—–Arun Sharma[1]
Ambit of Section 12 of the Arbitration and Conciliation Act, 1996 cannot be enlarged to inculcate unrealistic standards of independence and impartiality
COURT: Supreme Court
CASE: Voestalpine Schienen GmbH vs. Delhi Metro Rail Corporation Ltd.
CRUX OF THE DECISION:
The present petition has been filed before the Supreme Court of India.
The court held that the inclusion of arbitrators from the arbitral tribunal on grounds of being government employees/ ex employees of one of the party to the dispute would not render the arbitral tribunal invalid u/s 12 of the Arbitration & Conciliation Act, 1996. Arbitrators who were previously employed by the government of India would not form basis for attributing biasness with the respondent.
ISSUES INVOLVED:
- Whether inclusion of present/ex-employees of the government (wherein one of the party to dispute is a government PSU) as arbitrator would violate the principles of independence and impartiality as mentioned u/s 12(1) and 12(5) of the Arbitration and Conciliation Act, 1996.
DECISION OF THE COURT:
The Court held that the appointment of retired government employee/ retired employee of PSU in absence of connection between the individual and the respondent would not attribute biasness on the part of such individuals who are appointed as arbitrators, further in absence of such connection cannot be held to be devoid of independence and impartiality hence the panel appointed by the respondent cannot be said to be in violation with section 12(1) and section 12(5) of the Arbitration and Conciliation Act, 1996.
EXPLANATION:
In the present case DMRC (“hereinafter referred as “respondent”) has provided the petitioner with a panel of five arbitrators to choose from in order to send their nominee to constitute the arbitral tribunal. It is to be noted that the procedure followed was in accordance with the agreement entered between the parties. However, the petitioner challenged the Panel prepared by the respondent on grounds that same is in violation of section 12(1) and 12(5) of the Arbitration Act,1996. Petitioners contended that the panel of arbitrators consisted of individuals who are presently employees/ex employees of Government of India or PSUs. Thus attributing bias on part of such panel and accusing the panel of lacking independence and impartiality. The Supreme Court held that simply because the person appointed is a retired officer from the government or other statutory corporation or PSU does not show his connection with the respondent and such person cannot be treated as ineligible to act as an arbitrator. Had this been the intention of the legislature, the Seventh Schedule of the arbitration act would have covered such persons as well. The very reason for forming a panel of these persons is to ensure that technical aspects in relation to the dispute are resolved by their expertise when they act as arbitrators.
However, the Apex Court made a significant observation about the fact that the independence and impartiality of the arbitrator is the hallmark of any arbitration proceedings. The rule against biasness is the foundational stone of the principle of natural justice. This principle is applicable to all the judicial and quasi-judicial proceedings including arbitration proceeding and it can be waived off with a prior agreement between the parties as in the present case. The Hon’ble Court also held that contract between the parties which mandated limited number of panelist in relation to the arbitral tribunal put restrictions on the freedom of the parties to chose an arbitrator thus a panel of 31 members was provided by the respondent to be kept for constituting an arbitral tribunal in order to give broad choices to the parties and to avoid apprehension with respect to the principle independence and impartiality.
This judgment will send a rightful signal to the International business community about the development of healthy and conducive arbitration regime in India.[1]
