Bombay High Court

Priyanka Communications India Pvt Ltd vs Tata Capital Limited on 4 February, 2025

   2025:BHC-OS:1910


                                                                                        18-CARBP-97-2025 copy.docx



                                   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                        ORDINARY ORIGINAL CIVIL JURISDICTION
         Digitally
         signed by
         SHRADDHA
SHRADDHA KAMLESH
                                                  IN ITS COMMERCIAL DIVISION
KAMLESH TALEKAR
TALEKAR  Date:
         2025.02.07             COMMERCIAL ARBITRATION PETITION NO. 97 OF 2025
         11:14:53
         +0530


                      Priyanka Communications India Pvt                                      ...Petitioner
                            Versus
                      Tata Capital Limited                                                   ...Respondent



                      Mr. Atul Damle, Senior Advocate a/w. Premlal Krishnan, Nadeem
                      Shama, Rehmat Lokhandwala, Hrishikesh Nadkarni and Siddharth
                      Seshadri i/b PAN India Legal Services LLP, for Petitioner.

                      Mr. Rohan Savant a/w. Mr. Mayur Bhojwani, Mr. Aauam Mehta i/b
                      Manilal Kher Ambabal & Co, for Respondent.



                                                          CORAM : SOMASEKHAR SUNDARESAN, J.

                                                          Date       : February 4, 2025


                      ORAL JUDGEMENT:

1. This is a Petition filed invoking Sections 12, 13 and 14 of the Arbitration

and Conciliation Act, 1996 ("the Act"), requesting this Court to set aside an

order dated November 11, 2024, by which, the Learned Sole Arbitrator,

(appointed by an order of this Court under Section 11 of the Act on October

15, 2024) has not recused himself at the request of the Petitioner.

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2. The material on record brought to bear by the Petitioner, essentially

covers the disclosure made by the Learned Sole Arbitrator on November 11,

2024, setting out the nature of relationships between the Learned Sole

Arbitrator with affiliates of the Respondent. These disclosures are essentially

about a few matters where the Learned Sole Arbitrator had represented some

affiliates of the Respondent. The Petitioner has also brought to bear a range

of other past representations, which would lead to the factual matrix that

would enable the Petitioner to invoke the Fifth Schedule of the Act i.e. to

raise justifiable doubts as to independence and impartiality of the arbitrator.

The Petitioner filed an application under Section 13 of the Act requesting the

Learned Sole Arbitrator to recuse from the proceedings. The Learned Sole

Arbitrator rejected the application.

3. This Petition seeks that the Court should substitute the Learned Sole

Arbitrator on the premise that the arbitrator is conflicted. However, one

would need to have specific regard to the scope of jurisdiction of this Court.

Section 14(1)(a) of the Act inter alia enables this Court to interfere during the

course of arbitral proceedings where the arbitrator becomes de jure or de

facto unable to perform his functions. Under Section 14(2) of the Act, only

controversies about the grounds referred to in Section 14(1)(a) would give a

party aggrieved access to the jurisdiction of the Court to substitute the

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arbitrator. In other words, only where questions arise as to whether the

arbitral tribunal is truly de jure unable or de facto unable to perform as

arbitrator, this Court would have jurisdiction to replace the arbitrator.

4. It is now well declared law that to attract the element of being de jure

unable to perform, the arbitrator ought to be under a legal incapacity that

renders him ineligible to act as an arbitrator. For example, where an

individual acting as an arbitrator is elevated as a judge, he would be de jure

unable to act despite being physically able to act. Likewise, where the

arbitrator becomes incapacitated, say due to an illness, he would become de

facto unable to perform even if there were no legal incapacity making him

ineligible to act.

5. The Seventh Schedule lists the situations in which an arbitrator would

become ineligible to perform. Eligibility would go to the root of the matter. If

an arbitrator is rendered ineligible to function as such under the Seventh

Schedule, he would be de jure unable to act as an arbitrator. Doubts and

controversies in interpreting whether he is de jure unable to act would give

jurisdiction to this Court under Section 14 of the Act.

