Panipat Jalandhar NH-1 Tollway Private Limited Vs National Highways Authority of India (Supreme Court)
Summary: The Supreme Court in Panipat Jalandhar NH-1 Tollway Private Limited Vs National Highways Authority of India examined whether an arbitral tribunal comprising an arbitrator who had been appointed on multiple occasions by the same party could adjudicate further disputes arising from the same contract, having regard to Section 12(1)(b) read with Entry 22 of the Fifth Schedule to the Arbitration and Conciliation Act, 1996. The dispute arose from a concession agreement dated 9 May 2008 between the petitioner and the National Highways Authority of India for six-laning approximately 291.10 kilometres of National Highway-1 between Panipat and Jalandhar. Multiple disputes subsequently arose concerning project execution, delinking of a road stretch, suspension of toll collection and termination of the concession agreement. The petitioner claimed losses exceeding ₹2,000 crore and sought separate arbitral references for distinct disputes arising under the agreement.
The Delhi High Court had earlier constituted a second arbitral tribunal consisting of retired Supreme Court judges, including Justice G.P. Mathur as the respondent’s nominee. When further disputes arose, NHAI proposed referring them to the same tribunal to avoid duplication of proceedings and save time. The petitioner objected, contending that Justice G.P. Mathur had already received multiple appointments involving NHAI and that another nomination would attract Entry 22 of the Fifth Schedule. By its judgment dated 17 January 2022, the Delhi High Court directed that the additional disputes should be adjudicated by the already constituted second arbitral tribunal. The petitioner challenged this direction before the Supreme Court.
The Supreme Court examined the statutory framework governing independence, impartiality and eligibility of arbitrators. It distinguished the Fifth Schedule, which identifies circumstances giving rise to justifiable doubts regarding independence or impartiality, from the Seventh Schedule, which specifies circumstances resulting in statutory ineligibility under Section 12(5). Referring to Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665, and HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited, (2018) 12 SCC 471, the Court explained that the determination of possible bias requires an objective assessment from the perspective of a neutral third person. Repeated appointments under Entry 22 do not necessarily establish actual bias or impose an absolute statutory disqualification. Rather, the concern is whether successive appointments reflect a special affinity or relationship capable of compromising an arbitrator’s impartiality.
Applying these principles, the Supreme Court held that Entry 22 should not operate as an automatic prohibition against appointing the same arbitral tribunal to resolve multiple disputes arising between the same parties under the same contract. The Court distinguished such situations from repeated appointments in unrelated contractual disputes, where the possibility of special affinity between the appointing party and the arbitrator may warrant closer scrutiny. In the present case, Justice G.P. Mathur had initially been nominated during proceedings before the Delhi High Court, had submitted the prescribed disclosures, and was one member of a three-member tribunal consisting of experienced retired Supreme Court judges. No relationship falling within the Seventh Schedule was alleged or established.
The Court also observed that the petitioner had itself previously proposed that disputes be referred to an existing arbitral tribunal. Consolidating disputes under the same agreement would ordinarily promote procedural efficiency, avoid repetitive arguments and reduce expenditure, provided that consolidation was feasible and did not prejudice the proceedings. The Supreme Court found no basis to question the independence or impartiality of the tribunal or interfere with the Delhi High Court’s decision under Article 136 of the Constitution. Accordingly, the Special Leave Petition was dismissed. The judgment clarifies that repeated arbitral appointments require a contextual assessment of impartiality, rather than mechanical application of a numerical threshold, particularly where the disputes arise from the same contractual relationship.
Cases Discussed
- HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Limited), (2018) 12 SCC 471 (Supreme Court). Relied upon for interpreting the Fifth and Seventh Schedules objectively, including the distinction between circumstances raising justifiable doubts and statutory ineligibility. The judgment also explains the relevance of the IBA Guidelines on Conflicts of Interest in International Arbitration.
- Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665 (Supreme Court). Relied upon for the fundamental requirement of independence and impartiality of arbitrators and the statutory framework introduced through the 2015 amendments.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF SUPREME COURT OF INDIA
1. The short question involved in this Special Leave Petition is, whether the constitution of Arbitral Tribunals consisting of the same Arbitrator and/or Arbitrators in two or more arbitrations to adjudicate disputes arising out of the same contract is barred under Section 12(1)(b) read with Entry 22 of the Fifth Schedule of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”).
2. The Petitioner, Panipat Jalandhar NH-1 Tollway Private Limited entered into a Concession Agreement dated 9th May 2008 with the Respondent, National Highways Authority of India (NHAI) for Six-Laning of 291.10 km of the Panipat-Jalandhar Section of NH-1 (National Highway-1) from 96.00 km to 387.10 km in the States of Haryana and Punjab. The duration of the Concession Agreement was 15 years from 11th May 2009.
3. The relevant provisions of the Concession Agreement are as follows:-
“44.1 Dispute resolution
44.1.1. Any dispute, difference or controversy of whatever nature howsoever arising under or out of or in relation to this Agreement (including its interpretation) between the Parties, and so notified in writing by either Party to the other Party (the “Dispute”) shall, in the first instance, be attempted to be resolved amicably in accordance with the conciliation procedure set forth in Clause 44.2.
44.1.2. The Parties agree to use their best efforts for resolving all Disputes arising under or in respect of this Agreement promptly, equitably and in good faith, and further agree to provide each other with reasonable access during normal business hours to all non-privileged records, information and data pertaining to any Dispute.
44.2 Conciliation
In the event of any Dispute between the Parties, either Party may call upon the Independent Engineer to mediate and assist the Parties in arriving at an amicable settlement thereof Failing mediation by the Independent Engineer or without the intervention of the Independent Engineer, either Party may require such Dispute to be referred to the Chairman of the Authority and the Chairman of the Board of Directors of the Concessionaire for amicable settlement, and upon such reference, the said persons shall meet no later than 7 (seven) days from the date of reference to discuss and attempt to amicably resolve the Dispute, if such meeting does not take place within the 7 (seven) day period or the Dispute is not amicably settled within 15 (fifteen) days of the meeting or the Dispute is not resolved as evidenced by the signing of written terms of settlement within 30 (thirty) days of the notice in writing referred to in Clause 44.1.1 or such longer period as may be mutually agreed by the Parties, either Party may refer the Dispute to arbitration in accordance with the provisions of Clause 44.3.
44.3 Arbitration
44.3.1 Any Dispute which is not resolved amicably by conciliation, as provided in Clause 44.2, shall be finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with Clause 44.3.2. Such arbitration shall be held in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi (the “Rules”), or such other rules, may be mutually agreed by the Parties, and shall be subject to the provisions of the Arbitration Act. The venue of such arbitration shall be Delhi, and the language of arbitration proceedings shall be English.
44.3.2 There shall be a Board of three arbitrators, of whom each Party shall select one, and the third arbitrator shall be appointed by the two arbitrators so selected, and in the event of disagreement between the two arbitrators, the appointment shall be made in accordance with the Rules.
44.3.3 The arbitrators shall make a reasoned award (the “Award”) – Any Award made in any arbitration held pursuant to this Article 44 shall be final and binding on the Parties as from the date it is made, and the Concessionaire and the Authority agree and undertake to carry out such Award without delay.
47.1 Governing law and jurisdiction
This Agreement shall be construed and interpreted in accordance with and governed by the laws of India, and the courts at Delhi shall have jurisdiction over matters arising out of or relating to this Agreement.”
4. Pursuant to the said Concession Agreement, the Petitioner commenced work. However, disputes arose between the parties pertaining to the work done in the year 2013 which were referred to arbitration before an Arbitral Tribunal, referred to, for convenience as the first Arbitral Tribunal.
5. The Petitioner claims that after work was completed in respect of 269 km of the road out of 291.1 km required to be relaid, the Respondent took the decision to delink 22.1 km which, according to the Petitioner, was due to delay and failure on the part of the Respondent to hand over the stretch to the Petitioner.
