In Quess Corporation v Netcore Cloud Pvt Ltd, the Bombay High Court held that if an arbitrator has accepted a brief from a law firm or advocate representing a party in an arbitration, that by itself will not lead to disqualification or ineligibility if the matter in which the brief has been accepted is unrelated to the arbitration.
Disputes arose between the parties to a contract and the respondent, Netcore, invoked arbitration in accordance with that contract. A sole arbitrator, the nominee of the respondent, was appointed by the court under section 11(6) of the Arbitration and conciliation Act, 1996, after the petitioner, Quess, had objected to his appointment.
At a preliminary meeting, the arbitrator made disclosure under section 12(5) of the act to the effect that he had no interest in the subject matter of the arbitration that would cast doubt on his independence and impartiality.
As the matter progressed, the petitioner became aware that the arbitrator had been representing counsel for the respondent in various matters, including proceedings in the high court.
The petitioner therefore applied to the Bombay High Court contending that the arbitrator had become ineligible to continue as such under section 12(5), read with schedule VII of the act.
Quess submitted that the arbitrator was, under law and following the facts, unable to perform his functions. As the issue of ineligibility went to the root of his appointment, the arbitrator lacked inherent jurisdiction to proceed further. This enabled a party to apply under section 14(2) of the act to the court to terminate his mandate.
The court dismissed the petition under section 14(2), relying on the judgment in Sheetal Maruti Kurundwade v Metal Power Analytical (I) Pvt Ltd, which held that schedule V sets out various situations. Item 3 in this schedule is the same as item 3 of schedule VII. Items 4 and 25 of schedule V disqualify partners of a law firm from acting as arbitrators where their law firm represents one of the parties in arbitration.
The reason is so obvious it needs no great explanation. Item 29 is interesting, in that it says that where a person is repeatedly appointed as an arbitrator, this is justifiable doubt as to his independence and impartiality. Schedule V is linked to section 12(1)(a), which requires disclosure by the arbitrator.
Although it does appear that the non-disclosure is fatal, the disclosure, if accepted and waived, would not result in disqualification. Section 12(5) speaks of ineligibility, and is linked to schedule VII, but the proviso to that sub-section again contemplates that a waiver is possible.
The court further held that, at the broadest level, no arbitrator should be involved in any manner with one of the parties to the dispute, or a partner with a lawyer or law firm appearing in the arbitration, or representing the law firm or lawyer personally.
The high court decided that where counsel has accepted a brief from a particular attorney, advocate on record, or lawyer for some other client, this situation by itself does not require disqualification or ineligibility because the disqualification connection must be between the arbitrator’s counsel and the litigant. The Bombay High Court again relied on Sheetal Maruti Kurundwade as authority for this principle of law.
The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai. The authors can be contacted at support@numenlaw.com. Readers should not act on the basis of this information without seeking professional legal advice.
