²⁷

3.3 Timeline for Raising Challenges

The 15-day timeline prescribed in Section 13(2) is mandatory and strictly enforced. This timeline serves multiple purposes:

• Preventing Tactical Delays: By requiring challenges to be raised promptly, the provision prevents parties from sitting on known objections and raising them strategically at later stages to disrupt proceedings.²⁸
• Providing Certainty: The arbitral tribunal and parties need certainty about the composition of the tribunal to proceed effectively. Quick resolution of challenges provides this certainty.²⁹
• Calculation of Period: The 15-day period begins from whichever is later: (a) the date when the party became aware of the constitution of the arbitral tribunal, or (b) the date when the party became aware of circumstances giving rise to justifiable doubts.³⁰

Case Law - Bharat Broadband Network Ltd. v. United Telecoms Ltd.: The Supreme Court in this 2019 case emphasized the strict nature of the 15-day timeline. The appellant attempted to challenge an arbitrator 45 days after constitution of the tribunal, arguing that they discovered the grounds for challenge only later. The Court held that the burden of proof lies on the challenging party to demonstrate when they became aware of the circumstances. Mere assertion of late discovery is insufficient; parties must exercise due diligence in investigating arbitrators' backgrounds. The Court dismissed the challenge as time-barred and observed that strict adherence to timelines is essential for the efficacy of arbitration as an expeditious dispute resolution mechanism.³¹

3.4 Contents of Challenge Statement

The written statement of reasons required under Section 13(2) must be comprehensive and specific. Courts have held that vague or general allegations are insufficient. The statement should include:

• Specific Circumstances: Detailed description of the circumstances that create justifiable doubts
• Supporting Evidence: Documentary or other evidence substantiating the allegations
• Legal Grounds: Reference to applicable provisions (Section 12, Fifth/Seventh Schedule)
• Timeline: Information about when the challenging party became aware of the circumstances

3.5 Options After Challenge is Raised

Once a challenge is raised under Section 13(2), three possibilities exist:

3.5.1 Voluntary Withdrawal by Challenged Arbitrator

The challenged arbitrator may choose to withdraw voluntarily from office. This is often the most expedient resolution, particularly when the circumstances disclosed are serious. However, an arbitrator is not obligated to withdraw merely because a challenge is raised. Withdrawal is appropriate when the arbitrator, upon reflection, recognizes that the circumstances do create reasonable doubts.³²

3.5.2 Agreement by Other Party

The other party (i.e., the party not raising the challenge) may agree to the challenge. This agreement effectively removes the challenged arbitrator without need for tribunal decision. Such agreement might occur when the other party also recognizes the legitimacy of the concerns raised.³³

3.5.3 Decision by Arbitral Tribunal

If the arbitrator does not withdraw and the other party does not agree to the challenge, the arbitral tribunal must decide on the challenge under Section 13(3). This creates an interesting situation where the challenged arbitrator participates in deciding their own challenge.

Procedural Fairness in Tribunal Decision: While it may seem incongruous for an arbitrator to participate in deciding their own challenge, the Act contemplates this scenario. The rationale is that:

• The challenged arbitrator has valuable perspective on the circumstances in question
• In multi-arbitrator tribunals, other arbitrators provide a check on any bias
• The challenging party has recourse under Section 34 if the challenge fails

However, in cases of sole arbitrator, this creates a paradox. Courts have held that sole arbitrators must exercise special care in evaluating challenges and should lean toward withdrawal when circumstances are genuinely doubtful.³⁴

3.6 Continuation of Proceedings

Section 13(4) mandates that if a challenge is unsuccessful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. This provision serves two purposes:

• Preventing Disruption: It prevents unsuccessful challenges from disrupting the arbitration. Parties cannot use challenges as a delaying tactic if the challenge is rejected.³⁵
• Deferring Final Resolution: It defers final judicial review of the challenge to the stage of setting aside under Section 34. This avoids piecemeal litigation during arbitration.³⁶

Example: In an arbitration between Builder Ltd. and Developer Corp., Builder challenges one of the three arbitrators, alleging that the arbitrator's law firm represented Developer Corp. in an unrelated matter two years ago. The challenged arbitrator does not withdraw, and Developer Corp. opposes the challenge. The tribunal (including the challenged arbitrator) decides the challenge and rejects it, finding no justifiable doubts based on a representation in an unrelated matter that concluded two years prior. Under Section 13(4), the tribunal must continue proceedings despite Builder's objections. Builder's remedy is to challenge the final award under Section 34, raising the same grounds regarding arbitrator bias.

