Justifiable Doubts Regarding The Arbitrator’s Independence Must Be Raised Under Section 13 Only As Per The Arbitration And Conciliation Act, 1996 Solaris Developers Pvt. Ltd. v. State Bank of India Supervising Staff Bhagyashree Co-operative Housing Society Ltd

Summary:

The petition arises from disputes between the parties governed by a Development Agreement dated 27/08/2013, which led to the constitution of an Arbitral Tribunal under the court’s orders. The court agrees with the respondent’s argument, stating that the challenge to the arbitrator’s appointment should follow the procedure outlined in Section 13 of the Act. The court dismisses the petition, emphasizing that the alleged affiliations while raising justifiable doubts about the arbitrator’s impartiality, do not render the arbitrator de jure ineligible as per the Act’s provisions.

The Court dismissed the petition challenging the Arbitrator’s mandate under Sections 14(2) and 15(2) of the Arbitration and Conciliation Act, 1996. It ruled that the proper procedure for challenging an arbitrator’s appointment, based on doubts regarding their independence or impartiality, should have been followed under Section 13 of the Act. The court noted that the petitioner’s concerns about the arbitrator’s alleged associations, such as family ties, did not automatically disqualify the arbitrator. While the petition was dismissed, the petitioner was granted liberty to pursue legal proceedings permitted by law. Overall, the judgement emphasized the importance of adhering to statutory processes and distinguishing between perceived conflicts of interest and grounds for challenge under the law.

Facts Of The Case:

The petitioner argues that the arbitrator failed to disclose her familial connection with Mr. Harshad Tirodkar, the Secretary of the Respondent/Society, as well as with another undisclosed family member closely related to Mr. Tirodkar. Additionally, it is alleged that the arbitrator did not reveal her close relationship and friendship with the partner of the advocates representing the Respondent/Society. The petitioner contends that these undisclosed relationships may have influenced the arbitrator’s impartiality. Furthermore, the petitioner claims that the arbitrator exhibited unfair and biased behaviour during the preliminary meeting and subsequent proceedings, portraying the petitioner as dishonest and intentionally delaying the proceedings.

In response to the insinuations raised in the Petition regarding the fairness and impartiality of the Arbitrator, a request for substitution is made under Section 14(2) in conjunction with Section 15 of the Arbitration and Conciliation Act of 1996. The petitioner alleges that the Arbitrator’s actions were partial and unfair, lacking neutrality throughout the proceedings. Furthermore, Mr. Prashant Chawan, representing the Respondent/Society, has submitted an affidavit-in-reply dated 29/01/2024. He asserts a preliminary objection to the maintainability of the proceedings, citing the prescribed mechanism under the Act of 1996 for challenging the appointment of the Arbitrator based on doubts about their independence or impartiality, as outlined in Section 13. Therefore, he argues that the current Petition is not maintainable under the Act.

Issue:

The main issue, in this case, is whether the Arbitrator, Advocate Ms. Seema Sarnaik, can maintain impartiality and independence in conducting the arbitration proceedings, given the allegations of undisclosed relationships and unfair conduct raised by the petitioner.

Judgement:

The judgement states that the petition filed to challenge the Arbitrator’s mandate under Sections 14(2) and 15(2) of the Arbitration and Conciliation Act, 1996 is dismissed. The court found that the appropriate procedure for challenging an arbitrator’s appointment, based on doubts regarding their independence or impartiality, should have been followed under Section 13 of the Act.

The court agreed with the respondent’s objection that the petition was not maintainable, emphasizing that Section 12 of the Act stipulates specific grounds for challenging an arbitrator’s appointment. These grounds include circumstances giving rise to justifiable doubts about the arbitrator’s impartiality. The court noted that the allegations against the Arbitrator should have been addressed through the procedure outlined in Section 13.

Additionally, the court highlighted that while the petitioner raised concerns about the Arbitrator’s alleged close associations, such as family relationships, these relationships did not render the Arbitrator de jure ineligible to act. Therefore, the petition was dismissed.

The judgement concludes by granting the petitioner the liberty to pursue appropriate legal proceedings permitted by law, implying that they may still address their concerns through the proper procedure outlined in Section 13 of the Arbitration and Conciliation Act, 1996.

Analysis:

In short, the judgement emphasized the necessity of following proper legal procedures outlined in the Arbitration and Conciliation Act, 1996. It dismissed the petition, indicating that the petitioner should have used the appropriate mechanism, Section 13, to challenge the arbitrator’s appointment based on doubts regarding their independence or impartiality. The court noted that while the petitioner raised concerns about the arbitrator’s alleged associations, such as family ties, these did not automatically disqualify the arbitrator. The petitioner was granted liberty to pursue legal proceedings allowed by law, implying they could still address their concerns through the correct procedure. Overall, the judgement underscored the importance of adhering to statutory processes and distinguishing between perceived conflicts of interest and grounds for challenge under the law.