Whether a person can be appointed as an arbitrator if his daughter is married to the son of the eldest brother of one of the parties in the arbitration proceedings?

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Shubham Budhiraja[1]

Two brothers running a family business in the form of a company and dispute arise between them and both decide to resolve through arbitration. During course of arbitration proceedings, one of party filed Section 14(2) r/w Section 15 Petition filed challenging mandate of arbitrator as being terminated because son of arbitrator is married to daughter of eldest brother of one of party and thus should be disqualified under Section 12(5) being ‘close family relationship’. The Hon’ble Delhi High Court declined the relief and held that neither the Seventh Schedule of the A&C Act nor the IBA Guidelines define the expression ‘close family relationship’. The plain language of Entry no. 9 indicates that it is not the legislative intent to render a distant relative of the parties to be ineligible for being appointed as an arbitrator, if both the parties so agree. It is not sufficient that the arbitrator is related to any one of the parties; the relationship must be a ‘family relationship’ and, that too, a close one[2].

 

(I)                 Entries nos. 1 to 9 of the Seventh Schedule of the A&C Act relate to an arbitrator’s relations with the parties or the counsel.

 

(II)               It is not sufficient that the arbitrator is related to any one of the parties; the relationship must be a ‘family relationship’ and, that too, a close one. Obviously, if an arbitrator has a close family relationship with one of the parties, it is likely to raise doubt as to his independence and impartiality.

 

(III)             Neither the Seventh Schedule of the A&C Act nor the IBA Guidelines define the expression ‘close family relationship’. However, there are number of statutes, which define the said expression.

 

(IV)             The Vermont Securities Regulations, 2016 defines the expression ‘close family relationship’ to mean “a person within the third degree of relationship, by blood or adoption, or a spouse, step child or a fiduciary of a person within the third degree of relationship”.8 The Employment Standards Act, SNB 1982 (New Brunswick, Canada) defines the expression ‘close family relationship’ to mean the relationship “between parents and their children, between siblings and between grandparents and their grandchildren, and includes a relationship between persons who, though not married to one another and whether or not a blood relationship exists, demonstrate an intention to extend to one another the mutual affection and support normally associated with those relationships first mentioned

 

(V)               The expression ‘close family member’ is also used in Entries nos. 10, 18 and 19 of Seventh Schedule of the A&C Act.

 

(VI)             Nonetheless, the plain language of Entry no. 9 indicates that it is not the legislative intent to render a distant relative of the parties to be ineligible for being appointed as an arbitrator, if both the parties so agree.

 

(VII)           In the present case, the family relationship between the Arbitrator and the parties cannot be described as a close family relationship. The Arbitrator’s son is married to the daughter of the eldest brother of the parties. The Arbitrator is not from the same family as that of the parties


[1] Advocate, Delhi High Court, ShubhamBudhiraja02@gmail.com [LLB, ACS, BCOM(H)]

[2] O.M.P. (T) (COMM.) 119/2021, Delhi High Court 

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