3.7 Recourse Under Section 34

Section 13(5) provides that a party who unsuccessfully challenged an arbitrator may, after an award is made, apply to set aside the award under Section 34. Section 34(2)(a)(iii) specifically allows setting aside if "the arbitral tribunal was not constituted in accordance with this Act."

This creates a two-stage protection:

• First Stage: Challenge before the tribunal during proceedings
• Second Stage: Judicial review when seeking to set aside the award

However, courts have held that parties cannot raise new grounds for challenging arbitrators at the Section 34 stage that were not raised during arbitration. The principle of waiver applies—if a party was aware of circumstances during arbitration but failed to challenge, they cannot later rely on those circumstances in Section 34 proceedings.³⁷

3.8 Judicial Approach to Challenge Decisions

When courts review challenge decisions under Section 34, they apply limited scrutiny. Courts will set aside awards only if:

• The arbitrator clearly fell within the ineligibility categories of the Fifth Schedule
• Undisclosed circumstances created obvious and serious doubts about independence or impartiality
• The tribunal's decision on the challenge was perverse or in bad faith

Courts will not conduct a de novo review of the challenge. They respect the tribunal's decision unless it is clearly wrong or vitiated by non-disclosure.³⁸

Case Law - Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd.: In this 2017 case, the Supreme Court examined whether an arbitrator who was also a consultant to one party could continue. The appellant challenged the arbitrator during proceedings, which was rejected by the tribunal. After an adverse award, the appellant sought to set it aside on grounds of arbitrator bias. The Supreme Court held that the test under Section 34 is whether there exist circumstances that give rise to justifiable doubts—the same test as under Section 12(2)(a). The Court found that the arbitrator's ongoing consultancy relationship with one party created clear grounds for disqualification and set aside the award. The Court emphasized that institutional integrity requires strict adherence to independence standards, and tribunals must err on the side of caution when evaluating challenges involving ongoing financial or business relationships.³⁹

4.1 Overview of Section 14

Section 14 of the Arbitration and Conciliation Act, 1996, addresses situations where an arbitrator becomes unable to perform their functions or fails to act without undue delay. This provision ensures that arbitration proceedings do not stall due to an arbitrator's incapacity or inaction, while protecting arbitrators from removal based on parties' dissatisfaction with their conduct of proceedings.⁴⁰

4.2 Grounds for Termination Under Section 14(1)(a)

Section 14(1)(a) provides two broad grounds for termination of an arbitrator's mandate:

4.2.1 De Jure or De Facto Inability to Perform Functions

An arbitrator may become unable to perform their functions due to various circumstances:

• Physical Incapacity: Serious illness, injury, or disability that prevents the arbitrator from carrying out their duties. This could include hospitalization, medical conditions requiring extended treatment, or permanent disability.⁴²
• Mental Incapacity: Mental illness, cognitive decline, or other conditions affecting the arbitrator's ability to comprehend proceedings or make reasoned decisions. Indian courts recognize that mental capacity is essential for arbitral functions.⁴³
• Legal Incapacity (De Jure): Legal restrictions that prevent the arbitrator from continuing, such as disbarment, conviction for certain offenses, or legal declarations of incompetence.⁴⁴
• Practical Impossibility (De Facto): Situations where, though not legally barred, the arbitrator cannot practically perform functions due to circumstances such as imprisonment, being declared a fugitive, or residing in a jurisdiction from which they cannot travel.⁴⁵

Example: An arbitrator suffers a severe stroke during arbitration proceedings and is hospitalized for three months with uncertain recovery. Despite being willing to continue, medical evidence shows they cannot read documents or comprehend legal arguments. This constitutes de facto inability to perform functions, triggering Section 14(1)(a) even though the arbitrator has not resigned.

