Professional Engagement With Law Firm Does Not Disqualify Advocate From Acting As Arbitrator: Calcutta High Court

The Calcutta High Court bench of Justice Shampa Sarkar has held that an Advocate who has accepted briefs from a law firm for unrelated clients cannot, by that fact alone, be deemed ineligible to act as an Arbitrator in disputes involving parties not personally known to or represented by him, even if the same law firm appears in the arbitration. Brief Facts: This application under Section 14(2) read with Section 15 of the Arbitration and Conciliation Act, 1996 seeks termination of the mandate of the learned Arbitrator on the ground of de jure incapacity. The petitioner also prays for the appointment of a neutral substitute Arbitrator and an interim stay on the arbitral proceedings. The Petitioner submitted that under the said Act and the referral court's order, the learned Arbitrator was required to make a disclosure as per Schedule VI. He stated he had no direct or indirect relationship with the parties or their lawyers. However, the petitioner, dissatisfied with this, requested a specific disclosure on whether the Arbitrator had ever been engaged as counsel by the claimant's advocate-on-record, M/s. Choudhury & Co. It was further submitted that the Arbitrator did not respond. Later, he asked the petitioner to refile the letter and serve it upon the claimant, which had not been done. Despite this, the proceedings continued and pleadings were completed. It was further argued that this application has been filed seeking termination of mandate on the basis of the disqualifications mentioned under Schedule VII of the Arbitration Act. Per contra, the Respondent submitted that the order passed by the learned Arbitrator, directing the petitioner to take back the sur-rejoinder and file afresh, cannot be challenged in this proceeding. Lastly, It was submitted that the disqualifications under Schedule VII, do not come into operation in the present case. Issues were framed and evidence had commenced. The application is not maintainable at this belated stage. Observations: The Court noted that Section 12(5) of the said Act provides that, notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the VIIth schedule, shall be ineligible to be appointed as an arbitrator. It further observed that Schedule VII deals with the arbitrator's relationship with parties or counsel. Category 3 of the VIIth Schedule, provides that the arbitrator shall not represent the lawyer or the law firm, acting as counsel for one of the parties. Which means that the learned Arbitrator should not have represented the law firm as its Advocate or counsel in any legal proceeding. The court further said that the law firm should not be his client. Category 4 provides that the arbitrator should not be a lawyer of the same law firm which represents one of the parties. Which means, he should not be an employee or a partner, or in-house counsel of the law firm which represents any of the parties to an arbitral proceeding. Based on the above, the court held that if Mr. Sen's interpretation is accepted, it would lead to impractical consequences—virtually disqualifying most Advocates from acting as Arbitrators. In the normal course of their legal careers, Advocates are often briefed by various law firms, some of which may later represent parties in arbitration. It further held that the legislative intent was not to disqualify an Advocate from being appointed as an Arbitrator merely because a party is represented by a law firm that has previously engaged the Advocate in unrelated matters involving third parties. It further said that Category 3 of the VIIth Schedule cannot be interpreted so broadly as to bar an Advocate—merely because they were previously engaged by a law firm—from acting as an Arbitrator in a dispute between two unrelated parties, where one party has engaged that same law firm as its counsel or Advocate-on-Record under Section 11. Such an expansive interpretation would go beyond the intent of the provision, which is to prevent conflicts of interest, not routine professional associations. The court held that the Arbitrator's engagement by M/s. Choudhury & Co. Advocates was purely professional, to represent their clients—not the firm or its lawyers personally. The petitioner has not alleged that the Arbitrator ever represented the firm itself or had any personal relationship with its lawyers. It further held that broadly, while an Arbitrator must not be personally involved with any party or represent their counsel, a law firm briefing an Advocate in unrelated matters constitutes a professional engagement and stands on a different footing. The court concluded that “a counsel/Advocate, having accepted briefs from a law firm for some other client/litigant, cannot be per se be said to be...

Professional Engagement With Law Firm Does Not Disqualify Advocate From Acting As Arbitrator: Calcutta High Court

Mohd Malik Chauhan

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