Challenge Relating To The Bias Of An Arbitrator Cannot Be Raised Under Section 14 Of The A&C Act: Delhi High Court

The bench of Justice Yashwant Varma held that Section 14 of the Act confers the power on the Court to terminate the mandate of the arbitrator and appoint a substitute arbitrator only in circumstances that fall within the 7^th schedule of the Act that deals with de jure ineligibility of the arbitrator, however, ground of bias or justifiable ground as to the independence and impartiality falls within the 5^th Schedule r/w Section 12(3) wherein only the tribunal can decide on the challenge.

The Court held that Section 12, 13 and 14 though appearing to constitute a composite statutory scheme dealing the challenge to and termination of the mandate of the arbitrator, however, they provide for separate causeways for a challenge that can be raised.

Facts

The parties entered into a Production Sharing Contract dated 12.04.2000 for development and production of gas discoveries. A dispute arose between the parties which was referred to arbitration.

The petitioner alleged that the arbitral tribunal has passed certain procedural orders that indicate an evident bias as to its independence and impartiality, therefore, an application under Section 14 was filed before the Court for the termination of the mandate of the arbitral tribunal.

Grounds of Challenge

The petitioner challenged the mandate of the arbitrator on the following grounds:

• The tribunal has passed several procedural orders that would indicate that its has treated them unfairly, denied them reasonable opportunity and has favoured the respondents.
• The conduct of the tribunal is such that clearly establishes a bias on its part, therefore, its mandate must be terminated.
• An issue of bias of the arbitrator in administering the proceedings necessarily falls within the ambit of de jure disqualification, therefore, the Court can entertain an application under Section 14 of the Act.
• If Section 14 is not made applicable to the ground of bias, then the same would result in the aggrieved party being forced to pursue the challenge before the same tribunal of which bias is alleged.

The respondent objected to the maintainability of the petition on the following grounds:

• Section 14 of the Act can only be invoked when the question of de jure disqualification is involved, however, a question of justifiable doubts as to impartiality falls within Section 12 (3) r/w 4^th Schedule, therefore, only the tribunal can decide on such a challenge and if the tribunal rejects the challenge, the only remedy available to a party is to await the passing of the award and challenge it under Section 34 of the Act.

Analysis by the Court

The Court held that Section 12 relates to a challenge to the jurisdiction of the arbitrator that may be based either on the Fifth or the Seventh Schedule. Insofar as the question of justifiable grounds is concerned, the same falls within the ambit of the Fifth Schedule and only the tribunal has the power to decide on the challenge arising out of the same.

The Court held that the mandate of the arbitrator can only be challenged under Section 14 of the Act if the ground mentioned under the Seventh Schedule is the ground of challenge and there is no provision under the Schedule that relates to bias of the arbitrator. It held that Sections 12 and 13 constitute a complete and independent code for the purpose of trial of allegations that gives a justifiable doubt as to arbitrator's independence and impartiality which would involve an allegation of bias also.

The Court also opined that what Section 14 contemplates is de jure disqualification and there is no need for detailed inquiry in such cases, however, justifiable grounds involve factual inquiry which would necessarily have to be undertaken, therefore, only the tribunal can decide those challenges.

The Court also observed that the fact of arbitral tribunal being empowered to deal with a challenge to its mandate is in consonance with the principle of Kompetenz-Kompetenz enshrined under Section 16 of the Act.

Accordingly, the Court dismissed the petition as being non-maintainable.

Case Title Union of India v. Reliance Industries Limited, OMP (T) (COMM.) 125 of 2022

Citation: 2022 LiveLaw (Del) 1162

Counsel for the Petitioner: Mr. A. K. Ganguli, Sr. Adv. with Mr. Shailendra Swarup, Ms. Bindu Saxena, Mr. Kirit Javali, Ms. Mamta Tiwari, Mr. Arunav Ganguli and Ms. Charu Ambwani, Advs.

Counsel for the Respondent: Mr. Harish N. Salve, Sr. Adv. with Mr. Sameer Parekh, Ms. Shonali Basu, Mr. Ishan Nagar, Mr. Prateek Khandelwal, Mr. Abhishek Thakral and Mrs. Chetna Rai, Advs. for R-1. Mr. K. R. Sasiprabhu, Adv. for R-2. Mr. Mahesh Agarwal, Mr. Rishi Agrawala, Ms. Niyati Kohli, Mr. Pranjit Bhattacharya, Mr. Pratham Vir Agarwal, Advs. for R-3.

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