Former employee of one of the party to Arbitration 10 years back cannot be a ground for Removal of an arbitrator

Arbitration scenario in India got a great enthusiasm on 23rd October 2015 because of the amendments brought in to the Arbitration and Conciliation Act,1996 (Hereinafter “the Act”.  One of the major changes brought in by the said amendment was relating to the measures to ensure impartiality and independence of Arbitrators. The Amendment introduced a mandatory declaration by the arbitrators declaring their relationship connections with the lawyers & parties.

The above declaration had to be made in a Format provided under Schedule VI of the Act. While making the above-said declaration the potential arbitrator nominee requires to take into consideration, the list of relationships provided in Schedule V of the Act. The said Act also has provided a list of relationships that are prohibited to be considered as an Arbitrator. The Above said Schedules V & VII are an inspiration from the “IBA Rules on Conflict of interest in International Arbitrations”.

After the above-said amendment, the legal impact of the above said Schedules were considered and interpreted by various Courts in India, including the Supreme Court of India. As of now, the settled law is that the relationships listed in Schedule V are only a guideline for the arbitrators, while making their declaration. The existence of a relationship mentioned in Schedule V does not per se act as a disqualification. Hence the challenging party should challenge the appointment of such an arbitrator by way of a petition filed under S.13 before the Arbitral tribunal only. In the said proceeding the challenging party is required to prove that there are justifiable doubts and reasons to come to a conclusion that the said arbitrator may be biased. In such a case, the said application can be considered by the Arbitral Tribunal and a decision can be taken. In case if the tribunal rejects the said challenge, there is no appeal provided in the Act. The only remedy available to the aggrieved party is to wait for the final arbitration award and it can have “bias of the arbitrator” as an additional ground while filing an application under S.34 seeking to set aside the award. But the relationships mentioned in Schedule VII are clear prohibition to be appointed as an arbitrator. In case, one arbitrator falls under any of the relationships mentioned under Schedule VII then the challenging party may approach the Hon’ble High Court under Section 14 of the Act and seek for removal of the said arbitrator.

In India, Government departments and Public Sector undertakings normally nominate former officers or employees as their nominee to the Arbitration Tribunal. In some cases, the Government departments and Public Sector Undertakings insist that both the parties must choose the arbitrators only from their Panel of Arbitrators. For example, Delhi Metro Rail Corporation had a panel of arbitrators who were former employees of Railways. The said condition was incorporated in the Arbitration clause. But the contractor challenged the said provision on the ground that it is violating S. ……. Of the Act. But finally, Supreme Court of India in DMRC case, upheld the said clause after directing DMRC to include some former Judges, Lawyers and Chartered Accountants in the panel and make it a broad-based panel.

In a recent case decided on 03.01.2019 of G.F. Toll Road case[1] the Supreme Court held that The objection of reasonable bias raised was wholly unjustified and unsubstantiated, particularly since the nominee arbitrator was a former employee of the State over 10 years ago.

[1] The Government of Haryana PWD Haryana Vs G.F.Toll Road Pvt Limited  MANU/SC/0003/2019

 

Published in Corporate Law
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