6. The Petitioner claims that due to this delinking, the Petitioner suffered severe loss to the tune of more than Rs.2,000 crores. Accordingly, the Petitioner sent a Notice of Dispute dated 25th October 2019 to the Respondent, and requested the Respondent to initiate conciliation in accordance with Clause 44.2 of the Concession Agreement. Since the disputes could not be resolved through conciliation, the Petitioner invoked arbitration under Clause 44.3 of the Concession Agreement and issued a notice dated 7th February 2020 calling upon the Respondent to confer on a set of Arbitrators for formation of an Arbitral Tribunal.
7. On or about 4th December 2020, the Respondent suspended collection of toll by the Petitioner as per the Concession Agreement and took over toll collection from the Petitioner on 5th December 2020.
8. By a letter dated 11th December 2020, the Petitioner requested the Respondent to give its consent for reference of all disputes between the parties including the dispute with regard to the Notice of Suspension to the first Arbitral Tribunal as a fresh Arbitration or alternatively nominate its Arbitrator for constitution of a fresh Arbitral Tribunal.
9. The Respondent did not take any action on the request of the Petitioner for reference of the disputes to Arbitration. On 5th March 2021, the Respondent terminated the Concession Agreement.
10. The Petitioner, therefore, filed an application under Section 11(6) of the Arbitration Act before the High Court of Delhi. On 4th May 2021, the Delhi High Court appointed Justice G.P. Mathur, a retired Judge of this Court as the Respondent’s nominee Arbitrator. The Petitioner, thereafter nominated Justice A.K. Sikri, retired Judge of this Court as the Petitioner’s nominee Arbitrator and the two nominee Arbitrators appointed Dr. Justice Mukundakam Sharma (Retd.), the presiding Arbitrator.
11. Accordingly the second Arbitral Tribunal comprising Dr. Justice Mukundakam Sharma (Retd.) as Presiding Arbitrator, Justice A.K. Sikri (Retd.) as Petitioner’s nominee Arbitrator and Justice G.P. Mathur (Retd.) as Respondent’s nominee Arbitrator was constituted.
12. On 25th May 2021, Justice G.P. Mathur made a declaration in terms of Section 12(1) of the Arbitration Act, after which proceedings commenced before the second Arbitral Tribunal.
13. By a notice dated 4th June 2021, the Petitioner nominated Mr. V. K. Tyagi as its nominee Arbitrator, in respect of the disputes mentioned in the Notices dated 25.10.2019 and 07.02.2020 and called upon the Respondent to appoint its nominee Arbitrator within 30 days. The Petitioner claims that the disputes giving rise to the notice dated 4th June 2021 were distinct, separate and independent disputes not connected to the disputes under arbitration by the first and second Arbitral Tribunals.
14. By a letter dated 17th June 2021, written in response to the said notice dated 4th June 2021, the Respondent pointed out that the Petitioner had just initiated the second Arbitration for which the second Arbitral Tribunal had been constituted in May 2021. The Respondent suggested that since the disputes pertained to the same project, they might be referred to the same Arbitral Tribunal, that is, the second Arbitral Tribunal to avoid duplication of hearing and to save time.
15. By a notice dated 2nd July 2021, the Respondent appointed Justice G.P. Mathur (Retd.) as its nominee Arbitrator, without prejudice to its contention that the disputes be referred to the second Arbitral Tribunal, to avoid multiplicity of proceedings.
16. By letter dated 6th July 2021, the Petitioner objected to reference of the disputes to the second Arbitral Tribunal, inter alia, contending that the three arbitrations were different and independent of each other and could not be consolidated and further contending that Justice G. P. Mathur (Retd.) had already been appointed the Respondent’s Arbitrator in four matters, including the second arbitration between the parties.
