Nominated Arbitrator Having Decided The Issue Earlier In The Capacity Of A Judge Would Not Be Ineligible
Factual Background
Brief facts of the case are that due to some dispute between the parties, an Arbitral Tribunal was constituted comprising of two nominated Arbitrators by parties and one Presiding Arbitrator. At the time when the proceedings were at the stage of final hearing, one of the arbitrators nominated by the Respondent no. 1 recused himself. Thereafter, in light of the recusal, the matter was adjourned sine die with the liberty to get the matter reviewed upon nomination of the arbitrator by Respondent no. 1.
On 16.09.2023, the Respondent no. 1 intimated the appointment of an Arbitrator by email. The Ld. Arbitrator appointed by Respondent no. 1 had decided the dispute of the present case at an earlier point in time, when he was a member of the Division bench of the Gujarat which had passed the judgment and order dated 12.06.2018 whereby out of the Special Civil Application No. 4753 of 2018 and Special Civil Application No. 4759 of 2018 filed by the Respondent no. 1 challenging the common order dated 09.03.2018 passed by the Commercial Court as also the interim order passed by the Arbitral Tribunal under Section 17, Special Civil Application No. 4753 of 2018 was dismissed, whereas the Special Civil Application No. 4759 of 2018 was allowed and the order of the Arbitral Tribunal dated 23.12.2017 was set aside on the ground that the same was passed without hearing the parties. Further, the matter was relegated keeping it open for the Arbitral Tribunal to pass an order after hearing the parties.
Issues
- Whether the Arbitrator appointed by Respondent No. 1 is incapacitated or ineligible to act as an Arbitrator?
- Whether disqualification in Seventh Schedule, pressed into service by the Petitioner would be attracted in the facts of the instant case?
Arguments on behalf of the Petitioner
The contention of the Petitioner was that since, the Ld. Arbitrator nominated by the Respondent no. 1 was involved in the instant case for the dispute which was dealt by him at a previous point of time, he was ineligible, since, there were sufficient grounds to give rise to justifiable doubts as to the independence and impartiality of the Arbitrator.
Further, the Petitioner placed Item No. 15 and 16 of the Fifth Schedule before the Hon’ble Gujarat High Court to submit that the nominated Arbitrator cannot enter into the dispute, as he was ineligible being related to the subject matter of the dispute. In this regard reliance was placed by the Petitioner on the decision of the Apex Court in Perkins Eastman Architects DPC v. HSCC (India) Ltd. and Voestapline Schienenmbhv. Delhi Metro Rail Corpn. Ltd. The petitioner contended that the arbitrator’s impartiality and independence serve as the cornerstones of any arbitration process. One of the core tenets of natural justice is the rule against bias, which appropriately applies to all judicial and quasi-judicial processes. An arbitrator’s appointment is derived from the agreement between the parties; however, the arbitrator’s lack of impartiality and independence would disqualify him from conducting the arbitration. The relationship between the parties to the arbitration and the arbitrators is contractual in nature. This reasoning stems from the fact that an arbitrator remains impartial towards the parties involved in a dispute, even if they appoint him under the provisions of the agreement.His responsibilities and tasks demand that he put aside the partisan interests of the parties and refrain from acting in the particular interest of either party. It was argued that the arbitrator, whose duty it is to render an adjudicatory decision, ought to be unbiased and independent of the parties. Independence and impartiality may be ascertained by the parties at the outset of the arbitration proceedings in light of the circumstances disclosed by the Arbitrator. It is essential to create a healthy arbitration environment.
Arguments on behalf of the Respondent
The Respondent contended that in a challenge in which the grounds contained in the Seventh are revealed, raising reasonable doubts about the independence and impartiality of the arbitrator, the Arbitral Tribunal under Section 13 must decide these doubts as a matter of fact in the specific facts of the challenge. When a challenge is unsuccessful and the arbitral tribunal determines that the arbitrator’s independence and impartiality are unquestionably established, the arbitral tribunal is required to proceed with the proceedings in accordance with section 13(4) and render an award. The party contesting the arbitrator’s appointment on the grounds contained in the Seventh Schedule may only file an application to have the arbitral award set aside under Section 34 on the previously mentioned reasons after such an award has been made. In this regard reliance was placed by the Respondent no. 1 on HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Ltd.).
Decision of the Gujarat High Court
The Hon’ble Gujarat High Court noted that in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Ltd.), the Apex Court held that on a reading of the IBA Guidelines and the headingof Item 16 i.e. “Relationship of the arbitrator to the dispute”, the arbitrator has to have a previous involvement in the very dispute contained in the present arbitration. It is not possible to interpret item No. 16 to include previous involvement in another arbitration involving one of the parties on a relevant matter. The language of Item No. 16 indicates that the proposed arbitrator ought to be someone who has previously been involved in the case under a different avatar.Item No. 16 refers to previous involvement in an advisory or other capacity in the very dispute, but not as arbitrator. Thus, it was decided that giving legal advice to a party cannot be construed as expert opinion as described in Item No. 15. Only in case of any professional relationship or business relationship between the Arbitrator and one of the parties,the proposed arbitrator would be disentitled to act as an Arbitrator. The legal advice given to the party in any other issue would not be a reason to hold the Arbitrator ineligible.
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In the facts of the present case, the Hon’ble Gujarat High Court noted that by the mere reason that the Ld. Arbitrator nominated by the Respondent no. 1 was a member of the Division Bench, which had decided the validity of the interim order passed by the then Arbitral Tribunal, it cannot be held decision of the Division Bench falls within the meaning of Item No. 16 “that Arbitrator has previous involvement in the case”.
The nominated Arbitrator, who had decided the issue before him in the capacity of a Judge of the Hon’ble Gujarat High Court, cannot be said to have any involvement in the case. The only ground taken by the petitioner to raise doubt as to the independence and impartiality of the nominated Arbitrator, would not fall within the meaning of “justifiable doubts”as occurring in Fifth Schedule and Seventh Schedule and as such is unsustainable. Therefore, the Hon’ble Court opined that the nominated Arbitrator cannot be held to be ineligible under Section 12(5) of The Arbitration and Conciliation Act, 1996 and would not be disqualifed under Item No. 16 of the Fifth Schedule.
Conclusion
The Hon’ble Gujarat High Court dismissed the petition seeking to replace the nominated arbitrator and to declare the said arbitrator nominated by the Respondent no. 1 as disqualified.
Therefore, a mere fact that the nominated arbitrator haddecided the dispute of the present case at an earlier point of time in his capacity as a sitting judge, it cannot be held that the arbitrator has previous involvement in the case.
Author: Sonakshi Pandey, A Student at Symbiosis Law School in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing
References
- JRE Infra Private Limited v. Deendayal Port Authority, 2023 SCC OnLineGuj 4146
- https://www.scconline.com/blog/post/2023/11/29/nomination-of-arbitrator-involved-in-dispute-previously-in-capacity-of-judge-whether-eligible-legal-news/
- Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC760
- VoestaplineSchienenGmbh v. Delhi Metro Rail Corpn. Ltd., (2017) 4 SCC 665
- HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Ltd.), (2018) 12 SCC 471
