The court held that failure to disclose prior relationships with a party renders an arbitrator ineligible, thus invalidating the arbitral award under the Arbitration and Conciliation Act.

JUDGMENT

Vibhu Bakhru, J. The appellants have filed the present appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereafter `the A&C Act') impugning an order dated 30.06.2020 (hereafter `the impugned order') rendered by the learned Commercial Court. By virtue of the impugned order, the learned Commercial Court rejected the appellants' application preferred under Section 34 of the A&C Act [being OMP (Comm.) No.44/2019 captioned Ram Kumar & Anr. v. Shriram Transport Finance Co.], whereby they had impugned an arbitral award dated 30.08.2019 (hereafter `the impugned award') delivered by an arbitral tribunal comprising of a sole arbitrator.

2. In terms of the impugned award, the Arbitral Tribunal has awarded a sum of Rs.4,01,987/- (Rupees Four Lakh One Thousand and Eighty-Seven only) with interest on the aforesaid amount at 12% p.a, with effect from 16.08.2019 till the date of its realization, in favour of the Shriram Transport Finance Co. Ltd. (hereafter `the respondent').

3. The learned Commercial Court found no ground to set aside the impugned award. The court rejected the contention that the learned Sole Arbitrator was ineligible to act as an arbitrator under Section 12(5) of the A&C Act or that the impugned award could be impeached on the ground of justifiable doubts as to the independence and impartiality of the learned Sole Arbitrator. Further, the learned Commercial Court held that, as per Section 12 of the A&C Act, an arbitrator is required to give a declaration only if he is of the view that there are circumstances which affect his independence and impartiality.

Factual Context

4. The respondent is a limited company duly incorporated under the Companies Act, 1956 and carrying on business of hire purchase, lease and loan-cum-hypothecation in respect of light motor vehicle/medium motor vehicle/heavy goods vehicle as per the guidelines laid down by the Reserve Bank of India (RBI). The respondent (claimant before the Arbitral Tribunal) states that appellant no.1 (Mr. Ram Kumar) had approached the respondent, seeking finance of Rs.2,95,500/- for the purchase of goods/passenger vehicle. It is the respondent's case that the appellant entered into a loan-cum-hypothecation agreement (hereafter `the Agreement') on 12.03.2015, in respect of vehicle bearing RC No. DL 1ZZ-1722, with the respondent for the total agreement value of Rs.3,75,420/-, which was payable in 23 monthly installments. Mr. Ram Kumar executed the above-mentioned transaction as borrower and appellant no.2 (Mr. Sunil Mehta) as that of a guarantor; therefore, both are jointly and severally liable to pay the respondent the amount due under the Agreement.

5. The respondent claims that the appellants failed and neglected to pay the installments and the amount outstanding and payable by appellant no.1 swelled to a sum of Rs.4,01,987/- as on 18.06.2018.

6. The respondent states that as the appellants had defaulted in payment of the monthly installments and failed to respond to the demand for clearing the dues, hence, it seized the vehicle in question.

7. The respondent sold the seized vehicle for a sum of Rs.1,20,000/-. According to the respondent, that was the highest market price available for the vehicle.

8. According to the appellants, the seized vehicle was sold in a non-transparent manner at a price much below its assessed value. The appellants are also aggrieved by the respondent demanding further sums from them.

9. The respondent invoked the arbitration clause under the Agreement and