Bias at Bay: Supreme Court Sets Limits on Challenging Arbitration Awards

The Supreme Court in a recent judgement in Avitel Post Studios Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd. Civil Appeal Nos. 3835-3836 of 2024, upheld the Bombay High Court’s order for enforcement of a foreign award u/s 48 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) passed by SIAC (Seat: Singapore) for a claim of approx. $60 Million. It was alleged that the disclosure requirements for conflict of interest as per the International Bar Association Guidelines on Conflict of Interest, 2004 (“IBA Guidelines”) were not fulfilled by the presiding arbitrator. The main question before the Supreme Court was whether the High Court was correct in rejecting the Appellant’s contentions and allowing enforcement of award and whether a plea of arbitral bias could be raised at the stage of enforcement u/s 48(2)(b) for violation of public policy of India.

The Court took note of the fact that the parties chose the jurisdiction based on perceived neutrality and that no setting aside challenge based on bias was raised before the Courts of Singapore. The Appellant did raise a challenge before SIAC on appointment of the presiding arbitrator, however, the same was heard and dismissed. Under the IBA Guidelines, an arbitrator is required to refuse appointment in case of any doubts as to impartiality or independence and disclose all the facts relating to the same. The Court finally while agreeing with the observations made in the impugned judgement, held that the presiding arbitrator did not have any requirement for disclosure because he did not fall within the definition of ‘affiliate’ and that the Appellants were unable to lead sufficient evidence in this behalf. A plea of arbitral bias must be raised at stage of appointment of arbitrators, or in setting aside of award before the Seat Courts. The determination of bias at the stage of enforcement should be done only by applying international standards and unless there is blatant violation of the basic notions of morality and justice, enforcement should not be refused unless there are exceptional circumstances.

The Court observed that the New York Convention and Geneva Convention both provided for the defence of public policy at the stage of enforcement. However, such a defence must be construed narrowly to facilitate enforcement of foreign awards. The Court while referring to the judgement in Shri Lal Mahal Ltd. v. Progetto Grano SpA, (2014) 2 SCC 433 observed that wider grounds of public policy given u/s 34(2)(b)(ii) of the Act cannot be applied to S.48(2)(b) and that a review on merits of the dispute is not permitted u/s 48 of the Arbitration Act. Minimal judicial intervention to a foreign award is the norm and interference can only be based on the exhaustive grounds provided under Section 48. Therefore, grounds for resisting the enforcement of a foreign award are much narrower than the grounds provided for u/s 34 of the Act. The Court finally held that all bonafide challenges to appoint of arbitrator must be made in a timely manner and should not be used to prevent/delay the enforcement of the award.

By - Ansh Mittal

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