Recourse To S.14 Arbitration Act Not Available In Respect Of Challenge To Arbitrator U/S 12(1): Delhi High Court

Section 12 provides for 'grounds of challenge', whereas sub section (1) provides that an arbitrator must disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.

Justice Vibhu Bhakru has held,

"It is well settled that recourse to Section 14 of the A&C Act is not available in respect of any challenge to the arbitrator under Section 12(1) of the A&C Act."

The Bench however clarified that the provision may be invoked in the event the arbitrator is ineligible by virtue of Section 12(5) of the A&C Act. It provides that any person whose relationship with the parties, or counsel, falls within any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator.

In the present case, respondent (M/S APS Structures) was awarded a contract for the execution of the work relating to OR's Barrack and Store for the Indo Tibetan Border Police (ITBP) at Mana. The petitioner (Union of India) alleged that the respondent failed to execute the work and therefore the petitioner was forced to find another contractor. The respondent then invoked the Arbitration Agreement and one Mukund Joshi was appointed as the sole arbitrator.

Joshi made a disclosure as required under Section 12(1) of the A&C Act, which did not indicate any circumstances that were likely to give rise to any justifiable doubts as to his independence and impartiality.

The petitioner alleged that the disclosure made by Joshi was not full and true inasmuch as, he did not disclose that at one point of time, he was involved with the performance of the contract in question and had directed recommencement of the work. It was thus alleged by the petitioner that there is perceived bias and the arbitrator's mandate requires to be terminated.

The Court, upon perusal of the Seventh Schedule of the Act, noted that none of the circumstances as specified therein exist in the present case. Thus, per se, the Arbitrator cannot be held to be ineligible under Section 12(5) of the A&C Act to act as an arbitrator

"A challenge to the appointment of an arbitrator, other than on the ground of ineligibility as specified under Section 12(5) of the A&C Act, is required to be made as per the procedure set out in Section 13 of the A&C Act," the Court held.

Reliance was placed on HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (2018) 12 SCC 471, which had differentiated between Section 12(1) and Section12 (5) of the Act. It was held therein that since ineligibility goes to the root of the appointment, Section 12(5) read with the Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes "ineligible" to act as arbitrator". Once he becomes ineligible, it is clear that, under Section 14(1)(a), he then becomes de jure unable to perform his functions inasmuch as, in law, he is regarded as "ineligible".

In view of the aforesaid, the challenge under Sections 14 was dismissed as non-maintainable.

Case Title: Union of India v. M/S APS Structures Pvt. Ltd, OMP (T) (Comm) 2/2022

Citation: 2022 LiveLaw (Del) 97