Recusal triggers Section 15 substitution, not Section 32 termination | Delhi HC on arbitrator withdrawal : Delhi HC

The Delhi High Court resolved a critical ambiguity in arbitration law by distinguishing between withdrawal of arbitrators from office and termination of arbitral proceedings, holding that the recusal of all three arbitrators constituted a withdrawal of mandate requiring substitution under Section 15(2) of the Arbitration & Conciliation Act, 1996, not termination triggering Section 14(2) remedies.

Background & Facts

The Dispute

The National Highways Authority of India (NHAI) and IRB Westcoast Tollway Ltd. entered into a Concession Agreement (CA) dated 25.03.2013 for the "Four Laning of Goa/Karnataka Border to Kundapur Section of NH -66 (formerly NH -17) from Km 93.700 to Km 283.300 in the State of Karnataka under NHDP Phase IV on a Design, Build, Finance, Operate and Transfer (DBFOT) Toll Basis". The CA contained an arbitration clause in Article 44.3.

Key Facts

• The Concession Agreement (CA) was executed on 25.03.2013 between NHAI and IRB Westcoast Tollway Ltd.
• On 08.01.2024, the Concessionaire raised interim claims of compensation for Damages and Losses on account of Overstay at Site beyond Schedule Four Laning Date, aggregating approximately Rs. 2987.45 Crores (First Set of Claims).
• On 21.06.2024, the Concessionaire issued the first notice of arbitration, nominating Hon’ble Justice P. N. Deshmukh, Retd. Judge of the Bombay High Court as its nominee arbitrator.
• In response, NHAI nominated Hon’ble Mr. Justice (Retd.) V. Ramasubramanian, former Judge of the Supreme Court of India, as its nominee arbitrator vide communication dated 23.07.2024.
• On 19.08.2024, NHAI issued a suspension notice -cum -order consequent to the collapse of the old Kaali Bridge on 07.08.2024, which was disputed by the Concessionaire.
• On 11.09.2024, NHAI issued a Show Cause Notice to the Concessionaire and respondent nos. 2 and 3; the suspension notice was withdrawn on 12.09.2024.
• On 27.09.2024, the Concessionaire issued a further notice invoking arbitration regarding disputes concerning the old Kaali Bridge (second set of claims).
• On 17.10.2024, Hon’ble Mr. Justice (Retd.) Krishna Murari, former Judge of the Supreme Court of India, communicated his consent to act as Presiding Arbitrator, constituting the erstwhile Arbitral Tribunal.
• By order dated 24.12.2024, the erstwhile Arbitral Tribunal allowed NHAI’s Section 17 application and held that respondent nos. 2 and 3 were veritable parties to the contract.
• On 02.04.2025, NHAI filed an application seeking recall of Procedural Order No. 2 to the extent it fixed the fee of Rs.10,00,000/- per arbitrator for adjudicating the Section 17 application.
• On 21.05.2025, in response to the third notice of arbitration dated 03.05.2025, NHAI addressed a letter to the Concessionaire.
• On the same day (21.05.2025), the Concessionaire issued a fourth notice of arbitration regarding disputes concerning deemed modification of the concession period under Article 29 of the CA.
• On 16.06.2025, the Concessionaire and respondent nos. 2 and 3 filed a consolidated statement of claim covering all four sets of claims, with annexures exceeding 1,38,000 pages and an aggregate value of approximately Rs. 3515 Crores.
• By procedural Order No. 5 dated 01.07.2025, the erstwhile Arbitral Tribunal recorded procedural directions.
• On 16.07.2025, the erstwhile Arbitral Tribunal passed Procedural Order No. 6, which was circulated via email on 21.07.2025, recording the recusal of all three arbitrators.

