Agreement for institutional arbitration does not curb court's power to decide on termination of mandate: Bombay High Court

The Bombay High Court recently held that merely because parties have agreed to refer their dispute to institutional arbitration, that would not by itself exclude the courts’ power to intervene in the dispute under Section 14 of the Arbitration and Conciliation Act, 1996. [Era International v. Aditya Birla Global Trading India Pvt Ltd].Justice Bharati Dangre observed,“Merely because the arbitration is being conducted through an institutional arbitration, it shall not exclude the power of the Court to decide on termination of the mandate, if any controversy remains, concerning any of the grounds referred to in clause (a) of sub-section (1) of Section 14. Merely because a party has participated in an arbitration conducted by an institute and it being conducted by a set form of rules and the arbitrators are appointed from a pre-selected panel, it is nowhere indicative of the Court, being denuded of its statutory power,” the order stated..It also noted that Part 1 of the Act, which relates to domestic arbitration, does not make any distinction between institutional arbitration and ad hoc arbitration..The two parties - Era International (petitioner) and Aditya Birla Global Trading (respondent) - entered into three sale contracts in 2021 for supply of US coal.Due to contractual disputes between the parties, Aditya Birla invoked the arbitration clause in December 2022 and informed Era, marking a copy to the Mumbai Centre for International Arbitration (MCIA) for appointment of an arbitrator.Era claimed that the arbitration invocation process was in complete violation of the Act and the MCIA Rules. It elaborated that Aditya Birla’s lawyers, who were neither claimant nor party to the dispute, had initiated the reference. Thus, it was claimed that they lacked standing to initiate a reference. Based on the reference, MCIA registered an arbitration case and appointed a sole arbitrator. Era conveyed its objection to the appointment to MCIA on the ground that the the appointed arbitrator was an equity partner of the law firm Shardul Amarchand Mangaldas (SAM), which had represented Aditya Birla Finance.MCIA dismissed the challenge and the arbitration continued.In response, Era approached the High Court under Section 14 of the Arbitration and Conciliation Act read with Section 11. Section 14(2) provides that if there was controversy regarding the appointment of an arbitrator on the grounds that the arbitrator is unable to perform his function, the parties could apply to court..The Court agreed with Era International’s submissions and directed MCIA to change the arbitrator within four weeks. “Since the arbitration is expected to be conducted by an independent mind with an impartial attitude hence, I deem it appropriate to direct the MCIA to substitute the arbitrator and appoint an independent arbitrator to continue with the arbitral proceedings,” the Court said..Advocates Rahul Totala, Manish Priyadarshi, Naman Maheshwari, Vidisha Rohira, Apeksha Agarwal and Ashwin Poojari, briefed by RT Legal, appeared for Era International.Advocates Rushabh Sheth, Sayeed Mulani, Akshata Kadam and Ria Goradia, briefed by Mulani & Co, appeared for Aditya Birla Global Trading.Senior Advocate Vikram Nankani with Advocates Sumeer Nankani, Anuja, Neha Bhosale, Laveena Tejwania and Divadkar, briefed by NDB Law, appeared for MCIA..[Read order]