REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11126 OF 2017

(ARISING OUT OF S.L.P. (C) NO. 20679 OF 2017)

HRD CORPORATION (MARCUS OIL

AND CHEMICAL DIVISION) …APPELLANTS

VERSUS

GAIL (INDIA) LIMITED (FORMERLY GAS

AUTHORITY OF INDIA LTD.) …RESPONDENT

WITH

CIVIL APPEAL NO. 11127 OF 2017

(ARISING OUT OF S.L.P. (C) NO. 20675 OF 2017)

J U D G M E N T

R.F. Nariman, J.

1.Leave granted.

2.The present appeals raise interesting questions relating to the

applicability of Sections 12 and 14 of the Arbitration and Conciliation

Act, 1996, in particular with respect to sub-section (5) of Section 12

added by the Arbitration and Conciliation (Amendment) Act, 2015 (Act

3 of 2016) (hereinafter referred to as the 2016 Amendment Act).

3.Briefly stated, the relevant facts necessary to decide this case

are as follows. The respondent, GAIL (India), issued a notice inviting

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tenders for supply of wax generated at GAIL’s plant at Pata, Uttar

Pradesh for a period of 20 years on an exclusive basis. The

appellant successfully tendered for the said contract and the parties

entered into an agreement dated April 1, 1999. Disputes arose

between the parties, the appellant claiming that GAIL had wrongfully

withheld supplies of wax, as a result of which the appellant invoked

the arbitration clause included in the agreement.

4.Three earlier arbitrations have taken place between the parties.

The present dispute arises from the fourth such arbitration. For the

period 2004-2007, an Arbitral Tribunal consisting of Justice A.B.

Rohatgi (presiding arbitrator), Justice J.K. Mehra and Justice N.N.

Goswamy published an award on April 8, 2006 in which they directed

specific performance of the agreement dated April 1, 1999. This

award was never challenged and has since become final.

5.For the period 2007-2010, a second arbitration was held

consisting of the same panel as the first arbitration.

6.For the period 2010-2013, the same Arbitral Tribunal was

constituted. However, while the proceedings were pending, Justice

Goswamy expired and Justice T.S. Doabia was appointed in his

place. Justice A.B. Rohatgi resigned on February 17, 2013 as the

presiding arbitrator, as a result of which Justice S.S. Chadha was

appointed to fill his vacancy. This third arbitration proceeding

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culminated into two separate awards, both dated July 22, 2015. The

appellant has filed a petition under Section 34 of the Act assailing the

said awards, which is pending before the Delhi High Court.

7.In respect of the period from 2016 to 2019, initially, the

appellant nominated Justice K. Ramamoorthy as its arbitrator.

However, he withdrew from the case on December 14, 2016 and

Justice Mukul Mudgal was nominated as arbitrator in his place. The

respondent appointed Justice Doabia, and Justice Doabia and

Justice K. Ramamoorthy appointed Justice K.K. Lahoti to be the

presiding arbitrator, before Justice K. Ramamoorthy withdrew from

the case. Two applications have been filed by the appellant under

Section 12 of the Act, one seeking termination of the mandate of

Justice Doabia and the other seeking termination of the mandate of

Justice Lahoti. These two applications were heard and disposed of by

an order dated February 16, 2017. Justice Lahoti, with whom Justice

Doabia concurred, held that they were entitled to continue with the

arbitration. Justice Mukul Mudgal, on the other hand, concurred in

the appointment of Justice Lahoti but held that Justice Doabia’s

appointment was hit by certain clauses of the Fifth and Seventh

Schedules to the Act and, therefore, that his mandate has terminated.

As against this order, OMP No.22/2017 was filed before a single

Judge of the Delhi High Court who then dismissed both the petitions.

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8.Shri Shyam Divan, learned senior advocate appearing in civil

appeal arising out of SLP(C) No. 20679 of 2017 and Shri Gopal Jain,

learned senior advocate, appearing in civil appeal arising of SLP(C)

No. 20675 of 2017 have assailed the judgment of the single Judge.

According to Shri Divan, the appointment of Justice Lahoti squarely

attracted Items 1, 8 and 15 of the Seventh Schedule thereby making

him ineligible to act as arbitrator. He also argued that Items 20 and

22 contained in the Fifth Schedule are also attracted to the facts of

this case, thereby giving rise to justifiable doubts as to his

independence or impartiality. He further argued that if for any reason

Justice Doabia’s appointment is held to be bad, Justice Lahoti’s

appointment must follow as being bad as an ineligible arbitrator

cannot appoint another arbitrator. He has argued before us that the

2016 Amendment Act, which substituted Section 12(1), read with the

Fifth and Seventh Schedules and introduced Section 12(5), has to be

read in the context of the grounds for challenge to awards being

made narrower than they were under Section 34 of the Act. This

being so, it is extremely important that the independence and

impartiality of an arbitrator be squarely and unequivocally

established, and for this purpose, the grounds contained in the Fifth

and Seventh Schedules should be construed in a manner that

heightens independence and impartiality. According to learned

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counsel, once a Seventh Schedule challenge is presented before the

Court, the arbitrator becomes ineligible and consequently becomes

de jure unable to perform his functions under Section 14 of the Act.

9.Shri Gopal Jain, learned senior advocate appearing in civil

appeal arising from SLP(C) No. 20679 of 2017, argued that the object

of the 2016 Amendment Act is to appoint neutral arbitrators who are

independent and fair in their decision making. According to learned

counsel, Justice Doabia was ineligible as he squarely fell within Items

1, 15 and 16 of the Seventh Schedule, the last Item 16 being

contrasted with Explanation 3 thereof. According to him, Justice

Doabia has not disclosed in writing circumstances which are likely to

affect his ability to devote sufficient time to the arbitration and for this

reason also, his appointment should be set aside. According to

learned counsel, once Justice Doabia’s appointment falls, Justice

Lahoti’s appointment also falls.

10.Ms. Vanita Bhargava, learned counsel appearing on behalf of

the respondent, has argued, referring to various provisions of the

Seventh Schedule, that neither Justice Doabia nor Justice Lahoti are

ineligible to act as arbitrators. According to her, the list in the Fifth and

Seventh Schedules is taken from the International Bar Association

Guidelines on Conflicts of Interest in International Arbitration, 2014

(hereinafter referred to as IBA Guidelines) and must be read in

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consonance therewith. Once that is done, it becomes plain that Item

16 would not apply to Justice Doabia for the simple reason that he

should be an arbitrator who has had previous involvement in the very

dispute at hand and not in an earlier arbitration. For this purpose, she

contrasted Item 16 with Items 22 and 24 of the Fifth Schedule. She

also argued that the point regarding non disclosure on grounds

contained in Section 12(1)(b) is an afterthought and has never been

argued before either the Arbitral Tribunal or the single Judge.

According to her, the single Judge is right in holding that Justice

Lahoti’s appointment is not hit by Item 1 of the Seventh Schedule nor

is Justice Doabia’s appointment hit by Item 16 of the same Schedule,

and the reasoning contained in the judgment being correct need not

be interfered with.

