Removal of an Arbitrator under Arbitration and Conciliation Act, 1996

India’s judicial system continues to face a significant backlog of civil and commercial disputes. Arbitration has emerged as a preferred alternative dispute resolution mechanism, particularly in commercial matters, due to its efficiency, confidentiality, and flexibility. The Arbitration and Conciliation Act, 1996 (“the Act”) governs arbitration proceedings in India and seeks to ensure fairness, neutrality, and independence throughout the arbitral process.

A central feature of arbitration is the appointment of an impartial and independent arbitrator. However, situations may arise where an arbitrator becomes ineligible, biased, unable to perform duties, or otherwise unsuitable to continue. In such circumstances, the Act provides a structured mechanism for the removal of an arbitrator. The removal process safeguards the integrity of arbitration while balancing minimal judicial interference.

This article provides a comprehensive analysis of the grounds, procedures, and legal framework governing the removal of an arbitrator under Indian law.

Who is an Arbitrator

An arbitrator is a neutral third party appointed to adjudicate disputes between parties outside the traditional court system. The arbitrator derives authority from the arbitration agreement and the Act. Section 18 of the Arbitration and Conciliation Act, 1996 mandates equal treatment of parties and requires arbitrators to provide full opportunity to present their case.

The role of an arbitrator is quasi-judicial in nature. The arbitrator must act independently, impartially, and in accordance with the principles of natural justice.

Qualifications and Eligibility of an Arbitrator

The Act does not prescribe specific educational or professional qualifications for arbitrators. Section 11 of Arbitration and Conciliation Act, 1996 grants parties autonomy to appoint arbitrators of any nationality and to determine the appointment procedure.

However, the absence of formal qualification requirements does not imply unrestricted eligibility. Independence, impartiality, and absence of conflict of interest are fundamental requirements embedded in Sections 12 to 15 of the Act.

Composition of the Arbitral Tribunal

Number of Arbitrators

Section 10 of the Act allows parties to decide the number of arbitrators, provided it is an odd number. In the absence of agreement, a sole arbitrator is appointed.

Appointment of Arbitrators

Section 11 governs the appointment procedure. Where parties fail to appoint arbitrators as per the agreement, the High Court, Supreme Court, or a designated arbitral institution may step in. The appointing authority must ensure the arbitrator’s independence, impartiality, and competence.

Ineligibility to Act as an Arbitrator

Section 12(5) and the Seventh Schedule

The 2015 Amendment introduced a significant reform through Section 12(5) read with the Seventh Schedule. It renders certain persons statutorily ineligible to act as arbitrators, notwithstanding any prior agreement.

An arbitrator becomes ineligible if a relationship exists with:

• Either party
• Counsel of a party
• Subject matter of the dispute

The Seventh Schedule exhaustively lists disqualifying relationships, including professional, financial, managerial, and familial connections. These provisions aim to eliminate real or perceived bias at the threshold stage.

Judicial Position on Unilateral Appointments

The Supreme Court, in TRF Ltd. v. Energo Engineering Projects Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd., held that unilateral appointment of arbitrators by one party is invalid, even if the arbitrator is otherwise independent. Such appointments violate the principle of neutrality embedded in Section 12(5).

Meaning of Removal of an Arbitrator

Removal of an arbitrator refers to the termination of the arbitrator’s mandate before the conclusion of arbitral proceedings. Removal may occur due to challenge, statutory ineligibility, inability to act, withdrawal, or mutual agreement of the parties.

The Act recognises removal through three principal mechanisms:

• Challenge to appointment
• Termination of mandate
• Termination by mutual consent

Challenge to an Arbitrator under Section 12 and Section 13

Grounds for Challenge

Section 12(3) allows a challenge to an arbitrator only if:

• Circumstances exist giving rise to justifiable doubts as to independence or impartiality, or
• The arbitrator does not possess the qualifications agreed upon by the parties

The Fifth Schedule provides illustrative circumstances that may give rise to justifiable doubts. These include prior professional relationships, repeated appointments by one party, financial interests, or close association with counsel.

Disclosure Obligations

Under Section 12(1), an arbitrator must disclose any circumstances likely to affect independence or impartiality. Such disclosure must be made in the format prescribed under the Sixth Schedule.

Failure to disclose relevant information can itself become a ground for challenge.

Challenge Procedure under Section 13

Parties may agree upon a challenge procedure. In the absence of agreement, Section 13 applies. The challenge must be raised within 15 days of:

• Becoming aware of the tribunal’s constitution, or
• Becoming aware of the circumstances giving rise to challenge

The challenge is decided by the arbitral tribunal itself. If rejected, the proceedings continue and the award is rendered.

The significance of raising a challenge lies in preserving the right to question the award later under Section 34. Failure to challenge at the appropriate stage may bar subsequent objections.

Termination of Mandate under Section 14

Grounds for Termination

Section 14 provides for termination of the arbitrator’s mandate if the arbitrator:

• Becomes de jure unable to perform functions
• Becomes de facto unable to perform functions
• Fails to act without undue delay
• Withdraws from office
• Parties agree to termination

De jure inability arises when the arbitrator becomes legally disqualified, such as falling within Section 12(5), becoming insolvent, or being convicted of an offence.

De facto inability refers to factual incapacity, including prolonged illness, personal incapacity, or inability to devote sufficient time.

Court Intervention

If a dispute arises regarding the existence of such grounds, Section 14(2) allows a party to approach the court for determination. Unlike Section 13, the court plays a decisive role under Section 14.

Removal of Arbitrator by Mutual Consent under Section 15

Section 15 recognises party autonomy by allowing termination of an arbitrator’s mandate by mutual agreement, irrespective of the appointment method.

This provision allows parties to replace an arbitrator without attributing fault or bias. Mutual consent removal is often used where confidence in the arbitrator has eroded or proceedings have stalled.

Substitution of an Arbitrator

When an arbitrator’s mandate terminates, Section 15 provides for substitution. The substitute arbitrator must be appointed using the same procedure as the original appointment.

Unless otherwise agreed:

• Proceedings may continue from the stage already reached
• Prior orders and procedural rulings remain valid
• Hearings may be repeated at the discretion of the tribunal

Substitution does not automatically invalidate earlier proceedings.

Conclusion

Removal of an arbitrator is an essential safeguard under the Arbitration and Conciliation Act, 1996. While arbitration prioritises minimal court intervention, the Act recognises that neutrality and independence are non-negotiable. Sections 12 to 15 provide a structured and balanced mechanism to address situations where an arbitrator becomes unsuitable to continue.

The removal process strengthens confidence in arbitration and reinforces its role as a credible alternative to litigation in India. A well-regulated system for appointment and removal ensures that arbitration remains fair, efficient, and aligned with the principles of natural justice.