Document Fragment View

Matching Fragments

35. On the validity of the order dated 20.10.2016 rejecting the application moved by the respondents under Section 12/13 of the Arbitration Act' 1996, it was held that Section 12(1)(a) of the Arbitration Act' 1996 casts duty on the arbitrator at the time of his appointment to disclose in writing any circumstances such as existence of either direct or indirect, of any past or present relationship with or interest in any of the parties, whether financial, business, professional or any other kind which is likely to give rise to justifiable doubts as to his independence or impartiality. Section 12(2) of the Arbitration Act' 1996 casts duty on the arbitrator that he should during the arbitral proceedings disclose in writing the circumstances referred to in sub-section (1), if any. The disclosure has to be made in the form specified in the Sixth Schedule. Explanation 1 to Section 12(1) provides that the ground stated in Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubt of independence or impartiality of the arbitrator.

37. The effect of these provisions is that if the challenge is not successful, the arbitral proceedings must go on without any right to appeal. However, the only remedy is the last remedy of seeking relief to set aside the award under Section 34 of the Arbitration Act' 1996. It was, thus, opined that Section 12(1) of the Arbitration Act' 1996 cast an obligation upon the arbitrator to disclose existence of circumstances referred to in Section 12(1) of the Act' 1996.

39. Admittedly, Mr. Mahendra G. Lodha, who is the Director of Pinal Infrastructure Private Limited holds 51% shares in the claimant Company, which was later merged with Nitrix Logistics Pvt. Ltd., which continues to be a major shareholder of the claimant Company. Mr. Mahendra G. Lodha, being the Director and shareholder of Nitrix NEUTRAL CITATION C/FA/1639/2023 CAV JUDGMENT DATED: 13/09/2024 undefined Logistics Pvt. Ltd., is in turn holding 51% shareholding in the claimant Company and as such would obviously be interested in the outcome of the arbitration proceedings. Mr. Mahendra G. Lodha was known to and having relationship with the learned sole arbitrator not only in the past, but even during the arbitration proceeding. The name of Mr. Mahendra G. Lodha had surfaced for the first time in the cross-examination of Mr. Rajesh Lodha, Director of the claimant Company, in the year 2015. It was, thus, incumbent upon the learned sole arbitrator to make a mandatory disclosure under Section 12 of the Arbitration Act' 1996 either at the time of his appointment or after the name of Mr. Mahendra G. Lodha surfaced in the cross-examination.

53. On the second issue about the learned Arbitrator's obligation to disclose his relationship with the parties to the dispute, as highlighted by the civil court in setting aside the order dated 20.10.2016 in rejection the application under Section 13(2) of the Arbitration Act' 1996, reliance is placed on the decisions of the Apex Court and Delhi High Court in State of Haryana vs. G.F. Toll Road (P) Ltd. [(2019) 3 SCC 505] and Himanshu Shekhar vs. Prabhat Shekhar [2022 SCC Online Del 1651]; respectively, to submit that it must be demonstrated by the party objecting to the independence and impartiality of the learned arbitrator that there exists justifiable doubts as to the fairness of the learned arbitrator. Mere apprehension of the party pleading bias against the learned arbitrator would not be sufficient to raise any doubt so as to accept its claim of disqualification of the learned arbitrator by virtue of provisions of Section 12(5) of the Arbitration Act' 1996. The test to be applied for bias is whether the circumstances are such as would lead to a fair-minded and informed person to conclude that the learned arbitrator was in fact biased. Mere allegations of bias are not a ground for removal of an arbitrator. The submission is that the award passed by the learned arbitrator cannot be said to fall within the grounds stated in Sub-section (2) of Section 34 of the Arbitration Act' 1996 and on both the above noted counts, the order NEUTRAL CITATION C/FA/1639/2023 CAV JUDGMENT DATED: 13/09/2024 undefined passed by the civil court under Section 34 of the Arbitration Act' 1996 is liable to be set aside and the award is to be upheld.