De Jure and De Facto Incapacity: Analyzing Section 14(1)(a) of the Arbitration and Conciliation Act, 1996

De Jure and De Facto Incapacity: Analyzing Section 14(1)(a) of the Arbitration and Conciliation Act, 1996

1. Introduction

Section 14(1)(a) of the Arbitration and Conciliation Act, 1996 (“the Act”) terminates an arbitrator’s mandate where the arbitrator “becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay.” Although couched in succinct language, the provision operates at the confluence of party autonomy, procedural efficiency and judicial oversight. This article critically examines the jurisprudence that has crystallised around Section 14(1)(a), with particular focus on the post-2015 amendment era in which independence and impartiality standards (Section 12(5)) have substantially re-configured the meaning of “de jure inability.” Drawing on leading Supreme Court decisions—including S.P. Singla, TRF, Perkins, Bharat Broadband, and ONGC v Afcons—and significant High Court pronouncements, the discussion maps doctrinal contours, procedural pathways, and policy implications of the provision within India’s evolving arbitration ecosystem.

2. Statutory Framework

The legislative matrix relevant to Section 14(1)(a) comprises:

  • Section 12 (grounds for challenge and ineligibility)
  • Section 13 (challenge procedure before the tribunal)
  • Section 14(2) (court determination where controversy remains)
  • Section 15 (substitution of arbitrator)
  • Section 32 (termination of proceedings)
  • Section 25 (default of parties, often giving rise to de facto failure to act)

Read holistically, these provisions reveal a three-tiered control mechanism: (i) party-autonomous challenge before the tribunal; (ii) statutory ouster of ineligible appointments (de jure); and (iii) supervisory recourse to courts when the first two tiers falter.

3. Conceptual Dimensions: De Jure versus De Facto Inability

3.1 De Jure Inability

An arbitrator is de jure unable when a legal disqualification vitiates the appointment ab initio. Post-2015, the Seventh Schedule read with Section 12(5) imports objective ineligibility, rendering the affected arbitrator “incapable of performing” for purposes of Section 14(1)(a). The Supreme Court in TRF Ltd. v Energo[1] held that once the named arbitrator is statutorily ineligible, he also loses the derivative power to nominate another arbitrator, thereby creating a cascading de jure incapacity. Bharat Broadband v United Telecoms[2] reaffirmed that such ineligibility is non-derogable absent a post-dispute written waiver.

3.2 De Facto Inability

Analogous to factual impossibility, de facto inability encapsulates prolonged failure to act, bias-induced paralysis or procedural stalemate. Instances include: expiration of contractually stipulated timelines (Scorpion Express[3]), unjustified adjournments (National Highways Authority v Gammon Engineers[4]), refusal to furnish orders or perceived bias linked to exorbitant fees (Clarke Energy[5]). Unlike de jure incapacity, court intervention under Section 14(2) is predicated on evidentiary assessment rather than automatic disqualification.

4. Procedural Pathways and Judicial Review

Section 14(2) empowers the “court” (as defined in Section 2(1)(e)) to decide the controversy. The Supreme Court in Swadesh Kumar Agarwal v Dinesh Kumar Agarwal[6] clarified that High Courts exercising original jurisdiction or commercial courts at the seat qualify, whereas petitions under Article 226/227 are impermissible for interlocutory challenges (San​jeev Singla v HDFC Bank[7]). Where de jure ineligibility is evident, courts may terminate the mandate without delving into merits (ITD Cementation v Konkan Railway[8]); conversely, disputed de facto allegations often necessitate referral back to the tribunal for factual determination, preserving kompetenz-kompetenz (Sharma Enterprises[9]).

5. Analytical Survey of Key Judgments

5.1 S.P. Singla Constructions Pvt. Ltd. v State of Himachal Pradesh

While the controversy pivoted principally on Section 25(a) termination, the Supreme Court acknowledged that an arbitrator’s continued mandate is contingent on effective performance; failure to progress proceedings may trigger Section 14(1)(a). The Court ultimately substituted the arbitrator, highlighting the judiciary’s readiness to cure procedural dysfunction while respecting contractual nomination.[10]

5.2 TRF Ltd. v Energo Engineering Projects Ltd.

The Court construed Section 12(5) as engrafting an “incurable disqualification” that morphs into de jure inability under Section 14(1)(a). The ruling introduced the “nominator–nominee” doctrine: a person who is himself ineligible cannot indirectly appoint a surrogate—an approach later expanded in Perkins Eastman v HSCC[11].

