Bombay High Court
Sanjeev Kumar Kailash Prasad Agarwalla ... vs Bharat Co-Operative Bank (Bombay) ... on 9 January, 2023
Author: Bharati Dangre
Bench: Bharati Dangre
1/23 ARBAPL 26495-96.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION (L) NO. 26495 OF 2022
WITH
INTERIM APPLICATION (L) NO.26866 of 2022
IN
ARBITRATION APPLICATION (L) NO.26495 OF 2022
Sanjeev Kumar Kailash Prasad Agarwalla .. Applicants
and Anr
Versus
Bharat Co-operative Bank (Bombay) .. Respondent
Limited
WITH
ARBITRATION APPLICATION (L) NO.26496 OF 2022
WITH
INTERIM APPLICATION (L) NO.26897 of 2022
IN
ARBITRATION APPLICATION (L) NO.26496 OF 2022
Maya Sanjeev Kumar Agarwalla and ors .. Applicants
Versus
Bharat Co-operative Bank (Bombay) .. Respondent
Limited
Mr. Aniruddha Mitra with Amritam Mandal, Anukul Seth,
Nishtha Malik and Sonali Kochar i/b NAS Legal for the
applicants.
Mr. Yatin Shah with Veer Kankaria and Sunil Shukla i/b Apex
Juris LLP for the respondent.
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CORAM: BHARATI DANGRE, J.
DATED : 9th JANUARY, 2023.
JUDGMENT:-
1 By the two applications filed under Section 11(5) read with Section 14 and 15 of the Arbitration and Conciliation Act, 1996, the two applicants, who are the opponents before the Arbitral Tribunal, which was constituted to adjudicate the claim filed by the respondent Bharat Co-operative Bank Ltd, Bombay, seek the following reliefs :-
(i) The mandate of the learned Arbitrator be terminated on account of lacunae of S.21 Notice and also as de-jure and de-facto being ineligible to act as an arbitrator as his appointment is hit under Section 12 of the Arbitration and Conciliation Act, 1996 read with 5 th 6th and 7th Schedule thereunder,
(ii) Another arbitrator be appointed to adjudicate the disputes between the parties.
(iii) Interim stay of all further proceedings in the arbitration till the disposal of the instant application be granted by this Hon'ble Court;
2 The applicants proceed to narrate in the two distinct applications, that on receipt of the communication from the Sole Arbitrator, dated 25/11/2021, the applicants were informed about initiation of arbitration by the respondent Bank, pursuant to Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 3/23 ARBAPL 26495-96.doc which the Arbitrator had entered upon a reference and the arbitration proceedings were scheduled on 21/12/2021. Along with the said notice, the applicants received a Statement of Claim, which was staked before the Arbitrator Mr.Vasant Narayanrao Lothey (Patil), Ex-Presiding Officer, Judge DRT-3, Mumbai appointed by Registrar of Co-operative Societies, Maharashtra, Pune u/s.84 of the Multi State Co-operative Societies Act, 2002 (for short 'MSCS Act').
The claim staked by the respondent Bank in the two distinct disputes was projected on the basis that the Bank is a Multi-state Co-operative Society, which is engaged in banking business in State of Maharashtra, Karnataka and Gujarat and the opponents being the members of claimant's Bank, availed the financial facility, the opponent no.1 as the principal borrower and opponent no.2 as Joint/co-borrower. Since the loan was availed for the purpose of business expansion, it was disbursed under the distinct Asset Backed loan account, which resulted in execution of two distinct loan agreements on 22/6/2016 along with the Covering cum Undertaking from Authority cum Standing Instruction Letter. The claimant specifically pleaded that the opponents executed the Demand Promissory Note and the letter of General Lien and Set-off along with the Loan Agreement which furnished a security for due repayment of the loan along with interest, costs, charges, expenses, penal interest etc. to the Claimant/Bank. Apart from this, an Indemnity bond cum Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 4/23 ARBAPL 26495-96.doc Affidavit cum Undertaking was also executed by creating a registered mortgaged on the property belonging to the opponents.