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6. In the instant case, evidently, the arbitrator does not attract any of the

ineligibility conditions listed in the Seventh Schedule. Items 1 and 2 of the

Seventh Schedule are pressed into service. These read as follows:-

Arbitrator's relationship with the parties or counsel

1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.

2. The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.

[Emphasis Supplied]

7. It will be seen from a plain reading of the foregoing that for Item 1, to

be ineligible, the arbitrator ought to have a relationship with any party to the

arbitration, whether past or present, but in the capacity as an employee,

consultant, advisor or of any other business relationship. As for Item 2, to be

ineligible, the arbitrator ought to currently represent one of the parties or an

affiliate of one of the parties. There is a time element in Item 2 of there being

a current ongoing relationship, and consciously the legislature has not

brought in past representations or advisory relationships within the scope of

Item 2 (unlike Item 1 where present and past business relationship, are both

alluded to).

8. The allegation by the Petitioner is not that the Learned Sole Arbitrator

is currently representing the Respondent or its affiliates. The Petitioner has

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had past representations for affiliates of the Respondent, as a Counsel who is

briefed by law firms and attorneys. In these circumstances, neither of the

two Items of the Seventh Schedule are attracted.

9. The past representations of a party or an affiliate of a party as a lawyer,

would require the arbitrator to make disclosures under Section 12 of the Act

read with the Fifth Schedule, which the Learned Sole Arbitrator has done.

Such disclosures would enable a party to raise doubts about the

independence and impartiality of the arbitrator, but the statutory scheme of

the Act, would enable the party questioning the independence and

impartiality of the arbitrator only when (and if) a challenge is required to be

mounted under Section 34 of the Act after the passing of the final award. At

no intermediate stage can this Court interfere with the arbitral proceedings

on the ground of the Fifth Schedule being attracted.

10. Items 1 and 2 of the Seventh Schedule have fallen for detailed

consideration by the Supreme Court in HRD Corporation1. Paragraph 22 of

the judgment, which would be instructive, is extracted below:

"22. Shri Divan has pressed before us that since on a legal issue between GAIL and another public sector undertaking an opinion had been given by Justice Lahoti to GAIL in the year 2014, which had no concern with respect to the present matter, he would stand disqualified under Item 1 of the Seventh Schedule. Items 8 and 15

HRD Corporation (Marcus Oil and Chemical Division) vs. GAIL (India) Ltd. - (2018) 12 SCC 471

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were also faintly argued as interdicting Justice Lahoti's appointment. Item 8 would have no application as it is nobody's case that Justice Lahoti "regularly" advises the respondent. And Item 15 cannot apply as no legal opinion qua the dispute at hand was ever given. On reading Item 1 of the Seventh Schedule, it is clear that the item deals with "business relationships". The words "any other" show that the first part of Item 1 also confines "advisor" to a "business relationship". The arbitrator must, therefore, be an "advisor" insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2, 8, 14 and 15, the last item specifically dealing with "legal advice". Under Items 2, 8 and 14, advice given need not be advice relating to business but can be advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under Items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word "regularly" is missing from Items 1 and 2, it is clear that the arbitrator, if he is an "advisor", in the sense of being a person who has a business relationship in Item 1, or is a person who "currently"

advises a party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm's length. Something more is required, which is the element of being connected in an advisory capacity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the present dispute, he is clearly not disqualified under Item 1."

[Emphasis Supplied]

11. From a plain reading of the foregoing, it would be clear that for the

rigours of either Item 1 or 2 to be attracted by a lawyer's representation, there

ought to be a current representation of a party to the dispute or any affiliate

of such party. The role played by the Learned Sole Arbitrator with affiliates

of the Respondent is not in the nature of being a regular advisor.

Representation in court, briefed by law firms, is what the material brought to

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bear by the Petitioner, bears out. There is no current representation of the

Respondent or any affiliate of the Respondent, by the Learned Sole

Arbitrator. Neither has the Petitioner brought to bear any material to