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Supreme Court Rules on Arbitration Tribunal Mandate

Background

In a significant ruling, the Supreme Court addressed the issue of the mandate of an Arbitral Tribunal in the case involving a dispute between a supplier of paper and the Madhya Pradesh government. The appellant, who had supplied cream wove paper and duplicating paper under a contract, claimed that the government failed to make payments and rejected some consignments. After a series of legal proceedings, the appellant sought to terminate the mandate of the originally constituted Arbitral Tribunal, arguing that the members had become ineligible under the Arbitration and Conciliation Act, 1996.

Arguments

The appellant contended that the officers of the Stationery Purchase Committee, who constituted the Arbitral Tribunal, were ineligible to act as arbitrators due to their relationship with the respondent, as outlined in Section 12(5) of the Arbitration Act. They argued that the Tribunal's mandate should be terminated and a new arbitrator appointed. Conversely, the respondent maintained that the Tribunal was validly constituted prior to the amendment of the Act and that the appellant had participated in the proceedings, thus waiving any objections to the Tribunal's composition.

Court's Analysis and Reasoning

The Supreme Court analyzed the legal framework surrounding the eligibility of arbitrators, particularly focusing on the amendments made to the Arbitration Act in 2015. The Court emphasized that the purpose of these amendments was to ensure the neutrality and impartiality of arbitrators. It noted that the original Tribunal members had lost their mandate due to their ineligibility under the amended provisions, which apply irrespective of prior agreements. The Court also highlighted that the appellant's participation in earlier proceedings did not negate their right to challenge the Tribunal's composition based on the new legal standards.

Decision

The Supreme Court ruled in favor of the appellant, declaring that the original Arbitral Tribunal had lost its mandate and that a new arbitrator must be appointed. The Court appointed Justice Abhay Manohar Sapre , a former judge, to oversee the arbitration proceedings. This decision underscores the importance of maintaining impartiality in arbitration and reinforces the legal standards set forth in the Arbitration Act regarding the eligibility of arbitrators.