17. By a communication dated 25th July 2021, the Respondent reiterated its nomination of Justice G.P. Mathur (Retd.) and once again requested that the disputes be referred to the second Arbitral Tribunal. Further correspondence in this regard ensued. Thereafter the Petitioner filed another application under Section 11(6) of the Arbitration Act in the High Court of Delhi.
18. By an elaborate judgment and order dated 17th January 2022 impugned in this Special Leave Petition, the High Court directed that the disputes raised in the notice dated 4th June 2021 with regard to Concession Agreement dated 9th May 2008 and notice of dispute dated 25th October 2019 shall be dealt with by the second Arbitral Tribunal.
19. Ms. Meenakshi Arora, Senior Advocate appearing on behalf of the Petitioner emphatically argued that reference of the disputes being the subject matter of the notice dated 4th June 2021 to the second Arbitral Tribunal was barred by law mainly because of the inclusion in the second Arbitral Tribunal of Justice G.P. Mathur, retired Judge of this Court, since he had been nominated as Arbitrator by the Respondent in three other matters in the previous three years.
20. Section 12 of the Arbitration Act is set out hereinbelow for the convenience:-
“12. Grounds for challenge – (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,—
(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.
Explanation 1.—The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
Explanation 2.—The disclosure shall be made by such person in the form specified in the Sixth Schedule.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if—
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality; or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.”
21. The Fifth, Sixth and Seventh Schedules to the Arbitration Act, relevant to the issues raised in this Special Leave Petition, are set out hereinbelow:
“THE FIFTH SCHEDULE
[See Section 12(1)(b)]
The following grounds give rise to justifiable doubts as to the independence or impartiality of arbitrators:
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.
3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.
11. The arbitrator is a legal representative of an entity that is a party in the arbitration.
12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.
13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.
Relationship of the arbitrator to the dispute
15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
16. The arbitrator has previous involvement in the case.
Arbitrator’s direct or indirect interest in the dispute
17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.
18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.
19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.
Previous services for one of the parties or other involvement in the case
20. The arbitrator has within the past three years served as counsel for one of the parties or an affiliate of one of the parties or has previously advised or been consulted by the party or an affiliate of the party making the appointment in an unrelated matter, but the arbitrator and the party or the affiliate of the party have no ongoing relationship.
21. The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter.
22. The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.
23. The arbitrator’s law firm has within the past three years acted for one of the parties or an affiliate of one of the parties in an unrelated matter without the involvement of the arbitrator.
24. The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties or an affiliate of one of the parties.
Relationship between an arbitrator and another arbitrator or counsel
25. The arbitrator and another arbitrator are lawyers in the same law firm.
26. The arbitrator was within the past three years a partner of, or otherwise affiliated with, another arbitrator or any of the counsel in the same arbitration.
27. A lawyer in the arbitrator’s law firm is an arbitrator in another dispute involving the same party or parties or an affiliate of one of the parties.
28. A close family member of the arbitrator is a partner or employee of the law firm representing one of the parties, but is not assisting with the dispute.
29. The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm.
Relationship between arbitrator and party and others involved in the arbitration
30. The arbitrator’s law firm is currently acting adverse to one of the parties or an affiliate of one of the parties.
31. The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties in a professional capacity, such as a former employee or partner.
Other circumstances
32. The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an affiliate of one of the parties that is publicly listed.
33. The arbitrator holds a position in an arbitration institution with appointing authority over the dispute.
34. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties, where the affiliate is not directly involved in the matters in dispute in the arbitration.
Explanation 1.—The term “close family member” refers to a spouse, sibling, child, parent or life partner.
Explanation 2.—The term “affiliate” encompasses all companies in one group of companies including the parent company.
Explanation 3.—For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.
THE SIXTH SCHEDULE
[See Section 12(1)(b)]
Name:
Contact Details:
Prior Experience (Including Experience with Arbitrations):
Number of ongoing arbitrations:
Circumstances disclosing any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to your independence or impartiality (list out):
Circumstances which are likely to affect your ability to devote sufficient time to the arbitration and in particular your ability to finish the entire arbitration within twelve months (list out):
THE SEVENTH SCHEDULE
[See Section 12(5)]
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.
