'Urgent Need Of A Credible Institutional Arbitration Centre In India': Delhi High Court Rejects Plea Alleging Bias In Composition Of DIAC

Dismissing a public interest litigation challenging the constitutional validity of Section 5 of the New Delhi International Arbitration Centre Act, the Delhi High Court has said that mere involvement and support of the Centre does not by itself raise apprehension of bias and impartiality.

The provision provides for constitution of New Delhi International Arbitration Centre with following members: one retired judge of High Court or Supreme Court as Chairperson; two eminent persons and a representative of recognised body of commerce and industry appointed and chosen by the Central Government; Secretary of Department of Legal Affairs (Ministry of Law and Justice); one Financial Adviser nominated by Department of Expenditure (Ministry of Finance); and Chief Executive Officer.

The PIL filed by advocate Abhishek Kumar in 2020 argued that it was essential to insulate the DIAC from political and other influences to ensure its independence. Submitting that DIAC predominantly consists of employees of the central government, Kumar said such members cannot make a panel of Arbitrators, where one of the two litigants will be the Central Government itself.

The division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad said an Act promulgated by the legislature cannot be lightly declared unconstitutional as there exists a strong presumption of constitutionality in its favour.

The court said the creation and maintenance of the panel has been dealt with under Section 28, which states that DIAC will establish a 'Chamber of Arbitration' consisting of experienced arbitration practitioners, which will empanel and scrutinise the applications for empanelment.

"Hence, it appears that the Centre is not responsible for the creation of the panel, it will only create the 'Chamber of Arbitration', which consists of reputed and well-established arbitrators themselves. This insulates the panel from the influence of the members of the Centre, some of whom would have been nominated by the Central Government. Furthermore, even though the centre would lay down the criteria for empanelment by virtue of Section 28(3) of the Act, Section 32 categorically states that such rules would be placed before both houses of the parliament for 30 days for its approval or modification accordingly. This implies that even the criteria for empanelment would be subjected to legislative scrutiny and approval".

The court also said that Section 18 provides for removal of the members of DIAC by the Supreme Court on a reference being made to it by the Central Government. This further ensures that the members of the Centre are insulated from the influence of the Central Government, the court added.

"The financial independence of the Centre is ensured under Section 25 of the Act, which allows the Centre to draw salaries and fulfil other financial obligations from the fund that Centre needs to maintain. This indicates that the Centre is not solely dependent on the Central Government for its functioning," said the bench,

The court said it is evident that the Act has inbuilt safeguards to ensure financial and administrative independence of DIAC. "In the present case, even if the State is one of the parties, the other party would have an entire broad-based panel to pick their arbitrator from, thus dispelling any apprehension of bias," it added.

The bench also said that the retired judges of various High Courts and the Supreme Court are also supposed to be members of the Centre, adding the same would further "lend credence to its impartiality."

"Due to this, it appears that the Petitioner has moved this Writ Petition on the basis of a simple apprehension or a suspicion of bias, which is ill-founded and without any basis," said the court.

Terming the petitioner's "apprehension" misconceived, the court said he has failed to place on record any material to indicate that the panel of arbitrators would be tainted by bias. "This Court does not find the Impugned Section unconstitutional, as being violative of either the basic structure or Section 12(3) of the Arbitration Act," said the bench, while dismissing the PIL.

Urgent Need Of Credible Institutional Arbitration Centre

The court said there is an urgent need of a credible institutional arbitration centre in India, akin to other jurisdictions such as Singapore International Arbitration Centre, Hong Kong International Arbitration Centre, and London Court of International Arbitration.

"These internationally renowned centres are also run with the involvement of their governments respectively," observed the court.

The bench noted that the "High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India" presided over by Justice B. N. Srikrishna had pointed out deficiencies in pre-existing institutional arbitration landscape and stated the same could be remedied if the Government of India provided institutional backing to an institutional arbitration.

"Hence, the mere involvement and support of the Government of India does not by itself raise apprehension of bias and impartiality. Furthermore, the Law Commission of India in its 246th Report, while pointing out the importance of institutional arbitration has also stated that … the Government ought to provide land and funds for institutional arbitration to flourish in India," the court said.

Title: ABHISHEK AGARWAL v. UNION OF INDIA & ANR

Citation: 2022 LiveLaw (Del) 1172

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