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02 December 2021 | Clarke Energy India (P) Ltd. v. SAS EPC Solution (P) Ltd. and another| Arb OP No. 196 & 197 of 2021 | Madras High Court | Senthilkumar Ramamoorthy J | 2021 SCC OnLine Mad 6121
The Madras High Court has rejected a petition under Sections 14 & 15 ACA that sought termination of the arbitrator for de jure ineligibility on the ground of bias arising from the manner the tribunal fixed the fees (that is, not a bias of kind enumerated either in the Fifth or Seventh Schedule). The court found that a petition was maintainable but, on facts, not sustainable. In the facts, the court said, it was not possible to conclude that a reasonable and objective third party would infer that the arbitrator is biased against the petitioner.
The court has said that a challenge under Sections 12 and 13 ACA can be maintained on a criterion falling outside the Fifth and Seventh Schedules enumerated. However, the challenge should relate to the broad categories contained in those schedules:
[Ed. Note 1: The judgment does not say what will happen if an unenumerated circumstance is 'objective'.]
[Ed. Note 2: The interrelationship between the Fifth and the Seventh Schedule and when they could be invoked is explained, and Clarke should be read in light of Bharat Broadband (2019) 5 SCC 755.]
In addition, the court has also said that Section 12 (5) ACA is only one example of de jure ineligibility under Section 14 ACA. There could be several other examples, for instance, some form of serious cognitive impairment (whether on account of schizophrenia, Alzheimer's disease or the like).
[Ed. Note 3: The court also says in this context that less serious forms of cognitive impairment, such as bipolar disorder and the like, may, on the other hand, pose greater challenges. It added that an arbitrator’s de jure ineligibility could be contended with a fair measure of justification in case of insolvency.]
The court's next conclusion is that a reasonable apprehension of bias, in contrast to actual bias, even if established, does not constitute a legal disability in a formal, statutory sense.
The court has also observed that the expression de jure should be construed as extending beyond open-and-shut legal disability to take within its fold disability due to established loss of legitimacy. The burden of proof to establish this is very high.
As to matters relating to fees, the court concluded that:
Read the decision here.
Categories: Appointment of Arbitrators | Arbitral Fees | Bharat Broadband | Bias | Cap on Arbitrator's Fees | Challenge Procedure | Costs | De Jure Ineligibility | Deposits | Failure or Impossibility to Act | Fees | Fifth Schedule | Fourth Schedule | Grounds for Challenge | HRD Corporation | Independence and Impartiality of Arbitrator | Section 11 ACA | Section 12 ACA | Section 13 ACA | Section 14 ACA | Section 15 ACA | Section 31 (8) ACA | Section 31A ACA | Section 38 (1) ACA | Section 38 ACA | Seventh Schedule | Sum in Dispute | Termination of Mandate and Substitution of Arbitrator