Baseless Allegations Against Arbitrator Lead to Contempt Finding, Penalty by Delhi High Court

New Delhi: In a significant ruling underscoring the sanctity of the arbitral process, the Delhi High Court has held that making baseless and untenable allegations against an Arbitral Tribunal to force recusal constitutes criminal contempt. The court, comprising Justice Prathiba M. Singh and Justice Amit Sharma , disposed of a criminal contempt reference made by a Sole Arbitrator, Hon’ble Mr. Justice Swatanter Kumar (Retd.), finding the conduct of the respondents reprehensible and interfering with the administration of justice.

The case originated from a complex arbitration proceeding between the Dalmia Family Office Trust & Anr. (Petitioners/Dalmia Group) and Getamber Anand & Ors. (Respondents), including entities from the ATS Group. The core dispute revolved around alleged non-repayment of investments made by the Dalmia Group in ATS Group companies.

Background of the Dispute and Arbitration

Following failed attempts to resolve disputes arising from multiple transactions between 2013 and 2015, the parties entered into a Supplementary Agreement in 2019. Subsequently, eleven petitions were filed under Section 11 of the Arbitration and Conciliation Act, 1996 (the Act), leading to the appointment of a Sole Arbitrator on January 8, 2021, by the Delhi High Court with the consent of both parties.

During the arbitration, the Dalmia Group sought recovery of investments, while the ATS Group sought declaratory relief claiming the disputes were settled. The proceedings became contentious when, on June 10, 2021, during arguments on Section 17 applications for interim measures, the ATS Group and Respondent No. 1, Mr. Getamber Anand (promoter/director of ATS Group), sought recusal of the Arbitrator.

The Trigger: A Puzzling Legal Notice

The basis for seeking recusal was a legal notice dated June 8, 2021, allegedly sent by Advocate Mr. Vaibhav Luthra on behalf of Ms. Saloni Adarsh (Respondent No. 3), a home buyer. The notice alleged collusion between the Dalmia Group and ATS Infrastructure Limited concerning a flat and, crucially, claimed that the arbitration proceedings could not continue due to a conflict of interest concerning the Arbitrator.

The High Court found this conduct "puzzling," noting that the party allegedly responsible for the conflict (ATS Group) was the one seeking recusal, not the opposing party (Dalmia Group). The court observed, "It seems completely illogical... that the Respondents moved such an application."

Arbitrator's Strong Findings and Contempt Reference

The Sole Arbitrator, after extensively examining the allegations in the legal notice and the respondents' conduct, dismissed the applications for recusal in a detailed order dated October 5, 2021. The Arbitrator concluded that the legal notice appeared to be a "pre-planned affair," lacked genuineness, and was a "tactic by the Respondents to unduly delay and frustrate the arbitration proceedings on baseless and frivolous grounds."

The Arbitrator found the allegations of collusion, conflict of interest regarding a law firm, and challenges to procedural fairness to be false, vexatious, and made with malicious intent. The Arbitrator also specifically noted the misleading conduct of Respondent No. 1, including delaying tactics and casting doubt on recorded proceedings.

Citing the respondents' conduct as bringing disrepute to the institution of arbitration and interfering with the administration of justice, the Arbitrator made a reference to the Delhi High Court under Section 27(5) of the Act, requesting initiation of proceedings for perjury and criminal contempt against Respondent No. 1 (Mr. Getamber Anand ) and Respondent No. 3 (Ms. Saloni Adarsh), and proceedings against Advocate Vaibhav Luthra before the Bar Council of Delhi.

High Court's Analysis and Reference to Precedent

The Delhi High Court agreed with the Arbitrator's assessment, stating that the conduct of the respondents was "reprehensible." The court emphasized that Arbitral Tribunals function in place of Civil Courts and making baseless allegations against them cannot be permitted. "Any reckless or baseless allegations thus require to be dealt with strictly," the court noted.

The bench relied on the Supreme Court's decision in Alka Chandewar v. Shamshul Ishrar Khan, (2017) 16 SCC 119 , which discussed the powers of Arbitral Tribunals. The Supreme Court in Alka Chandewar highlighted that the 2015 amendment introducing Section 17(2) and the existing Section 27(5) aim to give teeth to the Arbitral Tribunal's orders and ensure that non-compliance or contemptuous behaviour is dealt with effectively.

The High Court quoted from the Supreme Court judgment and the Law Commission's 246th Report, affirming that Section 27(5) allows for persons guilty of contempt of the Arbitral Tribunal to be subject to the same penalties as for like offences in suits tried before the Court. "The Arbitral Tribunal is no different from a Civil Court in respect of dealing with contempt against itself," the Delhi High Court stated.

Apology and Conditional Outcome

Respondent No. 1, Mr. Getamber Anand , had tendered an apology before the Arbitrator, which the Arbitrator refused to accept in an opinion dated April 13, 2024, citing it as "neither bonafide nor a sincere remorse" but part of a strategy to avoid consequences.

Before the High Court, Mr. Anand again tendered an unconditional and unqualified apology. The High Court, while noting the Arbitrator's deep grievances and the deliberate delay caused in the proceedings, decided to accept the apology.

However, accepting the apology came with conditions. The court directed Respondent No. 1 to pay a sum of Rs. 10,00,000/- (Ten Lakh Rupees) by demand draft to a charitable organisation to be identified by the Arbitrator. Additionally, Respondent No. 1 was directed to pay Rs. 3,00,000/- (Three Lakh Rupees) to the petitioners towards the costs incurred in the contempt proceedings within one week.

The court cautioned Respondent No. 1 that such conduct must not be repeated in the future.

The contempt reference was disposed of in these terms, highlighting the judiciary's commitment to protecting the integrity and efficacy of the arbitration process against malicious and obstructive tactics.

The matter is now listed before the Registrar General on November 18, 2024, for compliance.