3. The arbitrator currently represents the lawyer or law firm acting as counsel for one of the parties.
4. The arbitrator is a lawyer in the same law firm which is representing one of the parties.
5. The arbitrator is a manager, director or part of the management, or has a similar controlling influence, in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration.
6. The arbitrator’s law firm had a previous but terminated involvement in the case without the arbitrator being involved himself or herself.
7. The arbitrator’s law firm currently has a significant commercial relationship with one of the parties or an affiliate of one of the parties.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company.
10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties.
11. The arbitrator is a legal representative of an entity that is a party in the arbitration.
12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties.
13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.
Relationship of the arbitrator to the dispute
15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
16. The arbitrator has previous involvement in the case.
Arbitrator’s direct or indirect interest in the dispute
17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held.
18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute.
19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute.
Explanation 1.—The term “close family member” refers to a spouse, sibling, child, parent or life partner.
Explanation 2.—The term “affiliate” encompasses all companies in one group of companies including the parent company.
Explanation 3.—For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a relevant fact to be taken into account while applying the rules set out above.”
22. Section 12 of the Arbitration Act, as amended with effect from 23rd October 2015 requires that when a person is approached in connection with his possible appointment as an Arbitrator, he should make a disclosure in writing, stating the existence of any direct or indirect, past or present relationship or interest in any of the parties or in relation to the subject-matter in dispute, which is likely to give justifiable doubts as to his independence or impartiality. He is also to disclose whether he can devote sufficient time to the arbitration, so that he can complete the arbitration within a period of twelve months. The disclosure under Section 12 is required to be made in the form specified in the Sixth Schedule.
23. In determining whether any circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an Arbitrator/Arbitral Tribunal, the grounds set forth in the Fifth Schedule are to serve as a guide.
24. Under Section 12 read with the Fifth Schedule to the Arbitration Act, and in particular, Entry 22 to the said Schedule, the fact that an Arbitrator had, within the past three years, been appointed as Arbitrator on two or more occasions, by any one of the parties or an affiliate of that party, could give rise to justifiable doubts as to the independence or impartiality of the Arbitrator. A person whose relationship with the parties or Counsel or subject matter of the dispute falls in any of the categories specified in the Seventh Schedule is, however ineligible to be appointed Arbitrator, notwithstanding any prior agreement to the contrary.
25. As held by this Court in Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd.1, independence and impartiality of the Arbitrator are the hallmarks of any arbitration proceedings. Rule against bias is one of the fundamental principles of natural justice, which applies to all judicial and quasi-judicial proceedings.
26. As observed by this Court in Voestalpine Schienen GmbH (supra):-
“25. Section 12 has been amended with the objective to induce neutrality of arbitrators viz. their independence and impartiality. The amended provision is enacted to identify the “circumstances” which give rise to “justifiable doubts” about the independence or impartiality of the arbitrator. If any of those circumstances as mentioned therein exists, it will give rise to justifiable apprehension of bias. The Fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. Likewise, the Seventh Schedule mentions those circumstances which would attract the provisions of sub-section (5) of Section 12 and nullify any prior agreement to the contrary. In the context of this case, it is relevant to mention that only if an arbitrator is an employee, a consultant, an advisor or has any past or present business relationship with a party, he is rendered ineligible to act as an arbitrator. Likewise, that person is treated as incompetent to perform the role of arbitrator, who is a manager, director or part of the management or has a single controlling influence in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. Likewise, persons who regularly advised the appointing party or affiliate of the appointing party are incapacitated. A comprehensive list is enumerated in Schedule 5 and Schedule 7 and admittedly the persons empanelled by the respondent are not covered by any of the items in the said list.”
27. As observed by this Court in HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited (Formerly Gas Authority of India Limited2, a broad commonsensical approach must be taken to the items stated in Fifth and Seventh Schedule. This approach requires a fair construction of the words used therein, neither enlarging or restricting them unduly.