11.Having heard learned counsel for both the sides, it is necessary

to first set out the statutory scheme contained in Sections 12 to 14 of

the Act. These Sections read as under:-

“Sec. 12 Grounds for challenge.-

(1) When a person is approached in connection with his

possible appointment as an arbitrator, he shall disclose in

writing any circumstances,-

(a)such as the existence either direct or indirect, of any past or

present relationship with or interest in any of the parties or in

relation to the subject-matter in dispute, whether financial,

business, professional or other kind, which is likely to give rise to

justifiable doubts as to his independence or impartiality; and

(b)which are likely to affect his ability to devote sufficient time to the

arbitration and in particular his ability to complete the entire

arbitration within a period of twelve months.

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Explanation 1.– The grounds stated in the Fifth

Schedule shall guide in determining whether

circumstances exist which give rise to justifiable doubts

as to the independence or impartiality of an arbitrator.

Explanation 2. – The disclosure shall be made by such

person in the form specified in the Sixth Schedule.

(2) An arbitrator, from the time of his appointment and

throughout the arbitral proceedings, shall, without delay,

disclose to the parties in writing any circumstances

referred to in sub-section (1) unless they have already

been informed of them by him.

(3) An arbitrator may be challenged only if-

(a) circumstances exist that give rise to justifiable

doubts as to his independence or impartiality, or

(b) he does not possess the qualifications agreed to by

the parties.

(4) A party may challenge an arbitrator appointed by him,

or in whose appointment he has participated, only for

reasons of which he becomes aware after the

appointment has been made.

(5) Notwithstanding any prior agreement to the contrary,

any person whose relationship, with the parties or counsel

or the subject-matter of the dispute, falls under any of the

categories specified in the Seventh Schedule shall be

ineligible to be appointed as an arbitrator:

Provided that parties may, subsequent to disputes having

arisen between them, waive the applicability of this

sub-section by an express agreement in writing.”

“Sec. 13 Challenge procedure.-

(1) Subject to sub-section (4), the parties are free to agree on

a procedure for challenging an arbitrator.

(2) Failing any agreement referred to in sub-section (1), a

party who intends to challenge an arbitrator shall, within fifteen

days after becoming aware of the constitution of the arbitral

tribunal or after becoming aware of any circumstances referred

to in sub-section (3) of section 12, send a written statement of

the reasons for the challenge to the arbitral tribunal.

(3) Unless the arbitrator challenged under sub-section (2)

withdraws from his office or the other party agrees to the

challenge, the arbitral tribunal shall decide on the challenge.

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(4) If a challenge under any procedure agreed upon by the

parties or tinder the procedure under sub-section (2) is not

successful, the arbitral tribunal shall continue the arbitral

proceedings and make an arbitral award.

(5) Where an arbitral award is made under sub-section (4),

the party challenging the arbitrator may make an application for

setting aside such an arbitral award in accordance with section

34.

(6) Where an arbitral award is set aside on an application

made under sub-section (5), the Court may decide as to

whether the arbitrator who is challenged is entitled to any fees.”

“Sec. 14. Failure or impossibility to act. –

(1) The mandate of an arbitrator shall terminate and he

shall be substituted by another arbitrator, if-

(a) he becomes de jure or de facto unable to perform

his functions or for other reasons fails to act without

undue delay; and

(b) he withdraws from his office or the parties agree to

the termination of his mandate.

(2) If a controversy remains concerning any of the

grounds referred to in clause (a) of sub-section (1), a

party may, unless otherwise agreed by the parties, apply

to the Court to decide on the termination of the mandate.

(3) If, under this section or sub-section (3) of section 13,

an arbitrator withdraws from his office or a party agrees to

the termination of the mandate of an arbitrator, it shall not

imply acceptance of the validity of any ground referred to

in this section or sub-section (3) of section 12.”

12.Under Section 12, it is clear that when a person is approached

in connection with his possible appointment as an arbitrator, he has to

make a disclosure in writing, in which he must state the existence of

any direct or indirect present or past relationship or interest in any of

the parties or in relation to the subject matter in dispute, which is

likely to give justifiable doubts as to his independence or impartiality.

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He is also to disclose whether he can devote sufficient time to the

arbitration, in particular to be able to complete the entire arbitration

within a period of 12 months. Such disclosure is to be made in a form

specified in the Sixth Schedule, grounds stated in the Fifth Schedule

being a guide in determining whether such circumstances exist.

Unlike the scheme contained in the IBA Guidelines, where there is a

non-waivable Red List, parties may, subsequent to disputes having

arisen between them, waive the applicability of the items contained in

the Seventh Schedule by an express agreement in writing. The Fifth,

Sixth and Seventh Schedules are important for determination of the

present disputes, and are set out with the corresponding provisions of

the IBA Guidelines hereunder:

“THE FIFTH SCHEDULE

[See section 12 (1)(b)]

The following grounds give rise to justifiable doubts as to

the independence or impartiality of arbitrators:

Fifth Schedule Corresponding provision

in the IBA Guidelines

1. The arbitrator is an

employee, consultant,

advisor or has any other past

or present business

relationship with a party.

(Non-Waivable Red List)

1.1 There is an identity

between a party and the

arbitrator, or the arbitrator

is a legal representative

or employee of an entity

that is a party in the

arbitration.

2. The arbitrator currently

represents or advises one of

(Waivable Red List)

2.3.1 The arbitrator

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the parties or an affiliate of

one of the parties.

currently represents or

advises one of the parties,

or an affiliate of one of the

parties.

3. The arbitrator currently

represents the lawyer or law

firm acting as counsel for

one of the parties.

(Waivable Red List)

2.3.2 The arbitrator

currently represents or

advises the lawyer or law

firm acting as counsel for

one of the parties.

4. The arbitrator is a lawyer

in the same law firm which is

representing one of the

parties.

(Waivable Red List)

2.3.3 The arbitrator is a

lawyer in the same law firm

as the counsel to one of

the parties.

5. The arbitrator is a

manager, director or part of

the management, or has a

similar controlling influence,

in an affiliate of one of the

parties if the affiliate is

directly involved in the

matters in dispute in the

arbitration.

(Waivable Red List)

2.3.4 The arbitrator is a

manager, director or

member of the supervisory

board, or has a controlling

influence in an affiliate of

one of the parties, if the

affiliate is directly involved

in the matters in dispute in

the arbitration.

6. The arbitrator’s law firm

had a previous but

terminated involvement in

the case without the

arbitrator being involved

himself or herself.

(Waivable Red List)

2.3.5 The arbitrator’s law

firm had a previous but

terminated involvement in

the case without the

arbitrator being involved

himself or herself.

7. The arbitrator’s law firm

currently has a significant

commercial relationship with

one of the parties or an

affiliate of one of the parties.

(Waivable Red List)

2.3.6 The arbitrator’s law

firm currently has a

significant commercial

relationship with one of the

parties, or an affiliate of

one of the parties.

