As per Section 12 of the Act, the person who has been approached in relation to his possible appointment as an arbitrator must give disclosure regarding any direct, indirect of past or present relationship with any of the parties or in relation to any interest in the subject matter in dispute etc. which may raise legitimate doubts on his independence and impartiality. Further, such person is also required disclose any situation or circumstance which may impact his ability to devote sufficient time to arbitration. The said disclosure is to be provided in such form as prescribed in the sixth schedule of the Amendment Act.
The Act also includes fifth schedule, introduced vide the Amendment Act, which elucidates guiding factors in determining whether such circumstances exist which may give rise to justifiable doubts as to the independence and impartiality of the arbitrator.
Further as per seventh schedule, if the relationship of the person, who has been approached to be appointed as the arbitrator, and the parties or the counsel or the subject matter falls within the forbidden categories, then such person shall be considered ineligible to be appointed as an arbitrator.
Criteria for appointment
In the case of Reliance Industries Ltd. & Ors v Union of India the Supreme Court stated that it was important to ensure that no doubts were cast on the neutrality, impartially and independence of the arbitral tribunal. Therefore the Supreme Court held that qualification, experience and integrity should be considered as important parameters for deciding the appointment of an arbitrator.
Judgement of the apex court
In the case of Voestalpine Schienen GmBH v. Delhi Metro Rail Corporation Limited,the primary issue was whether the arbitration clause providing for appointment of arbitrators from a panel of arbitrators was contrary to the parameters of impartiality and eligibility as per amended section 12 of the Act.
In the case Voestalpine Schienen GmBH v. Delhi Metro Rail Corporation Limited the Supreme Court took assistance of the book of O.P. Malhotra on the Law and Practice of Arbitration and Conciliation, where it has been rightly observed that one of the most important foundational pillars of the Arbitration and Conciliation Act, 1996 is the “party autonomy in the choice of procedure”, meaning, the parties have the freedom to follow the procedure as per the arbitration agreement executed between the parties. Further, this provision shall apply even when a substitute arbitrator is being appointed and, therefore, appointment of such a substitute arbitrator should also be done in accordance with the provisions of the original agreement, as applicable to the appointment of the arbitrator at the initial stage. However, this autonomy of the parties to choose their own arbitrator and/or procedure will not be effective unless the person who is being appointed as an arbitrator is neutral, impartial and independent. Thus, this judgment comes with an aim to consolidate the viewpoint of the Supreme Court on neutrality, impartiality and independence of the arbitral tribunal and therefore, will have far reaching effects not only in domestic arbitration but also on the international commercial arbitration.
Independence and impartiality forms an integral part of any judiciary system as it inevitably has an impact on the perception of justice and the administration of justice itself. While independence means that the arbitrator has no stake or apparent conflict with the parties or the sum involved in the proceedings, impartiality means that the arbitrator provides equal opportunity to be heard to both the parties in order to present their case. Thus, it is undisputable that arbitration is nothing but a forum to achieve the ends of justice and therefore it is necessary that under no circumstances the arbitration proceedings are abused or tainted by the partiality of the arbitrator or the arbitral panel.