28. The issue of reasonable likelihood of bias must be dealt with objectively from the point of view of a neutral third person. The question to be posed is, whether a neutral third person would perceive the appointment of the Arbitrator as unfair. In other words, the Court has to address to itself the core question of whether the Arbitrator has such interest in the Arbitration, or any of the parties thereto, that could colour his objectivity and sway his decision in any particular way, keeping in mind the grounds specified in the Fifth Schedule. However, a person whose relationship with the parties or counsel or the subject matter of the dispute falls is any of the categories specified in the Seventh Schedule, would outright be ineligible to be appointed as an Arbitrator.
29. It is nobody’s case that the relationship of Justice G.P. Mathur (Retd.) with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule. The grounds enumerated in the Fifth Schedule do not disqualify a person from being appointed Arbitrator. The Court would only examine whether such person has any such interest in the Arbitration that could affect his objectivity and impartiality.
30. As observed by this Court in HRD Corporation (Marcus Oil and Chemical Division) v. Gail (India) Limited (supra):-
“14. The enumeration of grounds given in the Fifth and Seventh Schedules have been taken from the IBA Guidelines, particularly from the Red and Orange Lists thereof. The aforesaid guidelines consist of three lists. The Red List, consisting of non-waivable and waivable guidelines, covers situations which are “more serious” and “serious”, the “more serious” objections being non-waivable. The Orange List, on the other hand, is a list of situations that may give rise to doubts as to the arbitrator’s impartiality or independence, as a consequence of which the arbitrator has a duty to disclose such situations. The Green List is a list of situations where no actual conflict of interest exists from an objective point of view, as a result of which the arbitrator has no duty of disclosure. These Guidelines were first introduced in the year 2004 and have thereafter been amended, after seeing the experience of arbitration worldwide. In Part 1 thereof, general standards regarding impartiality, independence and disclosure are set out.”
31. Entry 22 corresponds to the Orange List where the Arbitrator has a duty to make a disclosure, which Justice G.P. Mathur (Retd.) has done. This Court has to consider if there are justifiable doubts as to the independence or impartiality of Justice G.P. Mathur (Retd.).
32. The object of Entry 22 of the Fifth Schedule read with Section 12(1) of the Arbitration Act and in particular Explanation (1) to Section 12(1) is to see that disputes are not referred to an Arbitrator who has successively been nominated by any of the parties, or their associates, in different arbitrations because of some special affinity with the Arbitrator.
33. In this context, it may be pertinent to take judicial notice of the practice prevailing prior to the amendment of Section 12 of the Arbitration Act with effect from 25th October 2015, when the same Arbitrator, often an associate advocate of a law firm dealing with the cases of a particular party, was appointed Arbitrator by that party by virtue of an Arbitration Clause which empowered that party to appoint an Arbitrator. This was a common practice in case of some financing and hire purchase agreements.
34. Section 12 read with Entry 22 of the Fifth Schedule to the Arbitration Act frowns upon the appointment of an Arbitrator in successive arbitrations by virtue of some special affinity and/or connection with that Arbitrator.
35. The question which is to be addressed by this Court is the possible reason why the Arbitrator should have been appointed on two or more occasions in the past three years. Is there possibility of such special affinity between that Arbitrator and the party concerned that could make the Arbitrator lean favourably towards that party? Does the same Arbitrator being nominated again and again because of any special affinity with the party making the nomination, expect any favourable treatment from the Arbitrator?
36. It is immaterial whether the Arbitrator is actually biased in favour of the party making the nomination. Justice should not only be done, but manifestly be seen to have been done. The nomination of the same Arbitrator in successive arbitrations relating to different contracts may give rise to justifiable apprehension that the Arbitrator may be favourably disposed towards the party making the nomination.