8. The arbitrator regularly

advises the appointing party

or an affiliate of the

appointing party even though

neither the arbitrator nor his

(Waivable Red List)

2.3.7 The arbitrator

regularly advises one of

the parties, or an affiliate of

one of the parties, but

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or her firm derives a

significant financial income

therefrom.

neither the arbitrator nor

his or her firm derives a

significant financial income

therefrom.

9. The arbitrator has a close

family relationship with one

of the parties and in the case

of companies with the

persons in the management

and controlling the company.

(Waivable Red List)

2.3.8 The arbitrator has a

close family relationship

with one of the parties, or

with a manager, director or

member of the supervisory

board, or any person

having a controlling

influence in one of the

parties, or an affiliate of

one of the parties, or with a

counsel representing a

party.

10. A close family member of

the arbitrator has a

significant financial interest

in one of the parties or an

affiliate of one of the parties.

(Waivable Red List)

2.3.9 A close family

member of the arbitrator

has a significant financial

or personal interest in one

of the parties, or an affiliate

of one of the parties.

11. The arbitrator is a legal

representative of an entity

that is a party in the

arbitration.

(Non-Waivable Red List)

1.1 There is an identity

between a party and the

arbitrator, or the arbitrator

is a legal representative or

employee of an entity that

is a party in the arbitration.

12. The arbitrator is a

manager, director or part of

the management, or has a

similar controlling influence

in one of the parties.

(Non-Waivable Red List)

1.2 The arbitrator is a

manager, director or

member of the supervisory

board, or has a controlling

influence on one of the

parties or an entity that has

a direct economic interest

in the award to be

rendered in the arbitration.

13. The arbitrator has a

significant financial interest

in one of the parties or the

(Non-Waivable Red List)

1.3 The arbitrator has a

significant financial or

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outcome of the case. personal interest in one of

the parties, or the outcome

of the case.

14. The arbitrator regularly

advises the appointing party

or an affiliate of the

appointing party, and the

arbitrator or his or her firm

derives a significant financial

income therefrom.

(Non-Waivable Red List)

1.4 The arbitrator or his or

her firm regularly advises

the party, or an affiliate of

the party, and the arbitrator

or his or her firm derives

significant financial income

therefrom.

15. The arbitrator has given

legal advice or provided an

expert opinion on the dispute

to a party or an affiliate of

one of the parties.

(Waivable Red List)

2.1.1 The arbitrator has

given legal advice, or

provided an expert opinion,

on the dispute to a party or

an affiliate of one of the

parties.

16. The arbitrator has

previous involvement in the

case.

(Waivable Red List)

2.1.2 The arbitrator had a

prior involvement in the

dispute.

17. The arbitrator holds

shares, either directly or

indirectly, in one of the

parties or an affiliate of one

of the parties that is privately

held.

(Waivable Red List)

2.2.1 The arbitrator holds

shares, either directly or

indirectly, in one of the

parties, or an affiliate of

one of the parties, this

party or an affiliate being

privately held.

18. A close family member of

the arbitrator has a

significant financial interest

in the outcome of the

dispute.

(Waivable Red List)

2.2.2 A close family

member of the arbitrator

has a significant financial

interest in the outcome of

the dispute.

19. The arbitrator or a close

family member of the

arbitrator has a close

relationship with a third party

who may be liable to

recourse on the part of the

unsuccessful party in the

dispute.

(Waivable Red List)

2.2.3 The arbitrator, or a

close family member of the

arbitrator, has a close

relationship with a

non-party who may be

liable to

recourse on the part of the

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unsuccessful party in the

dispute.

20. The arbitrator has within

the past three years served

as counsel for one of the

parties or an affiliate of one

of the parties or has

previously advised or been

consulted by the party or an

affiliate of the party making

the appointment in an

unrelated matter, but the

arbitrator and the party or the

affiliate of the party have no

ongoing relationship.

(Orange List)

3.1.1 The arbitrator has,

within the past three years,

served as counsel for one

of the parties, or an affiliate

of one of the parties, or

has previously advised or

been consulted by the

party, or an affiliate of the

party, making the

appointment in an

unrelated matter, but the

arbitrator and the party, or

the affiliate of the party,

have no ongoing

relationship.

21. The arbitrator has within

the past three years served

as counsel against one of

the parties or an affiliate of

one of the parties in an

unrelated matter.

(Orange List)

3.1.2 The arbitrator has,

within the past three years,

served as counsel against

one of the parties, or an

affiliate of one of the

parties, in an unrelated

matter.

22. The arbitrator has within

the past three years been

appointed as arbitrator on

two or more occasions by

one of the parties or an

affiliate of one of the parties.

(Orange List)

3.1.3 The arbitrator has,

within the past three years,

been appointed as

arbitrator on two or more

occasions by one of the

parties, or an affiliate of

one of the parties.

23. The arbitrator’s law firm

has within the past three

years acted for one of the

parties or an affiliate of one

of the parties in an unrelated

matter without the

involvement of the arbitrator.

(Orange List)

3.1.4 The arbitrator’s law

firm has, within the past

three years, acted for or

against one of the parties,

or an affiliate of one of the

parties, in an unrelated

matter without the

involvement of the

arbitrator.

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24. The arbitrator currently

serves, or has served within

the past three years, as

arbitrator in another

arbitration on a related issue

involving one of the parties

or an affiliate of one of the

parties.

(Orange List)

3.1.5 The arbitrator

currently serves, or has

served within the past

three years, as arbitrator in

another arbitration on a

related issue involving one

of the parties, or an affiliate

of one of the parties.

25. The arbitrator and

another arbitrator are

lawyers in the same law firm.

(Orange List)

3.3.1 The arbitrator and

another arbitrator are

lawyers in the same law

firm.

26. The arbitrator was within

the past three years a

partner of, or otherwise

affiliated with, another

arbitrator or any of the

counsel in the same

arbitration.

(Orange List)

3.3.3 The arbitrator was,

within the past three years,

a partner of, or otherwise

affiliated with, another

arbitrator or any of the

counsel in the arbitration.

27. A lawyer in the

arbitrator’s law firm is an

arbitrator in another dispute

involving the same party or

parties or an affiliate of one

of the parties.

(Orange List)

3.3.4 A lawyer in the

arbitrator’s law firm is an

arbitrator in another

dispute involving the same

party or parties, or an

affiliate of one of the

parties.

28. A close family member of

the arbitrator is a partner or

employee of the law firm

representing one of the

parties, but is not assisting

with the dispute.

(Orange List)

3.3.5 A close family

member of the arbitrator is

a partner or employee of

the law firm representing

one of the parties, but is

not assisting with the

dispute.

29. The arbitrator has within

the past three years received

more than three

appointments by the same

counsel or the same law

firm.

(Orange List)

3.3.8 The arbitrator has,

within the past three years,

been appointed on more

than three occasions by

the same counsel, or the

same law firm.

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30. The arbitrator’s law firm

is currently acting adverse to

one of the parties or an

affiliate of one of the parties.

(Orange List)

3.4.1 The arbitrator’s law

firm is currently acting

adversely to one of the

parties, or an affiliate of

one of the parties.

31. The arbitrator had been

associated within the past

three years with a party or an

affiliate of one of the parties

in a professional capacity,

such as a former employee

or partner.

