Circumstances Mentioned Under Schedules V Do Not Per Se Render The Arbitrator Ineligible: Delhi High Court

The bench of Justice Manoj Kumar Ohri held that merely because an Arbitrator has been appointed in more than two arbitral proceedings between the parties/their affiliates, the Award cannot be set aside, until a concrete foundation is laid down for doubting the independence and impartiality of the Arbitrator.

Facts

The respondent, a non-banking financial company, had provided loans to the appellant. On failure of the appellant to repay the amount of the loan, the respondent appointed the arbitrator for adjudicating dispute arising out of two loan agreements. The respondent also r

eferred to the same arbitrator dispute arising out of another two loan agreements.

Despite service, the appellant failed to appear before the tribunal and were proceeded ex-parte. The arbitrator in both the arbitrations passed ex-parte award in favour of the respondent. Aggrieved by the award, the appellant challenged it under Section 34 of the A&C Act. However, the Court rejected its objection. Thereafter, the appellant filed the appeal under Section 37 of the A&C Act against the decision of the lower court.

Grounds of Appeal

The appellant challenged the award on the following grounds:

• The arbitrator was ineligible to be appointed as the arbitrator in view of Entry 22 and 24 of the Vth Schedule to the A&C Act for the reason that he was serving as the arbitrator in more two arbitrations between the same parties and on all these occasions he was appointed by the respondent.
• The arbitrator had filed an incomplete/improper disclosure and his appointment is against Section 12 r/w Schedule VI as he did not disclose the fact of his appointment in the other arbitrations in last three years by the respondent. Also, the arbitrator is needed to disclose the fact of his subsequent appointment and remaining discreet about the subsequent appointment actually casts an aspersion on his impartiality.
• The award is also liable to be set aside as the appellant was not given a chance to present its case and it became aware of the award only when it was filed for execution.

Analysis by the Court

The Court relied on the decision of the Hon'ble apex court in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, (2018) 12 SCC 471 to hold that mere appointment of an arbitrator in more than two arbitrations, in last three years, would not per se make him ineligible to be appointed as an arbitrator unless it is established by attending facts that the arbitrator's neutrality was indeed compromised.

The Court held that merely because an Arbitrator has been appointed in more than two arbitral proceedings between the parties/their affiliates, the Award cannot be set aside, until a concrete foundation is laid down for doubting the independence and impartiality of the Arbitrator.

The Court held that the appellants have challenged the award merely on the ground of violation of Entry 22 and 24 of Vth Schedule, however, they have neither pleaded non proved any action of the arbitrator that otherwise taints his neutrality making him unfit to act as the arbitrator.

Next, the Court rejected the objection regarding non-service and denial of opportunity to present the case. The Court held that the Court below had rejected the same objection by relying upon the service reports. The Court held that the same is a question of fact and does not come within the purview of Section 37, therefore, it finds no reason to upset the finding of the lower court which is based on the appreciation of evidence.

Accordingly, the Court dismissed the appeal.

Case Title: Bharat Foundry and Engineering Works v. Intec Capital Limited

Citation: 2022 LiveLaw (Del) 1058

Counsel for the Appellant: Ms. Aakanksha Kaul, Mr. Manek Singh and Mr. Aman Sahani, Advocates.

Counsel for the Respondent: Ms. Mallika Ahluwalia and Mr. Saransh Garg.

ClickHere To Read/Download Order