The court ruled that mere allegations of bias do not establish a de jure inability of the arbitrator to perform his functions, thus denying the petition to challenge the arbitrator's appointment.

JUDGEMENT :

[SOMASEKHAR SUNDARESAN, J.]

Context and Background:

1. This Petition has been filed seeking to invoke the jurisdiction of this Court under Section 14 and Section 15 of the Arbitration and Conciliation Act, 1996 (“the Act”).

2. Essentially, the Petitioners request this Court to interfere mid-course, when arbitration proceedings are underway. The Petitioners filed an application before the Learned Arbitrator, calling upon him to recuse from the proceedings on the ground of his impartiality and independence being allegedly suspect. The Learned Arbitrator has refused to do so, by an order dated October 28, 2024 (“Impugned Order”), which is challenged in this Petition.

3. For this Petition to be considered, the Petitioners ought to make out a case that there is a de jure inability on the part of the Learned Arbitrator to perform his functions. Without that threshold being met, the Petition cannot be entertained. For the reasons set out in this judgement, the Petition is dismissed.

Factual Matrix:

4. A brief overview of the factual matrix involved in the matter at hand, would be instructive.

5. According to the Petitioners, the arbitrator did not make the disclosure mandated under Section 12(1) of the Act. Petitioner No. 1 is the principal borrower of loans from Respondent No. 1, which is a multi-state co-operative bank. Petitioners No. 2 to 4 are guarantors of the borrowings effected by Petitioner No. 1. The arbitration proceedings have been initiated under Section 84 of the Multi-State Cooperative Societies Act, 2002 (“MSCS Act”).

6. The Petitioners allege that the Learned Arbitrator made a disclosure with a delay of nine months, and that too only after they sought it. On the basis of the disclosure, which they claim to have received only in October 2024, they filed a challenge before the Arbitral Tribunal.

7. The disclosure made by the Learned Arbitrator is found at Exhibit C to the Petition, and is dated January 20, 2024. Under Section 84(4) of the MSCS Act, it is the Commissioner for Co-operation and Registrar of Co- operative Societies (“Registrar”) who appoints arbitrators when a reference is made by any co-operative bank. The appointment being made by the statutory authority, it is not the co-operative bank that makes the appointment.

8. Typically, when loan assets of a co-operative bank become non- performing assets, the banks report the same to the Registrar, who makes the appointment of an arbitrator for various sets of loans. By a order dated May 27, 2024, the Registrar appointed the Learned Sole Arbitrator who is conducting the proceedings now, and about whom allegations are being made by the Petitioners. Annexed to that order is a list of cases pending with the Learned Arbitrator and new cases referred to him. That forms the basis of the allegations levelled by the Petitioners.

Section 13 Application:

9. The Petitioners filed an application dated October 22, 2024 before the Arbitral Tribunal purporting to invoke Section 14 of the Act. However, such application is referable only to Section 13 read with Section 12 of the Act (“Section 13 Application”). It is this Court that has jurisdiction under Section 14 while the jurisdiction in the first instance is before the Learned Arbitrator under Section 13 of the Act. For all purposes of this judgement, the Petitioners’ application to the Learned Arbitrator is referred to as the “Section 13 Application”.

10. In the Section 13 Application, the Petitioners alleged that the disclosure dated January 20, 2024 was received by them only on October 9,2024 and that the order appointing him was made available only on October 14, 2024. The key grievance with the disclosure statement is that it does not contain the contact details of the arbitrator. That, coupled with the allegation that the venue of arbitration is the Mulund branch of the bank, forms the basis of the allegation of the lack of independence of the arbitrator.

11. The annexures to the Registrar’s order dated May 27, 2024 would