This case is a part of our Annual Arbitration Review 2018.

Judgment Name: Manish Anand & Ors. v. FIITJEE Ltd.

Citation: 248 (2018) DLT 499

Court: The High Court of Delhi

Coram: Navin Chawla, J.

Date: 21st February 2018

Keywords: Section 11, Appointment, Arbitrator, challenge, disclosure, Section 12, Unilateral Appointment.

Overview

The mandate of the Sole Arbitrator was challenged in this case under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) on two grounds. First, the unilateral appointment of the Arbitrator by the Respondent. Second, that the Arbitrator had not given proper disclosure as required under Section 12(1) of the Act.

Issue

1. Whether the unilateral appointment of the sole Arbitrator by a party is invalid?
2. Whether the improper disclosure would render the Sole Arbitrator so appointed ineligible or de jure incapable of proceeding with the arbitration proceedings?
3. Whether the Court has jurisdiction to interfere in this case?

Facts

An arbitration agreement was entered into by the parties according to which the Respondent unilaterally appointed the sole Arbitrator to adjudicate upon the disputes that arose between them. The Arbitrator made a disclosure with regard to independence and impartiality under Section 12(1) of the Act, albeit not in the form prescribed in the Sixth Schedule. It was the contention of the petitioner that the arbitration agreement, so far as it vested the power in the Respondent to unilaterally appoint the Sole Arbitrator, was invalid. The Petitioner further contended that the mandate of the Arbitrator should be terminated as the disclosure made by him was not in the prescribed format. Hence, this petition was filed under Section 11 of the Act to terminate the mandate of the Arbitrator.

Analysis

The Court relied on the judgment of Bhayana Builders Private Ltd. v. Oriental Structural Engineers Private Ltd. to hold that the appointment of the Arbitrator cannot be challenged on the ground that he was unilaterally appointed by the respondent, as the appointment was made in accordance with the agreement between the parties.

The Court took note of the 246th Law Commission Report to appreciate and re-emphasize the importance of disclosure by an arbitrator under Section 12(1) of the Act. It inferred that the legislature did not state that the consequence of non-disclosure would result in automatic termination of the mandate of the Arbitrator. Hence, the Court held that in the facts of the present case, an improper disclosure would not render the arbitrator ineligible or de jure incapable of proceeding with the arbitration.

The Court also cited the case of Pallav Vimalbhai Shah & Ors. v. Kalpesh Sumatibhai Shah & Ors. which held that when no circumstances existed so as to give rise to justifiable doubts to the independence or impartiality of an arbitrator, mere failure to make a disclosure or in a format different from the one provided in the Sixth Schedule of the Act, would not nullify the appointment of the Arbitrator. The court further relied on the case of HRD Corporation v. Gail (India) Ltd. which held that an incomplete disclosure would not render the appointment of an arbitrator invalid.

The Court remarked that the petitioner’s reliance on Dream Valley Farms Private Ltd. & Another. v. Religare Finevest Ltd. & Others. was misplaced. In the said judgment, the Arbitrator’s disclosure was ex-facie misleading as opposed to the present case where the disclosure was not in the prescribed format. Thus, the court held that though the disclosure given by the arbitrator was not in the prescribed format, it disclosed the vital aspect of independence and impartiality.

The Court analyzed the scope of Section 11 of the Act as described by the Supreme Court in the case of Indian Oil Corporation Ltd. v. Raja Transport Private Ltd. which held that “…unless the cause of action for invoking jurisdiction Under Clauses (a), (b) or (c) of Sub-section (6) of Section 11 of 1996 Act arises, there is no question of the Chief Justice or his designate exercising power Under Sub-section (6) of Section 11”. As no such circumstance existed, the Court did not have jurisdiction to exercise its power under Section 11 of the Act.

Conclusion

The judgment clarified that an improper disclosure would not render the arbitrator ineligible or de jure incapable of proceeding with the arbitration. Hence, the mandate of the Arbitrator could not be terminated merely on the ground that the disclosure required under Section 12(1) of the Act was not in the format prescribed under the Sixth Schedule.