Arbitrator’s Mandate Cannot Be Terminated On Mere Complaint Or Unsubstantiated Allegations: Delhi High Court
The High Court held that an arbitrator’s mandate cannot be terminated solely based on unverified allegations or mere complaints, as such action would undermine the sanctity of arbitral proceedings and set a dangerous precedent allowing parties to derail arbitration through unfounded claims.
Justice Jyoti Singh, Delhi High Court
The Delhi High Court has ruled that termination of an arbitrator’s mandate under Section 14 of the Arbitration and Conciliation Act, 1996, cannot be justified based on mere allegations of misconduct or corruption.
The High Court was hearing a petition filed by the National Highways Infrastructure Development Corporation Ltd. (NHIDCL) under Sections 14 and 15 of the Arbitration Act, seeking termination of the mandate of the presiding arbitrator appointed under the Society for Affordable Redressal of Disputes (SAROD) Rules, in connection with disputes arising out of an Engineering Procurement and Construction (EPC) contract.
A Bench comprising Justice Jyoti Singh, while dismissing the appeal, observed: “Section 14 of the 1996 Act provides for termination of Arbitrator’s mandate where he becomes de jure or de facto unable to perform his functions. De jure ineligibility is an inherent disability and mere allegations cannot meet this threshold. Unless the complaint leads to some tangible legal action or judicial finding even prima facie, it remains in the realm of a mere allegation and/or suspicion and cannot be a ground for termination.”
Background
The matter arose out of a dispute concerning an EPC contract between NHIDCL, an enterprise under the Ministry of Road Transport and Highways, and a joint venture firm, for the construction and upgradation of a section of National Highway 717A in West Bengal.
After disputes arose over non-performance, arbitration was invoked under the SAROD Rules, leading to the constitution of a three-member arbitral tribunal. Subsequently, NHIDCL sought termination of the presiding arbitrator’s mandate, citing alleged corruption charges and pendency of a complaint before the Madhya Pradesh Lokayukta.
NHIDCL contended that the arbitrator was de jure ineligible due to the alleged corruption case and had failed to disclose this information in his Section 12 declaration.
SAROD rejected the representation, noting that mere allegations, unsupported by evidence or judicial findings, were insufficient to establish bias or de jure ineligibility. NHIDCL then filed the present petition seeking judicial termination of the arbitrator’s mandate.
Court’s Observation
The Delhi High Court examined the scope of Sections 12, 13, and 14 of the Arbitration and Conciliation Act, observing that the three provisions collectively govern challenges to an arbitrator’s appointment and termination of mandate. Referring to HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Ltd. and Union of India v. Reliance Industries Ltd., the Court clarified that only de jure disqualifications specified in the Seventh Schedule can render an arbitrator ineligible.
The Bench reiterated that “de jure ineligibility is an inherent disability and mere allegations cannot meet this threshold.” It further cautioned that “terminating the mandate on a mere complaint would be contrary not only to Section 14 of the 1996 Act, but would set a dangerous precedent where any party, unhappy with the course of arbitral proceedings, may refer to a complaint by a third party with unfounded and false accusations and seek termination of the mandate.”
The Court further underscored that the appointment of an individual with proven corruption charges would compromise the integrity of arbitration, and that preserving the integrity of arbitration is paramount to save public confidence in the process.
However, the Bench cautioned, this imperative must be “carefully balanced against the rights of individuals who may be the subject of unproven and motivated allegations” as the “termination of mandate of an Arbitrator on unsubstantiated claims could itself erode ‘fairness’ that arbitration regime seeks to uphold.”
The Bench also observed that NHIDCL had failed to produce any evidence proving registration of an FIR or any legal action against the arbitrator and took note that even SAROD had dismissed NHIDCL’s complaint, holding that the allegations were unsupported by evidence.
Conclusion
Holding that no grounds existed to terminate the arbitrator’s mandate, the Delhi High Court dismissed the petition accordingly.
Cause Title: National Highways Infrastructure Development Corporation Ltd. v. NSPR VKJ JV & Ors (Neutral Citation: 2025:DHC:9161)
Appearances
Petitioner: Senior Advocate Raj Shekhar Rao with Advocates Avneesh Garg, Rohit Rishi, Utkarsh Sharma, Zahid Ahmad, and Iptisha
Respondents: Advocates Amit George, Shashwat Kabi, Adishwar Suri, Sunny Choudhary, Asmita Narula and others