4.2.2 Failure to Act Without Undue Delay

The second ground under Section 14(1)(a) is failure to act without undue delay. This provision addresses situations where an arbitrator is capable but inactive. Key considerations include:

• What Constitutes "Undue Delay": Delay is "undue" when it exceeds what is reasonable given the complexity of the matter and circumstances. The test is objective—would a diligent arbitrator have proceeded more expeditiously? Minor delays or delays due to parties' conduct do not qualify.⁴⁶
• Burden of Proof: The party seeking termination must demonstrate: (a) specific instances of inaction, (b) absence of justification for the delay, and (c) prejudice or risk to the arbitration process.⁴⁷
• Examples of Undue Delay:
  • Failing to schedule hearings for months without explanation
  • Repeatedly postponing hearings for personal convenience
  • Failing to issue procedural orders or respond to party communications
  • Prolonged delay in rendering award after hearings conclude

Case Law - K.K. Modi v. K.N. Modi: This 1998 Supreme Court case remains a leading authority on failure to act. The arbitrator in a family business dispute had not conducted any hearings for 18 months despite repeated requests from parties. The Court held that arbitrators have a duty to act with reasonable dispatch. While arbitrators need flexibility in managing proceedings, prolonged inaction without justification amounts to failure to perform functions. The Court emphasized that parties choose arbitration for its speed and efficiency; an inactive arbitrator defeats this purpose. The mandate was terminated, and a new arbitrator was appointed.⁴⁸

4.3 Voluntary Withdrawal and Agreed Termination

Section 14(1)(b) recognizes two voluntary mechanisms for terminating an arbitrator's mandate:

4.3.1 Withdrawal by Arbitrator

An arbitrator may voluntarily withdraw from office for various reasons:

• Recognition of circumstances affecting independence or impartiality
• Personal or professional circumstances preventing adequate attention to the arbitration
• Unforeseen conflicts of interest emerging during proceedings
• Health issues or other personal reasons

Important aspects of withdrawal:

• Timing: An arbitrator may withdraw at any stage but should do so as soon as reasons become apparent to minimize disruption.⁴⁹
• Form: Withdrawal should be in writing and communicated to all parties and co-arbitrators.
• Effect: Withdrawal does not constitute admission of any wrongdoing or bias (Section 14(3)).
• Fees: Arbitrators who withdraw may be entitled to fees for work done up to withdrawal, depending on circumstances and agreement.⁵⁰

4.3.2 Termination by Party Agreement

Parties may mutually agree to terminate an arbitrator's mandate even without grounds under Section 14(1)(a). This reflects party autonomy and might occur when:

• Both parties recognize issues with the arbitrator's performance
• Parties prefer a different arbitrator due to changing circumstances
• Settlement discussions suggest a different arbitrator might facilitate resolution

4.4 Judicial Determination of Termination

When controversy exists regarding grounds for termination under Section 14(1)(a), Section 14(2) allows a party to apply to the court for determination. This judicial mechanism provides authoritative resolution when parties disagree.

4.4.1 Procedure for Court Application

• Jurisdiction: Application is made to the court having jurisdiction under Section 2(1)(e), typically the principal Civil Court of original jurisdiction or High Court as specified.⁵¹
• Parties: The application can be made by any party to the arbitration. The arbitrator and other parties must be given notice and opportunity to respond.
• Evidence: The applicant must present evidence substantiating the claim of inability or failure to act. This might include medical reports, correspondence showing inaction, or other relevant documentation.
• Standard of Review: Courts apply a reasonableness standard—would a reasonable person conclude that the arbitrator is unable or failing to act? Courts avoid substituting their judgment on arbitration management but intervene when clear grounds exist.⁵²

4.4.2 Court's Powers and Discretion

Upon finding grounds for termination, the court may:

• Order termination of the arbitrator's mandate
• Direct appointment of a substitute arbitrator (often referring to the procedure in Section 11)
• Issue directions regarding costs, including whether the removed arbitrator is entitled to fees
• Make orders about continuation of arbitration proceedings⁵³

4.5 Effect of Withdrawal - Section 14(3)

Section 14(3) clarifies that withdrawal or agreed termination does not imply acceptance of alleged grounds for disqualification or inability. This protection is important because:

• Protecting Reputation: Arbitrators can withdraw to avoid disputes without admitting any wrongdoing or incapacity.⁵⁴
• Facilitating Settlement: Parties can agree to terminate an arbitrator's mandate as part of resolving disputes about the arbitration itself, without prejudice to either side's position.
• Encouraging Appropriate Withdrawal: Without this protection, arbitrators might resist withdrawal even when appropriate, fearing it would damage their reputation.

