Factual Background & Procedural History
In the judgment dated 15 October 2025, the National Highway Infrastructure Development Corporation Ltd. (NHIDCL) (hereafter “Petitioner”) approached the High Court of Delhi under O.M.P. (T) (COMM.) No. 44/2025 (with I.A. 13797/2025) seeking termination of the mandate of the Presiding Arbitrator and appointment of a substitute, under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 (the “1996 Act”).
The background is as follows. The Petitioner (a central public sector enterprise under the Ministry of Road Transport & Highways) entered into an Engineering Procurement and Construction Agreement (“EPC Agreement”) dated 5 September 2019 with Respondent No. 1 (NSPR-VKJ JV) (comprising Respondent Nos. 2 & 3) for the construction and upgradation of the existing road to 2-lane with paved shoulder of NH-717A (Bagrakot to Kafer, Km 0.000 to Km 13.000) in West Bengal under SARDP-NE Phase ‘A’.
Disputes arose when the contractor (Respondent No. 1) purportedly did not perform its contractual obligations and invoked Clause 26.3 of the EPC Agreement, leading on 6 January 2024 to the lodging of an arbitration notice under the rules of the Society for Affordable Redressal of Disputes (“SAROD”).
SAROD forwarded notice to the Petitioner on 30 January 2024, and the Petitioner nominated a retired Supreme Court Judge (and then later another nominee) as its arbitrator. The nominated arbitrator recused himself because of prior assignments; another was nominated on 8 April 2024.
When the two nominee arbitrators failed to agree on a Presiding Arbitrator under Rule 11.2 of the SAROD Rules, Respondent No. 1 exercised Rule 11.5 and requested SAROD on 5 June 2024 to appoint the Presiding Arbitrator by draw of lots; draw of lots was held on 18 June 2024 and Respondent No. 4 (hereafter “the Arbitrator”) was appointed Presiding Arbitrator.
Following constitution of the Arbitral Tribunal, the Statement of Claim was filed by Respondent No. 1 in August 2024.
On 20 September 2024, the Petitioner learnt (via news articles) of an FIR allegedly registered against the Arbitrator by the Madhya Pradesh Lokayukta in 2016 on charges of corruption. Further, the Petitioner alleged the Arbitrator did not disclose these facts under Section 12 of the 1996 Act. On 27 September 2024, the Petitioner requested the Arbitrator’s recusal; no response came. The Petitioner filed a previous petition under Sections 14/15 of the 1996 Act (OMP (T)(COMM) 105/2024) on 9 October 2024, which the court disposed of on 17 December 2024, requiring the Petitioner to exhaust SAROD remedies.
The Petitioner then submitted a representation to SAROD on 31 December 2024 under Rule 18 of SAROD Rules seeking substitution of the Arbitrator; on 14 January 2025 SAROD rejected the representation for want of substantiating evidence. Thereafter the Petitioner filed W.P.(C) 1915/2025 under Articles 226/227 of the Constitution of India challenging that rejection; the writ was withdrawn on 29 April 2025 with liberty to move under Section 14 of the 1996 Act. Ultimately, the present petition (OMP (T)(COMM) 44/2025) was filed.
Respondents opposed the petition, contending that the Arbitrator’s mandate was not terminable under Section 14, that no FIR was registered and no de jure ineligibility existed. The Court heard the matter and delivered its judgment dismissing the petition on 15 October 2025.
Identification of Legal Issues
The principal legal issues that arose for determination by the Court are as follows:
- Whether the Arbitrator (Respondent No. 4) is de jure unable to perform his functions under Section 14(1)(a) of the 1996 Act, on the ground of ineligibility on account of alleged corruption proceedings — i.e., whether mere registration of an FIR or pending complaint before a Lokayukta can amount to an inherent disability under Section 14 without the nexus to the Seventh Schedule or express statutory ineligibility.
- Whether there are justifiable doubts as to the independence or impartiality of the Arbitrator, and if so, whether such grounds fall within the ambit of Section 14 (read with Section 12 and Section 13) so as to permit termination of mandate — in particular, whether the threat alleged by the Petitioner (that the Arbitrator would refuse extension unless the objection was given up) amounts to justifiable doubts of bias.
- Whether the remedy under Section 14(2) read with Section 15 of the 1996 Act is available when the grounds alleged are effectively those falling under Sections 12 and 13 (appointment challenge) rather than the narrower grounds under Section 14, and whether this Court has jurisdiction to entertain such a petition.
- Whether unsubstantiated allegations of an FIR or complaint before an investigatory body, without judicial finding or established legal proceeding, suffice to terminate the mandate of an Arbitrator under Section 14 — essentially, the threshold of proof required for termination of the arbitrator’s mandate.