Since the opponents were irregular in paying the monthly instalments and/or clearing the outstanding loan amount and neglected and avoided to regularize the outstanding loan, in respect of the loan facility, they rendered themselves liable for future consequences. This resulted in the Claimant recalling the entire loan facility through the legal notice issued to the opponents and this covered an amount of the loan along with interest, penal interest, costs, charge, expenses etc. Apart from this, it is also the claim of the Bank that they have initiated proceedings under the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the District Magistrate has passed an order for taking physical possession of the mortgaged premises. Since the arbitration was invoked and according to the applicants, they were not intimated about invocation of arbitration, the applicants have questioned the commencement of arbitration proceedings, which according to them, can only be commenced, after a notice is issued u/s.21 of the Arbitration and Conciliation Act.
3 The applicants, on receipt of the claim of the Bank, realised that the Arbitrator has been appointed u/s.84(4) of the Multi-State Co-operative Societies Act, 2002 by the Commissioner for Co-operation and Registrar of Co-operative Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 5/23 ARBAPL 26495-96.doc Societies, Pune, by his order dated 6/10/2021. The order of appointment of the Arbitrator is placed on record along with the application.
On perusal of the appointment order, the applicants have questioned the appointment, since according to them, it is evident from the letter of appointment, that the Arbitrator is appointed to adjudicate the disputes pending before him and he is also appointed as Arbitrator in 13 other proposals, which take the number of references made over to him to '19' (Nineteen), all in connection with the respondent - Bharat Co-operative Bank (Bombay) Ltd.
It is in this background the applicants claim that the number of arbitrations assigned to the Arbitrator would give rise to a justifiable ground as to his independence or to his impartiality and by placing reliance upon clause 22 of the Vth Schedule of the 1996 Act, an apprehension is raised by the applicants that the Arbitrator cannot adjudicate the disputes referred to him in an impartial manner and the object of the Amendment Act 3 of 2016, inserting the safeguards to ensure independence of the Arbitrator, is being frustrated.
4 With this apprehension in mind, the applicants filed an application u/s.12 and 13 of the Arbitration and Conciliation Act, 1996, praying, inter alia, for the learned Arbitrator to recuse himself and/or to withdraw from the office of the Arbitrator in Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 6/23 ARBAPL 26495-96.doc connection with the Arbitral reference. The two distinct applications raising similar ground were rejected by the learned Arbitrator, by a common order dated 16/6/2022 and hence, the present applications are filed, with a specific ground being raised to the following effect :-
"15 The appointment of the learned Arbitrator is clearly hit under clause 22 of the 5 th Schedule to section 12 of the Act of 1996. under the 6 th Schedule to section 12 it is mandatory for the learned Arbitrator to make disclosure in the form referred to therein. In the instant case, the learned Arbitrator had made no such disclosure. It is not in dispute that the learned Arbitrator is being appointed for adjudication of 19 nos. of disputes of the same claimant bank.
16 There is no doubt that there exist circumstances which gives rise to justifiable doubts as to the independence or impartiality of the Learned Arbitrator Moreover, the learned Arbitrator has been appointed in 19 nos. disputes by the same claimant bank, as such, he is having significant financial interest in the outcome of the dispute vis-a-vis his feed and further appointment as Arbitrator by the same claimant. Thus, the appointment is also bad and hit under Clause 7, 13 and 14 of the 7 th Schedule to Section 12(5) of the 1996 Act.
17 Under section 12(5) read with 7 th Schedule makes it clear that if the Arbitrator falls in any one of the categories specified in the 7th Schedule, he becomes ineligible to act as Arbitrator. Once he becomes ineligible it is clear that under Section 14(1)(a) of the Act, he then becomes de-jure and is unable to perform its function inasmuch in law, he is regarded as ineligible. In such a case i.e. the case which falls under Section 12 and section 14(1) Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 7/23 ARBAPL 26495-96.doc
(a) of the Act of 1996, the Arbitrator becomes ineligible as a matter of law i.e., de-jure, is unable to perform its functions.
Thus, under Section 12 being ineligible to be appointed as an Arbitrator. This being so, mandate of the learned Arbitrator is automatically terminated and he shall then be substituted by another Arbitrator under Section 14(1) itself".
