Gopaldas Bagri vs. C & E Ltd [AP 364 of 2020]
In any form of dispute resolution, whether it be litigation or alternate dispute resolution (ADR), the most important, basic and many times overlooked is the requirement of a Judge, Arbitrator, Mediator, etc., who is impartial and has not direct or indirect interest in the dispute at hand.
The Arbitration and Conciliation Act 1996 contains explicit provisions aimed at upholding impartiality and avoiding arbitrator bias within the arbitration framework. Section 12 underscores the importance of “impartiality” by mandating that arbitrators conduct themselves neutrally and independently, without showing any undue favouritism towards any party involved in the dispute. Additionally, Section 13 addresses “arbitrator bias” by requiring arbitrators to disclose any circumstances that could potentially compromise their impartiality. Parties are further empowered by Section 12 to challenge an arbitrator’s appointment if reasonable doubts arise regarding their independence or neutrality.
Background of the Case
The current case involves a conflict between two main groups: the Bagri and the Bhaiya group. The Bagri family initiated a legal case against Bhaiya Group, but it was later directed to arbitration in August 2014 with Mr. X as the Arbitrator.
The arbitrator revealed that he had previously represented Bulaki Das Bhaiya and his affiliated companies. Despite this revelation, those bound by the award expressed confidence in the Arbitrator’s unbiased stance. Over next three years, 126 arbitration sessions took place, and during this time, the arbitrator also had engagements with Bhaiya Group in a separate case involving a company (SSSMIL), which has ties to Bhaiya Group.
Subsequently, the award was granted in February 2020 in favour of the Bhaiya group to a substantial sum of Rs. 22 crores alongside accrued interest.
Findings of the Hon’ble Calcutta High Court
The Hon’ble Court initially examined whether M/s. SSSMIL is affiliated with the Bhaiya Group. The Court noted that upon examining the ownership structure it can be concluded that Bhaiya Group holds extensive control over SSSMIL. This makes it plausible to believe that he likely attended a majority of the meetings with the Learned Arbitrator while preparing for their case.
Thereafter, the Hon’ble Court examined that whether the Arbitrator rendered himself ineligible under Section 12(2) & (5) and Grounds 2, 11, 15, and 20 of the Fifth Schedule and Grounds 2, 8, and 15 of the Seventh Schedule of the Act.
The Hon’ble Court recognized that after the Arbitrator’s initial acknowledgment that he had represented the Bhaiya group was his obligation to discontinue any further representation. The fundamental intent behind the disclosure mandated by Section 12(2) implied that the Arbitrator should not maintain such an affiliation during the course of the proceedings. A disclosure by the Arbitrator regarding a past association with one party essentially imposes a commitment on the Arbitrator not to continue such association during the arbitration. By representing the Bhaiya group, the Arbitrator has violated this commitment, thereby undermining the core principle of such disclosure.
The Hon’ble Court then stated that one need not also enter into the merits of an award while assessing the reasonable likelihood of bias. Given the circumstances of this case of the case, the Court concluded that the Arbitrator has rendered himself ineligible by reason of his actions, and non-disclosure thereof. Either bona fide or otherwise, his actions fall foul of the mandate under Arbitration and Conciliation Act. Consequently, the award was set aside.
Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate
Connect with Mr. Bhatt on Linkedin: https://www.linkedin.com/in/adit-ravishbhatt/
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