The main legal point established in the judgment is that the challenge procedure under Section 13 of the Arbitration and Conciliation Act, 1996 must be followed, and the party cannot invoke Section 14 until the pronouncement of the Award. The decision of the Maritime Arbitration Committee (MAC) on the challenge to the arbitrators was deemed binding, and the party had to wait for the passing of the Award to raise a ground for challenge under Section 34 of the Act.

1. An interesting question of law arises for determination in this petition filed by the Petitioner, Steel Authority of India (‘SAIL’) against the Respondent, British Marine PLC. (‘BMPL’) under Section 14 of the Arbitration and Conciliation Act, 1996 (‘Act’). It is whether the Court, in exercise of its power under Section 14 (1) (a) of the Act, can declare that two of the three members constituting the Arbitral Tribunal (‘AT’) are “unable" to perform their functions and therefore, their mandate should be terminated and they should be substituted by another two arbitrators?

2. The factual background to the present petition is that on 5th December, 2007 an agreement was entered into between SAIL and BMPL which was amended by Addenda dated 14th December, 2009 and 20th April, 2011. The Agreement was for import of coal from Australia to the extent of 3.0 million tonne (MTs) plus or minus 5% during the period from June 2008 to December 2012. It is not in dispute that by its letter dated 12th September, 2012 SAIL terminated the Agreement under Clause 62 thereof.

3. BMPL then invoked Clause 60 of the Agreement which provided for arbitration under the Act “or any further amendment thereof” and under the Maritime Arbitration Rules (‘MAR’) of the Indian Council of Arbitration (‘ICA’). In terms of the said clause, the Arbitrators were to be appointed “from out of the Maritime Panel of Arbitrators” of the ICA. It was further stipulated that “the arbitrators shall be commercial men.”

4. After invoking the arbitration clause on 31st March 2014, BMPL filed its statement of claim and nominated Mr. Niranjan Chakraborty from the Maritime Panel of Arbitrators of the ICA. On 30th April, 2014 SAIL challenged the appointment of Mr. Chakraborty on the ground that he did not qualify as a commercial man. Under Clause 10 (4) (c) of the MAR, any party shall have the right to challenge the appointment of an Arbitrator within 30 days after his appointment has been communicated to the challenging party or even within 30 days after his becoming aware of the reasons for which the challenge is made. The Rule further stipulates, “The Maritime Arbitration Committee shall be the sole judge of the grounds of challenge and its decision shall be final and binding on the parties.”

5. By an order 17th June 2014, the Maritime Arbitration Committee (‘MAC’) of the ICA rejected the challenge of SAIL.

6. In the meanwhile, on 29th May 2014 SAIL appointed Mr. Ashok Sharma as its nominee Arbitrator. On 20th June, 2014 SAIL filed a Statement of Defence contesting the claim of BMPL.

7. On 18th June, 2014, Mr. Chakraborty while accepting to serve as an arbitrator made a declaration that “I do not have financial or personal interest in the outcome of the award which is likely to disqualify me to act as an impartial or independent arbitrator.” On 25th June 2014 the ICA appointed Captain S.M. Berry as the third/Presiding Arbitrator and the AT was thus constituted.

8. The case of SAIL is that there was a claim made against SAIL by Seaspray Shipping Company Limited ('Seaspray') which came to be adjudicated by the AT which comprised of both, Mr. Chakraborty and Captain Berry as co-Arbitrators. The Award dated 20th August 2014 in that case was passed by the three-member AT (which was presided over by Capital Prakash Anand). It allowed the claim of Seaspray against SAIL. SAIL states that it had received a copy of the said Award, which was sent to it by covering letter dated 1st September 2014, only on 5th December, 2014.

9. Meanwhile, on 10th October, 2014, the AT in the present case framed issues. On 6th January, 2015 SAIL filed an application under Section 12 of the Act challenging the continuance of both Mr. Chakraborty and Captain Berry on the ground that they were disqualified from functioning as such. According to SAIL, the questions involved in the present arbitration and those in the arbitration in which the Award was made in favour of Seaspray and against SAIL were more or le