P. Cheran v/s M/s Gemini Industries & Imaging Limited; Arb.O.P (Com.Div.) No.286 of 2022
In a significant ruling, the Madras High Court has affirmed the right of a party to challenge the appointment of an arbitrator at any stage if there is a violation of the provisions of the Arbitration and Conciliation Act, 1996 (“the Act”). This ruling establishes that even if the award debtor participated in the arbitral proceedings or failed to challenge the arbitrator’s appointment in accordance with Section 13 of the Act, this would not deprive them of the right to challenge the appointment under Section 34 for violation of Section 12(5) of the Act.
This case involved a dispute between P. Cheran (the Petitioner), who had availed a loan from M/s Gemini Industries & Imaging Ltd. (the Respondent) under an agreement. The dispute arose out of a financial assistance availed by the petitioner from the respondent. The parties had entered into an agreement which contained an arbitration clause. The petitioner challenged the appointment of the arbitrator, alleging that it was made unilaterally by the respondent and was in violation of the provisions of the Arbitration and Conciliation Act, 1996. The petitioner argued that the unilateral appointment was contrary to the proviso to sub-section (5) of Section 12 of the Act, and therefore fell under Explanation (2) of Section 34(2)(b) of the Act, which is in contravention with the fundamental policy of Indian law.
The Hon’ble Court upon examination of facts, observed that the arbitrator had failed to disclose any circumstances that may give rise to justifiable doubts as to his impartiality or independence, as required under Section 12(5) of the Act. The Court also noted that the petitioner had not waived the applicability of Section 12(5) of the Act, and that the award had been passed without giving any opportunity to the petitioner. Thus, Madras High Court held that the award was liable to be set aside for the violation of the provision under Section 12(5) of the Act and the principles of natural justice.
In a broader context, the Hon’ble Court underscored that its endeavour is always to rectify the errors apparent on the decisions/orders/judgments of the authorities/Tribunals/lower Courts etc. to prevent miscarriages of justice. Therefore, it affirmed that the appointment of an Arbitrator could be questioned not only under Section 13 but also under Section 34 of the Act, regardless of the Stage of the Arbitral Proceedings or the Execution of the Award.
Ultimately, the ruling of the Hon’ble Madras High Court reinforces the importance of adherence to the provisions of the Arbitration and Conciliation Act in arbitrator appointments. Any award made in violation of these provisions is considered against the public policy of India and can be set aside, upholding the integrity of the arbitration process.
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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