Procedure to challenge the arbitrator
Section 13 governs the procedure of challenge. Section 13 provides that the parties are free to agree on a certain procedure for the challenge of arbitrator by themselves. However, if they haven’t chosen a particular process, then the one provided by this section has to be followed.
Any party who finds any information under Section 12 to cause suspicion and apprehension of bias or impartiality and independence of the arbitrator, within 15 days of becoming aware of such circumstances or within 15 days of the constitution of the Tribunal, must send a written statement of the reasons for the challenge to the Tribunal.
This written statement must consist of all the facts assembled that point out the suspicion leading to the challenge. These facts must be reasoned with the conduct of the Arbitrator that lead the suspicion. The justification of the suspicion should be explained well. The limitation period of 15 days also holds importance. If these 15 days have passed in any situation, then it amounts to an implied waiver. These 15 days are also extremely important in judging the Arbitrator’s conduct. There have been cases where the Arbitrator acted in undue haste and did not wait for these 15 days to commence arbitration. The arbitrator accepted the reference and held a procedural meeting before letting these 15 days buffer period to complete. The Arbitrator also did not provide for a disclosure and only did so after repeated requests from one of the parties. This formed the basis for the challenge application under S. 12 and 13.
The Arbitral Tribunal has a right to rule on their own jurisdiction and can hear their challenge objection by themselves. If the arbitrator removes himself from office after accepting the challenge, then both the parties have to start afresh in appointing another arbitrator and start the proceedings from scratch.
If the party challenging an arbitrator is not successful, the tribunal shall continue with the proceedings in the same manner as if there had been no challenge whatsoever. The party challenging appointment of the arbitrator will have no option but to proceed with the arbitral proceedings under protest, until the award is passed, because these decisions of the tribunal are not appealable.
Once the award is passed by the tribunal, the party seeking removal of the arbitrator can question the independence and impartiality of the arbitrator in a petition to set aside the award under Section 34 of the Arbitration and Conciliation Act.
However, a challenge under Section 34 based on the absence of independence or impartiality is possible only when there was an unsuccessful attempt to challenge the same before the Arbitral Tribunal. It cannot be raised for the very first time in a court under a Section 34 application. If the challenge which had been unsuccessful before the tribunal becomes successful in court, then the same would result into setting aside the award. That would also destroy the entire proceedings of dispute resolution and both the parties shall have to start afresh. The court in considering each different situation, can choose to rule differently on whether the parties are liable to pay fees to the arbitrator.
Challenge to appointment of an employee of a party as an arbitrator
With Schedule V and VII in existence because of the 2015 amendments, the process of disqualification has become much easier. There have been several cases prior to the 2015 Amendment where the arbitration agreement spelled the requirement of an employee as an arbitrator, especially when one of the parties was a PSU or a government department entering into a contract with a private entity.
However, this also happened in case of arbitrations between two private entities themselves, see for example, in the case of Aravalli Power Co. Ltd v. Era Infra Engineering (2017 Supreme Court).
Situations where current or ex-employees were arbitrators and whose appointment was upheld by the court was primarily in context of pre-2015 amendment situations. Post the 2015 Amendment, a current employee or an ex-employee who worked with the organization (even if it is a government organization) who is appointed as arbitrator can be challenged on grounds of violation of impartiality (see first paragraph of Seventh Schedule).
The statement of challenge is not very difficult to draft, because all it contains is the relevant facts that amounted to suspicion reasoned with the conduct of the arbitrator.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.