4 The extreme urgency is expressed by the applicants in view of the fact that the Arbitrator is proceeding with the arbitration and has directed the applicants to file statement of defence and it is projected before me that unless and until the arbitral proceedings are stayed, grave harm, loss and injury will be caused to the applicants.
5 Heard learned counsel Mr.Aniruddha Mitra i/b NAS Legal for the applicants and Mr.Yatin Shah i/b Apex Juris LLP for the respondents.
The learned Arbitrator has passed the impugned order dealing with the applications filed under Section 12 and 13 of the Arbitration and Conciliation Act, in the backdrop of the factual scenario placed before him as well as dealing with the legal submissions advanced to the effect that the appointment of arbitrator in 19 matters in connection with the disputant bank is hit by the embargo created under the Vth Schedule to the 1996 Act and hence, the appointment is bad-in-law.
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The learned Arbitrator also decided the objection about his appointment and his recusal as prayed for.
6 The Disputant Bank opposed the application, by specifically pleading that it is a Multi-State Co-operative Society and the appointment of the Arbtirator, is in terms of sub-section (4) of Section 84 of the Multi-State Co-operative Societies Act 2002, which has come into force with effect from 19/8/2002. It is the case of the Bank, that the amendment carried out in the Arbitration Act 1996, shall not apply to the arbitrations carried out under the 2002 Act and therefore, the submission that the appointment is hit by clause 22 of Vth Schedule of the Arbitration and Conciliation Act, was specifically contested. It was also sought to be argued before the Arbitrator that the special mechanism, as regards appointment of Arbitrator, under the MSCS Act, has overriding effect over the provisions of appointment of Arbitrator under the Arbitration Act, 1996, on account of the save and otherwise clause under Rule 30. The disclosure requirement as contemplated u/s.12(1) is not applicable to the arbitrations to be conducted u/s.84 of the MSCS Act, was and is the submission of the learned counsel representing the Bank.
7 The Sole Arbitrator dealt with the rival contentions placed before him and dealing with the objection about the Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 9/23 ARBAPL 26495-96.doc initiation of proceedings without invocation of arbitration, as contemplated u/s.21 of the Arbitration and Conciliation Act, he has recorded as under :-
"9 The concerned authority under the MSCS Act, 2002 is only empowered to appoint an arbitrator from their panel. There is no say as far as other side is concerned in such cases. The learned counsel for the disputant in paragraph no.12 of the note of argument covered this point. The judgment of Division Bench of Hon'ble Bombay High Court is prior to amendment to an Arbitration Act. But the saving clauses as contemplated twice in section 84 of the MSCS Act 2002 that is in subsection(1) of Section 84 and in subsection (5) to section 84 are there to protect the provisions of MSCS Act 2002. The provisions of Section 84 will not be hit by either amended or unamended Arbitration Act 1993. Chapter IX of MSCS Act 2002 consists of two sections only 84 and 85 and section 85 which provides for its own limitation takes care of the same saving clause by saying that 'notwithstanding anything contained in the Limitation Act, 1963'. Therefore, only the Hon'ble Bombay High Court has observed that it is a complete code in itself. Subsection (2) of Section 11 of Arbitration Act provides the liberty to the parties to agree on a procedure for appointing the arbitrator. Section 84 does not provide for such a liberty but gives a mandate that the dispute shall be settled or decided by the arbitrator who is appointed by Central Registrar";
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Relying upon the decision of the Bombay High Court, wherein it has been held that the provisions of Section 84 of the MSCS Act, 2002 gives an over riding effect to the Act, the Arbitral Tribunal has observed as under :-
"12 The another ruling is Car Mart Private Limited and another Vs. Bombay Mercantile Bank reported in 2016 SCC online Bombay 4910, in paragraph no.5 of the judgment it is observed that the provision of section 84 of MSCS Act 2002 gives an overriding effect to the Act. It is also observed that while challenging the final award the party aggrieved can raise all the contentions. It is also observed in para no.7 that even there is a challenge raised to the jurisdiction of the arbitral tribunal as provided under Section 16 of the Arbirator and Conciliation Act, the arbitral tribunal is competent to rule on the same".
