Advocates Appeared:
For the Appellants : Shailendra Swarup, Ms. Bindu Saxena, Ms. Aparajita Swarup, Advs.
For the Respondents: Mrs. Vanita Bhargava, Ajay Bhargava, Mrs. Abhisaar Bairagi, (M/s. Khaitan & Co.), Advs.

Key Principles on Arbitrator Eligibility and Challenge under Arbitration and Conciliation Act, 1996

• Ineligibility under Section 12(5) read with Seventh Schedule: Any person whose relationship with parties, counsel, or subject-matter falls under categories in the Seventh Schedule is ineligible to be appointed as arbitrator, notwithstanding prior agreement (waivable only by express written agreement post-dispute). Such ineligibility renders the arbitrator de jure unable to perform functions under Section 14(1)(a), and termination of mandate must be decided by court under Section 14(2), not by arbitral tribunal under Section 13. (!) (!) (!) [1000597240011]

• Distinction between Fifth and Seventh Schedules: Items 1-19 are common to both Schedules; Fifth Schedule grounds (justifiable doubts on independence/impartiality) are for disclosure and post-award challenge under Section 34 after tribunal decides under Section 13; Seventh Schedule grounds cause absolute ineligibility determinable pre-award by court. (!) (!) (!) (!)

• Disclosure obligations under Section 12(1): Prospective arbitrator must disclose in writing (Sixth Schedule form) any past/present relationships/interests likely raising justifiable doubts on independence/impartiality (guided by Fifth Schedule), or affecting ability to devote time/complete within 12 months; ongoing duty post-appointment. (!) (!) (!) (!) (!) (!)

• Challenge procedure: Parties may agree on procedure; default is written challenge to tribunal within 15 days of awareness; if unsuccessful, tribunal continues and award challengeable under Section 34; withdrawal/agreement does not admit grounds' validity. (!) (!) (!) (!) (!)

• Narrow grounds for award challenge post-2016 Amendment: Public policy limited to fundamental policy of Indian law, justice, or morality; patent illegality excludes mere erroneous law application or evidence re-appreciation; applies to domestic/international awards under Sections 34/48. [1000597240018][1000597240019]

• Interpretation of Schedules: Adopt broad common-sensical approach per IBA Guidelines origin; neither expand nor restrict unduly; focus on impartiality/independence from reasonable third-person view; Explanation 3 allows repeat appointments in specialized fields (e.g., maritime/commodities) as custom/practice factor. [1000597240019] (!) (!)

• Item 1, Seventh Schedule (advisor/business relationship): Requires regular advisory role concerning party's business; one-time professional legal opinion on unrelated matter does not qualify as "advisor" or business relationship, especially contrasted with Items 2, 8, 14, 15. [1000597240021] (!) (!)

• Item 16, Seventh Schedule (previous involvement in case): Limited to prior involvement in the specific dispute (not prior arbitration between same parties on related issues/periods under same agreement); must contrast with Fifth Schedule Items 22/24; prior award as arbitrator does not create reasonable bias likelihood mandating ineligibility. [1000597240022][1000597240023][1000597240024] (!) (!)

• No apparent bias from prior award: Arbitrator expected to approach subsequent related arbitration with open mind/objective judgment; prior decision alone insufficient for bias unless closed mind evidenced; common in repeat disputes (e.g., successive periods). [1000597240024][1000597240027] (!)

• Outcome in facts: Single professional opinion by arbitrator to party on unrelated legal issue (2014) does not trigger Item 1; prior service as arbitrator in earlier phase of multi-arbitration dispute does not trigger Item 16; appointments upheld, challenges to tribunal order dismissed. [1000597240021][1000597240022][1000597240031]