No clash of interest involved when the adjudicating Arbitrator had accepted brief of party’s lawyer in an unrelated matter previously

In the matter of Quess Corp versus Netcore Cloud Pvt Ltd (Arbitration Petition (L) No. 24705 OF 2022) decided by the Hon’ble Bombay High Court on 17.01.2023

FACTS: After certain disputes arose between the petitioner, Quess Corp, and the respondent, Netcore Cloud Pvt Ltd, under a Master Service Agreement, the Respondent invoked the Arbitration clause and subsequently filed an Arbitration petition under Section 11(6) of the A&C Act. The Hon’ble Bombay High Court appointed a Sole Arbitrator proposed by the respondent.

Thereafter, the petitioner filed a petition under Section 14(2) of the A&C Act before the Bombay High Court, seeking to terminate the mandate of the Sole Arbitrator submitting that the Arbitrator had previously represented the counsel for the respondent in several matters before various forums. It argued that as per Section 12(5) read with Schedule VII of the A&C Act, the Sole Arbitrator had become ineligible to continue as an arbitrator, and thus, he was de jure and de facto unable to perform his functions.

OBSERVATIONS: The Hon’ble Court referred to Sheetal Maruti Kurundwade vs. Metal Power Analytical (I) Pvt. Ltd (2017) wherein it had ruled that though no arbitrator should be involved in any manner with one of the parties to the dispute or be a partner with a lawyer or a law firm appearing in the arbitration; however, a law firm’s briefing of counsel in other, unrelated matters is on a very different footing.

Reference was also placed on Schedule V of the A&C Act which enumerates the circumstances which give rise to justifiable doubts regarding the Arbitrator’s independence or impartiality, the bench noted that Items 3 and 4 of the Vth Schedule include the following grounds, respectively: The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties”, and “The arbitrator is a lawyer in the same law firm which is representing one of the parties.”

The High Court thus concluded that, where the counsel (Arbitrator) has accepted a brief from a particular attorney, Advocate on record, or a lawyer for some other client, the same will not amount to per se disqualification or ineligibility because the disqualification connection as contemplated under Item 3 of Schedule VII, must be between the Arbitrator who had acted as a counsel and the litigant.

Hence, it was held that the disqualification connection contemplated under Item 3 of Schedule VII of the Arbitration and Conciliation Act, 1996 must be between the Arbitrator and the litigant. Thus, where the Arbitrator who had accepted a brief from the respondent’s counsel for some other client, the same will not amount to per se disqualification or ineligibility.