4.6 Practical Considerations

Several practical issues arise in applying Section 14:

• Multi-Arbitrator Tribunals: When one arbitrator in a three-member tribunal becomes unable to act, the remaining two arbitrators and parties must decide whether to continue with a substitute or reconstitute the entire tribunal. Generally, substitution of one arbitrator is preferred to avoid starting over.⁵⁵
• Advanced Stage of Proceedings: Termination becomes particularly problematic when substantial work has been completed. Courts are reluctant to terminate mandates at advanced stages unless grounds are serious and compelling.
• Timelines: The Act's emphasis on completing arbitration within 12 months (Section 29A) creates pressure to resolve termination issues quickly.

5.1 Overview of Section 15

Section 15 of the Arbitration and Conciliation Act, 1996, governs the consequences when an arbitrator's mandate terminates and the appointment of substitute arbitrators. This provision ensures continuity of arbitration proceedings while addressing the practical and legal issues that arise when tribunal composition changes.⁵⁶

5.2 Grounds for Termination of Mandate

Section 15(1) consolidates various circumstances that lead to termination of an arbitrator's mandate. These include:

Ground	Section	Explanation
Successful Challenge	Section 13	When challenge is upheld by tribunal or court
Inability to Act	Section 14(1)(a)	De jure or de facto inability to perform functions
Failure to Act	Section 14(1)(a)	Undue delay or inaction in proceedings
Voluntary Withdrawal	Section 15(1)(a)	Arbitrator's decision to resign for any reason
Party Agreement	Section 15(1)(b)	Mutual agreement of parties to terminate mandate
Death	Implicit	Natural termination upon arbitrator's demise

5.3 Appointment of Substitute Arbitrator

Section 15(2) establishes the principle that substitute arbitrators must be appointed following the same procedure used for the original arbitrator. This ensures consistency and respects the original agreement or mechanism chosen by the parties.⁵⁸

5.3.1 Application of Original Appointment Method

The substitute appointment follows the original method, which could be:

• Party Appointment: If the original arbitrator was appointed by one party, that party appoints the substitute. For example, if Company A appointed Arbitrator X who later resigned, Company A appoints the replacement.⁵⁹
• Institutional Appointment: If the original arbitrator was appointed by an arbitral institution (like DIAC, MCIA, LCIA), the same institution appoints the substitute following its rules.
• Court Appointment: If the original arbitrator was appointed by the court under Section 11, the substitute is also appointed by the court. Parties can apply under Section 11 for appointment of substitute.⁶⁰
• Agreed Mechanism: If parties had agreed to a specific appointment mechanism in their arbitration agreement, that mechanism applies to substitute appointment.

Example: An arbitration agreement provides for a three-member tribunal with each party appointing one arbitrator and those two arbitrators appointing the presiding arbitrator. If the presiding arbitrator becomes unable to act and the mandate terminates, the two party-appointed arbitrators must appoint a substitute presiding arbitrator following the same procedure. If they cannot agree, parties may seek court assistance under Section 11(6).

5.3.2 Practical Issues in Substitution

Several practical challenges arise in appointing substitutes:

• Disclosure by Substitute: The substitute arbitrator must make all disclosures required under Section 12 as if they were being originally appointed. Past relationships with parties or counsel must be disclosed.⁶¹
• Qualifications: The substitute must possess any qualifications agreed by parties for arbitrators. If the original agreement specified "chartered accountant with 20 years experience," the substitute must meet these criteria.
• Acceptance of Terms: The substitute accepts appointment on the same terms and conditions as the original arbitrator, including fees, unless parties agree otherwise.

5.4 Repetition of Hearings

Section 15(3) addresses a critical question: when an arbitrator is replaced partway through proceedings, should prior hearings be repeated? The provision balances efficiency with fairness.

5.4.1 Discretion of the Tribunal

Unless parties agree otherwise, the reconstituted arbitral tribunal has discretion to decide whether to repeat hearings. Factors influencing this decision include:

• Stage of Proceedings: If replacement occurs early (before substantial evidence is recorded), repetition may not be needed. If replacement occurs after extensive testimony, some repetition may be necessary for the substitute to properly evaluate evidence.⁶²
• Nature of Evidence: Documentary evidence may not require repetition if the substitute can review documents and written submissions. Oral testimony, cross-examination, and witness credibility assessments may require repetition if the substitute wasn't present.⁶³
• Party Consent: If both parties agree that prior proceedings need not be repeated, the tribunal typically respects this consent.
• Prejudice: If one party would be seriously prejudiced by not repeating hearings (e.g., key witness testimony that substitute arbitrator did not observe), repetition may be necessary.

