Priyanka Communications India Pvt v. Tata Capital Limited

1. This is a Petition filed invoking Sections 12, 13 and 14 of the Arbitration and Conciliation Act, 1996 (“the Act”), requesting this Court to set aside an order dated November 11, 2024, by which, the Learned Sole Arbitrator, (appointed by an order of this Court under Section 11 of the Act on October 15, 2024) has not recused himself at the request of the Petitioner. February 4, 2025

2. The material on record brought to bear by the Petitioner, essentially covers the disclosure made by the Learned Sole Arbitrator on November 11, 2024, setting out the nature of relationships between the Learned Sole Arbitrator with affiliates of the Respondent. These disclosures are essentially about a few matters where the Learned Sole Arbitrator had represented some affiliates of the Respondent. The Petitioner has also brought to bear a range of other past representations, which would lead to the factual matrix that would enable the Petitioner to invoke the Fifth Schedule of the Act i.e. to raise justifiable doubts as to independence and impartiality of the arbitrator. The Petitioner filed an application under Section 13 of the Act requesting the Learned Sole Arbitrator to recuse from the proceedings. The Learned Sole Arbitrator rejected the application.

3. This Petition seeks that the Court should substitute the Learned Sole Arbitrator on the premise that the arbitrator is conflicted. However, one would need to have specific regard to the scope of jurisdiction of this Court. Section 14(1)(a) of the Act inter alia enables this Court to interfere during the course of arbitral proceedings where the arbitrator becomes de jure or de facto unable to perform his functions. Under Section 14(2) of the Act, only controversies about the grounds referred to in Section 14(1)(a) would give a party aggrieved access to the jurisdiction of the Court to substitute the arbitrator. In other words, only where questions arise as to whether the arbitral tribunal is truly de jure unable or de facto unable to perform as arbitrator, this Court would have jurisdiction to replace the arbitrator.

4. It is now well declared law that to attract the element of being de jure unable to perform, the arbitrator ought to be under a legal incapacity that renders him ineligible to act as an arbitrator. For example, where an individual acting as an arbitrator is elevated as a judge, he would be de jure unable to act despite being physically able to act. Likewise, where the arbitrator becomes incapacitated, say due to an illness, he would become de facto unable to perform even if there were no legal incapacity making him ineligible to act.

5. The Seventh Schedule lists the situations in which an arbitrator would become ineligible to perform. Eligibility would go to the root of the matter. If an arbitrator is rendered ineligible to function as such under the Seventh Schedule, he would be de jure unable to act as an arbitrator. Doubts and controversies in interpreting whether he is de jure unable to act would give jurisdiction to this Court under Section 14 of the Act.

6. In the instant case, evidently, the arbitrator does not attract any of the ineligibility conditions listed in the Seventh Schedule. Items 1 and 2 of the Seventh Schedule are pressed into service. These read as follows:- Arbitrator’s relationship with the parties or counsel

1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.

2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties. [Emphasis Supplied]

7. It will be seen from a plain reading of the foregoing that for Item 1, to be ineligible, the arbitrator ought to have a relationship with any party to the arbitration, whether past or present, but in the capacity as an employee, consultant, advisor or of any other business relationship. As for Item 2, to be ineligible, the arbitrator ought to currently represent one of the parties or an affiliate of one of the parties. There is a time element in Item 2 of there being a current ongoing relationship, and consciously the legislature has not brought in past representations or advisory relationships within the scope of Item 2 (unlike Item 1 where present and past business relationship, are both alluded to).

8. The allegation by the Petitioner is not that the Learned Sole Arbitrator is currently representing the Respondent or its affiliates. The Petitioner has had past representations for affiliates of the Respondent, as a Counsel who is briefed by law firms and attorneys. In these circumstances, neither of the two Items of the Seventh Schedule are attracted.

9. The past representations of a party or an affiliate of a party as a lawyer, would require the arbitrator to make disclosures under Section 12 of the Act read with the Fifth Schedule, which the Learned Sole Arbitrator has done. Such disclosures would enable a party to raise doubts about the independence and impartiality of the arbitrator, but the statutory scheme of the Act, would enable the party questioning the independence and impartiality of the arbitrator only when (and if) a challenge is required to be mounted under Section 34 of the Act after the passing of the final award. At no intermediate stage can this Court interfere with the arbitral proceedings on the ground of the Fifth Schedule being attracted.

10. Items 1 and 2 of the Seventh Schedule have fallen for detailed consideration by the Supreme Court in HRD Corporation[1]. Paragraph 22 of the judgment, which would be instructive, is extracted below:

11. From a plain reading of the foregoing, it would be clear that for the rigours of either Item 1 or 2 to be attracted by a lawyer’s representation, there ought to be a current representation of a party to the dispute or any affiliate of such party. The role played by the Learned Sole Arbitrator with affiliates of the Respondent is not in the nature of being a regular advisor. Representation in court, briefed by law firms, is what the material brought to bear by the Petitioner, bears out. There is no current representation of the Respondent or any affiliate of the Respondent, by the Learned Sole Arbitrator. Neither has the Petitioner brought to bear any material to indicate current representation nor do the disclosures made by the Learned Sole Arbitrator point to such current representation. The Petitioner relies on past representations. The best case that the Petitioner may make would bring the matter within the ambit of the Fifth Schedule and not the Seventh Schedule.