The principle of party autonomy suggests securing "the freedom of the parties to construct their contractual relationship in the way they see fit"1 . The arbitral process owes a flexibility to honour this principle wherein the choice of the parties is respected. Recognizing this principle, the hon'ble Calcutta High Court in its judgment delivered by Justice Moushumi Bhattacharya titled Jagdish Kishinchand Valecha v. Srei Equipment Finance Limited and Ors.2 dealt with the issue of appointment of a new arbitrator with parties' consent after setting aside of an award. This judgment has paved the way for a fresh deliberation on "party autonomy principle".
BRIEF PREAMBLE OF THE CASE
In this case, the award has been challenged on the grounds of breach of principles of natural justice. The petitioner contended that there have been certain procedural lapses in the conduct of arbitration by the sole arbitrator and a proper opportunity of being heard was not given to him, which is in violation of Section 18 of the Arbitration and Conciliation Act,1996 (the Act) and, thus, qualifying as a valid ground u/s 34(2)(a)(iii) of the Act. The Respondent, though contested and argued that the petitioner was presented with sufficient opportunity to represent himself before the arbitrator, it expressed its dissatisfaction with the Award and offered to consent for appointment of an arbitrator for fresh appreciation and adjudication of the case. In this context, the issue which arose before the Calcutta High Court was "Whether a court is entitled to appointment a new arbitrator for deciding the dispute between the parties after the arbitral award has been set aside u/s 34 of the Arbitration and Conciliation Act, 1996?"
Decision of the court
The court adopted a two-pronged approach over finding a legitimate statutory path to decide on challenge of the arbitral award and appointment of different arbitrator to decide the same matter afresh which are as follows:
- Quest for a statutory recourse
The court noted that the parties having consented for appointment of new arbitrator, the provisions of Section 11 will not have any applicability in the circumstances at hand. The court proceeded to note that the arbitrator in the case has been acting as arbitrator in other arbitration proceedings invoked by Respondent, apart from acting as counsel for Respondent's Group Companies. Such instances were observed by the court to be attracting the prescriptions of Section 12 of the Act. In the circumstances, the court found the award to be liable to be set-aside.
- 'Spotlighting on party autonomy'
Being satisfied about the award to be not sustainable, the court laboured further as to what will be the way forward pursuant to setting-aside of the award. In this context, the court dwelt upon the exercise of appointing another arbitrator, particularly in view of the express consent of the parties in that regard. The court, highlighting the significance of party autonomy in arbitral proceedings, affirmed that freedom of the parties must be preserved at every level so as to enable them to decide their next course of action. The court inferred that the statutory recognition to keeping all redressal-doors open for the parties post setting aside of an award is secured in Section 43(4) of the 1996 Act which provides that upon setting aside of an arbitral award, the period between the commencement of the arbitration and the date of the order of setting aside of the award shall be excluded for the purpose of computing the time prescribed by the Limitation Act, 1963, for commencement of the proceeding with respect to the dispute submitted. The court, thus, observed that the remedies post setting-aside of the award shall not be restricted to only those available under the Act.
The court in reference to various provisions of Act, construed them as enablers for the court to map out a future course of action for the parties in accordance with their consent/ agreement. The court premised on the notion that "the parties who have come to the court cannot be left without a remedy when they have agreed that the matter should go before a different arbitrator."3 The court further went ahead to observe that the 1996 Act does not curtail the power of a court to mould the relief in fit cases provided the relief is not repugnant to the law as existing on that date. Accordingly, the court decided to set aside the award, and giving primacy to party autonomy concluded that in view of the given reasons, a different and independent arbitrator should be appointed to decide the matter afresh.
The Arbitration Act, 1996, is silent on the ramifications of setting aside of an award. The Act also does not address the situations when parties themselves give consent for re-initiation of arbitral proceedings by a different arbitrator. In the instant case, the conundrum surrounding the post-setting aside of award position has been cleared to some extent, as the court has echoed the significance of remedial approach through appointment of new arbitrator, in furtherance of the principles of party autonomy.
In Dakshin Haryana Bijli Vitran Nigam Limited v. M/s. Navigant Technologies Pvt. Ltd.4 , it was held that "where the court sets aside the award passed by the majority members of the tribunal, the underlying disputes would require to be decided afresh in an appropriate proceeding." Further, in the case of Taruna Vaid v. Rakesh Kumar, 5 the Supreme Court directed the appointment of another independent arbitrator for re-initiation of arbitral proceedings for the purpose of doing complete justice between the parties. Going ahead, the Calcutta High Court devised a new path to keep the arbitration alive through appointment of a new arbitrator by the consent of parties.
The framework of the Arbitration Act is based on the essence of party autonomy. In the case of Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd.6 it was emphasised that "party autonomy is virtually the backbone of arbitrations". Further, the Supreme court in the case of Pasl Wind solutions v. GE Power Conversion India Pvt Ltd.,7 highlighted the significance of party autonomy by calling it "the brooding and guiding spirit of arbitration." In the instant case, the court has upheld the overarching principle of party autonomy by placing due emphasis on the express consent given by the parties while carefully delving into the inapplicability of Section 11. Therefore, it can be asserted that this case would carry substantial symbolic weight in the sphere of dispute resolution/ upcoming arbitration cases, as a new dimension of party-autonomy has been unfolded by the court, while exercising jurisdiction under Section 34 of the Act.
1 Abdulhay, S., Corruption in International Trade and Commercial Arbitration, (London: United Kingdom: Kluwer Law International,2004) 159.
3 Supra note 2.
4 Civil Appeal No. 791 of 2021 (Arising out of SLP (C) No. 10372/2020)
5 (2005) 12 SCC 235
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