Author - Gaurav Rai
Editor - Gautam Mohanty
In this part of our ongoing paper series I am going to talk about appointment of Senior Advocates as arbitrators and the possible questions that arise regarding such an appointment. I will also look at the status of law regarding treatment of the connection between Senior Advocate as an arbitrator and the counsel for the party appointing such Senior Advocate to the arbitral Tribunal.
Section 12 of the Arbitration and Conciliation Act 1996 (hereinafter referred to as “Act, 1996”) casts an obligation on a person, who is approached in connection with his possible appointment as an arbitrator, to disclose in writing any circumstances which might lead to justifiable doubts regarding his impartiality and independence. Such circumstances might include the existence of either direct or indirect relationship or interest of either the past or present 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. Further Explanation 1 of Section 16, Act 1996 stipulates that the grounds stated in the Fifth Schedule are to serve as a guide in determining whether circumstances exist which may give rise to justifiable doubts as to the independence or impartiality of an arbitrator. The arbitrator is supposed to inform in writing all circumstances which may give rise to justifiable doubts to his independence and impartiality throughout the arbitral proceedings.
Hence the question which might come up for consideration is whether such a Senior Advocate so nominated as an arbitrator was required to disclose that he appeared as a counsel assisted by advocates for the nominating party in certain cases before various courts in matters in which the party nominating the Senior Advocate as an arbitrator was not the client engaging the services and in which the subject matter of dispute of this arbitration was not the subject matter of dispute. Such a circumstances is similar to the revolving door in investment arbitration or even commercial arbitrations where in Queen’s Counsel or Barristers in the English Legal System are appointed as arbitrators who also have their own active practice as lawyers.
A challenge to such a Senior Advocate came up for adjudication before the Bombay High Court in Perma Container (UK) Line Limited Vs. Perma Container Line (India) Pvt. Ltd. MANU/MH/0614/2014. In this case it was alleged that the arbitrator did not disclose the fact that he had appeared as a counsel and was instructed by solicitors of the claimant in February 2011. Further the Respondent alleged that the arbitrators generally from his conduct demonstrated a bias and that the award was in conflict with public policy on that ground. The Hon’ble Bombay High Court lay reliance on the fact that the Senior Advocate was briefed by the Advocates in a completely unrelated matter between different parties. They specifically held in para 132 of the judgement as reported in Manupatra that:
“In my view, unless a party making allegations, demonstrates that the learned arbitrator had interest in the subject matter of the dispute in which he was acting as arbitrator or was related to any of the parties in any manner whosoever, no bias can be attributed against such arbitrator on the ground of he having been engaged by solicitors of one of the party and that also in some unconnected matter once or twice.”
Further, in the case of Sheetal Maruti Kurundwade Vs. Metal Power Analytical (I) Pvt Ltd. and Ors. MANU/MH/3556/2017, the question that arose for decision was about the scope and purport of the provisions regarding appointment of arbitrators and challenges to their continuance in section 12(1), 12(3) and 12(5) and item 3 of the Seventh Schedule of the Act,1996 as amended by the Amendment Act. In this case two of the three arbitrators were practicing counsels before the Bombay High Court and were briefed by various law firms in different matters and one such law firm namely M/s. Hariani and Co. had been engaged by the parties to the arbitration. It was contended by one party that Section 12(1)(a) read with section 12(3) and 12(5) and item 3 of the Seventh Schedule would operate to automatically disqualify the two arbitrators as they were practicing counsels briefed by M/s Hariani and Co. and their association as practicing counsel with the law firm was sufficient to render them both ineligible to function as independent and impartial arbitrators in any matter where M/s Hariani and Co. appeared for one of the parties. The Hon’ble Bombay High Court considered inter alia the provisions of section 12(5) read with item 3 of the Seventh Schedule of the Act, 1996 and rejected the contention that the two arbitrators were ineligible to act as arbitrators. After discussing at length regarding the practice of the legal profession, the Court held the following in para 28 as reported in Manupatra reproduced herein below:
“28. Therefore, counsel having accepted a brief from a particular attorney, advocate-on-record or lawyer for some other client is not per se a disqualification or ineligibility. The disqualification connection must be between the arbitrator-counsel and the litigant. That this is of the essence is obvious from Item 3 of the two Schedules in a given case, where the law firm or lawyer is itself or himself the client,”
The Court further explained the general independence of Senior Advocates in the Indian Legal System as follows:
In-house counsel or counsel who receive a fee-paid general retainer or salary from a law firm stand on a different footing. We are here concerned with independent counsel, those in the profession who in the course of their daily practice receive briefs from many attorneys, law firms or individual practitioners. This is a remnant of the "'dual system"', now abolished, and a central feature of that system, one that continues to this day in practice, is the independence of counsel. They accept briefs from multiple attorneys (often on the same day at the same time in different courts). They are not always briefed at every stage of the case, nor is there any rule that they perform the same functions at every stage: a counsel may lead at one stage, and at another may take second chair to a senior. None of this is backed by statute, but hinges on traditions of long standing.
As the Bombay High Court has held in the two cases cited above, the fact that a person has been briefed as a Senior Advocate by a law firm or by solicitors to appear in some cases and the very same law firm or solicitor also appears for one of the parties before the arbitral tribunal are not circumstances which are likely to give rise to justifiable doubts to the independence or impartiality of such a person to act as an arbitrator and does not make such persons ineligible to act as an arbitrator within the meaning of Section 12(1) and 12(5) of the Arbitration and Conciliation Act, 1996 read with Schedule 7 of the Act, 1996.