What are the consequences of non-disclosing the factum of previous arbitrations conducted by the arbitrator unilaterally appointed by the Bank?

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Shubham Budhiraja[1]

 

Mr. A has taken a loan from the Bank for Rs.3,00,000/- for the purchase of the vehicle. The Hypothecation cum Loan agreement was entered between the parties. Mr. A made defaults and Bank unilaterally appointed the arbitrator and arbitrator passed an award of Rs.4,00,000/- in favour of Bank. Mr. A challenged the award on the ground that the arbitrator was biased because he has been the arbitrator in many cases for the Bank. Thus, non-disclosure under section 12(1) The Ld. Commercial Court dismissed the petition holding that onus is on Mr. A to show the number of arbitration that arbitrator has conducted. The Hon’ble High Court in First Appeal under section 37 set aside the award holding that disclosure under Section 12(1) is mandatory. The onus is on the arbitrator to disclose the particulars to have integrity in the arbitration. The award is also set aside for unilateral appointment.[2]

 

(i)                    The Court is unable to accept that such a disclosure is not a mandatory.

 

(ii)                   The onus for disclosing the number of matters in which the learned Sole Arbitrator had been appointed as such at the instance of the Bank, rested with the learned Sole, Arbitrator.

 

(iii)                 The assumption that the burden to ascertain the circumstances that may give rise to justifiable doubts as to the independence and impartiality of the arbitrators is on the parties, is erroneous.

 

(iv)                 An award rendered by a person who is ineligible to act as an arbitrator would be of little value; it cannot be considered as an arbitral award under the A&C Act.

 

(v)                   While it is permissible for the parties to agree to waive the ineligibility of an arbitrator the proviso to Section 12(5) of the A&C Act makes it clear that such be in writing.

 

 


[1] Advocate, Delhi High Court [LLB, ACS, BCOM(H)], +91-9654055315, Budhirajalawchambers@gmail.com

[2] RAM KUMAR & ANR. v. SHRIRAM TRANSPORT FINANCE CO. LTD., 2022/DHC/005313

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