Case Law - Central Organization for Railway Electrification v. ECI SPIC SMO MCML (JV): The Supreme Court in this 2020 case dealt with substitution of an arbitrator in an infrastructure dispute. The original presiding arbitrator resigned after hearings were partially completed. The substitute presiding arbitrator chose not to repeat hearings, relying on transcripts and written submissions. One party challenged the final award arguing they were prejudiced by not having the substitute hear their witnesses. The Supreme Court held that the discretion under Section 15(3) must be exercised judicially. While complete repetition is not always necessary, the substitute must have adequate basis to decide factual disputes. The Court found that in this case, transcripts and cross-examination records were sufficient, and mere preference to personally appear before the substitute does not require repetition. The challenge was dismissed.⁶⁴

5.4.2 Party Agreement on Repetition

Section 15(3) permits parties to agree on whether hearings will be repeated. Such agreement might be:

• Pre-Agreed: The arbitration agreement itself might specify that in case of substitution, hearings will/will not be repeated.
• Post-Substitution Agreement: After substitution occurs, parties can agree on the scope of repetition (e.g., agreeing to repeat witness testimony but not document review).

5.5 Validity of Prior Orders and Rulings

Section 15(4) provides crucial certainty: orders and rulings made before an arbitrator's replacement remain valid unless parties agree otherwise. This prevents the need to revisit all prior decisions when tribunal composition changes.⁶⁵

5.5.1 Types of Orders That Remain Valid

• Procedural Orders: Orders regarding timelines, discovery, witness lists, document production, etc., generally remain valid.
• Interim Orders: Orders under Section 17 for interim relief remain enforceable despite tribunal reconstitution.
• Jurisdictional Rulings: Decisions on tribunal's jurisdiction, applicability of arbitration agreement, etc., are not affected by substitution.
• Evidentiary Rulings: Decisions on admissibility of evidence, relevance of documents, and similar rulings stand.

5.5.2 Exception: Party Agreement

Parties can agree that certain prior orders should be reconsidered by the reconstituted tribunal. This might occur when:

• Prior orders were controversial and reconstituted tribunal might take a different view
• Changed circumstances make prior orders inappropriate
• Both parties prefer fresh consideration of significant issues

5.5.3 Exception: Fundamental Unfairness

While Section 15(4) validates prior orders, courts have recognized that in extreme cases involving fundamental unfairness, a reconstituted tribunal may reconsider prior rulings. This is exceptional and applies only when:

• The prior order was clearly erroneous and caused serious prejudice
• New evidence emerges making the prior order untenable
• The prior order violated principles of natural justice⁶⁶

5.6 Impact on Arbitration Timelines

Substitution affects the 12-month timeline under Section 29A for completing arbitration. The Act recognizes that substitution may require additional time. However, arbitrators should still strive to minimize delay caused by substitution.⁶⁷

5.7 Fees and Costs Issues

Substitution raises questions about fees:

• Departing Arbitrator's Fees: Generally entitled to fees for work completed up to departure. The specific amount depends on the fee agreement and circumstances of departure.
• Substitute Arbitrator's Fees: Entitled to fees from appointment onward. If substantial prior work must be reviewed, this may be reflected in fees.
• Increased Costs: Substitution often increases overall costs due to the need for the substitute to review prior proceedings. These costs are typically borne by parties as part of arbitration costs.⁶⁸

6.1 Evolution of Judicial Interpretation

Indian courts, particularly the Supreme Court, have played a crucial role in interpreting and refining the application of Sections 12-15 of the Arbitration and Conciliation Act, 1996. Through a series of landmark judgments, courts have established principles that balance party autonomy, arbitral efficiency, and fairness.⁶⁹

6.2 Key Supreme Court Judgments

6.2.1 TRF Limited v. Energo Engineering Projects Limited (2017) 8 SCC 377

Facts: This case involved a dispute regarding the appointment of a retired Supreme Court judge as an arbitrator. The respondent challenged the appointment on the ground that the arbitrator had previously represented one of the parties during his practice days before becoming a judge.

