Navoneel
Important Aspects of Section 12 Under Arbitration and Conciliation (Amendment) Act, 2015 with Case Study
Navoneel Karmakar 15 Oct 2020

INTRODUCTION:

Freedom, impartiality and neutrality are the main characteristics of equal, fair and impartial arbitration. Arbitration and Conciliation (Amendment) Act,2015(“The Arbitration and Conciliation Act, 199”) came into force on 23rd October,2015. Its goal was to increase the quality of commercial arbitration in the country. The 2015 amendment placed a strong emphasis on freedom and impartiality. Arbitration and conciliation (Amendment),2019 has inserted an 8(eight-day) timetable setting down the general rules and standards applicable to the arbitrator, with emphasis on an unbiased judgement or a fair stance for arbitral proceedings. The integrity and impartiality of arbitrators are the main indications of the arbitration proceedings. The reforms to the Arbitration and Conciliation Act 1996 ('Act') in 2015, adopted by the International Bar Association Guidance on Conflict of Interest aimed at improving not just the neutrality of arbitrators, yet also the interpretation of neutrality. Section 12 of Arbitration and Conciliation Amendment Act, 2015 mainly deals with the neutrality of the arbitrators. Section 12 does not allow an arbitrator to conduct an arbitration proceeding, if the arbitrator is biased towards the parties or party in that particular proceeding.

 

SECTION 12:

By the amendment in Arbitration and Conciliation Act in 2015, a special provision was inserted which is, according to Section 12 of Arbitration and Conciliation (Amendment) Act, 2015 “every person who has been contacted by the parties to select an arbitrator shall report in writing, expressly or indirectly, all the particulars of the past or current relationship with the parties, the lawyer or the subject-matter concerned and also the result of the arbitration, which could be financial, professional, commercial or some other kind likely to give rise to justifiable concerns as to impartiality and freedom, which may also contribute to the failure to commit adequate time to the arbitration and to the willingness of the arbitrator to operate and to give the parties a verdict within 12 months”.

According to the rules and regulation of 6th  Schedule, every arbitrator has a duty to disclose all the facts before the beginning of the Arbitration proceedings and on the basis of the disclosure provided by the arbitrator, it will be decided whether any such condition occurs or whether it comes under the scope of any of the grounds set out in the Fifth or Sixth Schedule.

 

CASE STUDY:

HRD Corporation Vs.GAIL (India) Ltd, 2017

Facts of the Case:

The respondent company entered into a contract with the petitioner Company on 1 April 1999 (the Agreement) for the supply of wax manufactured at the GAIL plant for a term of 20 years. A similar conflict occurred between the parties on different occasions and, as a result, HRD invoked the arbitration clause of the Deal at various times. In total, four different arbitrations have taken place. However, Supreme Court has concentrated on the fourth arbitration. Below are the grounds on which the appointment of the arbitrator was challenged:

a)     Items 20 and 22 of the Fifth Schedule to the Act were applicable in this particular case hence, it gave rise to justifiable doubts as to the arbitrator’s independence and impartiality.

b)     Items 1, 8, and 15 of the Seventh Schedule to the Act were also applicable in this case and hence its makes the arbitrator ineligible to work in the arbitration proceedings.


Judgement of the Court:

The Supreme Court ruled that if a person comes under the category of Schedule Seven, that person is ineligible to conduct an arbitration process. Section 12(5), read with Seven Schedule, makes it very simple that, if the arbitrator comes under any of the sections referred to in the Seventh Schedule, the arbitrator is found to be ineligible for selection as arbitrator to that particular case and will be succeeded by another arbitrator under Section 14(1) of the Act. On the other side, if the disclosure falls within the limits of the Fifth Schedule and gives rise to justifiable suspicions, the impartiality and integrity of the arbitrator can be questioned before the Arbitral Tribunal pursuant to Section 13 of the Act.

 

CONCLUSION:

Through evaluating the definition, it can be interpreted that freedom and impartiality are important elements of the appointment of an arbitrator and therefore result in a fair and impartial judgement on the conflict. Given the attempts made to enact the Act, more aggressive steps are required to promote and enable a better model of the structure. In every dispute, there must be at least one person or authority, who tries to resolve the dispute by giving a fair decision and that decision must be binding for all the parties related to a particular case. While giving an order, a decision or an award, the person who is resolving the disputes must not be biased towards any of the parties or party. If the person or authority is biased towards a party then the decision or the award which has been provided will not be a fair decision. To stop biasness of the arbitrators, section 12 of Arbitration and Conciliation Amendment Act, 2015 has been implemented.  

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