Introduction
In today’s globalized business landscape, characterized by rapid growth and expansion, companies enter into several contracts and agreements daily. These agreements outline the roles, responsibilities and transactions of the contracting parties. As such, these contracts contain intricate transactions where disputes are inevitable. Whenever any discrepancy arises, the concerned parties prefer to settle those issues through the dispute resolution clauses in their contracts to sidestep the lengthy and costly courtroom battles. Given the context, arbitration has gained prominence as an effective ADR mechanism to resolve such disputes in a time-efficient manner.
Section 12 of the Arbitration Act
The principles of independence and impartiality lie at the core of arbitration as they are essential for safeguarding the integrity and fairness of the arbitral process. These core principles apply to both judicial and quasi-judicial proceedings. Anything that suggests or demonstrates the lack of independence or partiality by one or more members of the Arbitral Tribunal would serve as a ground to challenge the tribunal’s authority or the awards rendered by it. [i]
In this regard, Section 12 of the Arbitration and Conciliation Act, 1996 (“A&C Act”) addresses the circumstances that relate to the impact on the independence or impartiality of arbitrators. The A&C Act was amended in 2015 to align with international standards like the International Bar Association Guidelines on Conflict of Interest to strengthen the Arbitrator’s neutrality in arbitral proceedings. The amended section requires the arbitrators to disclose any factors that could cast doubt on their impartiality or independence. The purpose behind this provision is to ensure that the arbitrators are not moved by any biases or end up acting under any internal or external influence. It is significant for preserving the integrity of the proceedings. Further, Section 12(5) of the A&C Act prohibits individuals from serving as arbitrators if they are part of any relationships as outlined in the Seventh Schedule. However, the proviso to 12(5) provides that the parties can waive this restriction through a written agreement after a dispute arises.[ii]
Delhi High Court’s Ruling on Arbitral Tribunal’s Independence and Impartiality
Recently, the Delhi High Court passed an order in the case of National Highways Authority of India v. M/S KCC Buildcon Pvt. Ltd.[iii], wherein the issue relating to independence and impartiality of an arbitral tribunal was considered. This case pertained to a dispute regarding an Engineering, Procurement, and Construction Agreement. The Petitioner had sought to extend the mandate of the Learned Arbitral Tribunal through a petition under Section 29A of the A&C Act, 1996. During the course of the proceedings, upon the Court’s enquiry concerning the considerable delay involved in the arbitral proceedings, it emerged that the Respondent had filed an application to amend the Written Statement at the time when the matter was scheduled for evidence, as a result of which, the Petitioner also submitted an application to amend the Statement of Claims. Moreover, records also indicated that the Respondent had filed an affidavit of evidence along with new documents. This is why the Learned Arbitral Tribunal deliberated whether or not to admit the documents that were submitted after substantial delay by the Respondent.
The Respondent, in principle, opposed the plea of the Petitioner and contented that since the arbitral tribunal’s mandate had expired, they had decided to nominate a new arbitrator as per the terms of the agreement. To support this stance, the Respondent alleged that the existing arbitral tribunal, whose mandate the Petitioner sought to extend, was not independent or impartial.
The High Court ruled that the allegations levelled by the Respondent were devoid of any credible reasoning. It was held that “The petition seeking extension of mandate of the ld. Arbitral tribunal, cannot be converted into a ruse to obtain replacement of an arbitrator or a tribunal, by making unfounded allegations against an arbitrator or Tribunal.” The Court further observed that the submissions of the Respondent also lacked merit as it had unnecessarily delayed the presentation of evidence. The Court keeping in view the fact the Respondent had failed to demonstrate as to how the arbitral tribunal acted with a bias or impartial intent [iv], eventually extended the mandate of the existing arbitral tribunal and rejected the allegations of the Respondent.
Conclusion
Therefore, it can be inferred from the recent order that any challenge to the competence of an arbitral tribunal must be based on grounds of independence and impartiality, which necessitate fulfilment of the requirements provided under Section 12 of the A&C Act. Thus, by merely alleging any form of bias upon an Arbitrator, that too, without any substantial evidence to demonstrate how any prejudice has been caused, a fit case for intervention by Courts in arbitral proceedings is not made out and the same is unwarranted.
References:
[i] Challenging The Arbitrator For Bias And Partiality: Does The Arbitration And Conciliation Act, 1996, Provide Effective Remedy? LiveLaw, 17th May 2023, https://www.livelaw.in/law-firms/law-firm-articles-/arbitrator-bias-arbitration-and-conciliation-act-adr-zeus-law-associates-228883 [ii] The independence and impartiality of arbitrators, https://www.opkhaitan.com/the-independence-and-impartiality-of-arbitrators/ [iii] O.M.P (Misc.) (Comm.) 327/2024 [iv] Allegations Against Arbitral Tribunal Without Any Basis Is Contrary To Letter And Spirit Of Arbitral Process: Delhi High Court LiveLaw, 4th May, 2024, https://www.livelaw.in/high-court/delhi-high-court/delhi-high-court-allegations-arbitral-tribunal-arbitral-process-256940