Issues:

• Whether the Fifth and Seventh Schedules apply retrospectively
• What constitutes "justifiable doubts" about independence
• The test for evaluating past relationships of arbitrators

Court's Reasoning and Holding: The Supreme Court, in a comprehensive judgment, held that:

• The Fifth and Seventh Schedules apply prospectively from October 23, 2015 (date of amendment) and do not affect appointments made earlier or arbitrations commenced before that date.
• The test for "justifiable doubts" is objective—would a fair-minded and informed observer, having considered the facts, conclude that there was a real possibility of bias?
• Past professional relationships must be evaluated based on recency, nature, and whether they would create current doubts. A relationship ending many years ago, particularly before the person became a judge, generally does not create justifiable doubts.
• The Court emphasized that the independence of the judiciary is well-established, and a person's tenure as a judge creates a strong presumption of impartiality in subsequent arbitrator roles.

Significance: This judgment clarified the temporal application of the 2015 amendments and established that independence and impartiality must be assessed objectively, not based on a party's subjective discomfort. It also recognized that prior professional experience does not automatically taint an arbitrator's independence.⁷⁰

6.2.2 HRD Corporation v. GAIL (India) Ltd. (2018) 12 SCC 471

Facts: The case involved a challenge to an arbitrator who had been repeatedly appointed by one of the parties in multiple arbitrations. The challenging party argued that this pattern of appointments created a financial interest and bias in favor of the appointing party.

Court's Holding: The Supreme Court held that:

• Repeat appointments by themselves do not create automatic disqualification unless the pattern is so frequent and lucrative as to create a financial dependency.
• The Fifth Schedule's category of "a person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule" must be read carefully.
• Disclosure of all appointments by a party is mandatory under the Seventh Schedule, and failure to disclose is a serious matter.
• After disclosure, parties can decide whether to challenge; mere repeat appointment, if disclosed, does not automatically vitiate the arbitrator's independence.

Significance: This case emphasized the importance of transparency through disclosure while recognizing that skilled arbitrators may naturally receive repeat appointments from multiple parties. The key is full disclosure enabling informed party consent.⁷¹

6.2.3 Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020) 20 SCC 760

Facts: An arbitration between an architectural firm and a government corporation involved a challenge to an arbitrator based on an alleged relationship with the corporation's parent ministry. The challenging party argued that the arbitrator had previously served on government committees and had business relationships with government entities.

Court's Analysis: The Supreme Court conducted a detailed analysis of what constitutes sufficient "relationship" to create justifiable doubts:

• Professional dealings with government or large institutions in unrelated contexts do not automatically disqualify arbitrators in disputes involving those entities.
• The relationship must be with the specific party to the dispute, not merely with a parent entity or affiliate, unless the relationship is so close as to effectively be with the party.
• Committee memberships, professional associations, and arm's-length commercial transactions generally do not create the kind of close relationship contemplated by the Act.
• The Court must examine the substance of the relationship, not just its formal existence.

Holding: The challenge was rejected. The Court found no circumstances creating justifiable doubts about independence based on general professional interactions with government entities.⁷²

6.3 Judicial Principles on Challenge Procedure

6.3.1 Strict Adherence to Timelines

Courts have consistently held that the 15-day timeline under Section 13(2) is mandatory and must be strictly observed. In Bharat Broadband Network Ltd. v. United Telecoms Ltd. (2019) 5 SCC 755, the Court emphasized that allowing extensions would defeat the purpose of having a specific timeline. The burden is on the challenging party to demonstrate when they became aware of grounds for challenge.⁷³

6.3.2 Waiver and Estoppel

In Ace Multi Axes Systems Ltd. v. Firm Magnum Enterprises (2019) 18 SCC 469, the Supreme Court held that parties who proceed with arbitration without raising known objections are deemed to have waived their right to challenge. This principle prevents parties from using challenges strategically when arbitration appears to be going against them.⁷⁴

6.3.3 Limited Scope of Section 34 Review

Courts have clarified that review under Section 34 of tribunal decisions on challenges is limited. In Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665, the Court stated that Section 34 applications involving arbitrator challenges should focus on whether there exist objective circumstances creating justifiable doubts, not on whether the tribunal's decision was correct in all respects.⁷⁵

6.4 Comparative Analysis with International Standards

6.4.1 IBA Guidelines on Conflicts of Interest

Indian courts have increasingly referred to the International Bar Association (IBA) Guidelines on Conflicts of Interest in International Arbitration (2014) as persuasive authority. These guidelines categorize relationships into:

• Red List: Circumstances creating automatic disqualification (Non-Waivable Red List) or requiring party waiver (Waivable Red List)
• Orange List: Circumstances requiring disclosure that may lead to challenge
• Green List: Circumstances unlikely to create conflicts