Arguments of the Parties
Petitioner’s Contentions
- The Petitioner contended that the Arbitrator is de jure ineligible to perform his functions because he is allegedly an accused in a corruption case (FIR registered at the instance of the Madhya Pradesh Lokayukta) and thus cannot embody the requisite independence and integrity demanded of an arbitrator.
- The Petitioner argued that even if the corruption allegation did not strictly attract the Seventh Schedule ineligibility, it is a disability that renders the Arbitrator’s continuation impermissible and thus comes within Section 14(1)(a). The Petitioner relied on the logic in Clarke Energy India Pvt. Ltd. v. SAS EPC Solution Pvt. Ltd. (2021 SCC OnLine Mad 6121) and other decisions to the effect that de jure inability may not be limited to the Seventh Schedule, and that justifiable doubts of bias also go to the jurisdiction of the court under Section 14.
- Further, the Petitioner argued that the Arbitrator exhibited lack of impartiality in that immediately after service of the Petitioner’s earlier Section 14 petition, the Arbitrator responded on the same day (24 October 2024) to the Petitioner’s request for extension of time, despite not being a party, thereby showing collusion with the contractor. The Petitioner also highlighted that the Arbitrator threatened to close the right to file Statement of Defence unless the Petitioner withdrew its objection — thus raising justifiable doubts of independence and impartiality.
Respondents’ Contentions
- Respondents No. 1-3 (and Respondent No. 4) argued that no FIR has in fact been registered against Respondent No. 4; that the Petitioner’s assertions (based on news articles) were unverified.
- They further submitted that the grounds relied upon by the Petitioner fall within Sections 12/13 (appointment challenge) and not within Section 14 (termination challenge). That is, the Petitioner had to challenge the appointment under Section 12/13 and not under Section 14. The Fifth and Seventh Schedules of the 1996 Act specify the only grounds for de jure ineligibility, and mere allegations or pendency of a complaint do not suffice.
- The Respondents emphasised that arbitration must not be derailed by unverified allegations; arbitrary removal of an arbitrator on mere suspicion would undermine the integrity of arbitration and introduce instability.
Court’s Analysis & Reasoning
Legal Framework
The Court began by reaffirming that the 1996 Act, post-2016 amendment, provides the comprehensive scheme for appointment, challenge and termination of arbitrators through Sections 12, 13 and 14. Section 12 deals with disclosures and challenge to appointment; Section 13 deals with procedure after challenge; Section 14 deals with termination of mandate. The Court noted that the Fifth and Seventh Schedules set out, respectively, the grounds for justifiable doubts as to independence/impartiality (Fifth Schedule) and list of persons ineligible to be arbitrators (Seventh Schedule). In the landmark decision HRD Corporation (Marcus Oil & Chemical Division) v. Gail (India) Ltd. (2017 SCC OnLine Del 8034), the Court had held that de jure ineligibility under Seventh Schedule makes the arbitrator incapable of functioning, and the petition under Section 14 may be filed without waiting for award. In the more recent decision Union of India v. Reliance Industries Limited & Ors. (2022 SCC OnLine Del 4310), it was held that the grounds under the Seventh Schedule alone can be treated as de jure ineligibility; bias or procedural irregularity outside Schedules cannot justify termination under Section 14.
The Court emphasised that the scheme draws a clear demarcation:
- Challenges to appointment (Sections 12/13) for justifiable doubts or ineligibility;
- Termination of mandate (Section 14) only when arbitrator is de jure or de facto unable to perform his functions (Section 14(1)(a)) or when incapacity arises per Section 14(1)(b).
Application to Facts
- On justifiable doubts of impartiality/independence: The Court found that the Petitioner’s allegation that the Arbitrator threatened to close its right to file a Statement of Defence unless it withdrew its objection did not amount to a “threat” or manifest bias. The letter of 24 October 2024 was merely a request to confirm whether the Petitioner intended to seek an extension. The Court held the content was “far from threatening” and not a ground of bias.
Further, insofar as justifiable doubts go, the Court reaffirmed that these matters fall within Sections 12 & 13 and not within Section 14. The Court held:
“Justifiable doubts on impartiality and independence are specifically provisioned in Section 12 and once legislatively a subject stands included in the said Section … it would be tenuous to hold that the same ground can be raised under Section 14.”
- On the ground of de jure ineligibility by virtue of alleged corruption/FIR/complaints:
- The Court found that there was no FIR registered against the Arbitrator. The Respondents had consistently denied registration; the Petitioner could not prove it. This obstacle alone negated that leg of the petition.