13. In view of all the above discussion the applications filed by the opponents deserve to be rejected and hence I pass the following common order"
8 The moot question that arises for consideration in the two applications placed before me, is whether the Arbitrator is bound to make disclosure as contemplated under Schedule VI of the Arbitration and Conciliation Act, 1996 and the second question being, whether clause 22 of Schedule VII which creates an embargo upon the number of Arbitrations to be made over to an Arbitrator would hit the appointment of the Sole Arbitrator in the present case, who has been appointed by the Government of Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 11/23 ARBAPL 26495-96.doc Maharashtra, Commissioner for Co-operation and Registrar of Co-operative Societies, Maharashtra State, Pune, u/s.84(4) of the Multi-State Co-operative Societies Act, 2002.
Recently, I had an opportunity to deal with a similar contention in case of Kalpesh Shantikumar Mehta & Ors Vs. NKGSB Co-op. Bank and Anr in Commercial Arbitration Petition No.220/2022 and 221/2022, to the effect that the mandate of the Arbitrator stand terminated as he becomes de jure or de facto unable to perform his functions in the wake of the disqualification incurred by him. By drawing a comparative analysis between the Arbitration and Conciliation Act, 1996, and the Multi-State Co-operative Societies Act, 2002, and by recording that sub-section (5) of Section 84 of the Multi-State Co-operative Societies Act, which is a special statute to deal with the co-operative societies, having multi-state operations, has by reference invoked the provisions of the Arbitration and Conciliation Act, 1996, the following observations are recorded in the judgment :-
"25 In contrast, under the MSCS Act, what is necessarily contemplated is a statutory arbitration, with the power of appointment of Arbitrator being reposed in an authority created under the statute itself i.e. 'Central Registrar' appointed under sub-section (1) of Section (4) of the Act, which would include any Officer empowered to exercise the power of Central Registrar. Hence, there is no appointment of Arbitrator by any party and the Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 12/23 ARBAPL 26495-96.doc petitioners are under the misconception, that the appointment is made by the Bank, who is the disputant, aggrieved by non-payment of the dues.
When the procedure for appointment adopted by the Central Registrar, is minutely looked into, it is evident that it maintain a panel of Arbitrators, which is constituted every three years and since the powers are delegated to the respondent no.3, the Commissioner, the panel is maintained by him and this Panel is re- constituted every three years. The empanellment is undertaken, by following a specific procedure of empanelling qualified persons to act as Arbitrators. The Commissioner for Co-operation and Registrar of Co- operative Societies has no interest in the subject matter, but he choose an Arbitrator from the panel prepared by him and assign to a particular arbitrator, distinct number of cases filed by a particular disputant and as it could be seen from the appointment order in the present case, the Arbitrator is appointed for 10 disputes, which are mentioned in the order of appointment issued, with a clear understanding that the provisions of the Arbitration Act shall apply to the arbitration proceedings and even the fees and other expenses of the Arbitrator shall be governed by Act of 1996.
The order of appointment also contemplate that immediately after his appointment, the Arbitrator shall submit a brief report regarding any adverse remarks, strictures or orders passed by the competent Court against him, if any.
The reason for such a disclosure is obvious, being to ascertain whether the Arbitrator has faced any adverse action at the hands of a competent court, in Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 13/23 ARBAPL 26495-96.doc which circumstances he may be considered to be incompetent to act as an Arbitrator, if his appointing authority feel so.
Not only this, the Arbitrator has also made a disclosure statement in form of 'self declaration of the prospective Arbitrator' as required to be done u/s.12(1)
(a) and (b) and Sixth Schedule of Arbitration and Conciliation Act, 1996. In this statement, he has disclosed the number of arbitrations which he has undertaken as well as his prior experience in arbitration proceedings. This include his various arbitration assignments from 2005 onwards. There is also a disclosure that the prospective Arbitrator was an arbitrator for the Disputant Bank from 2010 till March 2020.
26 The object in introducing the provision for disclosure by the proposed arbitrator in Section 12 of 1996 being apparent, to have transparency in the process of Arbitration and this could be achieved by assuring the independence and impartiality of the Arbitrator to carry out the process and from the disclosure given by the proposed arbitrator, it could be discerned whether the Arbitrator has any direct or indirect relationship with, or has any interest in any of the parties, or in relation to the subject matter in dispute, which may be financial, business, professional or any other kind.
