Ever since the Arbitration and Conciliation (Amendment) Act, 2015 came into force, Arbitration in India has started to evolve into new positive dimensions. The unique and diverse traits that the Indian country possess has contributed so much to the jurisprudence of Arbitration at large. In the same manner this article makes an attempt to analyse and explore the recent decision by the Supreme Court of India in HRD Corporation(Marcus Oil and Chemical Division) V. GAIL(India) Limited,and as to what it has to contribute to the jurisprudence relating to the practice of frequently appointing the same person as arbitrator in Indian Arbitration. The case has raised interesting questions relating to Section 12 and 14 of the Amended Act and in very particular with respect to Section 12(5). The brief facts of this case is that certain disputes arose between the Respondent(GAIL) India Limited and the Appellants HRD Corporation(Marcus Oil and Chemical Division) who was the successful tenderer for supply of wax generated at GAIL's plant at Pata, Uttar Pradesh. Even before this case was brought up before the Apex Court, three earlier arbitrations have taken place between the parties and this case is a fourth of such arbitrations that took place between the parties. The first arbitration between the parties took place for the period 2004-2007 and the Tribunal constituted to adjudicate the dispute consisted of Justice A.B.Rohatgi, as the presiding arbitrator, Justice J.K.Mehra and Justice N.N.Goswamy as co-arbitrators. An award was passed in the said dispute and it was not challenged and had become final. Secondly, in 2007-2010, an arbitration held between the parties consisting of the same above said panel. In the third dispute in 2010-2013, the same tribunal was constituted but during the pendency of the proceedings Justice Goswamy expired and in his place Justice T.S.Doabia was appointed. Subsequently in February 17,2013, Justice A.B.Rohatgi resigned and in his place Justice S.S.Chadha was appointed. With respect to the present case, dispute arose for the period from 2016-2019 wherein initially the appellant nominated Justice K.Ramamoorthy as its arbitrator who later withdrew from the case and Justice Mukul Mudgal was nominated as arbitrator in his place. The Respondents appointed Justice Doabia and he and Justice K.Ramamoorthy before his withdrawal appointed Justice K.K.Lahoti as the presiding arbitrator. The Appellant in this circumstance, filed two applications under Section 12 of the Arbitration and Conciliation Act, one seeking termination of the mandate of Justice Daobia and the other seeking termination of the mandate of Justice Lahoti. The two applications were heard and an order was passed wherein Justice Lahoti with whom Justice Daobia concurred held that they were entitled to continue with the arbitration. However Justice Mudgal concurred with the appointment of Justice Lahoti but held that Justice Daobia's appointment was hit by certain clauses of the Fifth and Seventh Schedules of the Arbitration and Conciliation Act. A petition was filed against this order which was dismissed by a single judge of High Court thereby approving the appointment of Justice Lahoti and Justice Daobia, pursuant to which, the present dispute was brought before the Supreme Court by Special Leave Petition.
The two judge bench of the Apex Court consisting of Hon'ble Justice R.F.Nariman and Hon'ble Justice Sanjay Kishan Kaul was pleased to extensively consider Section 12, 13, 14 and Fifth, Sixth and Seventh Schedule of the Arbitration and Conciliation (Amendment) Act, 2015. In particular, the Fifth Schedule which is a mirror reflection of the International Bar Association Guidelines on Conflicts of Interest in International Arbitration, 2014. The Supreme Court has clearly compared and contrasted between the Seventh Schedule and the Fifth Schedule as both the schedules contain similar items. The Court has cleared the air in this regard that the Seventh Schedule will be a guide as to determine the 'ineligibility' of the Arbitrator if the arbitrator in question falls under any of the items enunciated in the Seventh Schedule and a challenge thereof will be preferred to the Court under Section 14 as he becomes de jure unable to perform his functions under the Act. The Fifth Schedule on the other hand elucidates situation where 'justifiable doubts exists as to independence or impartiality' of the arbitrator in question and challenge under this Schedule will bring an action under Section 13 and the Arbitral Tribunal shall decide about the independence or impartiality of the arbitrator in question. Further, if the challenge is not successful, it does not stop the Tribunal from passing an award and questions relating to setting aside of award will only follow after passing the award by the Tribunal. Clearly, the Fifth Schedule is drawn from the Red and Orange List of the IBA guidelines which is a mere 'guide' to determine whether circumstances exist which gives rise to justifiable doubts of the arbitrator. On the other hand, Seventh Schedule read with Section 12(5) drawn from the Red List of IBA guidelines will make an arbitrator automatically ineligible and de-jure disabled to perform his functions. Therefore, disclosure under the Act follows from a broad list of categories as set out in Fifth Schedule whereas ineligibility to be appointed as arbitrator is drawn from a small list of categories enunciated under Seventh Schedule. It is pertinent to note here that the Fifth Schedule contains 24 items to it whereas the Seventh Schedule contains only 19 items and most of the Items in Fifth Schedule is found in the Seventh Schedule and also a few items that are present in the Fifth Schedule is absent in the Seventh Schedule . This implies the stringency required in making an arbitrator disqualified under the Seventh Schedule. The IBA guidelines by itself has stipulated that the Red list consists of non-waivable and waivable guidelines and covers situations which are 'more serious' and 'serious', the 'more serious' objections being non-waivable. Whereas the Orange List enumerates only a list of situations that may give rise to justifiable doubts as to the arbitrator's impartiality or independence.
The Arbitration and Conciliation(Amendment) Act, 2015 has addressed to recognize the essence of arbitration which is 'party autonomy' by providing proviso to Section 12(5) which reads as under:
'Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.'
The parties are thereby given a leeway to exclude the items enumerated under the Seventh Schedule by express writing. The 246th Law Commission Report has also manifested this legislative intent of theirs to uphold party autonomy in arbitration proceedings. The need to retain the same arbitrator becomes relevant in cases of family arbitrations where the party trusts the arbitrator in blind faith irrespective of doubts as to his 'independence or impartiality' and in such cases the parties can waive the applicability of Section 12(5) by express writing. There lies an ample number of situations wherein it is a customary practice to appoint the same arbitrator mainly for speedy disposal of cases which is the most important objective of arbitration.
The verdict has also examined the importance of independence and impartiality of arbitrator and also had made a distinction between 'independence' and 'impartiality'. The Hon'ble Supreme Court has cited its own judgement in Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd,in which it was rightly observed that 'Independence and impartiality of the arbitrator are the hallmarks of any arbitral proceedings. Rule against bias is one of the fundamental principles of natural justice which applied to all judicial and quasi-judicial proceedings.' It was also observed that even when the arbitrator is appointed by the parties themselves by the contract, the arbitrator is still independent of the parties. The United Kingdom Supreme Court's judgment in Hashwani v Jivraj was also referred which held that 'although the contract between the parties and the arbitrators would be a contract for the provision of personal services, they were not personal services under the direction of the parties.' Further, independence and impartiality were observed to be two different concepts. It is not necessary a person who is independent is impartial or vice versa. Impartiality is a more subjective concept whereas independence is a more objective concept which is more straightforwardly ascertained by the parties at the outset of the proceedings in light of circumstances disclosed by the arbitrator. Further, the Apex Court also rejected the arguments of the Counsel that since the Amendment Act has narrowed the grounds of challenge in determining independence, impartiality and neutrality of arbitrators, the items in Fifth and Seventh Schedule has to be construed in the most expansive manner so that even the remotest likelihood of bias gets removed. The Apex Court has clarified that since the Fifth and Seventh Schedule derives its existence from the IBA guidelines, the same has to be construed in the light of 'a reasonable third person test'which provides that 'doubts relating to independence, impartiality or neutrality of the arbitrator are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case in reaching his or her decision.' The test in the view of the Court requires a broad common-sensical approach with regard to items enumerated under the Fifth and Seventh Schedule of the Act. The words contained therein also has to be construed fairly neither restricting or enlarging the same.
With respect to the appointment of Justice Daobia and Justice Lahoti in the present case, it was argued that Justice Lahoti has given an opinion on a legal issue between GAIL(the Respondents) and another Public Sector Undertaking. Items 1,2,8,14 and 15 of the Seventh Schedule were attracted in this circumstance. Item 8 and 14 was held to be not applicable since it provides that the arbitrator should 'regularly' advice the appointing party and the words 'regularly' was stressed upon thereby making Item 8 and 14 not applicable since Justice Lahoti was not a regular advisor between those parties. Item 1 was also held to be not violated since there was no 'business relationship' with the party as stipulated thereunder and it was only a professional relationship. Items 2 and 15 will also finds no place since both the items will become relevant only if it there was an advice, legal or expert opinion given by the arbitrator in the present/existing dispute. Since the dispute do not go to the roots of the dispute in hand, Justice Lahoti's appointment was saved under both the Items and hence his appointment was held to be proper. With respect to Justice Daobia's appointment it was argued that since he had previously rendered an award between the same parties in an earlier arbitration concerning the same disputes but for an earlier period he is hit by Item 16 of the Seventh Schedule which reads simply, 'the arbitrator has previous involvement in the case'. The Hon'ble Supreme Court has widened the interpretation and construed the statute in its widest ambit and provided new dimensions in this regard. The Court has held that the words 'in the case' read along with the heading containing Item 16 in the Seventh Schedule namely, 'Relationship of the Arbitrator to the dispute' implies that the arbitrator must have involvement in the very same dispute and not with any other dispute. Further, the Court was of the view that Item 16 of the Seventh Schedule must be read along with Item 22 and 24 of the Fifth Schedule and both of the disqualifications are not absolute and an arbitrator who has within the past three years been appointed as arbitrator on two or more occasions by one of the parties may still not be disqualified if he establishes that he was independent and impartial in the earlier two occasions. The Hon'ble Supreme Court was of the view that Item 16 of the Seventh Schedule refers to previous involvement in an advisor or other capacity