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7. Shri T.R. Andhyarujina, learned senior advocate appearing on behalf of the appellant, has argued before us that as this was the case of a named arbitrator, the arbitration agreement contained in the consent terms in the Suit No.1927 of 2007 spent its force when the named arbitrator resigned, it being clear that the said clause would only apply to the named arbitrator and nobody else, parties having faith only in the named arbitrator. He cited three decisions of this Court to buttress his submission and further argued that under Section 15(2) of the Arbitration and Conciliation Act, 1996, where the mandate of a named arbitrator terminates, there being no rules that would apply to the appointment of the arbitrator being replaced, the said Section would, therefore, not apply and the High Court having missed this vital fact is, therefore, wrong in appointing a substitute arbitrator.

“In our view, the learned Chief Justice and the Division Bench have rightly understood the scope of Section 15 of the Act. When the arbitrator originally appointed in terms of the arbitration agreement withdrew for health reasons, the Managing Director, as authorised originally by the arbitration agreement, promptly appointed a substitute arbitrator. It is true that in the arbitration agreement there is no specific provision authorising the Managing Director to appoint a substitute arbitrator if the original appointment terminates or if the originally appointed arbitrator withdraws from the arbitration. But, this so-called omission in the arbitration agreement is made up by the specific provision contained in Section 15(2) of the Act. 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. Obviously, 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. We are not in a position to agree with the contrary view taken by some of the High Courts.” [at para 4]

20. The scheme of Section 8 of the 1940 Act and the scheme of Section 15(2) of the 1996 Act now needs to be appreciated. Under Section 8(1)(b) read with Section 8(2) if a situation arises in which an arbitrator refuses to act, any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in a fresh appointment, and if such appointment is not made within 15 clear days after service of notice, the Court steps in to appoint such fresh arbitrator who, by a deeming fiction, is to act as if he has been appointed by the consent of all parties. This can only be done where the arbitration agreement does not show that it was intended that the vacancy caused be not supplied. However, under Section 15(2), where the mandate of an arbitrator terminates, a substitute arbitrator “shall” be appointed. Had Section 15(2) ended there, it would be clear that in accordance with the object sought to be achieved by the Arbitration and Conciliation Act, 1996 in all cases and for whatever reason the mandate of an arbitrator terminates, a substitute arbitrator is mandatorily to be appointed. This Court, however, in the judgments noticed above, has interpreted the latter part of the Section as including a reference to the arbitration agreement or arbitration clause which would then be “the rules” applicable to the appointment of the arbitrator being replaced. It is in this manner that the scheme of the repealed Section 8 is resurrected while construing Section 15(2). The arbitration agreement between the parties has now to be seen, and it is for this reason that unless it is clear that an arbitration agreement on the facts of a particular case excludes either expressly or by necessary implication the substitution of an arbitrator, whether named or otherwise, such a substitution must take place. In fact, sub-sections (3) and (4) of Section 15 also throw considerable light on the correct construction of sub- section (2). Under sub-section (3), when an arbitrator is replaced, any hearings previously held by the replaced arbitrator may or may not be repeated at the discretion of the newly appointed Tribunal, unless parties have agreed otherwise. Equally, orders or rulings of the earlier arbitral Tribunal are not to be invalid only because there has been a change in the composition of the earlier Tribunal, subject, of course, to a contrary agreement by parties. This also indicates that the object of speedy resolution of disputes by arbitration would best be sub-served by a substitute arbitrator continuing at the point at which the earlier arbitrator has left off.

I am entirely in agreement with the conclusion arrived at by my learned Brother R.F. Nariman, J. in his accompanying judgment on the interpretation of Section 15(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act'). It is held by my learned Brother that since arbitration agreement that was arrived at between the parties herein did not specifically bar the appointment of another arbitrator on the recusal/withdrawal of the earlier arbitrator appointed by the parties with mutual agreement, Section 15(2) of the Act would be attracted and a substitute arbitrator could be appointed according to 'Rules' that govern the field. In the instant case, it was the agreement between the parties which is treated as 'Rules' for the purposes of Section 15(2) of the Act. My learned Brother has given cogent reasons while interpreting the said provision of law in the aforesaid manner, which, inter alia, includes reliance upon the earlier judgment of this Court in ACC Ltd. v. Global Cements Ltd.[1] While concurring with the judgment authored by my learned Brother, I would like to give some additional reasons in support, which are as under: