Arbitrator Who Accepted Brief Of Party’s Lawyer In An Unrelated Matter, No Clash of Interest Involved: Bombay High Court

The bench of Justice Bharati Dangre concluded that the disqualification connection, contemplated under Item 3 of Schedule VII of the Arbitration and Conciliation Act, 1996 (A&C Act), must be between the Arbitrator and the litigant. Thus, where the Arbitrator had accepted a brief from the respondent’s counsel for some other client, the same will not amount to per se disqualification or ineligibility, the Court ruled.

As per Item 3 and 4 of Schedule VII of the A&C Act, if the arbitrator currently represents the lawyer or law firm acting as a counsel for one of the parties, or if the arbitrator is a lawyer in the same law firm which is representing one of the parties, respectively, he shall be ineligible to be appointed as an arbitrator.

After certain disputes arose between the petitioner, Quess Corp, and the respondent, Netcore Cloud Pvt Ltd, under a Master Service Agreement, the respondent invoked the arbitration clause. In a petition filed before the Bombay High Court under Section 11(6) of the A&C Act, the Court appointed a Sole Arbitrator proposed by the respondent.

Thereafter, the petitioner filed a petition under Section 14(2) of the A&C Act before the Bombay High Court, seeking to terminate the mandate of the Sole Arbitrator.

The petitioner, Quess Corp, submitted before the High Court that while the proceedings were going on before the Arbitral Tribunal, it came to its notice that the Arbitrator had previously represented the counsel for the respondent in several matters before various forums, including the Mumbai bench of the National Company Law Tribunal and the Mumbai High Court.

The petitioner added that the said information was not disclosed by the Arbitrator during the preliminary hearing held by him or at any time thereafter.

It argued that as per Section 12(5) read with Schedule VII of the A&C Act, the Sole Arbitrator had become ineligible to continue as an arbitrator, and thus, he was de jure and de facto unable to perform his functions. Since the issue of ineligibility goes to the root of the appointment, the application filed by the petitioner under Section 14(2), to decide on the termination of the arbitrator’s mandate, was maintainable before the Court, it pleaded.

Disputing the maintainability of the petition, the respondent, Netcore Cloud, argued that Section 14 is applicable only with regard to the disqualification or ineligible circumstances enumerated in Schedule VII of the A&C Act.

Section 14 (1) of the A&C Act provides that the mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator if he becomes de jure or de facto unable to perform his functions. As per Section 14 (2), if a controversy remains concerning the said ground, a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.

Further, Section 12(5) provides that any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in Schedule VII, shall be ineligible to be appointed as an arbitrator.

While noting that as per Section 12(3), the appointment of an Arbitrator can be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality or if he does not possess the qualifications agreed to by the parties, the Court reckoned that the procedure to challenge the appointment before the Arbitral Tribunal is set out in Section 13.

Referring to the facts of the case, the Court concluded that the petitioner has not followed the procedure contemplated under Section 13, for challenging the appointment on the ground that there was an incorrect disclosure by the Sole Arbitrator.

“When I have perused the communication addressed by the respondent to the Arbitrator and from reading of the order passed by the Arbitral Tribunal, what is evident is, the petitioner never raised a challenge as contemplated u/s.13 of the Arbitration and Conciliation Act, but he requested the arbitrator to keep the proceedings in abeyance as he has already instituted the proceedings, seeking termination of his mandate u/s.14 of the Act,” the Court said.

Referring to Schedule V of the A&C Act, which enumerates the circumstances which give rise to justifiable doubts regarding the arbitrator’s independence or impartiality, the bench noted that Items 3 and 4 of the Vth Schedule include the following grounds, respectively: “The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties”, and “The arbitrator is a lawyer in the same law firm which is representing one of the parties.”

Further, the bench observed that the Bombay High Court in Sheetal Maruti Kurundwade vs. Metal Power Analytical (I) Pvt. Ltd (2017), had noted that Item 3 of Schedule V is exactly the same as Item 3 of Schedule VII. The Court in Sheetal Maruti Kurundwade (2017) had ruled that though no arbitrator should be involved in any manner with one of the parties to the dispute or be a partner with a lawyer or a law firm appearing in the arbitration; however, a law firm’s briefing of counsel in other, unrelated matters is on a very different footing.

The High Court thus concluded that, where the counsel (Arbitrator) has accepted a brief from a particular attorney, Advocate on record, or a lawyer for some other client, the same will not amount to per se disqualification or ineligibility because the disqualification connection, as contemplated under Item 3 of Schedule VII, must be between the Arbitrator, who had acted as a counsel, and the litigant.

“In the wake of the aforesaid observations, I do not think that there is any need to further deliberate upon the issue, as I find myself in complete agreement with the observations made in case of Sheetal Maruti Kurundwade (supra) as apparently, there is no clash of interest of the Arbitrator because as a counsel, he had represented the Advocate representing the opposite party,” the bench ruled.

The Court thus dismissed the petition.

Case Title: Quess Corp versus Netcore Cloud Pvt Ltd

Citation: 2023 LiveLaw (Bom) 97

Dated: 17.01.2023

Counsel for the Petitioner: Mr.Vishal Nautiyal with Ms.Vidhi N. Sharda, Mr.Smit Shah i/b Mr.Aviral Dhirendra

Counsel for the Respondent: Mr. Prakhar Tandon

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