37. In the instant case, the Respondent had not nominated any Arbitrator till 4th May 2021, when the application filed by the Petitioner under Section 11(6) of the Arbitration Act was taken up for hearing before the Delhi High Court. In Court, Counsel had, after taking instructions from the representative of the Respondent, suggested the name of Justice G.P. Mathur (Retd.) as the Respondent’s nominee. This is not a case where different arbitration references relating to different contracts are being made to the same Arbitrator with any ulterior intent.
38. This Court is of the view that Entry 22 would not apply as a rule to appointment of the same Arbitral Tribunal to adjudicate multiple disputes between the same parties arising out of the same contract, to avoid duplication of arguments and save time.
39. In the considered view of this Court, Entry 22 of the Fifth Schedule would only be attracted in case of multiple references by a party, of disputes relating to different contracts, to the same Arbitrator, in excess of the cap of Entry 22. Reference of a dispute to the same Arbitrator conducting different arbitrations concerning any party attracts the Fifth Schedule. Where the disputes pertain to the same contract and a subsequent reference is made to the same Arbitral Tribunal only for the sake of convenience, it cannot be said that circumstances exist, which raise reasonable doubts as to the impartiality or independence of the Arbitral Tribunal.
40. The High Court has very rightly held that there is no embargo to appointment of Arbitrator in cases more than the number stipulated in Entry 22 of the Fifth Schedule. The Court is not debarred from taking a just decision.
41. The declaration made by Justice G.P. Mathur (Retd.) by his communication dated 25th May 2021 and the second declaration made on 5th August 2021 have been set out in the judgment and order impugned. Justice G.P. Mathur is not ineligible to be appointed Arbitrator under Section 12(5) of the Arbitration Act, or otherwise. As held by the High Court, a conjoint reading of both the declarations clearly show that neither the learned Arbitrator nor any member of his family had any relationship with the Respondent or any associate or affiliate of the Respondent which could cast any doubts on the propriety of his appointment. He had categorically declared that he had been appointed Arbitrator in three other matters, the last of which was by virtue of the order dated 4th May 2021 of the Delhi High Court as stated above.
42. Significantly the Petitioner itself had earlier, long after the amendment of 2015, by its letter dated 11th December 2020 suggested reference of all disputes between the Petitioner and the Respondent to the first Arbitral Tribunal adjudicating the first reference since 2013, or alternatively to any other Arbitral Tribunal that might be constituted. It is difficult to comprehend why objection should now be raised to reference of the same disputes covered by the letter dated 11th December 2020 to the second Arbitral Tribunal, which is already in seisin of dispute relating to the same project and the same contract.
43. The second Arbitral Tribunal is comprised of highly experienced legal luminaries who had been Judges of the highest Court in this country. There is no reason to suppose that the Arbitral Tribunal will not be independent or impartial. Moreover, Justice G.P. Mathur (Retd.) is one of the Arbitrators in an Arbitral Tribunal comprising two others. Even if he had earlier been nominated by the Respondent, that was because of his legal acumen and vast experience.
44. This Court also agrees that an arbitration clause is incorporated in an agreement and/or contract with the object of speedy resolution of disputes. Multiple disputes arising out of the same agreement and/or contract should, wherever possible, be consolidated and referred to the same Arbitral Tribunal, unless reference to the same Arbitral Tribunal is not expedient or feasible. To give an example, reference of a subsequent dispute to an Arbitral Tribunal deciding an arbitration which is at an advanced stage of arguments, or where proceedings have been concluded and award awaited, may not be feasible. The example is only illustrative.
45. This Court finds no infirmity in the impugned judgment and order of the High Court, which warrants interference under Article 136 of the Constitution of India.
46. The Special Leave Petition is, accordingly, dismissed.
The special leave petition is dismissed in terms of the signed non-reportable judgment.
Pending applications, if any, stand disposed of accordingly.
The special leave petition is dismissed.
Reasons to follow.
Pending application(s), if any, shall stand dispose of.
1. (2017) 4 SCC 665 ↩
2. (2018) 12 SCC 471 ↩
