An arbitrator is ineligible to act if any relationship affecting impartiality exists, leading to a null and void award per Section 12(5) of the Arbitration and Conciliation Act.

JUDGMENT :

VIBHU BAKHRU, C.J.

1. The appellant has filed the present appeal under Section 37 (1)(c) of the Arbitration and Conciliation Act, 1996 [the A&C Act] impugning an order dated 20.03.2025 passed by the learned II Additional District and Sessions Judge, Udupi [Commercial Court] in A.P.No.10/2024 [impugned order], 'Sri Ramdas Shettigar v. The General Insurance Employees' Co-operative Credit Society Ltd . and others.

2. The respondent filed the aforementioned petition under Section 34 of the A&C Act impugning an Arbitral Award dated 10.04.2024 rendered by an Arbitral Tribunal comprising of a sole arbitrator - Shri S. Gururaj Aithal [Arbitral Tribunal]. The learned Commercial Court found that the sole arbitrator is ineligible to act as an arbitrator in terms of Section 12 (5) of the A&C Act read with Seventh Schedule of the A&C Act. Concededly, the sole arbitrator was at the material time acting as a counsel for the appellant – Society in a suit bearing O.S.No.02/2015, which was pending consideration before another court at the material time.

3. We consider it apposite to refer to Sub-sections (1), (2) and (5) of Section 12 of the A&C Act. The same are set out below.

" 12. Grounds for challenge.—(1) When a person is approached in connection with his possible ppointment as an arbitrator, he shall disclose in writing any circumstances,—

(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and (b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.

Explanation 1.—The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.

Explanation 2.—The disclosure shall be made by such person in the form specified in the Sixth Schedule.

(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.

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(5). Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator."

4. In terms of Section 12 (1) of the A&C Act, an arbitrator is required to disclose in writing any circumstances of existence of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence and impartiality of an arbitrator.

5. In terms of explanation 1 to Section 12 (1) of the A&C Act, the Arbitrator is required to be guided by the circumstances as stated in the Fifth Schedule for determining whether the circumstances exist which give rise to justifiable doubts. In terms of explanation 2 to Section 12 (1) of the A&C Act, the disclosure is required to be made in the form as specified in the Sixth Schedule. There is no material on record to indicate that the sole arbitrator had made any such disclosure as is mandatory.

6. In terms of Section 12 (5) of the A&C Act, an arbitrator is ineligible to act as an arbitrator, if his relationship with the par