- The Petitioner relied on a pending complaint (Case No. 0094/E/2022) before the Madhya Pradesh Lokayukta. The Court held the source for this was newspaper articles and a letter from the Lokayukta’s office; but there was no detail on the status or outcome of the proceeding, no judicial finding or prima facie adjudication. Thus the Court held:
“Mere complaints or unverified allegations do not translate into de jure inability under Section 14… Unless the complaint leads to some tangible legal action or judicial finding, it remains unsubstantiated…”
The Court held that to terminate an arbitrator’s mandate under Section 14 on de jure grounds, one must show a statutory ineligibility (such as those listed in the Seventh Schedule) or other legally cognisable disability. Allegations of misconduct or mere complaints do not suffice.
- On the remedy under Section 14(2) and Section 15: The Court reaffirmed that Section 14(2) procedure allows the Court to terminate the arbitrator’s mandate, but only when the grounds fall under Section 14(1)(a) or (b). Challenges that fall under Sections 12/13 (i.e., justifiable doubts) must proceed under the appointment-challenge regime, not under Section 14.
Consequently, the Court held that the Petitioner’s attempt to invoke Section 14 on grounds that essentially relate to appointment or challenge to independence/impartiality (i.e., under Section 12) was not maintainable.
Balance of Policy and Protection of Arbitration Process
The Court reiterated that while the integrity and impartiality of arbitrators is paramount for the credibility of the arbitral process, this must be balanced against the need for finality, certainty and non-disruption of arbitral proceedings. A low threshold for removal would introduce uncertainty and enable collusive tactics.
Thus, in the Court’s view, the framework of the 1996 Act strikes that balance: only clear ineligibility or incapacity triggers Section 14; routine objections of bias must follow the procedure under Section 12/13.
Final Conclusion & Holding
In summary, the Court held that the petition under Sections 14 and 15 of the 1996 Act was dismissed, and the mandate of Respondent No. 4 as the Presiding Arbitrator cannot be terminated on the facts of the case.
The Court laid down the following key legal principles:
- The grounds for termination of an arbitrator’s mandate under Section 14 are strictly confined to the de jure or de facto inability of the arbitrator to perform his functions (Section 14(1)(a)/(b)), and cannot be expanded by judicial creativity.
- De jure ineligibility arises only where statutory provisions (such as the Seventh Schedule) demarcate such disability; mere allegations, unverified complaints or pendency of investigatory proceedings do not suffice.
- Justifiable doubts as to independence or impartiality fall under Section 12(1)(b) and must be pursued through the appointment-challenge regime (Sections 12 & 13), and cannot be repackaged under Section 14.
- The petitioners must present substantiated facts and evidence of bias, corruption or ineligibility; newspapers reports or vague allegations will not meet the threshold.
- The arbitration regime requires protection of the arbitral process’s integrity, but the same must not become a mechanism for delaying or derailing dispute resolution by recourse to unproven misconduct claims.
Hence, the decision reinforces a strict, structured approach to arbitrator challenges and removes ambiguities by maintaining a clear demarcation between appointment-challenges and mandate-termination.
FAQs:
1. When can an arbitrator’s mandate be terminated under Section 14 of the Arbitration & Conciliation Act?
An arbitrator’s mandate can only be terminated under Section 14 when the arbitrator becomes de jure unable (i.e., legally ineligible) or de facto unable (i.e., physically or practically incapable) to perform his functions. Mere allegations of bias, non-disclosure or pending investigation do not automatically suffice.
2. What is the difference between challenging appointment under Sections 12/13 and termination under Section 14?
Challenging appointment under Sections 12/13 focuses on independence/impartiality or eligibility before or at the time of appointment. Termination under Section 14 concerns an arbitrator’s continued mandate after appointment, but only if the arbitrator falls under the specific disabilities in Section 14(1)(a)/(b). Grounds under Section 12 cannot be repackaged as Section 14 grounds.
3. Do unverified news reports or complaints suffice to challenge an arbitrator on grounds of independence or eligibility?
No. Courts require substantiated facts and evidence showing either statutory ineligibility or actual incapacity. News reports or mere allegations without judicial or investigatory findings do not meet the threshold for Section 14 termination.
4. If there is a pending complaint or FIR against an arbitrator, can that alone render the arbitrator disqualified?
Not necessarily. Unless the complaint results in an investigatory or judicial action that conclusively renders the arbitrator ineligible, mere pendency does not amount to de jure inability. The arbitrator’s mandate cannot be terminated solely on that basis under Section 14.
5. What is the policy reason for maintaining a strict threshold for termination of arbitrator mandates?
It is to preserve the finality, efficiency and credibility of the arbitral process. Allowing removal on loose grounds risks delaying proceedings, encouraging tactical challenges and undermining confidence in arbitration. The statutory framework balances the protection of parties’ rights with the need for stability and orderly dispute resolution.
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