in the very dispute but not as arbitrator. Further, the fact that Justice Daobia has already rendered an award in a previous arbitration between the parties would not by itself render him ineligible to be an arbitrator in a subsequent arbitration on the ground of reasonable likelihood of bias. This point of the Court was substantiated with the judgment in AMEC Capital Projects Ltd v. Whitefriars City Estates Ltdby the Court of Appeal which held that 'the mere fact that the Tribunal has previously decided the issue is not of itself sufficient to justify a conclusion of apparent bias. Something more is required. Judges are assumed to be trustworthy and to understand that they should approach every case with an open mind. The same applies to adjudicators who are almost professional persons. It would be unrealistic, indeed absurd, to expect the Tribunal in such circumstances to ignore its earlier decision and not to be inclined to come to the same conclusion as before, particularly if the previous decision was carefully reasoned.' The Hon'ble Supreme Court thereby inferred that 'the fact that the Tribunal has decided an issue before is not sufficient to establish apparent bias. There needs to be something of substance to lead a fair minded and informed observer conclude that there is a real possibility that the Tribunal will not bring an open mind and objective judgment.' The 'reasonable third person test' was thereby recognized and accepted by the Hon'ble Supreme Court.
Further the Hon'ble Supreme Court has drawn various instances wherein an arbitrator can involve in more than three cases and observed that there lies an exception to this general rule. The Supreme Court has cited the Landmark judgment by Court of Appeals, UK, in Locabail(UK) Limited V Bayfield Properties Limited which elucidates a situation wherein a loss whether from boom or batch which gives rise to a number of arbitrations against a number of insurers who have subscribed to the same program. In this situation also the practice is such that a same arbitrator is appointed to decide all the cases. Similarly in Rustal trading Ltd V. Gill and Duffas,a challenge was brought against an arbitrator who had previously involved in a trade dispute with one of the parties. The Court held that 'it is an ordinary incident of commercial life' that occurs in the relatively small filed like trade arbitration'. Item No.22 of the Fifth Schedule also becomes more relevant in this context which provides that, 'the arbitrator shall not within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.' It is pertinent to note that this Item finds no place under the Seventh Schedule which implies that these type of situations must be construed less stringently as under the Orange List of IBA guidelines. Further the Court had also relied on the significance of Explanation 3 to Fifth Schedule which often goes unnoticed but very relevant in this regard. It clearly clarifies that 'it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialized pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out in the Fifth Schedule'. The words '….certain specific kinds of arbitration such as…' also implies that the List is illustrative and not exhaustive and can include any or all types of cases in which the practice is such that parties frequently to appoint the same arbitrator in different cases . The verdict has also in para 31 clarified that Explanation 3 to Fifth Schedule stands by itself and that it has nothing to do with any Items set out under Seventh Schedule.
The Hon'ble Supreme Court has also gave a wide scope to the 'disclosure' requirements required under the Act. The Court was of the view that even though Justice Daobia had not made complete disclosure, since he did not indicate anything to contrary it implies that he would be able to devote sufficient time to arbitration and complete the process within 12 months. For all the above stated reasons and observations, the Hon'ble Supreme Court upheld the orders of the Single Judge of High Court and thereby dismissed the appeals of the Appellants.
The Hon'ble Supreme Court of India has in this present order addressed many questions that were unanswered and also had clarified various uncertainties with regard to the amendments in the Arbitration Act and this order is another feather to the crown to the jurisprudence of Indian Arbitration which should positively stand the test of time.
 Hereinafter also referred to as 'The Act' or 'The Arbitration Act'
 2017 SCC Online SC 1024
 Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
 Hereinafter referred as IBA guidelines
14. Failure or impossibility to act.—(1) [The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if]—
(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay
(b) he withdraws from his office or the parties agree to the termination of his mandate.
(2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.
 Supra at note 2
 (2017) 4 SCC 665 at 687-689
 (2011) 1 WLR 1872: 2011 UKSC 40
 IBA guidelines on 'Conflict of Interest' Adopted by resolution of the IBA Council on Thursday 23 October 2014, page 6,available at,
https://www.ibanet.org/Publications/publications_IBA_guides_and_free_materials.aspx, last accessed on October 10, 2017
Item 8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.
Item 1.The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
 Item 2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
Item 22. The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
Item 24. The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.
  1 All ER 723
  QB 451
  1 Lloyd's Rep.14
 For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.
 Explanation 3 stands by itself and has to be applied as a relevant fact to be taken into account. It has no indirect bearing on any of the other items mentioned in the Seventh Schedule.