Procedural History

• 19.07.2025: NHAI addressed a communication purporting to nominate another nominee arbitrator; the nominee expressed inability to accept.
• 21.07.2025: NHAI nominated Hon’ble Mr. Justice (Retd.) Uday U. Lalit, former Chief Justice of India, as its nominee arbitrator, who conveyed consent the same day.
• 17.08.2025: The Concessionaire sought to nominate Hon’ble (Retd.) Justice Virendrasingh Gyansingh Bisht, former Judge of the Bombay High Court, as its nominee arbitrator; consent furnished on 22.08.2025.
• 10.09.2025: Hon’ble Mr. Justice (Retd.) Uday U. Lalit recused himself from acting as an arbitrator, communicated via email dated 11.09.2025.
• 29.09.2025: NHAI nominated Hon’ble Mr. Justice (Retd.) Sakha Ram Singh, former Judge of the High Court of Allahabad, as its nominee arbitrator; acceptance/consent furnished on 02.10.2025.
• 09.10.2025: The Delhi High Court dismissed W.P.(C) 12165/2025 filed by respondents seeking permission to re-approach the erstwhile Arbitral Tribunal for re-fixation of arbitral fee.
• 30.10.2025: Hon’ble Mr. Justice (Retd.) Sakha Ram Singh informed parties through email regarding his acceptance.
• November 2025: Respondents filed ARB. P. NO. 1862/2025 under Section 11(6) of the A&C Act seeking appointment of a presiding arbitrator.
• 01.12.2025: The Delhi High Court disposed of ARB. P. NO. 1862/2025 by order appointing a presiding arbitrator.
• 05.01.2026: The appointed presiding arbitrator recused himself and requested steps for appointing a substitute.
• 04.02.2026: Respondents filed before the erstwhile Arbitral Tribunal an "Application seeking recall of Procedural Order No. 6 dated 16.07.2025".
• 05.02.2026: The present petition came up for hearing.
• 16.10.2026: Judgment pronounced.

Relief Sought

NHAI sought appointment of a presiding arbitrator to complete the constitution of the Arbitral Tribunal for adjudication of disputes under the CA dated 25.03.2013.

The Legal Issue

The central question was whether the recusal of all three members of an arbitral tribunal, recorded in Procedural Order No. 6 dated 16.07.2025, constituted an order terminating arbitral proceedings under Section 32 of the Arbitration & Conciliation Act, 1996, thereby requiring the remedy of recall under Section 14(2), or merely created vacancies in the offices of arbitrators to be filled by substitution under Section 15(2).

Arguments Presented

For the Petitioner (NHAI)

NHAI contended that Procedural Order No. 6 dated 16.07.2025 recorded only the recusal/withdrawal of arbitrators from office, not termination of proceedings. It relied on Section 15(1)(a) of the A&C Act, which provides for termination of an arbitrator’s mandate upon withdrawal from office, attracting Section 15(2) for substitution. NHAI argued that the order did not use the word ‘terminate’, made no reference to Section 32, and recorded no finding that continuation of proceedings had become unnecessary or impossible. It emphasized that the respondents themselves had previously invoked Section 11(6) by filing ARB. P. NO. 1862/2025 in November 2025, acknowledging the subsistence of the reference. NHAI cited Harshbir Singh Pannu & Anr. v. Jaswinder Singh, 2025 SCC OnLine SC 2742, to argue that the case dealt with express termination under Section 38, not withdrawal of mandate, and that the remedial scheme in that judgment presupposed an existing termination order and a tribunal capable of recalling it - conditions absent here.

For the Respondent (IRB Westcoast Tollway Ltd. & Ors)

The respondents contended that Procedural Order No. 6 dated 16.07.2025 was, in substance, an order terminating arbitral proceedings under Section 32(2)(c) of the A&C Act. They argued that Section 32 is exhaustive of termination modes, and the arbitral reference is singular and non-perpetual, meaning once seized of a dispute, the mechanism cannot be re-invoked to refer the same dispute to another tribunal. They relied on Harshbir Singh Pannu (supra) to assert that the remedy for a party aggrieved by a termination order is to first seek recall before the same tribunal and, if refused, approach the Court under Section 14(2). The respondents maintained that the petitioner’s unreasonable stand on arbitral fees occasioned the recusal, and that the judgment dated 09.10.2025 in W.P.(C) 12165/2025 did not bar their objection as it merely held relief could not be granted in writ jurisdiction.

The Court's Analysis

The Court began by examining the scheme of the A&C Act, noting that Section 15 governs termination of an arbitrator’s mandate and substitution, while Section 32 governs termination of arbitral proceedings. It held that withdrawal of an arbitrator from office under Section 15(1)(a) is a complete self-sufficient event resulting in termination of mandate, attracting Section 15(2) for substitution, and that such withdrawal does not require justification or recall. The Court quoted Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd., (2006) 6 SCC 204, to emphasize that upon withdrawal, the arbitrator retains no authority in relation to the reference.

The Court then analyzed Procedural Order No. 6 dated 16.07.2025, observing that: (i) the order did not use the word ‘terminate’ or any cognate expression; (ii) it did not refer to Section 32 or any other provisions under which proceedings could be terminated; (iii) it recorded no finding that continuation of proceedings had become unnecessary or impossible; and (iv) it recorded no default under Section 38 of the A&C Act. The Court concluded that, on its face, the order could not be characterised as an order under Section 32 and merely brought about withdrawal from office, falling within Section 15(1)(a).