While not binding, the IBA Guidelines provide useful reference points for evaluating relationships under the Fifth and Seventh Schedules.⁷⁶

6.4.2 UNCITRAL Model Law Alignment

Indian jurisprudence has emphasized aligning with international standards set by the UNCITRAL Model Law. The Supreme Court has noted that uniform interpretation across jurisdictions enhances the enforceability of Indian arbitral awards internationally and makes India a more attractive venue for international arbitration.⁷⁷

6.5 Emerging Trends and Recent Developments

6.5.1 Technology and Disclosure

Recent cases have addressed whether arbitrators must disclose relationships discoverable through internet searches. Courts have held that arbitrators have a duty to disclose material relationships regardless of whether they are publicly available. Parties' ability to discover information independently does not excuse non-disclosure.⁷⁸

6.5.2 Institutional Arbitration and Challenges

When arbitrations are conducted under institutional rules (ICC, LCIA, SIAC, etc.), courts have held that institutional challenge procedures take precedence over Section 13(2) and (3). However, Section 13(5) and recourse under Section 34 remain available after awards are rendered.⁷⁹

6.5.3 Virtual Hearings and Arbitrator Conduct

Post-pandemic cases have begun addressing whether arbitrator conduct in virtual hearings creates new grounds for challenge. Issues like arbitrators appearing from inappropriate locations or appearing inattentive during video hearings have been raised, though no definitive jurisprudence has yet emerged.⁸⁰

7.1 Summary of Findings

This study has examined the comprehensive framework established by Sections 12-15 of the Arbitration and Conciliation Act, 1996, for addressing challenges to arbitrator appointments. Several key findings emerge from this analysis:

• Robust Disclosure Mechanism: The 2015 amendments significantly strengthened disclosure requirements, making them mandatory and continuous. The Fifth and Seventh Schedules provide clear guidance on what must be disclosed or results in disqualification, reducing ambiguity.⁸¹
• Balanced Approach: The statutory framework balances competing interests—protecting party autonomy, ensuring arbitrator independence, maintaining arbitral efficiency, and providing recourse against unfairness. This balance is generally well-calibrated, though some tensions remain.⁸²
• Emphasis on Expedition: The strict 15-day timeline for challenges, the requirement to continue proceedings after unsuccessful challenges, and deferral of judicial review to the post-award stage all reflect a legislative intent to prevent challenges from becoming tools of delay.⁸³
• Evolving Jurisprudence: Indian courts, particularly the Supreme Court, have developed sophisticated jurisprudence on arbitrator challenges, generally favoring objective standards and recognizing that arbitration must remain an efficient alternative to litigation.⁸⁴

7.2 Effectiveness of the Current Framework

The challenge mechanism under Sections 12-15 has been largely effective in achieving its objectives:

7.2.1 Strengths

• Clear Standards: The "justifiable doubts" standard, interpreted as an objective test, provides workable criteria without being overly rigid.
• Procedural Clarity: The step-by-step procedure in Section 13, with defined timelines and recourse mechanisms, reduces procedural disputes.
• Substitution Provisions: Section 15's provisions for seamless substitution help maintain arbitration continuity when arbitrators must be replaced.
• International Alignment: Alignment with the UNCITRAL Model Law facilitates international arbitration and award enforcement.⁸⁵

7.2.2 Challenges and Limitations

Despite its strengths, the framework faces several challenges:

• Information Asymmetry: Parties often lack resources to thoroughly investigate arbitrators' backgrounds, making it difficult to identify grounds for challenge within the 15-day period. This is particularly problematic for individuals and small businesses facing well-resourced opponents.⁸⁶
• Sole Arbitrator Paradox: The provision allowing arbitrators to decide challenges to themselves creates an inherent conflict, especially in sole arbitrator cases. While Section 13(5) provides post-award recourse, this may come too late if proceedings were tainted by bias.⁸⁷
• Ambiguity in "Justifiable Doubts": Despite judicial clarification, the "justifiable doubts" standard remains somewhat subjective. Different courts and tribunals may reach different conclusions on similar facts, creating uncertainty.⁸⁸
• Inadequate Sanctions for Non-Disclosure: While non-disclosure can be grounds for challenge, there are no specific penalties for arbitrators who deliberately conceal relevant information. This reduces the deterrent effect of disclosure requirements.⁸⁹

