Written By: Apoorv Agarwal
Arbitration is founded on the principle of party autonomy, but the legitimacy of an arbitral award ultimately depends on the neutrality of the tribunal deciding the dispute. Parties choose to resolve disputes privately, outside the ordinary court process, precisely because they expect the arbitrator to approach the matter independently, impartially and without a predetermined view. Doubts about an arbitrator’s neutrality can therefore have consequences extending beyond the constitution of the tribunal and may affect the validity and enforceability of the eventual award.
The Arbitration and Conciliation Act, 1996 (“the Act”) recognises this concern and provides a statutory framework for challenging the appointment of an arbitrator. Sections 12, 13, 14 and 15, read together with the Fifth and Seventh Schedules, set out separate grounds and procedures for questions touching an arbitrator’s independence, impartiality, qualifications and eligibility.
Independence and Impartiality: Related but Distinct Concepts
Independence and impartiality are often used together, but they address different concerns. Independence is largely an objective inquiry that relates to the external relationships or influences that could affect an arbitrator’s decision. Professional, financial or personal relationship with a party, its counsel, or the subject matter of the dispute may give rise to doubts regarding independence.
Impartiality, on the other hand, concerns the arbitrator’s approach to the dispute and whether the arbitrator remains free from bias, prejudice or a preconceived determination. Unlike independence, which can often be assessed through objective facts and disclosed relationships, impartiality may become apparent through the conduct of proceedings. Unequal treatment of parties, procedural conduct suggestive of preconceived notion, or an apparent predisposition may give rise to a doubt regarding impartiality.
Indian arbitration jurisprudence has adopted an objective approach to the assessment of bias. The question is not necessarily whether actual bias can be proved, but whether the circumstances would cause a reasonable and informed person to apprehend a likelihood of bias. In A.K. Kraipak v. Union of India, (1969) 2 SCC 262, the Supreme Court recognised the importance of the appearance of bias in determining whether a decision-making process satisfies standards of fairness. This approach was subsequently considered in the context of arbitration in HRD Corporation v. GAIL (India) Ltd., (2018) 12 SCC 471. The real likelihood test should be based on whether a reasonable observer, knowing all relevant facts, would anticipate bias. However, impartiality is to be judged based on common-sensical test, meaning thereby that doubts as to the biasedness are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case.
Statutory Framework for Challenging an Arbitrator
Section 12 of the Arbitration Act requires an arbitrator to disclose circumstances that may give rise to justifiable doubts as to his or her independence or impartiality. The Fifth Schedule provides circumstances that may guide the assessment of whether such doubts arise. These provisions recognise that transparency is an essential safeguard in arbitration. A failure to make a material disclosure can itself become significant when the circumstances surrounding the arbitrator’s neutrality are subsequently examined.
The Act also deals more stringently with situations covered by Section 12(5) and the Seventh Schedule. Where an arbitrator falls within a category specified in the Seventh Schedule, the person is rendered ineligible to act as an arbitrator. Statutory ineligibility operates as a legal bar upon the arbitrator’s continuation in office and may result in the arbitrator becoming de jure unable to perform his or her functions.
The Supreme Court’s decisions in TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, and Bharat Broadband Network Ltd. v. United Telecoms Ltd., (2019) 5 SCC 755, are important in this regard. The principle emerging from these decisions is that where a person is rendered ineligible under Section 12(5) read with the Seventh Schedule, that ineligibility affects the person’s legal ability to act as an arbitrator. The statutory scheme also makes clear that any waiver of Section 12(5) must satisfy the requirements prescribed by its proviso rather than being inferred merely from participation in the proceedings. The Supreme Court has subsequently developed this jurisprudence in relation to unilateral appointment mechanisms, including in the Constitution Bench decision concerning the Central Organisation for Railway Electrification.
The Importance of Raising a Challenge at the Appropriate Stage
The right to challenge an arbitrator is not entirely open-ended. Section 13 prescribes a 15 day period for a party to submit its challenge from the time it becomes aware of the constitution of the tribunal or the relevant circumstances giving rise justifiable doubts about the impartiality of an arbitrator. The statutory time limit reflects the broader objective of preventing a party from remaining silent about a known objection, participating in the arbitration and raising the issue only after the outcome has become unfavourable.