Another factor which could be inferred from the disclosure is whether the Arbitrator would be able to devote sufficient time to the Arbitration process, and in particular, his ability to complete the Arbitration within the period of 12 months. Having more than three Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 14/23 ARBAPL 26495-96.doc arbitrations in hand at the same time, would not per-se disqualify an Arbitrator and that certainly, is not the intention of the Statute to disqualify him, but a disclosure would only give a clarity, on whether he has sufficient time on his hands to devote to the arbitration proceedings, in which he is proposed to be appointed. 27 In the present case, in my considered opinion, I need not go that far to ascertain whether the Arbitrator would be in a position to complete the proceedings with the number of arbitrations assigned to him, since the disclosure contemplated under clause no.22 of Schedule V is for inference of a circumstance of impartiality of an arbitrator who was appointed, by one of the parties or an affiliate of one of the parties on more than two occasions in past three years.
28 The axe of impediment or the embargo would not fall upon an Arbitrator appointed by the respondent no.3, i.e. Commissioner of Co-operation and Registrar, Co-operative Society, M.S. as he is not appointed by any of the parties to the dispute or by an affiliate of the disputant and therefore, he having more than two arbitrations assigned to him, would not create any legal impediment on his part. The Arbitrators from the Panel prepared by respondent no.3 have experience in dealing with the disputes being referred to them, which has arisen on the default attributed to the borrowers and guarantors, as against the facility extended to them by the Bank, and in the wake of the expertise possessed by them, the dispute can be conveniently adjudicated and which may not consume considerable length of time and since the Arbitrator is exclusively devoted to the similar nature of work, who shall take up the proceedings of Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 15/23 ARBAPL 26495-96.doc similar nature, it would definitely not create a disqualification in him, to act as an Arbitrator.
Hence, I am not persuaded to accept the argument advanced by the counsel for the petitioners that the Arbitrator has incurred a disqualification, and therefore has become de jure, unable to perform his functions as an arbitrator, requiring his mandate to be terminated and the prayer for substituting him by a new Arbitrator, which is the relief prayed in the Petition, deserve to be granted".
9 However, I am in complete agreement with the submission of the learned counsel for the applicants that the imperative mandate as contemplated u/s.12(1) of the 1996 Act, make it obligatory, for a person who is approached in connection with his possible appointment as an Arbitrator, to disclose in writing any circumstance, in existence, either direct or indirect, of any past or present relationship or interest in any of the parties, or in relation to the subject matter in dispute, which is likely to give rise to justifiable doubt as to his independence or impartiality of the learned Arbitrator. The grounds culled out in Vth/VIIth Schedule shall be the determining factors to ascertain whether the existing circumstance give rise to such a doubt, and therefore, the legislature made it mandatory for an Arbitrator to make a disclosure in the form of VI Schedule.
In the case of Kalpesh Shantikumar Mehta Vs. NKGSB Co-op Bank Ltd & Anr (supra), the Arbitrator had Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 16/23 ARBAPL 26495-96.doc made a specific disclosure in the format prescribed in Schedule VI, disclosing the number of arbitrations which were entrusted to him and also his entire career graph as an arbitrator, but it is apparent that in the present case, there is no such disclosure.
The letter of appointment issued in favour of the Sole Arbtirator in the present case, disclose that the Arbitrator is appointed for six proposals, pending before him as on date, and in case of 13 new proposals. The list of disputes referred to him was appended as Annexure 'A' and 'B' to the order of appointment.
The order of appointment of the Sole Arbitrator Shri Vasant Narayan Lothe (Patil) also included a following but very relevant clause to the following effect:-
"The Arbitrator shall submit immediately a brief report regarding any adverse remarks, strictures or orders passed by the competent Court against the Arbitrator, if any"
The above clause necessarily indicate a disclosure by the Arbitrator about his conduct in such a capacity, which may include any adverse comments/remarks, which would preclude from he being appointed/acting as an Arbitrator in terms of his appointment.