(Orange List)

3.4.2 The arbitrator has

been associated with a

party, or an affiliate of one

of the parties, in a

professional capacity, such

as a former employee or

partner.

32. The arbitrator holds

shares, either directly or

indirectly, which by reason of

number or denomination

constitute a material holding

in one of the parties or an

affiliate of one of the parties

that is publicly listed.

(Orange List)

3.5.1 The arbitrator holds

shares, either directly or

indirectly, that by reason of

number or denomination

constitute a material

holding in one of the

parties, or an affiliate of

one of the parties, this

party or affiliate being

publicly listed.

33. The arbitrator holds a

position in an arbitration

institution with appointing

authority over the dispute.

(Orange List)

3.5.3 The arbitrator holds a

position with the appointing

authority with respect to

the dispute.

34. The arbitrator is a

manager, director or part of

the management, or has a

similar controlling influence,

in an affiliate of one of the

parties, where the affiliate is

not directly involved in the

matters in dispute in the

arbitration.

(Orange List)

3.5.4 The arbitrator is a

manager, director or

member of the supervisory

board, or has a controlling

influence on an affiliate of

one of the parties, where

the affiliate is not directly

involved in the matters in

dispute in the arbitration.

Explanation 1.—The term

“close family member” refers

to a spouse, sibling, child,

parent or life partner.

Footnote 3.— Throughout

the Application Lists, the

term ‘close family member’

refers to a: spouse, sibling,

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child, parent or life partner,

in addition to any other

family member with whom

a close relationship exists.

Explanation 2.—The term

“affiliate” encompasses all

companies in one group of

companies including the

parent company.

Footnote 4.— Throughout

the Application Lists, the

term ‘affiliate’

encompasses all

companies in a group of

companies, including the

parent company.

Explanation 3.—For the

removal of doubts, it is

clarified that it may be the

practice in certain specific

kinds of arbitration, such as

maritime or commodities

arbitration, to draw

arbitrators from a small,

specialized pool. If in such

fields it is the custom and

practice for parties frequently

to appoint the same

arbitrator in different cases,

this is a relevant fact to be

taken into account while

applying the rules set out

above.

Footnote 5.— It may be the

practice in certain types of

arbitration, such as

maritime, sports or

commodities arbitration, to

draw arbitrators from a

smaller or specialised pool

of individuals. If in such

fields it is the custom and

practice for parties to

frequently appoint the

same arbitrator in different

cases, no disclosure of this

fact is required, where all

parties in the arbitration

should be familiar with

such custom and practice.

“THE SIXTH SCHEDULE

[See section 12 (1)(b)]

NAME:

CONTACT DETAILS:

PRIOR EXPERIENCE (INCLUDING EXPERIENCE WITH

ARBITRATIONS):

NUMBER OF ONGOING ARBITRATIONS:

CIRCUMSTANCES DISCLOSING ANY PAST OR

PRESENT RELATIONSHIP WITH OR INTEREST IN ANY

OF THE PARTIES OR IN RELATION TO THE

SUBJECT-MATTER IN DISPUTE, WHETHER

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FINANCIAL, BUSINESS, PROFESSIONAL OR OTHER

KIND, WHICH IS LIKELY TO GIVE RISE TO

JUSTIFIABLE DOUBTS AS TO YOUR INDEPENDENCE

OR IMPARTIALITY (LIST OUT):

CIRCUMSTANCES WHICH ARE LIKELY TO AFFECT

YOUR ABILITY TO DEVOTE SUFFICIENT TIME TO THE

ARBITRATION AND IN PARTICULAR YOUR ABILITY TO

FINISH THE ENTIRE ARBITRATION WITHIN TWELVE

MONTHS (LIST OUT):”

“THE SEVENTH SCHEDULE

[See section 12 (5)]

Arbitrator’s relationship with the parties or counsel

1. The arbitrator is an employee, consultant, advisor or

has any other past or present business relationship with a

party.

2. The arbitrator currently represents or advises one of

the parties or an affiliate of one of the parties.

3. The arbitrator currently represents the lawyer or law

firm acting as counsel for one of the parties.

4. The arbitrator is a lawyer in the same law firm which is

representing one of the parties.

5. The arbitrator is a manager, director or part of the

management, or has a similar controlling influence, in an

affiliate of one of the parties if the affiliate is directly

involved in the matters in dispute in the arbitration.

6. The arbitrator’s law firm had a previous but terminated

involvement in the case without the arbitrator being

involved himself or herself.

7. The arbitrator’s law firm currently has a significant

commercial relationship with one of the parties or an

affiliate of one of the parties.

8. The arbitrator regularly advises the appointing party or

an affiliate of the appointing party even though neither the

arbitrator nor his or her firm derives a significant financial

income therefrom.

9. The arbitrator has a close family relationship with one

of the parties and in the case of companies with the

persons in the management and controlling the company.

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10. A close family member of the arbitrator has a

significant financial interest in one of the parties or an

affiliate of one of the parties.

11. The arbitrator is a legal representative of an entity that

is a party in the arbitration.

12. The arbitrator is a manager, director or part of the

management, or has a similar controlling influence in one

of the parties.

13. The arbitrator has a significant financial interest in one

of the parties or the outcome of the case.

14. The arbitrator regularly advises the appointing party or

an affiliate of the appointing party, and the arbitrator or his

or her firm derives a significant financial income

therefrom.

Relationship of the arbitrator to the dispute

15. The arbitrator has given legal advice or provided an

expert opinion on the dispute to a party or an affiliate of

one of the parties.

16. The arbitrator has previous involvement in the case.

Arbitrator’s direct or indirect interest in the dispute.

17. The arbitrator holds shares, either directly or indirectly,

in one of the parties or an affiliate of one of the parties

that is privately held.

18. A close family member of the arbitrator has a

significant financial interest in the outcome of the dispute.

19. The arbitrator or a close family member of the

arbitrator has a close relationship with a third party who

may be liable to recourse on the part of the unsuccessful

party in the dispute.

Explanation 1.—The term “close family member” refers to

a spouse, sibling, child, parent or life partner.

Explanation 2.—The term “affiliate” encompasses all

companies in one group of companies including the

parent company.

Explanation 3.—For the removal of doubts, it is clarified

that it may be the practice in certain specific kinds of

arbitration, such as maritime or commodities arbitration,

18

to draw arbitrators from a small, specialized pool. If in

such fields it is the custom and practice for parties

frequently to appoint the same arbitrator in different

cases, this is a relevant fact to be taken into account

while applying the rules set out above.”

13.After the 2016 Amendment Act, a dichotomy is made by the Act

between persons who become “ineligible” to be appointed as

arbitrators, and persons about whom justifiable doubts exist as to

their independence or impartiality. Since ineligibility goes to the root

of the appointment, Section 12(5) read with the Seventh Schedule

makes it clear that if the arbitrator falls in any one of the categories

specified in the Seventh Schedule, he becomes “ineligible” to act as

arbitrator. Once he becomes ineligible, it is clear that, under Section

14(1)(a), he then becomes de jure unable to perform his functions

inasmuch as, in law, he is regarded as “ineligible”. In order to

determine whether an arbitrator is de jure unable to perform his

functions, it is not necessary to go to the Arbitral Tribunal under

Section 13. Since such a person would lack inherent jurisdiction to

proceed any further, an application may be filed under Section 14(2)

to the Court to decide on the termination of his/her mandate on this

ground. As opposed to this, in a challenge where grounds stated in

the Fifth Schedule are disclosed, which give rise to justifiable doubts

as to the arbitrator’s independence or impartiality, such doubts as to

independence or impartiality have to be determined as a matter of

19

fact in the facts of the particular challenge by the Arbitral Tribunal

under Section 13. If a challenge is not successful, and the Arbitral

Tribunal decides that there are no justifiable doubts as to the

independence or impartiality of the arbitrator/arbitrators, the Tribunal

must then continue the arbitral proceedings under Section 13(4) and

make an award. It is only after such award is made, that the party

challenging the arbitrator’s appointment on grounds contained in the

Fifth Schedule may make an application for setting aside the arbitral

award in accordance with Section 34 on the aforesaid grounds. It is

clear, therefore, that any challenge contained in the Fifth Schedule

against the appointment of Justice Doabia and Justice Lahoti cannot

be gone into at this stage, but will be gone into only after the Arbitral

Tribunal has given an award. Therefore, we express no opinion on

items contained in the Fifth Schedule under which the appellant may

challenge the appointment of either arbitrator. They will be free to do

so only after an award is rendered by the Tribunal.

14.Confining ourselves to ineligibility, it is important to note that the

Law Commission by its 246

th

Report of August, 2014 had this to say

in relation to the amendments made to Section 12 and the insertion of

the Fifth and Seventh Schedules:

“59. The Commission has proposed the requirement of

having specific disclosures by the arbitrator, at the stage

of his possible appointment, regarding existence of any

20

relationship or interest of any kind which is likely to give

rise to justifiable doubts. The Commission has proposed

the incorporation of the Fourth Schedule, which has

drawn from the Red and Orange lists of the IBA

Guidelines on Conflicts of Interest in International

Arbitration, and which would be treated as a “guide” to

determine whether circumstances exist which give rise to

such justifiable doubts. On the other hand, in terms of the

proposed section 12 (5) of the Act and the Fifth Schedule

which incorporates the categories from the Red list of the

IBA Guidelines (as above), the person proposed to be

appointed as an arbitrator shall be ineligible to be so

appointed, notwithstanding any prior agreement to the

contrary. In the event such an ineligible person is

purported to be appointed as an arbitrator, he shall be de

jure deemed to be unable to perform his functions, in

terms of the proposed explanation to section 14.

Therefore, while the disclosure is required with respect to

a broader list of categories (as set out in the Fourth

Schedule, and as based on the Red and Orange lists of

the IBA Guidelines), the ineligibility to be appointed as an

arbitrator (and the consequent de jure inability to so act)

follows from a smaller and more serious sub-set of

situations (as set out in the Fifth Schedule, and as based

on the Red list of the IBA Guidelines).

60. The Commission, however, feels that real and

genuine party autonomy must be respected, and, in

certain situations, parties should be allowed to waive

even the categories of ineligibility as set in the proposed

Fifth Schedule. This could be in situations of family

arbitrations or other arbitrations where a person

commands the blind faith and trust of the parties to the

dispute, despite the existence of objective “justifiable

doubts” regarding his independence and impartiality. To

deal with such situations, the Commission has proposed

the proviso to section 12 (5), where parties may,

subsequent to disputes having arisen between them,

waive the applicability of the proposed Section 12 (5) by

an express agreement in writing. In all other cases, the

general rule in the proposed section 12 (5) must be

followed. In the event the High Court is approached in

connection with appointment of an arbitrator, the

Commission has proposed seeking the disclosure in

terms of section 12 (1) and in which context the High

21

Court or the designate is to have “due regard” to the

contents of such disclosure in appointing the arbitrator.”

15.The enumeration of grounds given in the Fifth and Seventh

Schedules have been taken from the IBA Guidelines, particularly from

the Red and Orange Lists thereof. The aforesaid guidelines consist of

three lists. The Red List, consisting of non-waivable and waivable

guidelines, covers situations which are “more serious” and “serious”,

the “more serious” objections being non-waivable. The Orange List,

on the other hand, is a list of situations that may give rise to doubts

as to the arbitrator’s impartiality or independence, as a consequence

of which the arbitrator has a duty to disclose such situations. The

Green List is a list of situations where no actual conflict of interest

exists from an objective point of view, as a result of which the

arbitrator has no duty of disclosure. These guidelines were first

introduced in the year 2004 and have thereafter been amended, after

seeing the experience of arbitration worldwide. In Part 1 thereof,

general standards regarding impartiality, independence and

disclosure are set out. General principle 1 reads as follows:

“IBA Guidelines on Conflicts of Interest in

International Arbitration

(1) General Principle:

Every arbitrator shall be impartial and independent of the

parties at the time of accepting an appointment to serve

and shall remain so until the final award has been

rendered or the proceedings have otherwise finally

terminated.”

22

On “conflicts of interest”, guidelines laid down are as follows:

“(2) Conflicts of Interest

(a) An arbitrator shall decline to accept an appointment or,

if the arbitration has already been commenced, refuse to

continue to act as an arbitrator, if he or she has any doubt

as to his or her ability to be impartial or independent.

(b) The same principle applies if facts or circumstances

exist, or have arisen since the appointment, which, from

the point of view of a reasonable third person having

knowledge of the relevant facts and circumstances, would

give rise to justifiable doubts as to the arbitrator’s

impartiality or independence, unless the parties have

accepted the arbitrator in accordance with the

requirements set out in General Standard 4.

(c) Doubts are justifiable if a reasonable third person,

having knowledge of the relevant facts and

circumstances, would reach the conclusion that there is a

likelihood that the arbitrator may be influenced by factors

other than the merits of the case as presented by the

parties in reaching his or her decision.

(d) Justifiable doubts necessarily exist as to the

arbitrator’s impartiality or independence in any of the

situations described in the Non-Waivable Red List.”

16.In Voestalpine Schienen GmbH v. Delhi Metro Rail

Corporation Ltd., (2017) 4 SCC 665 at 687-689, in the context of a

Section 11 application made under the Act, this Court had occasion to

delve into the independence and impartiality of arbitrators and the

guidelines that are laid down in the Fifth and Seventh Schedule. This

Court stated:

“20. Independence and impartiality of the arbitrator are

the hallmarks of any arbitration proceedings. Rule against

bias is one of the fundamental principles of natural justice

which applied to all judicial and quasi-judicial

23

proceedings. It is for this reason that notwithstanding the

fact that relationship between the parties to the arbitration

and the arbitrators themselves are contractual in nature

and the source of an arbitrator's appointment is deduced

from the agreement entered into between the parties,

notwithstanding the same non-independence and

non-impartiality of such arbitrator (though contractually

agreed upon) would render him ineligible to conduct the

arbitration. The genesis behind this rational is that even

when an arbitrator is appointed in terms of contract and

by the parties to the contract, he is independent of the

parties. Functions and duties require him to rise above

the partisan interest of the parties and not to act in, or so

as to further, the particular interest of either parties. After

all, the arbitrator has adjudicatory role to perform and,

therefore, he must be independent of parties as well as

impartial. The United Kingdom Supreme Court has

beautifully highlighted this aspect in Hashwani

v. Jivraj [Hashwani v. Jivraj, (2011) 1 WLR 1872 : 2011

UKSC 40] in the following words: (WLR p. 1889, para 45)

“45. … the dominant purpose of appointing an

arbitrator or arbitrators is the impartial

resolution of the dispute between the parties

in accordance with the terms of the agreement

and, although the contract between the parties

and the arbitrators would be a contract for the

provision of personal services, they were not

personal services under the direction of the

parties.”

