Allegations On Arbitrator's Independence Under Item 24 Of 5th Schedule Of Arbitration Act Is Not Automatically A Ground For Disqualification: Allahabad High Court

Brief Facts:

The Allahabad High Court (“High Court”), in an order, suggested Justice V.C. Gupta (Former Judge of this Court) as an arbitrator to resolve the dispute between the parties. Justice V.C. Gupta, in compliance with this order, conveyed his consent through a letter in accordance with the law.

However, the Respondent approached the High Court and contended that the proposed arbitrator, Justice V.C. Gupta, is currently engaged in arbitrating a case between the Respondent, U.P. Power Transmission Corporation Ltd., and SEW Infrastructure Ltd. This appointment was made by the High Court through an order in Civil Misc. Arbitration Application. The Respondent argued that as per Item 24 of the Fifth Schedule of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the appointment of Justice V.C. Gupta may lead to justifiable doubts about his independence or impartiality.

In contrast, the Applicant countered this contention, asserting that the argument put forth by the Respondent was misconceived and untenable. It argued that there was no evidence to suggest that the proposed arbitrator has any connection or affiliation with either of the parties involved in this case or the other arbitration.

Observations by the District Commission:

The High Court noted that Section 11 delineates the procedure for arbitrator appointments, particularly Sub-sections (6) and (8), underscoring the High Court's role when parties fail to agree on an appointment. Sub-section (8) emphasizes the necessity for the arbitral institution, before appointing an arbitrator, to seek written disclosure from the prospective arbitrator in accordance with Section 12(1). The court is mandated to consider qualifications agreed upon by the parties, the contents of the disclosure, and other factors ensuring the appointment of an independent and impartial arbitrator.

Section 12 of the Act requires the proposed arbitrator to disclose in writing any circumstances affecting their independence and impartiality as outlined in the Fifth Schedule. Grounds for challenge under Section 12(3) include circumstances giving rise to justifiable doubts about independence or impartiality, or the arbitrator lacking the agreed qualifications. Notably, the Fifth Schedule provides specific grounds for doubting arbitrators' independence or impartiality.

Item No.24 of the Fifth Schedule states that doubts about an arbitrator's independence or impartiality can arise if they currently serve or have served as an arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties within the past three years. The High Court clarified that while this can be a ground for doubt, it is not conclusive and must be considered in the context of the specific circumstances.

Items No.15 and 16 specify that an arbitrator can be considered related to the dispute if they provided legal advice or expert opinion to a party or an affiliate of one of the parties, or if they have previous involvement in the case.

The High Court, considering the objection raised by the respondent based on Item No.24, held that it was misconceived and untenable. It noted that the Respondent didn't present any concrete circumstances that would suggest the proposed arbitrator's involvement in another arbitration related to the respondent corporation or any affiliation. The objection raised by the Respondent solely relied on Item No.24 of the Fifth Schedule, asserting the arbitrator's disqualification without disclosing any specific relationship between the arbitrator and the respondent corporation, other than his role in a separate arbitration.

The High Court highlighted the need to harmoniously interpret Item No.16 along with Items 22 and 24, asserting that disqualifications are not automatic, and a showing of independence and impartiality in previous appointments can override potential disqualifications. It dismissed the Respondent's objection, stating that Item No.16, which pertains to previous involvement in an advisory or other capacity in the dispute, should not be read as including previous involvements as an arbitrator.

Therefore, the High Court appointed Justice V.C. Gupta as the arbitrator to decide the dispute between the parties.

Case Title: Gepdec Infratech Limited Thru Authorized Representative vs. U.P. Power Transmission Corporation Ltd. Thru Superintending Engineer Lucknow. 2024 LiveLaw (AB) 143

Case Citation: 2024 LiveLaw (AB) 143

Case Number: CIVIL MISC. ARBITRATION APPLICATION No. - 91 of 2023.

Advocate for the Complainant: Vishnu Pratap Singh and Awaneesh Yadav.

Advocate for the Respondent: Puneet Chandra.

Click Here To Read/Download Order