Statutory Remedy Against Appointment Of Arbitrator Lies Under Arbitration Act, Can't Invoke Extraordinary Jurisdiction Under Art. 226: Gujarat HC

In a writ petition seeking stay of the arbitration proceedings on account of a past working relationship between the Arbitrator and the Respondent, Justice Ashutosh J Shastri, while emphasising the remedies available to the Petitioner under Sections 13 and 14 of the Arbitration and Conciliation Act 1996 for challenging the appointment of the Arbitrator, dismissed the plea.

The Bench opined that the power under Articles 226 and 227 must be exercised sparingly when it pertains to issues that are already encompassed within the Arbitration and Conciliation Act.

Background

The Petitioner and Respondent No. 2 were partners in the firm 'Ronak Developers' by virtue of a partnership deed containing an arbitration clause. When a dispute arose between the two parties, Respondent 2 invoked the arbitration clause and issued notice to the Petitioner informing him about the appointment of Respondent No. 1 as an Arbitrator.

The claim of the petitioner was that such appointment of respondent no. 1 was a violation of the requirements given in Section 11 since Respondent No. 2 straightaway referred the matter to the Arbitrator and appointed him unilaterally. The petitioner further claimed that respondent no.1 and respondent no.2 had worked together as advocates on various cases.

The Petitioner was thus doubtful of respondent no.1's impartiality and independence as an arbitrator. Further stating that such disclosure was mandatory and thus, as per S.12(1) along with Rule 26 of Schedule V and Schedule VII, quashing respondent no. 1's appointment as an arbitrator was justified.

Per Contra, the Respondents contended that the petition to quash the arbitrator's appointment was not maintainable since the issue could have been agitated before an alternative forum and not the High Court. It was further submitted that the vakalatnama was signed some 14 years ago in 2000 and this factum should not have cast any doubt on the impartiality of the Arbitrator.

Additionally, the Respondent pointed out that this issue was not raised in the proceedings even when 4 months extension was granted. Thus, the respondents claimed that petitioners only brought this issue to thwart the legal proceedings. Even in the previous Special Leave Civil Application filed before the HC in 2020, no such grievance was raised.

Respondents had further submitted that the Petition in question had wrongly invoked the extraordinary jurisdiction of High Court under Art 226 of the Constitution as well as under section 11 of the Arbitration and Conciliation Act.

Judgement

The Bench began by observing that Section 12(5) prescribes that any person whose relationship with parties or counsel or the subject matter of dispute falls under any of the categories specified in Schedule V, then that person shall be ineligible to be appointed as an Arbitrator. On a thorough perusal of S.12, 13, 14, 15 and Schedule V (clause 1,4 and 8) and VII of the Arbitration and Conciliation Act, the High Court opined that no that there appeared to be no relation between the Arbitrator and the Respondent 2.

The High Court further noted that the vakalatnama was filed more than a decade ago and the telephone number diary also did not establish the persistent relationship between the Arbitrator and Respondent no. 2 or any indication that it created impartiality in the proceedings and thus, in High Court's opinion, the evidence presented was not sufficient enough for the grievances made by the petitioner.

The High Court also took note of the petitioner's initial acceptance of arbitration proceedings and that he was a participant of such proceedings; even after the petitioner was given an extension of four months to voice his grievances during the pendency of a Special Leave Application, the petitioner chose to not address these concerns.

Further averring that the Petitioner also had other remedies available to him under S.13 and S.14 of the Arbitration Act and petitioner chose not to avail them and instead invoked the extraordinary jurisdiction of this court under S.11 which was improper, the High Court opined that when a process has been set in motion under a special statute, it cannot be then intercepted on unjustifiable grounds.

Referring to the apex court judgment in Premjibhai K. Shah versus Executive Engineer, Sardar Sarovar Narmada Nigam Limited and another, (2022) 1 SCC 75 where the Supreme Court had held that "the discretion under Art 226/227 cannot be exercised to allow any judicial interference beyond the procedure established under the Arbitration and Conciliation Act 1996" and such power needs to be exercised with exceptional rarity, only in cases where the petitioner has no other remedy, the High Court remarked that once the procedure had been started under Arbitration and Conciliation Act, 1996, there was no reason for the petitioner to invoke extraordinary jurisdiction of the High Court.

The petition was thus dismissed for the aforementioned reasons.

Case Title: Sandipbhai Ashokbhai Parmar Versus The Arbitrator, Kumari Neetaben Vitthabhai Patel

Citation: 2022 LiveLaw (Guj) 17

Case No.: C/IAAP/140/2021

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