Critically, the Court distinguished Harshbir Singh Pannu (supra), noting that case involved an express order terminating proceedings under Section 38 due to non-payment of fees, whereas here there was no order terminating proceedings, no invocation of Sections 25, 30, 38, or 32(2), no refusal by NHAI to pay fees under the Fourth Schedule, and no attempt to restart a claim - the respondents’ consolidated statement of claim was already on record, and only completion of the tribunal was sought. The Court emphasized that Harshbir Singh Pannu explicitly recognises the distinction between termination of mandate (governed by Section 15) and termination of proceedings (governed by Section 32), holding in paragraphs 268-269 that where mandate terminates due to withdrawal, the recourse is appointment of a substitute under Section 15, but where proceedings terminate, the Act is silent on remedies.

The Court further relied on the respondents’ own conduct: they had filed W.P.(C) 12165/2025 seeking permission to re-approach the tribunal for fee re-fixation (not alleging termination), nominated a new nominee arbitrator on 17.08.2025 "in view of recusal", and invoked Section 11(6) by filing ARB. P. NO. 1862/2025 in November 2025 to appoint a presiding arbitrator - actions inconsistent with the assertion that proceedings had terminated. The Court held that a party who has invoked Section 11(6) on the footing that the reference subsists cannot later contend the reference does not subsist.

The Verdict

The Court held that Procedural Order No. 6 dated 16.07.2025 is not an order terminating arbitral proceedings under Section 32 of the A&C Act but a withdrawal from office by each of the three members of the erstwhile Arbitral Tribunal within the meaning of Section 15(1)(a). The consequence provided by the Act for such withdrawal is substitution under Section 15(2) according to the rules applicable to the appointment of arbitrators being replaced, namely Article 44.3.2 of the CA. The Court appointed Mr. Justice (Retd.) Rajesh Bindal, former Judge of the Supreme Court of India, as the Presiding Arbitrator along with Hon’ble Mr. Justice (Retd.) Sakha Ram Singh (NHAI’s nominee) and Hon’ble (Retd.) Justice Virendrasingh Gyansingh Bisht (respondents’ nominee) to adjudicate disputes under the CA dated 25.03.2013. The arbitral proceedings shall commence from the stage at which they stood on 16.07.2025, subject to the discretion of the Arbitral Tribunal. The appointment is subject to the Presiding Arbitrator furnishing the requisite declaration under Section 12 of the A&C Act.

What This Means For Similar Cases

Withdrawal ≠ Termination: Statutory Distinction is Crucial

Practitioners must meticulously distinguish between withdrawal of an arbitrator from office (governed by Section 15) and termination of arbitral proceedings (governed by Section 32). The former triggers substitution under Section 15(2) without need for recall, while the latter requires the remedial scheme of recall under Section 14(2). Misclassification risks invoking incorrect procedures, causing costly delays. The Court’s focus on the operative language of the order - absence of terms like ‘terminate’, no reference to Section 32, and no finding of impossibility - provides a clear test for tribunals and courts.

Conduct of Parties Overrides Submissions

The respondents’ own actions fatally undermined their termination argument: seeking fee re-fixation in W.P.(C) 12165/2025 (not alleging termination), nominating a new arbitrator "in view of recusal", and invoking Section 11(6) to appoint a presiding arbitrator all demonstrated their belief that the reference subsisted. Courts will scrutinize party conduct to determine whether proceedings were truly terminated, as held in paragraph 79: "A party who has invoked the jurisdiction of this Court under Section 11(6) of the A&C Act and obtained an order appointing a presiding arbitrator on the footing that the reference subsists, cannot, when the other party invokes the same jurisdiction for the same purpose, be heard to contend that the reference does not subsist."

Harshbir Singh Pannu Does Not Apply to Withdrawal Scenarios

Harshbir Singh Pannu & Anr. v. Jaswinder Singh is authority only for situations involving an express order terminating proceedings under Section 32. Its remedial scheme (recall followed by Section 14(2) petition) presupposes both a recall-capable order and a tribunal capable of considering it. Where arbitrators withdraw from office without terminating proceedings - as confirmed by absence of Section 32 reference and parties’ continued engagement - the judgment has no application. Practitioners must resist overreliance on this precedent in withdrawal contexts.

Simultaneous Recusal Does Not Alter Legal Consequence

The Court rejected the notion that three arbitrators withdrawing simultaneously creates a different legal consequence than sequential withdrawal. Since Section 2(1)(d) defines an Arbitral Tribunal as "a sole arbitrator or a panel of arbitrators", and Sections 15(1) and 15(2) use the singular, the Act treats plurality of withdrawals as individual events each attracting Section 15(2). There is no provision for "recall" of a withdrawal order, and compelling an arbitrator to resume office would be illogical as authority flows solely from mandate.