Court Observes That Parties Must Follow Agreed Procedure For Constitution Of Arbitral Tribunal Before Approaching Court For Appointment Of Arbitrator
LawDaily.org | Arbitration Law
The Allahabad High Court, Lucknow Bench has dismissed a petition seeking appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, holding that the petitioner failed to properly invoke the arbitration clause and did not follow the agreed procedure for constitution of the arbitral tribunal.
Justice Jaspreet Singh delivered the judgment in Civil Misc. Arbitration Application No. 4 of 2024 – Syed Rizwan Murtaza v. Ashok Kumar Bhargava, reserved on 17 July 2026 and delivered on 22 July 2026. The petition was filed seeking appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
The Court held that although an arbitration clause existed between the parties, the petitioner approached the Court without completing the necessary steps required for invoking the arbitration mechanism. Consequently, the application was dismissed while granting liberty to the petitioner to invoke arbitration appropriately in accordance with law.
Background Of The Dispute
The dispute arose out of a lease agreement dated 24 April 2019 executed between the petitioner, who was the lessee, and the respondent, who was the lessor. Under the lease agreement, the leased premises were provided to the petitioner at a monthly rent of ₹2,50,000, payable in advance by the 10th day of each English calendar month. The lease was executed for a period of nine years, with a provision for enhancement of rent by 15% after every three years.
The agreement also provided for a refundable interest-free security deposit of ₹15 lakh, out of which ₹7.5 lakh was to be adjusted against initial rent installments and the remaining amount was to be adjusted towards the final installments subject to conditions mentioned in the lease deed. The lease agreement contained an arbitration clause under which disputes relating to interpretation of lease terms or disputes arising from the lease were required to be referred to arbitration. The clause specifically named two arbitrators, namely Shri Dinesh Rastogi and Shri Ramji Das, Advocate, whose award was to be binding upon the parties.
Arbitration Proceedings And Subsequent Developments
Certain disputes arose between the parties and the respondent invoked the arbitration clause through a communication dated 12 February 2020. Following the invocation, the two named arbitrators issued notices to the petitioner. However, the petitioner did not participate in the proceedings until July 2021.
The record showed that the two arbitrators proceeded with the matter. Subsequently, by communication dated 4 November 2022, the arbitrators informed the parties that since the petitioner had suggested appointment of Shri Syed Rizwan Murtaza as the third arbitrator, consent of the proposed third arbitrator was required.
The proposed third arbitrator communicated that although he consented to the proposed appointment, due to his wife’s hospitalisation he would not be able to participate on the scheduled date. Later, the respondent requested the two named arbitrators to proceed with the matter since the appointment of the third arbitrator was causing delay. However, the two named arbitrators, through their letter dated 28 July 2023, refused to continue with the proceedings, observing that the respondent had not filed the statement of claim. Thereafter, the arbitration proceedings came to an end.
Petitioner Approaches High Court For Appointment Of Arbitrator
After the failure of the arbitration proceedings, the petitioner approached the Allahabad High Court by filing an application under Section 11(6) read with Section 15(2) of the Arbitration Act seeking appointment of a substitute arbitrator. The petitioner argued that since the named arbitrators had refused to continue and the appointment procedure had failed, the Court had jurisdiction to appoint a substitute arbitrator. It was submitted that the jurisdiction under Section 11(6) is limited and the Court is required only to examine whether an arbitration agreement exists and whether the petition has been filed before the appropriate court.
The petitioner argued that other objections could be decided by the arbitral tribunal under Section 16 of the Arbitration Act. The petitioner also alleged that the respondent had abandoned arbitration proceedings and approached the rent authority under the Uttar Pradesh Regulation of Urban Premises Tenancy Act, 2021, amounting to forum shopping.
Respondent Opposes Petition
The respondent opposed the petition and raised objections regarding maintainability. It was argued that the petitioner could not directly invoke Section 15(2) for appointment of a substitute arbitrator because the original arbitral tribunal itself had not been constituted legally. The respondent submitted that the petitioner had failed to follow the original procedure agreed between the parties for appointment of arbitrators.
It was further argued that the petition was premature because no notice had been issued seeking constitution of the arbitral tribunal after the earlier arbitrators withdrew. The respondent also argued that the petition was barred due to expiry of the statutory period under Section 29-A of the Arbitration Act.
Court Examines Validity Of Arbitral Tribunal Constitution
The High Court examined whether the arbitration tribunal was ever constituted in accordance with law. The Court noted that under Section 10 of the Arbitration and Conciliation Act, 1996, parties have the freedom to determine the number of arbitrators, but the number cannot be an even number.
The Court observed that although the lease agreement named two arbitrators, the arbitrators were required to appoint a third arbitrator to complete the tribunal. The Court found that no valid three-member arbitral tribunal was ever constituted. The two named arbitrators continued proceedings despite the fact that the tribunal was incomplete. Later, both arbitrators withdrew from the proceedings.
The Court observed that the proceedings conducted by the two-member tribunal could not be given legal sanctity because the tribunal was not constituted as required under law.
Section 29-A Objection Rejected
The respondent argued that the arbitration proceedings had commenced and the statutory period under Section 29-A had expired. However, the High Court rejected this contention. The Court held that since the arbitral tribunal itself was never legally constituted, the question of expiry of the statutory period under Section 29-A did not arise. Therefore, the objection based on Section 29-A was not accepted.
Court Holds Section 15(2) Not Applicable
The High Court thereafter examined whether the petitioner could seek appointment of a substitute arbitrator under Section 15(2).
The Court held that substitute appointment arises only where the original arbitral tribunal has been properly constituted and subsequently a vacancy arises due to circumstances mentioned in Section 14 of the Act.
In the present case, since the original tribunal itself was never legally constituted, Section 15(2) could not be invoked.
The Court further observed that even for appointment of a substitute arbitrator, parties must first return to the original appointment procedure agreed between them.
Proper Invocation Of Arbitration Clause Necessary
The Court held that when the two named arbitrators withdrew, the parties were required to mutually resolve the issue of appointment of a fresh tribunal.
The parties could have agreed upon new arbitrators or followed the procedure prescribed under the Arbitration Act.
Only after failure of such procedure could a party approach the Court under Section 11.
The Court observed that Section 11 is a default mechanism and can be invoked only when parties fail to constitute an arbitral tribunal according to their agreed procedure.
Since the petitioner had not properly invoked the arbitration clause, the petition was held not maintainable.
Final Decision
The Allahabad High Court dismissed the arbitration application, holding that the arbitration clause had not been properly invoked.
However, the Court clarified that the petitioner would remain at liberty to invoke the arbitration clause appropriately in accordance with law and approach the Court again if required.
Legal Significance Of The Judgment
The judgment highlights the importance of following the agreed arbitration procedure before approaching the court for appointment of an arbitrator.
The ruling reinforces that:
- Parties must strictly follow the appointment mechanism contained in the arbitration agreement.
- Section 11 jurisdiction is not meant to replace the agreed procedure between parties.
- A substitute arbitrator can be appointed only when a valid arbitral tribunal existed earlier.
- Courts cannot treat an improperly constituted tribunal as a legally valid arbitral tribunal.
The decision serves as a reminder that arbitration is based on party autonomy, but such autonomy must operate within the framework of the Arbitration and Conciliation Act, 1996.