The Supreme Court in HRD Corporation and Bharat Broadband has emphasised the importance of raising an objection at the earliest opportunity. The principle is particularly relevant where the alleged bias or conflict was known to a party well before the conclusion of the proceedings. In such circumstances, allowing an objection to be raised only after the award may raise questions of waiver or acquiescence.
At the same time, the statutory scheme treats an arbitrator’s ineligibility under the Seventh Schedule differently. Since such ineligibility concerns the arbitrator’s legal capacity to act, the issue may engage Section 14 concerning termination of mandate.
Can an Arbitrator Be Challenged During Final Arguments?
The fact that an arbitration has progressed to the stage of final arguments does not, by itself, mean that every objection concerning the arbitrator becomes incapable of consideration. The decisive question is the nature of the objection and when the relevant circumstances became known to the complaining party.
Where a party seeks to challenge an arbitrator on the basis of a circumstance falling within the ordinary grounds of Section 12, the 15 day statutory requirement under Section 13 becomes particularly significant. A party that was aware of the relevant circumstance much earlier but continued with the arbitral proceedings without objection may face substantial difficulty in subsequently challenging the arbitrator’s mandate or relying upon the same circumstances to challenge the award.
The position can be materially different where the objection concerns statutory ineligibility under Section 12(5) and the Seventh Schedule. In such cases, the issue is not simply whether an arbitrator’s conduct creates an apprehension of bias; it concerns whether the arbitrator possesses the legal eligibility to continue acting in the first place.
Non-Disclosure, Repeat Appointments and Perceived Bias
Arbitration law not only focuses on actual conflicts but also on circumstances capable of creating an appearance of partiality. Disclosure by the arbitrator under Section 12 of the Act therefore performs a preventive function. It enables parties to assess potential conflicts at the initial stage of arbitral proceedings and decide whether to raise an objection. International arbitration standards similarly emphasise continuing disclosure obligations and recognise that the significance of a relationship may depend upon the circumstances in which it arises.
Repeat appointments of the arbitrator present a more nuanced question. A prior appointment of the arbitrator in proceedings involving the same parties or similar subject matter by itself, does not necessarily establish bias or dependence. However, a pattern of repeated appointments may become relevant where it gives rise to a reasonable apprehension that an arbitrator’s professional or economic interests could be affected. The same is true of prior involvement in related proceedings: the existence of earlier involvement is not automatically disqualifying, but non-disclosure or circumstances indicating prejudgment may warrant closer scrutiny.
Termination of Mandate and the Role of the Courts
Sections 14 and 15 provide for termination and substitution of an arbitrator in specified circumstances. Section 14 addresses situations where an arbitrator becomes de jure or de facto unable to perform his or her functions, while Section 15 deals with other circumstances including withdrawal by the arbitrator or agreement of the parties.
The distinction between de jure and de facto inability is important. De jure inability arises from a legal prohibition preventing the arbitrator from continuing in office. In contrast, de facto inability concerns circumstances in which the arbitrator is practically incapable of performing the functions of the office. Where statutory ineligibility is established, the issue goes beyond dissatisfaction with the arbitrator’s conduct and concerns the legal validity of the tribunal’s continuation.
The Supreme Court’s jurisprudence demonstrates that Indian arbitration law seeks to balance two competing objectives: protecting party confidence in a neutral tribunal while preventing tactical or belated challenges designed merely to delay the arbitration. International arbitration similarly recognises that judicial intervention must protect due process without converting every allegation of perceived bias into a basis for disrupting proceedings.
Conclusion
The effectiveness of arbitration depends not merely upon the finality of an award but upon the confidence that the award has been rendered by a tribunal that was, throughout the proceedings, independent and impartial. Indian arbitration law therefore provides multiple safeguards, ranging from disclosure requirements and challenges under Section 12 and Section 13 to termination of mandate under Sections 14 and 15 where legally recognised grounds arise.
For parties, however, the timing and nature of an objection remain critical. A party cannot ordinarily remain silent about a known circumstance giving rise to a challenge and seek to resurrect the objection after the proceedings have concluded. Conversely, an allegation of statutory ineligibility may raise a fundamentally different question because it concerns the arbitrator’s legal authority to act.
The jurisprudence ultimately reflects a broader principle: arbitration cannot derive legitimacy from efficiency alone. Party autonomy and finality must operate alongside independence, impartiality and procedural fairness. A neutral tribunal is therefore not merely a desirable feature of arbitration; it is one of the conditions upon which the credibility of the arbitral process itself rests.