21. Similarly, Cour de Cassation, France, in a judgment

delivered in 1972 in Consorts Ury [Fouchard, Gaillard,

Goldman on International Commercial Arbitration 562

(Emmanuel Gaillard & John Savage eds., 1999) {quoting

Cour de cassation [Cass.] [Supreme Court for judicial

matters] Consorts Ury v. S.A. des Galeries Lafayette,

Cass. 2e civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972)

(France)}], underlined that:

“an independent mind is indispensable in the

exercise of judicial power, whatever the

source of that power may be, and it is one of

the essential qualities of an arbitrator.”

22. Independence and impartiality are two different

24

concepts. An arbitrator may be independent and yet, lack

impartiality, or vice versa. Impartiality, as is well accepted,

is a more subjective concept as compared to

independence. Independence, which is more an objective

concept, may, thus, be more straightforwardly ascertained

by the parties at the outset of the arbitration proceedings

in light of the circumstances disclosed by the arbitrator,

while partiality will more likely surface during the

arbitration proceedings.

23. It also cannot be denied that the Seventh Schedule is

based on IBA guidelines which are clearly regarded as a

representation of international based practices and are

based on statutes, case law and juristic opinion from a

cross-section on jurisdiction. It is so mentioned in the

guidelines itself.

24. xxx xxx xxx

25. Section 12 has been amended with the objective to

induce neutrality of arbitrators viz. their independence and

impartiality. The amended provision is enacted to identify

the “circumstances” which give rise to “justifiable doubts”

about the independence or impartiality of the arbitrator. If

any of those circumstances as mentioned therein exists, it

will give rise to justifiable apprehension of bias. The Fifth

Schedule to the Act enumerates the grounds which may

give rise to justifiable doubts of this nature. Likewise, the

Seventh Schedule mentions those circumstances which

would attract the provisions of sub-section (5) of Section

12 and nullify any prior agreement to the contrary. In the

context of this case, it is relevant to mention that only if an

arbitrator is an employee, a consultant, an advisor or has

any past or present business relationship with a party, he

is rendered ineligible to act as an arbitrator. Likewise, that

person is treated as incompetent to perform the role of

arbitrator, who is a manager, director or part of the

management or has a single controlling influence in an

affiliate of one of the parties if the affiliate is directly

involved in the matters in dispute in the arbitration.

Likewise, persons who regularly advised the appointing

party or affiliate of the appointing party are incapacitated.

A comprehensive list is enumerated in Schedule 5 and

Schedule 7 and admittedly the persons empanelled by

25

the respondent are not covered by any of the items in the

said list.”

17.It will be noticed that Items 1 to 19 of the Fifth Schedule are

identical with the aforesaid items in the Seventh Schedule. The only

reason that these items also appear in the Fifth Schedule is for

purposes of disclosure by the arbitrator, as unless the proposed

arbitrator discloses in writing his involvement in terms of Items 1 to 34

of the Fifth Schedule, such disclosure would be lacking, in which case

the parties would be put at a disadvantage as such information is

often within the personal knowledge of the arbitrator only. It is for this

reason that it appears that Items 1 to 19 also appear in the Fifth

Schedule.

18.Shri Divan is right in drawing our attention to the fact that the

246

th

Law Commission Report brought in amendments to the Act

narrowing the grounds of challenge co-terminus with seeing that

independent, impartial and neutral arbitrators are appointed and that,

therefore, we must be careful in preserving such independence,

impartiality and neutrality of arbitrators. In fact, the same Law

Commission Report has amended Sections 28 and 34 so as to

narrow grounds of challenge available under the Act. The judgment

in ONGC v. Saw Pipes Ltd, (2003) 5 SCC 705, has been expressly

done away with. So has the judgment in ONGC v. Western Geco

26

International Ltd., (2014) 9 SCC 263. Both Sections 34 and 48

have been brought back to the position of law contained in

Renusagar Power Plant Co Ltd. v. General Electric Co., (1994)

Supp (1) SCC 644, where “public policy” will now include only two of

the three things set out therein, viz., “fundamental policy of Indian

law” and “justice or morality”. The ground relating to “the interest of

India” no longer obtains. “Fundamental policy of Indian law” is now to

be understood as laid down in Renusagar (supra). “Justice or

morality” has been tightened and is now to be understood as

meaning only basic notions of justice and morality i.e. such notions as

would shock the conscience of the Court as understood in Associate

Builders v. Delhi Development Authority, (2015) 3 SCC 49.

Section 28(3) has also been amended to bring it in line with the

judgment of this Court in Associate Builders (supra), making it clear

that the construction of the terms of the contract is primarily for the

arbitrator to decide unless it is found that such a construction is not a

possible one.

19.Thus, an award rendered in an international commercial

arbitration – whether in India or abroad – is subject to the same tests

qua setting aside under Section 34 or enforcement under Section 48,

as the case may be. The only difference is that in an arbitral award

governed by Part I, arising out of an arbitration other than an

27

international commercial arbitration, one more ground of challenge is

available viz. patent illegality appearing on the face of the award. The

ground of patent illegality would not be established, if there is merely

an erroneous application of the law or a re-appreciation of evidence.

20.However, to accede to Shri Divan’s submission that because

the grounds for challenge have been narrowed as aforesaid, we must

construe the items in the Fifth and Seventh Schedules in the most

expansive manner, so that the remotest likelihood of bias gets

removed, is not an acceptable way of interpreting the Schedules. As

has been pointed out by us hereinabove, the items contained in the

Schedules owe their origin to the IBA Guidelines, which are to be

construed in the light of the general principles contained therein – that

every arbitrator shall be impartial and independent of the parties at

the time of accepting his/her appointment. Doubts as to the above

are only justifiable if a reasonable third person having knowledge of

the relevant facts and circumstances would reach the conclusion that

there is a likelihood that the arbitrator may be influenced by factors

other than the merits of the case in reaching his or her decision. This

test requires taking a broad common-sensical approach to the items

stated in the Fifth and Seventh Schedules. This approach would,

therefore, require a fair construction of the words used therein,

neither tending to enlarge or restrict them unduly. It is with these

28

prefatory remarks that we proceed to deal with the arguments of both

sides in construing the language of the Seventh Schedule.

