16 March 2023 5:52 AM GMT
Recently, a Single Bench of the High Court of Calcutta has delivered a judgment, McLeod Russel India Limited v. Aditya Birla Finance Limited (“McLeod Russel”) in an application under Section 14 of the Arbitration and Conciliation Act, 1996 (“Act”).In this matter, a challenge to the appointment of a Sole Arbitrator was made on the ground that such Arbitrator was...
Recently, a Single Bench of the High Court of Calcutta has delivered a judgment, McLeod Russel India Limited v. Aditya Birla Finance Limited (“McLeod Russel”) in an application under Section 14 of the Arbitration and Conciliation Act, 1996 (“Act”).
In this matter, a challenge to the appointment of a Sole Arbitrator was made on the ground that such Arbitrator was appointed unilaterally by the ‘Investor’, as provided in the arbitration agreement between the parties, thus falling foul of the decision of the Supreme Court of India in Perkins Eastman Architects DPC. v. HSCC (India) Limited (“Perkins”). The Court rejected the challenge on the ground of existence of an “express agreement in writing,” as inferred from the facts and circumstances of the case.
In the backdrop of the aforesaid decision, it may be useful to take another look at Perkins and analyse whether McLeod Russel indeed defeats the spirit of the Supreme Court decision, or steers clear of the boundaries set by it.
“in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.”
As far as the provisions of the statute and the judicial precedents are concerned, it appears that just because a party has participated in an arbitration proceeding, they may not be precluded from taking an objection to the unilateral appointment of an arbitrator by the counterparty.
On the other hand, however, it must be remembered that law assists only those who are vigilant, and not those who sleep over their rights. If a party has failed to challenge a unilateral appointment of an Arbitrator at the first instance, and has participated in the arbitration proceeding without any demur or protest whatsoever, is it equitable that they should be allowed to set the clock back by challenging a contested award, solely on the basis that the Sole Arbitrator has been appointed unilaterally? In fact, some Courts have refused to interfere with such awards.
It is, however, also imperative that positive signals to the international business community are sent, to create healthy arbitration environment and conducive arbitration culture in this country. Negating actual as well as perceived bias in arbitrators is an integral component of party autonomy, and decisions like Perkins restore the parties’ faith in the process. Is Perkins absolute or is it susceptible to exceptions?
Author: Pooja Chakrabarti, Partner (Argus Partners). Views are personal.
McLeod Russel India Limited v. Aditya Birla Finance Limited (AP No. 106 of 2020) decided on February 14, 2023. ↑
Act No. 26 of 1996. ↑
(2020) 20 SCC 760. ↑
M/s. Voestalpine Schienen GMHB v. Delhi Metro Rail Corporation Limited, AIR 2017 SC 939. ↑
(2017) 8 SCC 377. ↑
(2020) 2 Arb LR 260. ↑
Envirad Projects Private Limited v. NTPC Limited, Arbitration Petition No. 27/2022 decided on January 18, 2022. ↑
In Director General of Fair-Trading v. The Proprietary Association of Great Britain, [(2001) 1 WLR 700, decided on December 21, 2001 (Court of Appeal)] the UK Court of Appeal drew a distinction between ‘actual bias’ and ‘apparent bias’. While ‘actual bias’ denotes a demonstrable situation where a judge has been influenced by partiality or prejudice in reaching his decision, ‘apparent bias’ denotes existence of a reasonable apprehension that the judge may have been, or may be, biased. ↑
(2019) 5 SCC 755. ↑
2021 SCC OnLine SC 730. ↑
Hina Suneet Sharma v. M/s. Nissan Renault Financial Services India Private Limited, Arb.O.P. (Com.Div.) No.159 of 2022 decided on February 15, 2023. ↑
Lion Engg. Consultants v. State of Madhya Pradesh (2018) 16 SCC 758. ↑
Naresh Kanayalal Rajwani v. Kotak Mahindra Bank Limited, Comm. Arbitration Petition (L) No. 1444 OF 2019 decided on November 23, 2022 ↑
Delhi Integrated Multi Modal Transit System Limited v. Delhi Jal Board O.M.P. (T) (COMM.) 16/2021 decided on December 22, 2022. ↑
Paragraph 56 of the judgment. ↑
Section 7(4) An arbitration agreement is in writing if it is contained in—
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. ↑
Bengal Immunity v. State of Bihar, (1955) 2 SCR 603. ↑
(2020) 10 SCC 1 ↑
JMC Projects India Limited v. Indure Private Limited, O.M.P. (T) (COMM.) 33/2020 decided on August 20, 2020; relied upon in Larsen and Toubro Limited v. HLL Lifecare Limited, O.M.P. (T) (COMM.) 59/2021 decided on September 21, 2021. ↑
Paragraph 16 of the judgment. ↑
Paragraph 53 of the judgment. ↑
In Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited, 2021 SCC OnLine Del 4883, the arbitrator had been unilaterally appointed by a party. No challenge as to the jurisdiction of the was made by the counterparty. After an award was published, the Court negated the challenge to the award on ground of unilateral appointment. ↑