Arbitrator Involved In Another Dispute Between Same Parties Is Not Automatically Disqualified: Karnataka High Court
Rajesh Kumar
5 July 2024 7:15 AM GMT
The Karnataka High Court bench of Justice R. Devdas has held that prior involvement as an arbitrator in a dispute or multiple appointments by one of the parties or its affiliate does not automatically disqualify an individual from serving as an arbitrator in subsequent cases. The crucial factor lies in the arbitrator's ability to demonstrate independence and impartiality in past proceedings.
Therefore, the bench dismissed the contention that an arbitrator engaged in a dispute concerning a party and an affiliate of another party is ineligible for appointment.
Brief Facts:
The Petitioner was employed with Pricewaterhouse Coopers Pvt—limited and equity partnership with PricewaterhouseCooper Services LLP. Disputes arose between the Petitioner and the Respondent post-retirement which led to arbitration notices and subsequent petitions filed by the Petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). During the proceedings before the Bombay High Court, objections were raised by the Respondent concerning the jurisdiction of the court due to the seat of arbitration being in Bengaluru as per the LLP Agreement. Consequently, the Petitioner withdrew the petition related to the LLP Agreement. However, the Bombay High Court appointed Justice M.S. Sanklecha as the sole arbitrator to decide the disputes between the Petitioner and the Respondent. The Petitioner, subsequently, approached the Karnataka High Court (“High Court”) to affirm the appointment of Justice Sanklecha.
The Respondent stated that it proposed the names of two former judges of the Bombay High Court, considering Bengaluru as the seat of arbitration. It contended that Justice Sanklecha's appointment was barred under Entry 24 of the Fifth Schedule since he was already serving as an arbitrator in a related issue. The Petitioner, however, referred to a Supreme Court judgment in Panipat Jalandhar NH-1 Tollway Private Limited Vs. National Highways Authority of India argued that the appointment of an arbitrator who previously decided a dispute between the same parties is not a total bar for appointment in another dispute.
Additionally, the Petitioner insisted on consolidated arbitration proceedings due to the closely related nature of the issues, despite not mandating consolidation. Conversely, the Respondent referred to HRD Corporation (Marcus Oil And Chemical Division) Vs. Gail (India) Limited (Formerly Gas Authority of India Limited), where it was held that an arbitrator might be disqualified under Entry 24 is currently serving or has served within the past three years in another arbitration on a related issue.
Observations by the High Court:
The question before the High Court was whether an arbitrator involved in another dispute between the same or one of the parties is disqualified from adjudicating a new dispute. Referring to the Supreme Court's ruling in the case of Panipat Jalandar, the High Court held that the disqualifications mentioned in the provisions of Entry 22 and Entry 24 are not absolute.
The High Court held that challenges can only arise if circumstances exist that cast doubt on the arbitrator's independence or impartiality. Moreover, the High Court held that the arbitrator must not fall under any disqualifications listed in the Seventh Schedule of the Act.
The High Court held that an arbitrator, even if involved in previous disputes or appointments, may not be disqualified if he/she can demonstrate independence and impartiality. It held that there is a distinction between previous involvement in the same dispute and appointments in related issues.
Considering the appointment of Justice Sanklecha by the Bombay High Court in a related case, the High Court held that Entry 24 cannot serve as a blanket rule for declining his appointment. Instead, it held it conducive to justice and efficiency to appoint Justice Sanklecha as the arbitrator in the case, especially given his prior involvement in a related matter and to prevent duplication of arguments.
Therefore, the High Court appointed Justice Sanklecha as the sole arbitrator to adjudicate the disputes and differences arising under the LLP Agreement between the Petitioner and the Respondent.
Case Title: Mr. Shyamal Mukherjee Vs Pricewaterhousecoopers Services LLP
Case Number: CIVIL MISCELLEANEOUS PETITION NO.96 OF 2024
Advocate for the Petitioner: Pradeep Nayak
Advocate for the Respondent: C.K.Nandakumar, Anandi Kamani And Kamal Shankar
Date of Judgment: 04th Day Of June 2024
