The Supreme Court has set aside a Delhi High Court order that extended the mandate of a sole arbitrator whose tenure had expired by operation of law. The Apex Court held that when the mandate of an arbitrator terminates under Section 29A(4) of the Arbitration and Conciliation Act, 1996, for failure to pass an award within the prescribed timeline, the Court is empowered to substitute the arbitrator under Section 29A(6) to ensure expeditious resolution.
A Bench comprising Justice Alok Aradhe and Justice Sanjay Kumar allowed the appeals filed by Mohan Lal Fatehpuria, substituting the previous arbitrator with Mr. Justice Najmi Waziri, a former Judge of the Delhi High Court.
The core issue before the Supreme Court was whether the High Court was justified in declining the substitution of a sole arbitrator and extending his mandate, even after the statutory period for passing the award had expired. The Supreme Court ruled that “continuation is impermissible” when an arbitrator’s mandate has ceased, and subsequently exercised its jurisdiction under Section 29A(6) to substitute the arbitrator.
Background of the Case
The dispute originated from a partnership deed executed on May 18, 1992, between the appellants (husband and wife) and respondent nos. 2 to 4. Following disputes, the Delhi High Court appointed Mr. Anjum Javed, Advocate, as the sole arbitrator on March 13, 2020. The arbitrator entered upon the reference on May 20, 2020.
According to the facts noted in the judgment, the pleadings under Section 23(4) of the Act were completed by November 19, 2020. Accounting for the exclusion of the period from March 15, 2020, to February 28, 2022, due to the COVID-19 pandemic (as per the Supreme Court’s ruling in In Re: Cognizance for Extension of Limitation), the statutory twelve-month period for making the award commenced on March 1, 2022, and expired on February 28, 2023.
The sole arbitrator failed to pass the award within this period, and no application for extension was filed by the parties at that stage. Consequently, the arbitrator adjourned the proceedings sine die on August 31, 2023. The appellants then approached the High Court under Section 29A(6) seeking substitution of the arbitrator. By an order dated April 22, 2025, the High Court declined substitution but extended the mandate by four months.
Arguments of the Parties
The appellants contended that the sole arbitrator had acted in contravention of the initial appointment order regarding fees and expenses. They argued that the High Court should have appreciated that “the power of substitution of an arbitrator is wider under Section 29A(6) of the Act and is not restricted to the grounds in Sections 14 and 15 of the Act.”
Per contra, the respondents submitted that no ground was made out for substitution. They relied on a previous High Court order dated January 28, 2022, which had rejected petitions under Sections 14 and 15 seeking termination of the mandate based on fee disputes. Alternatively, the respondents suggested that if the Court directed substitution, a former judge should be appointed.
Court’s Analysis
The Supreme Court analyzed the statutory scheme of Section 29A, which aims to ensure time-bound disposal of arbitration proceedings.
On Termination of Mandate: The Bench observed that under Section 29A(1), the award was required to be made within 12 months. Since the period expired on February 28, 2023, without an award or an extension application, the Court noted:
“The sole arbitrator, in view of mandate contained in Section 29A(4) became functus officio.”
Referring to the factual matrix, the Court stated:
“When mandate of arbitrator has expired, his continuation is impermissible.”
On Power to Substitute: The Court clarified the scope of Section 29A(6), stating that it “empowers and obligates the Court to substitute the Arbitrator.” The Bench rejected the respondent’s reliance on the earlier dismissal of petitions under Sections 14 and 15, noting that on that date (January 24, 2022), the mandate had not yet terminated.
The Court held:
“The substitution of a sole arbitrator is warranted, when his mandate ceases to exist, to effectuate the object of the Act, which mandates expeditious resolution of the dispute. In view of the statutory scheme and undisputed factual position, we are satisfied that the case warranted the exercise of jurisdiction under Section 29A(6) of the Act. The High Court erred in granting an extension when the mandate of the sole arbitrator had ceased to exist.”
Decision
The Supreme Court quashed and set aside the Delhi High Court’s order dated April 22, 2025.
The Court ordered:
“The mandate of sole arbitrator Mr. Anjum Javed stands terminated by operation of law. Mr. Justice Najmi Waziri, Former Judge of Delhi High Court is appointed as the substituted sole arbitrator.”
The Court directed that the arbitral proceedings “shall resume from the stage already attained and be concluded within six months.”
Case Details:
- Case Title: Mohan Lal Fatehpuria v. M/s Bharat Textiles & Ors.
- Case No.: Civil Appeal No. of 2025 (@ SLP (C) No. 13759 of 2025)
- Bench: Justice Sanjay Kumar and Justice Alok Aradhe
- Citation: 2025 INSC 1409