5.3 Bharat Broadband Network Ltd. v United Telecoms Ltd.

Emphasising the mandatory tenor of Section 12(5), the Court annulled the appointment of a sole arbitrator made after the amendment without a valid waiver, holding that such an appointment is void ab initio and the arbitrator is de jure unable under Section 14.[2]

5.4 HRD Corporation v GAIL (India) Ltd.

Here, challenges based on alleged bias were rejected as they did not fit within the Seventh Schedule. The Court delineated the boundary between waivable doubts (Section 12(3)) and non-waivable ineligibility (Section 12(5)), illustrating that not every allegation translates into de jure incapacity.[12]

5.5 ONGC v Afcons Gunanusa JV

Though focused on arbitrators’ fees, the Court observed that imposition of fees contrary to statutory caps could, in extreme cases, evidence inability “to perform functions without undue delay,” thereby conceptually grounding a potential Section 14(1)(a) claim.[13]

6. Interrelation with Section 12(5): From Ineligibility to Incapacity

Sections 12(5) and 14(1)(a) function sequentially. The former establishes objective ineligibility; the latter supplies the procedural device for terminating the mandate. Jurisprudence treats the transformation as automatic (TRF; Bharat Broadband). Consequently, parties need not first navigate the Section 13 challenge route because the incapacity is not a “doubt” but a statutory fact.

7. Time-Linked Failure to Act: Operationalising De Facto Incapacity

The Delhi High Court in Scorpion Express terminated the arbitrator’s mandate where the tribunal overshot a consented four-month timeline, underscoring party autonomy over procedural tempo. Likewise, Bharat Chugh v MC Agrawal HUF held that absence of a Section 21 notice rendered the arbitrator coram non judice, invoking Section 14(1)(a) to nullify proceedings.[14] These cases illustrate that delay-based incapacity is a fact-sensitive enquiry balancing efficiency against due process.

8. Comparative Insights and Policy Considerations

  • International Alignment: Section 14(1)(a) echoes Article 14 of the UNCITRAL Model Law, reinforcing India’s pro-arbitration stance.
  • Judicial Economy: Automatic termination for de jure incapacity minimises satellite litigation, yet the proliferation of Section 14 petitions for de facto grounds risks clogging courts; calibrated standards are therefore imperative.
  • Institutional Arbitration: Clear fee schedules and appointment mechanisms, as endorsed in ONGC v Afcons, pre-empt Section 14 disputes by reducing scope for procedural impasse.

9. Conclusion

Section 14(1)(a) operates as a vital safety-valve within India’s arbitral framework, ensuring that tribunals remain both legally qualified and functionally effective. Supreme Court jurisprudence post-2015 has unequivocally linked statutory ineligibility under Section 12(5) with de jure incapacity, thereby streamlining the path to judicial intervention. Concurrently, High Courts have cultivated a nuanced approach to de facto incapacity, intervening only where delay, bias, or procedural dereliction is patently demonstrable. As Indian arbitration matures, conscious deployment of Section 14(1)(a) will be essential to balance autonomy with accountability, reinforcing confidence in arbitral dispute resolution.

10. Footnotes

  1. TRF Ltd. v Energo Engineering Projects Ltd., (2017) 8 SCC 377.
  2. Bharat Broadband Network Ltd. v United Telecoms Ltd., (2019) 5 SCC 755.
  3. Scorpion Express Pvt. Ltd. v Union of India, Delhi HC, 2017.
  4. National Highways Authority of India v Gammon Engineers & Contractor Pvt. Ltd., Delhi HC, 2018.
  5. Clarke Energy India Pvt. Ltd. v SAS EPC Solution Pvt. Ltd., Madras HC, 2021.
  6. Swadesh Kumar Agarwal v Dinesh Kumar Agarwal, (2022) 10 SCC 235.
  7. Sanjeev Kumar Singla v HDFC Bank Ltd., P&H HC, 2020.
  8. ITD Cementation India Ltd. v Konkan Railway Corporation Ltd., Bombay HC, 2019.
  9. Sharma Enterprises v National Buildings Construction Corporation Ltd., (2008) SCC OnLine Del 955.
  10. S.P. Singla Constructions Pvt. Ltd. v State of Himachal Pradesh, (2019) 2 SCC 488.
  11. Perkins Eastman Architects DPC v HSCC (India) Ltd., (2019) SCC OnLine SC 1517.
  12. HRD Corporation v GAIL (India) Ltd., (2017) SCC OnLine SC 1024.
  13. Oil & Natural Gas Corporation Ltd. v Afcons Gunanusa JV, (2022) SCC OnLine SC 1122.
  14. Bharat Chugh v MC Agrawal HUF, Delhi HC, 2021.