The main legal point established in the judgment is the interpretation of the ineligibility of an arbitrator under Section 12(5) of the A&C Act and the definition of 'close family relationship' as per the Seventh Schedule.

JUDGMENT :

Vibhu Bakhru, J.:--

1. The petitioner has filed the present petition under Sections 14(2) and 15 of the Arbitration & Conciliation Act, 1996 (hereafter the ‘A&C Act’), inter alia, praying that the mandate of the Sole Arbitrator – Mr. Subhash Chandra Batra (hereafter the ‘Arbitrator’) be terminated and an independent arbitrator be appointed in his place.

2. The petitioner claims that the Arbitrator is ineligible to act as an arbitrator by virtue of Section 12(5) of the A&C Act. He is related to the parties and they have not entered into any agreement waiving their right to waive the ineligibility, in terms of the proviso to Section 12(5) of the A&C Act.

3. In addition to the above, the petitioner also avers that the manner in which the Arbitrator has conducted the proceedings, indicates his bias. In particular, it is contended that the Arbitrator has passed orders granting interim relief without any application to the aforesaid effect. It is further submitted that the Arbitrator has also passed orders against the persons, who are not signatories to the Arbitration Agreement or to the arbitral proceedings.

4. It is well settled that Sections 12 and 13 of the A&C Act provide for the mechanism regarding challenge to the appointment of an arbitrator. A party challenging the appointment of an arbitrator would necessarily have to confine itself to that scheme. In terms of Section 13(1) of the A&C Act, the parties are required to follow the procedure, as agreed, for challenging an arbitrator. Section 13(2) of the A&C Act provides that failing any such procedure, the party who intends to challenge an arbitrator is required to file a written statement setting out the reasons for such a challenge within a period of fifteen days of becoming aware of the constitution of the arbitral tribunal or the circumstances as is referred to in Section 12(3) of the A&C Act. If the arbitrator does not withdraw from the proceedings, the arbitral tribunal is required to decide the challenge. If the challenge is not sustained, the arbitral tribunal is required to proceed and make an award. The party challenging an arbitrator does not have any recourse to courts prior to the arbitral tribunal rendering the award. Section 13(5) of the A&C Act makes it clear that in such a case, the party challenging an arbitrator can make an application for setting aside the award, in accordance with Section 34 of the A&C Act.

5. In Progressive Career Academy Pvt. Ltd. v. FIIT JEE Ltd., (2011) 180 DLT 714, a Division Bench of this Court has held as under:

“16. On a reading of Section 13(5), the legislative intent becomes amply clear that Parliament did not want to clothe the Courts with the power to annul an Arbitral Tribunal on the ground of bias at an intermediate stage. The Act enjoins the immediate articulation of a challenge to the authority of an arbitrator on the ground of bias before the Tribunal itself, and thereafter ordains that the adjudication of this challenge must be raised as an objection under Section 34 of the Act. Courts have to give full expression and efficacy to the words of the Parliament especially where they are unambiguous and unequivocal….”

6. The Arbitration & Conciliation (Amendment) Act, 2015 substantially amended the A&C Act including Section 12 of the A&C Act. The extent of disclosure, as required under Section 12(1) of the A&C Act, was significantly expanded. Sub-section (5) of Section 12 of the A&C Act was introduced. In conjunction with such amendments, the Fifth, Sixth and Seventh Schedules were inserted to the A&C Act.

7. An arbitrator approached in connection with his appointment is required to make a disclosure in terms of the Sixth Schedule of the A&C Act. The Fifth Schedule of the A&C Act indicates the circumstances, which may give rise to justifiable doubts as to the independence and impartiality of an arbitrator. It serves as a guide for an arbitrator to make the necessary disclosure. Sub-section (5) of Section 12 of the A&C Act