21.Coming to the challenge in the present case, Justice Lahoti’s

appointment is challenged on the ground that the arbitrator has been

an advisor to GAIL

in another unconnected matter and, therefore,

Justice Lahoti should be removed. In his disclosure statement made

on 24.11.2016, Justice Lahoti had said:

“That on a legal issue between GAIL and another Public

Sector Undertaking, an opinion was given by me to GAIL,

in the year 2014, but it has no concern with respect to the

present matter. I am an Arbitrator in a pending matter

between M/s. Pioneer Power Limited and GAIL (India)

Limited.”

22.Shri Divan has pressed before us that since on a legal issue

between GAIL and another public sector undertaking an opinion had

been given by Justice Lahoti to GAIL in the year 2014, which had no

concern with respect to the present matter, he would stand

disqualified under Item 1 of the Seventh Schedule. Items 8 and 15

were also faintly argued as interdicting Justice Lahoti’s appointment.

Item 8 would have no application as it is nobody’s case that Justice

Lahoti “regularly” advises the respondent. And Item 15 cannot apply

as no legal opinion qua the dispute at hand was ever given. On

reading Item 1 of the Seventh Schedule, it is clear that the item deals

with “business relationships”. The words “any other” show that the

first part of Item 1 also confines “advisor” to a “business relationship”.

29

The arbitrator must, therefore, be an “advisor” insofar as it concerns

the business of a party. Howsoever widely construed, it is very

difficult to state that a professional relationship is equal to a business

relationship, as, in its widest sense, it would include commercial

relationships of all kinds, but would not include legal advice given.

This becomes clear if it is read along with Items 2, 8, 14 and 15, the

last item specifically dealing with “legal advice”. Under Items 2, 8 and

14, advice given need not be advice relating to business but can be

advice of any kind. The importance of contrasting Item 1 with Items

2, 8 and 14 is that the arbitrator should be a regular advisor under

items 2, 8 and 14 to one of the parties or the appointing party or an

affiliate thereof, as the case may be. Though the word “regularly” is

missing from Items 1 and 2, it is clear that the arbitrator, if he is an

“advisor”, in the sense of being a person who has a business

relationship in Item 1, or is a person who “currently” advises a party

or his affiliates in Item 2, connotes some degree of regularity in both

items. The advice given under any of these items cannot possibly be

one opinion given by a retired Judge on a professional basis at arm’s

length. Something more is required, which is the element of being

connected in an advisory capacity with a party. Since Justice Lahoti

has only given a professional opinion to GAIL, which has no concern

with the present dispute, he is clearly not disqualified under Item 1.

30

23.Coming to Justice Doabia’s appointment, it has been

vehemently argued that since Justice Doabia has previously rendered

an award between the same parties in an earlier arbitration

concerning the same disputes, but for an earlier period, he is hit by

Item 16 of the Seventh Schedule, which states that the arbitrator

should not have previous involvement “in the case”. From the

italicized words, it was sought to be argued that “the case” is an

ongoing one, and a previous arbitration award delivered by Justice

Doabia between the same parties and arising out of the same

agreement would incapacitate his appointment in the present case.

We are afraid we are unable to agree with this contention. In this

context, it is important to refer to the IBA Guidelines, which are the

genesis of the items contained in the Seventh Schedule. Under the

waivable Red List of the IBA Guidelines, para 2.1.2 states:

“The Arbitrator had a prior involvement in the dispute.”

24.On reading the aforesaid guideline and reading the heading

which appears with Item 16, namely “Relationship of the arbitrator to

the dispute”, it is obvious that the arbitrator has to have a previous

involvement in the very dispute contained in the present arbitration.

Admittedly, Justice Doabia has no such involvement. Further, Item

16 must be read along with Items 22 and 24 of the Fifth Schedule.

The disqualification contained in Items 22 and 24 is not absolute, as

31

an arbitrator who has, within the past three years, been appointed as

arbitrator on two or more occasions by one of the parties or an

affiliate, may yet not be disqualified on his showing that he was

independent and impartial on the earlier two occasions. Also, if he

currently serves or has served within the past three years as

arbitrator in another arbitration on a related issue, he may be

disqualified under Item 24, which must then be contrasted with Item

16. Item 16 cannot be read as including previous involvements in

another arbitration on a related issue involving one of the parties as

otherwise Item 24 will be rendered largely ineffective. It must not be

forgotten that Item 16 also appears in the Fifth Schedule and has,

therefore, to be harmoniously read with Item 24. It has also been

argued by learned counsel appearing on behalf of the respondent

that the expression “the arbitrator” in Item 16 cannot possibly mean

“the arbitrator” acting as an arbitrator, but must mean that the

proposed arbitrator is a person who has had previous involvement in

the case in some other avatar. According to us, this is a sound

argument as “the arbitrator” refers to the proposed arbitrator. This

becomes clear, when contrasted with Items 22 and 24, where the

arbitrator must have served “as arbitrator” before he can be

disqualified. Obviously, Item 16 refers to previous involvement in an

advisory or other capacity in the very dispute, but not as arbitrator. It

32

was also faintly argued that Justice Doabia was ineligible under Items

1 and 15. Appointment as an arbitrator is not a “business

relationship” with the respondent under Item 1. Nor is the delivery of

an award providing an expert “opinion” i.e. advice to a party covered

by Item 15.

25.The fact that Justice Doabia has already rendered an award in

a previous arbitration between the parties would not, by itself, on the

ground of reasonable likelihood of bias, render him ineligible to be an

arbitrator in a subsequent arbitration. As has been stated in H. v. L &

others, [2017] 1 W.L.R. 2280 at 2288-2289:

“26. If authority were needed it is to be found in AMEC

Capital Projects Ltd v Whitefriars City Estates Ltd [2005] 1

All ER 723. An adjudicator had decided a case without

jurisdiction as a result of defects in the procedural

mechanism for his appointment. His adjudication was set

aside and he was then reappointed to decide the same

dispute, between the same parties, and decided it in the

same way. At first instance it was held that his second

adjudication should be set aside for apparent bias

because, amongst other things, he had already decided

the same issue. The Court of Appeal reversed the

decision. Dyson LJ said:

“20. In my judgment, the mere fact that the

tribunal has previously decided the issue is

not of itself sufficient to justify a conclusion of

apparent bias. Something more is required.

Judges are assumed to be trustworthy and to

understand that they should approach every

case with an open mind. The same applies to

adjudicators, who are almost always

professional persons. That is not to say that, if

it is asked to re-determine an issue and the

evidence and arguments are merely a repeat

of what went before, the tribunal will not be

33

likely to reach the same conclusion as before.

It would be unrealistic, indeed absurd, to

expect the tribunal in such circumstances to

ignore its earlier decision and not to be

inclined to come to the same conclusion as

before, particularly if the previous decision

was carefully reasoned. The vice which the

law must guard against is that the tribunal

may approach the rehearing with a closed

mind. If a judge has considered an issue

carefully before reaching a decision on the

first occasion, it cannot sensibly be said that

he has a closed mind if, the evidence and

arguments being the same as before, he does

not give as careful a consideration on the

second occasion as on the first. He will,

however, be expected to give such

reconsideration of the matter as is reasonably

necessary for him to be satisfied that his first

decision was correct. As I have said, it will be

a most unusual case where the second

hearing is for practical purposes an exact

rerun of the first.