7.3 Recommendations for Reform

Based on the analysis conducted in this study, several recommendations emerge:

7.3.1 Enhanced Database of Arbitrators

Establish a centralized, publicly accessible database of arbitrators including:

• Professional background and qualifications
• Record of appointments and by whom
• Disclosed relationships and interests
• Disciplinary actions or successful challenges (without details of underlying disputes)

Such a database would help parties make informed decisions and identify potential conflicts early. It would also create reputational incentives for arbitrators to maintain high disclosure standards.⁹⁰

7.3.2 Institutional Challenge Mechanisms

Encourage use of institutional arbitration where challenges are decided by independent authorities rather than the tribunal itself. This addresses the sole arbitrator paradox and provides greater confidence in challenge procedures. Legislative amendments could incentivize institutional arbitration through:

• Fast-track enforcement for institutional awards
• Reduced court fees for institutional arbitration disputes
• Recognition of institutional challenge decisions in Section 34 proceedings⁹¹

7.3.3 Clarification of "Undue Delay"

Section 14's "undue delay" standard should be clarified through guidelines or amendments specifying:

• Reasonable timeframes for different procedural stages
• Factors to consider when evaluating delay
• Consequences of undue delay (automatic termination after specified periods)

7.3.4 Sanctions for Deliberate Non-Disclosure

Introduce explicit sanctions for arbitrators who deliberately fail to disclose material information:

• Forfeiture of fees for arbitrations involving non-disclosure
• Reporting to professional bodies (Bar Councils, professional associations)
• Ineligibility for future appointments under the Act for specified periods

Such sanctions would strengthen the disclosure regime and protect parties from dishonest arbitrators.⁹²

7.3.5 Specialized Training and Accreditation

Develop mandatory training programs on independence and conflict of interest for arbitrators. Accreditation requirements could include:

• Training on the Fifth and Seventh Schedules
• Understanding of IBA Guidelines and international standards
• Ethical responsibilities and disclosure obligations
• Case studies of successful and unsuccessful challenges

7.4 Comparative Lessons from Other Jurisdictions

India can learn from approaches adopted in other jurisdictions:

• England and Wales: The Arbitration Act 1996 allows removal by court if arbitrator fails to use reasonable dispatch. India could adopt similar provisions with clearer standards.⁹³
• Singapore: The Singapore International Arbitration Act has strong institutional mechanisms and clear timelines. Singapore's success in becoming a preferred arbitration seat demonstrates the value of institutional support.⁹⁴
• Hong Kong: Hong Kong's arbitration law includes detailed provisions on arbitrator fees and costs when mandates terminate, reducing disputes. India could benefit from similar clarifications.⁹⁵

7.5 Future Directions

As arbitration continues to evolve, several emerging issues will require attention:

• Technology and Virtual Arbitration: Guidelines on arbitrator conduct in virtual proceedings, disclosure of technical capabilities, and standards for virtual hearing integrity
• ESG and Diversity Considerations: Whether and how environmental, social, and governance factors affect arbitrator selection and challenges
• Artificial Intelligence: The role of AI in arbitrator selection, conflict checking, and even as decision-support tools
• Investment Treaty Arbitration: Special considerations for arbitrator challenges in investor-state disputes⁹⁶

7.6 Concluding Observations

The framework for challenging arbitrator appointments under the Arbitration and Conciliation Act, 1996, represents a careful balancing act. It seeks to ensure fairness and impartiality while preserving the efficiency and finality that make arbitration attractive. The 2015 amendments significantly improved this framework, and subsequent judicial interpretation has generally been constructive.

However, as with any legal mechanism, room for improvement exists. The recommendations outlined above—ranging from enhanced databases to clearer standards and stronger sanctions—could further strengthen the challenge mechanism without undermining arbitration's fundamental advantages.

Ultimately, the success of these provisions depends not just on statutory text or judicial interpretation, but on the good faith and professionalism of arbitrators themselves. No set of rules can substitute for arbitrators who take their ethical obligations seriously and parties who engage with the arbitration process in good faith. The challenge mechanism is a necessary safeguard, but the goal should be to create an arbitration culture where challenges are rarely needed because independence and impartiality are the norm, not the exception.

As India continues its journey toward becoming a preferred seat for international commercial arbitration, maintaining and strengthening the integrity of the arbitrator challenge mechanism will be crucial. This project has sought to contribute to that goal by comprehensively analyzing the current framework and identifying pathways for improvement.