10 In the present case, there is no disclosure by the Sole Arbitrator, as contemplated under Schedule VI of the Arbitration and Conciliation Act, 1996 and since it has been held in case of Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 17/23 ARBAPL 26495-96.doc Kalpesh Shantikumar Mehta vs. NKGSB Bank Ltd (supra), that since sub-section (5) of Section 84 is a statute by reference, all the amendments that are effected in the Arbitration and Conciliation Act, 1996, must necessarily govern the proceedings of Arbitration u/s.84 (1) of the Multi-State Co-operative Societies Act, 2002.
Having held as above, I see no reason to deviate from the said procedure, when Section 84 of the Multi-State Co- operative Societies Act has adopted a mechanism of statutory arbitration by specifically providing that when the dispute is referred to Arbitration under sub-section (1), the same shall be settled or decided by the Arbitrator to be appointed by the Central Registrar and the provisions of Arbitration and Conciliation Act, 1996 shall apply to such arbitration proceedings, as if the proceedings for arbitration were referred for settlement or decision under the provisions of Arbitration and Conciliation Act, 1996.
11 The argument of the counsel for the applicants that the MSCS Act, 2002 is a special statute, cannot be doubted but the submission that Section 84 has an overriding effect over the Arbitration and Conciliation Act, 1996, cannot be accepted. Sub- section (5) of Section 84 begin with the words "Save as otherwise provided under this Act" but use of the words itself without any specific procedure/provision being enacted in the Act of 2002, do not wipe out the effect of the applicability of provisions of the Arbitration and Conciliation Act, 1996, to the statutory Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 18/23 ARBAPL 26495-96.doc arbitration contemplated u/s.84 of the MSCS Act.
Undisputedly, Section 84 of the Act of 2002 is a Code in itself, which prescribe the nature of disputes that can be resolved through Arbitration along with a mechanism provided for appointment of Arbitrator by the Central Registrar. However, instead of providing the procedure to be followed in such arbitration proceedings, the Parliament deemed it appropriate to adopt the procedure prescribed for carrying out the arbitration process under the Arbitration and Conciliation Act, 1996 by specifically providing that the provisions of the Act of 1996, shall apply to all the arbitrations under the MSCS Act, 2002, as if the proceedings for arbitration were referred for settlement or decision under the Act of 1996. The only window kept open for escape was, any particular provision provided under the MSCS Act, 2002 itself and this provision is to be found in Section 85 of the Act of 2002, in regards to the period of limitation. There being no other exception to the provision of Arbitration and Conciliation Act, since sub-section (5) of Section 84 is a statute by reference, I am not persuaded to accept the submission of the learned counsel for the applicants and also the finding rendered by the Tribunal to the effect that the Act of 2002, being a special enactment, the procedure of disclosure as contemplated u/s.12 read with Schedule V, VI and VII of the Arbitration and Conciliation Act, 1996, cannot be made applicable to the Arbitral References emanating u/s.84 of the MSCS Act, 2002.
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12 Arbitration being a chosen forum decided by the
parties, who have also agreed to the name of a person, to act as an arbitrator, to adjudicate the disputes that have arisen between them, the essence of the whole process lies in its impartiality and unbiased nature. An independent and impartial Arbitral Tribunal is one of the essential ingredient and foundation stone of Arbitration law and the procedure for appointment of Arbitrators is primary and integral part of the entire arbitral process. While such a process allow each party to chose a co-arbitrator to constitute the Tribunal or a Sole Arbitrator, as the case may be, to be decided by consensus, necessarily a person who has an interest in the outcome or decision in the dispute is not expected to be appointed as a Sole Arbitrator. The test of independence and impartiality of an Arbitrator presiding over an Arbitral Tribunal, is therefore, governed by the respective substantive and procedural laws, which ensure independence on one side, which necessarily refer to the Arbitrator's relationship with one of the parties and impartiality on other side, which necessarily would weed out actual or apparent bias of an arbitrator, either in favour of one of the parties or in relation to the issue in dispute. The two terms are embodied together as a term of art, being recognized as a hall-mark of the arbitration process.
