The Hon'ble Bombay High Court in a recent ruling has held that if an arbitrator has accepted a brief from the law firm or advocate representing a party in an arbitration, that by itself will not per se amount to disqualification or ineligibility if the client for whom the brief has been accepted is unrelated.

Facts :-

1. A Ld. Sole Arbitrator was appointed on the basis of an application filed by one of the parties to the contract u/s 11 of the Arbitration and conciliation Act, 1996 (“the Act”). Thereafter, a preliminary meeting was scheduled by the Ld. Sole Arbitrator when a disclosure u/s 12(5) of the Act was made.
2. The matter progressed and issues were framed by the Ld. Arbitrator. The Claimant became aware that the Ld. Arbitrator had been representing the counsel for the Respondent in certain matters in the High Court.
3. On this basis, the Claimant filed a Petition before the Hon’ble Bombay High Court contending that the Ld. Arbitrator had become ineligible to continue as an arbitrator as per Section 12(5) r/w Schedule VII of the Act. It was submitted that the Ld. Arbitrator was de jure and de facto unable to perform his functions and since the issue of ineligibility goes to the root of the appointment, he would lack inherent jurisdiction to proceed further which would enable a party to file an application u/s 14(2) to the Court to decide on termination of his mandate.
4. The Hon’ble Bombay High Court dismissed the petition filed under section 14(2) relying upon the judgment of Sheetal Maruti Kurundwade vs. Metal Power Analytical (I) Pvt. Ltd. reported at 2017 (6) MH LJ. 642 where it was held that Schedule V contemplates various scenarios. Item 3 of this Schedule is exactly the same as Item 3 of the VIIth Schedule. Items 4 and 25 of the Vth Schedule disqualify partners of a law firm from acting as arbitrators where their law firm represents one of the parties in arbitration. The reason is so obvious it needs no great explanation. Item 29 is interesting, and it says that where a person is repeatedly appointed as an arbitrator, this is justifiable doubt. The point is that Schedule V is linked to Section 12(1)(a), and this mandates a disclosure by the arbitrator. Though it does appear that the non-disclosure is fatal, but the disclosure, if accepted and waived, would not result in a disqualification. Section 12(5) speaks of ineligibility and it is linked to the VIIth Schedule; but the proviso to that sub-section again contemplates a possible waiver. The Hon’ble Court had further held that at the broadest level, no arbitrator should be involved in any manner with one of the parties to the dispute or a partner with a lawyer or law firm appearing in the arbitration, or representing the law firm or lawyer personally.
5. The Hon’ble Bombay High Court held that, referring to a situation where the counsel having accepted a brief from a particular attorney, Advocate on record or lawyer for some other client, has been held to be not amounting to per se disqualification or ineligibility because the disqualification connection must be between the Arbitrator's counsel and the litigant. The Hon’ble Bombay High Court once again placed reliance upon Sheetal Maruti Kurundwade’s case where this proposition is succinctly set out in para 28 of the judgment where it was held as follows:- “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 arbitrator cannot function as such in an arbitration where that very law firm or lawyer is also engaged, though for some other party; for the arbitrator in question would then have before him a party for whom he is engaged.”¹

By - Chaitanyaa Bhandarkar