Death of hand-picked arbitrator doesn't preclude appointment of substitute unless expressly contemplated: Apex Court

Where an arbitration agreement handpicks the arbitrator if at ‘anytime' a dispute breaks out in the course of proceeding with a contract, it does not ipso facto mean that on the death of such arbitrator, the arbitration agreement comes to an end or the subsisting arbitration proceedings are automatically aborted. The Apex Court in ACC Ltd vs Global Cements Ltd pointed out that such a presumption is not warranted unless the arbitration agreement itself says so in so many words.

The arbitration agreement between the petitioner and the respondent contemplated appointment of either Mr Nani Palkivala, the eminent jurist who incidentally was the chairman of the petitioner-company or Mr D.S. Seth who was a director of the same company. The petitioner company contended that the arbitration agreement had automatically come to an end because both these persons were no more. The respondent, however, did not agree and went to the Bombay High Court which agreed with it while negativing the contention of the petitioner-company that the very fact that the alternative arbitrators were cherry-picked showed that the parties had enormous trust and faith in these two persons and no other arbitrator could fill the void left by their death or absence.

Upholding the Bombay High Court verdict, the Supreme Court said that the idea of the Arbitration Act was to promote quick and alternative justice and nothing should be done to undermine it. It set store by the words ‘at anytime' occurring in the arbitration agreement in coming to the conclusion that the parties had not contemplated coming to end of the arbitration agreement in the event of the unfortunate death of both of the handpicked arbitrators. These words gave primacy to dispute arising at anytime rather than to the handpicked arbitrators.

(The author is a New Delhi-based chartered accountant)

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