21. The mere fact that the tribunal has

decided the issue before is therefore not

enough for apparent bias. There needs to be

something of substance to lead the

fair-minded and informed observer to

conclude that there is a real possibility that the

tribunal will not bring an open mind and

objective judgment to bear.”

27. Those comments apply with as much force to

arbitrators in international reinsurance arbitration as they

do to adjudicators in building disputes. Just as an

arbitrator or adjudicator can be expected to bring an open

mind and objective judgment to bear when redetermining

the same question on the same evidence between the

same parties, it is all the more so where the evidence is

different and heard in a reference between different

parties.

28. The position in Bermuda Form arbitrations is

accurately summarised in a leading textbook, Liability

Insurance in International Arbitration, 2nd ed (2011), at

para 14.32 in these terms:

34

“14.32 Commencing a Bermuda Form

Arbitration

The decision in Locabail (UK) Ltd v Bayfield

Properties Ltd [2000] QB 451, and the

foregoing discussion, is also relevant in the

fairly common situation where a loss, whether

from boom or batch, gives rise to a number of

arbitrations against different insurers who

have subscribed to the same programme. A

number of arbitrations may be commenced at

around the same time, and the same arbitrator

may be appointed at the outset in respect of

all these arbitrations. Another possibility is that

there are successive arbitrations, for example

because the policyholder wishes to see the

outcome of an arbitration on the first layer

before embarking on further proceedings. A

policyholder, who has been successful before

one tribunal, may then be tempted to appoint

one of its members (not necessarily its original

appointee, but possibly the chairman or even

the insurer's original appointee) as arbitrator

in a subsequent arbitration. Similarly, if insurer

A has been successful in the first arbitration,

insurer B may in practice learn of this success

and the identity of the arbitrators who have

upheld insurer A's arguments. It follows from

Locabail and AMEC Capital Projects Ltd v

Whitefriars City Estates Ltd [2005] 1 All ER

723 that an objection to the appointment of a

member of a previous panel would not be

sustained simply on the basis that the

arbitrator had previously decided a particular

issue in favour of one or other party. It equally

follows that an arbitrator can properly be

appointed at the outset in respect of a number

of layers of coverage, even though he may

then decide the dispute under one layer

before hearing the case on another layer.”

26.We were, however, referred to Russell on Arbitration (23

rd

edition), in which the learned author has referred to the ground of

35

bias in the context of previous views expressed by an arbitrator. In

Chapter 4-124, the learned author states as follows:

“In certain circumstances, previously expressed views of

an arbitrator, which suggest a certain pre-disposition to a

particular course of action, outcome or in favour of a

party, can constitute grounds for removal. One of the

Locabail v. Bayfield applications ([2000] 1 All E.R. 65 at

92-93) against a judge was successful on this basis. The

judge had written four strongly worded articles which led

the Court to conclude that an objective apprehension of

bias may arise on the part of one of the parties. However,

a challenge against a sole arbitrator in a trade arbitration

which alleged apparent bias because the arbitrator had

previously been involved in a dispute with one of the

parties failed. The judge found this on the facts to be no

more than “an ordinary incident of commercial life”

occurring in the relatively small field of trade arbitrations

where it was thought the parties and arbitrators were

quite likely to have had prior dealing with each other

(Rustal Trading Ltd. v. Gill and Duffas SA [2000] 1 Lloyd’s

Rep. 14). Similarly, the fact that an insurance arbitrator

had previously given a statement in another arbitration

(and may have been called to give evidence

subsequently) about the meaning of a standard form

clause which might have had a tentative bearing on the

present arbitration would not give grounds for removal

(Argonaut Insurance Co v. Republic Insurance Co [2003]

EWHC 547).”

27.The judgment referred to in Russell is reported in Locabail v.

Bayfield, (2000) 1 All E.R. 65. In paragraph 89 thereof, the Court of

Appeal stated:

“We have found this a difficult and anxious application to

resolve. There is no suggestion of actual bias on the part

of the recorder. Nor, quite rightly, is any imputation made

as to his good faith. His voluntary disclosure of the

matters already referred to show that he was conscious of

his judicial duty. The views he expressed in the articles

36

relied on are no doubt shared by other experienced

commentators. We have, however, to ask, taking a broad

commonsense approach, whether a person holding the

pronounced pro-claimant anti-insurer views expressed by

the recorder in the articles might not unconsciously have

leant in favour of the claimant and against the defendant

in resolving the factual issues between them. Not without

misgiving, we conclude that there was on the facts here a

real danger of such a result. We do not think a lay

observer with knowledge of the facts could have excluded

that possibility, and nor can we. We accordingly grant

permission to appeal on this ground, allow the

defendant's appeal and order a retrial. We should not be

thought to hold any view at all on the likely or proper

outcome of any retrial.”

28.We have not been shown anything to indicate that Justice

Doabia would be a person holding a pronounced anti-claimant view

as in Locabail (supra). Therefore, we are satisfied that there is no

real possibility that Justice Doabia will not bring an open mind and

objective judgment to bear on arguments made by the parties in the

fourth arbitration, which may or may not differ from arguments made

in the third arbitration.

29.The appointment of Justice Doabia was also attacked on the

ground that he had not made a complete disclosure, in that his

disclosure statement did not indicate as to whether he was likely to

devote sufficient time to the arbitration and would be able to complete

it within 12 months. We are afraid that we cannot allow the appellant

to raise this point at this stage as it was never raised earlier.

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Obviously, if Justice Doabia did not indicate anything to the contrary,

he would be able to devote sufficient time to the arbitration and

complete the process within 12 months.

30.It was also faintly urged that the arbitrator must without delay

make a disclosure to the parties in writing. Justice Doabia’s

disclosure was by a letter dated October 31, 2016 which was sent to

the Secretary General of the International Centre for Alternative

Dispute Resolution (ICADR). It has come on record that for no fault of

Justice Doabia, the ICADR, through oversight, did not handover the

said letter or a copy thereof to the appellant until November 24, 2016,

which is stated in its letter dated November 29, 2016. This contention

also, therefore, need not detain us.

31.It was then argued that under Explanation 3 to the Seventh

Schedule, maritime or commodities arbitration may draw arbitrators

from a small, specialized pool, in which case it is the custom and

practice for parties to appoint the same arbitrator in different cases.

This is in contrast to an arbitrator in other cases where he should not

be appointed more than once. We are afraid that this argument again

cannot be countenanced for the simple reason that Explanation 3

stands by itself and has to be applied as a relevant fact to be taken

into account. It has no indirect bearing on any of the other items

mentioned in the Seventh Schedule.

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32.This being the case, we are satisfied that the learned single

Judge’s judgment requires no interference. The appeals are,

accordingly, dismissed.

…………………………J.

(R.F. Nariman)

…………………………J.

(Sanjay Kishan Kaul)

New Delhi;

August 31, 2017

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