The judgment clarified the procedures and remedies available under the Arbitration and Conciliation Act, 1996 for challenging the independence and impartiality of an Arbitrator, emphasizing the exclusive jurisdiction of the Arbitrator under Section 12 and Section 13, and the distinct nature of the remedy under Section 14 for termination of an Arbitrator's mandate.

JUDGMENT :

This miscellaneous appeal has been filed for setting aside the ex parte order dated 27.03.2019 passed in Miscellaneous (Arbitration) Case No. 31 of 2019 passed by learned District Judge cum Principal Civil Court of Original Jurisdiction, Patna by which application dated 27.03.2019 filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “the Act”) has been allowed, by which the Arbitral Tribunal has been restrained to proceed further till final order is passed on the petition filed under Section 14(2) of the Act by the respondents to terminate the mandate of sole Arbitrator.

2. Briefly stated, the facts of the case is that dispute and differences had arisen between the parties, during execution of contract, this Court by order dated 27.07.2018 passed in CWJC No. 9143 of 2016 appointed Justice (Rtd.) Shyam Kishore Sharma, as sole Arbitrator by consent of the parties, however, during pendency of arbitral proceeding the sole Arbitrator was appointed Lokayukta, Bihar, and accordingly, he was substituted by Justice (Rtd.) C.M. Prasad, as the sole Arbitrator by consent of the parties, by order dated 06.09.2018 passed in MJC No. 1593 of 2018.

3. According to respondents, during arbitral proceeding some observation was made by sole Arbitrator against the respondents which raised doubts regarding independence, impartiality and neutrality of the sole Arbitrator and as such respondents filed application dated 25.01.2019 under Section 13(2) of the Act in Arbitration Case No. 2 of 2016, seeking recusal of sole Arbitrator from hearing the arbitration case on the ground of justifiable doubts about his independence, impartiality and neutrality to adjudicate as envisaged under Section 12(3)(a) of the Act.

4. In their application, filed under Section 13(2) of the Act they have stated that respondents have lost complete faith and confidence in sole Arbitrator and has serious apprehension that the dispute before him would not be adjudicated in a fair, impartial and neutral manner. Petition is based upon actual events and remarks which transpired during course of arbitral proceeding. Respondents stated that from day one sole Arbitrator has shown biased approach which raises strong doubts with regard to his impartiality to adjudicate in a fair and impartial manner. Even without hearing the case of the respondent-Corporation, the sole Arbitrator observed in open court that Corporation is at fault and has illegally and arbitrarily terminated the contract and they are liable to pay. Similar, type of observation was made by sole Arbitrator a number of times which raised serious doubt about his neutrality and as such sole Arbitrator has become dejure as well as de facto and has lost complete trust of the respondent-Corporation.

5. Section 12 and 13 of the Act reads as follows:-

“Section 12 - Grounds for challenge.-

(1) When a person is approached in connection with his possible appointment 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 writi