The amendments brought in by the 2016 Amendment Act, reflect the sanguine approach of the legislature to maintain the independence and impartial approach on part of Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 20/23 ARBAPL 26495-96.doc the Presiding Officer of the Arbitral Tribunal. This principle must, therefore, necessarily govern all the arbitrations, whether statutory one, as contemplated under the MSCS Act, 2002, or those under the Arbitration and Conciliation Act, 1996, the process being chosen as choices forum, the quintessence of the process being to maintain independence and impartiality. The pristime issue of adjudicative ethics rest on the premise that the Arbitral Tribunal permitted by law to try cases and adjudicate upon the disputes/differences arising between the parties, must not only be unbiased, but must also avoid even the possibility or likelihood of bias.
13 In the wake of the above principle, clearly flowing through the concept of Arbitration, and an attempt on part of the legislature to maintain the sanctity of the procedure, it is necessary that the Arbitrator, who is chosen to adjudicate the disputes that have arisen between the Bank and the Borrower/Guarantors must necessarily submit a disclosure, as contemplated under Schedule VI. Whether, upon this disclosure, the Arbitrator who would incur a disqualification, is liable to be determined first by the Arbitrator himself, if an objection is raised to that effect by either of the party and subsequently by the Competent forum, when challenge is raised to the competence of the Arbitrator to arbitrate a dispute, on the ground of he lacking impartiality and neutrality. However, while dealing with a submission that clause 22 of Schedule V would create an Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 21/23 ARBAPL 26495-96.doc impediment in the present case, since the Arbitrator has been appointed in 19 matters, is not a submission worth consideration as the said clause contemplate that when the Arbitrator has, within the past three years, being appointed, on two or more occasions by one of the parties or affiliate of one of the parties, it is an indication of a possible likelihood of bias, on being appointed so.
In the present case, the appointment of the Sole Arbitrator is not by any of the party to the dispute, but the appointment is by the Commissioner for Co-operation and Registrar of Co-operative Societies, a delegate of the Central Registrar, who has maintained a panel of qualified arbitrators to deal with similar nature of disputes and practically it is a matter of convenience and expeditiousness that the same Arbitrator would adjudicate the disputes arising between a disputant bank and the defaulter, either the borrowers or the guarantors with utmost expediency.
In any case, in the present scenario, the Arbitrator appointed by the order of appointment dated 6/10/2022 has not incurred any disqualification merely on the ground that he is assigned with 19 arbitrations, as he is not appointed by either of the party nor he is interested in the outcome of the dispute, being appointed by the party itself. On the contrary, the arbitrator being qualified to act so, with his previous experience would be in an advantageous position to adjudicate the dispute raised by the Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 ::: 22/23 ARBAPL 26495-96.doc Bank for recover of the amount of loan, in terms of the agreement that is entered between the Borrower/ Guarantors on one hand and the Bank on the other, with the terms and conditions specifically agreed upon.
However, in order to ensure that the arbitration proceedings are carried out by the Arbitrator which would infuse an element of trust between the parties, as regards his impartiality and independence, he must make a statement of disclosure as contemplated in Schedule VI of the Arbitration and Conciliation Act, which shall include a disclosure about his prior experience, number of ongoing arbitrations and existence of any circumstances, disclosing any past or present relationships with or interest in any of the party, or in relation to the subject matter in dispute, whether financial, business, professional or any other kind. He must also disclose the circumstances, which are likely to affect his ability to devote sufficient time to arbitration and his ability to finish the entire arbitration within 12 months, as contemplated u/s.12(1)(b) of the Arbitration and Conciliation Act, 1996.
Subject to the aforesaid compliance being ensured by the Arbitrator, by making the disclosure to the parties to the dispute, within a period of six weeks from the date of uploading of the order, the learned Arbitrator is permitted to continue with the Arbitration proceedings thereafter.
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14 In the wake of the aforesaid discussion, since I find no
merit in the submission advanced on behalf of the applicants, claiming that the Arbitrator has become de jure/de facto, unable to continue with the Arbitration proceedings, subject to the compliance as directed above, the Arbitration Applications are dismissed by upholding the impugned order passed by the Sole Arbitrator.
In view of the disposal of the Arbitration Applications, Interim Applications, therein do not survive and are disposed off accordingly.
( SMT. BHARATI DANGRE, J.) Tilak ::: Uploaded on - 28/02/2023 ::: Downloaded on - 28/05/2023 14:25:34 :::