Challenging an arbitrator on grounds of bias under India

Challenging an arbitrator on the grounds of bias Introduction: In the process of arbitration, arbitrators render final and binding decisions on the parties which affect their contractual rights and obligations. Therefore it is extremely important that the decisions of the arbitrators do not suffer from serious problems like bias. In order to avoid such misgiving section 12 of the Arbitration and Conciliation Act, 1996 (hereinafter referred as the Act) provides for bias as a ground for challenging an arbitrator.

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On the other side, it is equally important to protect the arbitrators from frivolous claims of the parties which delay the proceedings. Hence, a balance must be struck between the protection of the right of the parties by imposing sanction on arbitrators and giving enough space to the arbitrators to fulfill their function without any unwanted claims. This project will look into the provisions that eradicate problems such as bias and partiality in the arbitrators.

Also in its discourse the project shall answer the question whether if such provisions are effectively able to fulfill the above mentioned purpose? Grounds for Challenging Arbitrator under Section 12: S. 12(3) of the Act provides for two grounds under which an arbitrator’s appointment can be challenged after his appointment. The first being, 12(3)(a): On the ground of justifiable doubt on impartiality or independence of arbitrator, and second being; 1 2(3)(b): On the ground of insufficient qualification. This discourse shall restrict itself to the first ground only.

Burden on the Arbitrator to disclose information: There is a preventive measure which the Act burdens upon the arbitrator who is approached or appointed as arbitrator. Such measure requires the arbitrator to disclose all information in writing which may give rise to Justifiable doubt as to his independence or impartiality. L Therefore the law lays the primary burden on the arbitrators and gives them the first opportunity to show their independence or impartiality by disclosing any such circumstance and avoid making the other person doubt his independence.

Hence the law by laying such burden invokes the principle that “Justice should not only be done but also seem to be done. ” However to avoid cautious proceedings against the arbitrators on the grounds of bias the law requires certain standard to be met before such doubts can be raised. The Indian Courts have held that “the apprehension of bias must be Judged from a healthy, reasonable and average point of view and not on mere apprehension of any whimsical person. Standard to regulate our vision. 2 Therefore, the doubt raised in the minds of the other party must be Justified, there is suppose to be strong evidence which is clear to everyone and raises the same doubt. By setting such standards to avoid vexatious recordings on one hand and burdening the arbitrator to disclose material circumstances which might give rise to Justifiable doubt as to his independence on the other hand, shows that the law protects the right of the parties as well as that of the arbitrator and avoids unnecessary delay in the proceeding.

Suppose, the arbitrator is the director of one of the companies in dispute and there is a strong and clear evidence to show that, and further the arbitrator has not complied with the mandatory provision under the law to inform both the parties about such situation which might give rise to reasonable doubt about his independence. Then in such situations what procedure does the affected party have to follow to attain remedy? The answer to the above question brings us to the next part of the project, procedure to challenge the arbitrators.

Procedure to Challenge the Arbitrators: Section 13 of the Act provides with the procedure to be followed once the party wants to challenge the arbitrator on any of the two grounds mentioned under section 12. As stated in the above paragraph we shall only be referring to the ground of bias in this reject. The parties have full autonomy to draw up their own procedure to challenge an arbitrators. But, of course it goes without saying that such procedure should be subservient to the mandatory provisions of the Act and should adhere to the principles of natural Justice.

In case there is no such agreement between the parties then the law provides that the affected party shall within 15 days, from the day it becomes aware about bias of the arbitrator shall give its reasons in writing to the arbitrary tribunal. So far, the procedure is simple. However the problem arises in the next step. The challenge is heard by the same arbitrator against whom the challenge is launched, unless of course, he withdraws from his office. Such provision of law goes against the very principle that “no one should be a Judge in his own cause. ” Further, if the arbitrary tribunal does not find any merit in the challenge raised then it shall continue on deciding the case. It can be argued that by doing so there is a risk of corrupt arbitrators never ruling against themselves’ and passing arbitrary awards in a prejudiced manner. However, the law provides that the injured party can approach the Courts to set aside the award under section 34 of the Act. In various case laws the questions of constitutional validity of Section 13 have been raised before. The Courts have come to the conclusion that there is no merit in the contention that section 13 is constitutionally ultra fires as it does not give an effective remedy against biased arbitrators even under section 34. The Courts Justification is that, legislature cannot have intended to exclude bias as a ground for challenge under section 34(2) b)(ii) and hence bias can be challenged under this section in the Courts.

Further, when we compare the UNCIAL model law and the Act, Article 13 of the model law like section 13 of the Act allows the arbitrator to be a Judge in his own cause but also further provides for Court intervention if the injured party is still not satisfied. 7 Such intervention of the Court is not present in the Act. The Courts Justify this by looking into the Objective of the Act which is speedy disposal of arbitrary proceedings and to minimize Judicial intervention which is clear from section 5 of the Act. This leaves get terminated? This brings us to the next part which deals with termination of mandate of the arbitrator.

Failure or impossibility to Act: Section 14 of the Act provides for alternative remedy to section 13 & 34. Under this section if it can be shown that it has De Cure or De facto become impossible for the arbitrator to perform his function then his mandate can be terminated by the Courts. 9 De Cure non-performance meaner unable to perform according to law. In various scales 1, it has been said that bias of an arbitrator or non-disclosure of material information which gives rise to Justifiable doubt as to independence of the arbitrator can be included within the purview of De Cure non-performance of arbitrator’s functions.

Hence his mandate can be quashed by the Courts. There need not be election between the two remedies, as election requires inconsistencies between two or more remedies. 12 Between Section 12, 13 on one hand and section 14 on the other there is no inconsistency rather they are constituent of the same scheme. 13 One has to challenge before the arbitrary tribunal under Section 13 first, and if he is still grieved then he can still approach the Court under section 14.

Approaching section 13 does not disqualify remedy under section 14. 14 Conclusion: The Author is of the conclusion that though the Act has deviated from the model law with respect to the availability of the remedy after the arbitrator decides on his own cause, there still exists an alternative remedy which is available to the aggrieved party under section 14. By doing so the law not only maintains the objective of speedy disposal of cases, but also allows for necessary Judicial intervention.

Though section 5 provides for minimizing Judicial intervention, but at times timely intervention by the Courts not only avoids wastage of time but also resources that might be spent for no good in absence of such interventions. Therefore the author agrees with the constitutional validity of Section 13 & 34 as it gives an opportunity to the arbitrators to correct the wrong they might have committed thereby avoiding court’s intervention and section 14 acting as fail safe option. Hence the provisions in the Act are effectively able to deal with eradication of bias or partiality in the arbitrators.

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