Party Cannot Be Forced To Accept Arbitrator Who Has Conflict Of Interest, Violates Principles Of Natural Justice And Fair Trial: J&K High Court

The Jammu and Kashmir High Court held that a party could not be forced to accept an arbitrator who has a conflict of interest, as the same would violate the principles of a fair trial. The court held that the Perpetual Lease Deed, as well as the Byelaws, which provide for the Registrar, Cooperative Societies to be the sole arbitrator for adjudicating disputes between the petitioner and the department, would be against the law.

Chief Justice Tashi Rabstan observed that the Registrar, who was appointed as the sole arbitrator under the lease deed, was the head of the respondent cooperative society, and the possibility of bias on his part could not be ruled out.

The petitioner had, by virtue of the present petition, requested the appointment of an independent arbitrator under Section 12(5) of the Arbitration Act for adjudicating the dispute, claiming that the Registrar was disqualified due to a conflict of interest.

The court also noted that Schedule VII of the Arbitration and Conciliation Act provides that any person having a controlling influence over any party cannot act as an arbitrator between such parties for resolving the dispute.

The court, therefore, appointed a former District & Sessions Judge as the independent sole arbitrator, who would proceed to hear the dispute and pass a decree in a time-bound manner as per the law.

The court also noted that wide powers were given to the Registrar to adjudicate the dispute, and the greater his powers under the arbitration agreement, the greater the care that should be taken by the court to prevent any injustice at his hands.

BACKGROUND:

The petitioner filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an independent arbitrator. The dispute pertains to leasehold rights over a shop, which was originally allotted to Smt. Vaishno Devi through a perpetual lease deed and later transferred through a release deed to the petitioner.

When the dispute arose, the petitioner filed the above application upon realizing that the arbitration clause designated the Registrar, Cooperative Societies, as the sole arbitrator, which was not permissible under the law.

The court held that the Registrar, Cooperative Societies, being the head of the respondent society, could not be appointed as an independent arbitrator due to a conflict of interest. The court noted that Section 12(5) of the Arbitration Act barred any person having controlling power over any party from being appointed as an arbitrator. The court thus appointed Suneet Gupta, a retired District & Sessions Judge, as the sole arbitrator.

APPEARANCE:

R K Jain, Senior Advocate with

Pranav Jain, Advocate. FOR Petitioners

Monika Kohli, Sr. AAG

K. Nirmal Kotwal, Advocate FOR Respondents

Case-title: Meena Kumari vs Sainik Cooperative House Society Ltd,

Citation: 2025 Livelaw (JKL) 70

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