Published by: Madhav Goswami
College: GLA University, Mathura.
Introduction:
The Indian Judiciary is overburdened and has a slow pace in disposing cases. As per the
statistical reports around 1.65 Lakh cases are pending in every High Court of the country and
more than 2.6 Crore cases are pending in lower and subordinate judiciary of the country
respectively. As a consequence of the same there is an urging need of disposing of the cases in
reasonable time with a faster and effective mechanism. Therefore, Arbitration and Conciliation
Act, 1996 (26 of 1996) was passed with a view of disposing-off the cases effectively within a
period of stipulated time. It promotes Arbitration as an alternate dispute resolution mechanism
in India. It emerged out as a successful attempt to reduce the burden on Indian Courts as well.
Business entities usually incorporates Arbitration Clauses in any agreement or contract that
they enter into with another entity or sign a separate agreement for the same altogether.
The Supreme Court of India has embarked the independence and impartiality of an arbitrator
which is the essential foundation of arbitration along with a fundamental principle of Natural
Justice. In view of the same, Section 12 was also incorporated which lays down certain
specified grounds on which the competency of an arbitrator can be challenged.
Moreover, the 2015 amendment to the said act has further added Seventh Schedule which lays
down additional criterions on which an arbitrator’s impartiality and independence can be
challenged simultaneously.
Grounds for arduous the appointment of an Arbitrator: –
Section 12(1) of the Arbitration and Conciliation Act, 1996 states that; “When a person
is proceed towards in connection with his probable appointment as an arbitrator, he is
required to disclose in writing, any circumstances:-
Such as existence of either direct or indirect;
Any Past or Present Relationship;
With or attentiveness in any of the parties;
Relationship with subject-matter of the dispute;
Or Any Financial, Business, Professional or other kind of relationship
Which gives rise to the justifiable doubts as to his independence or impartiality and also
likely to affect his capability in order to allot sufficient time to the arbitration. On the
other hand, in particular his ability to complete the entire arbitration within a period of
stipulated time i.e., a period of twelve months.
Furthermore, the grounds stated in the Fifth Schedule of the above-mentioned act
provides an exhaustive list which also helps in determining the existence of
circumstances that are likely to give birth to justifiable or reasonable doubts as to the
independence or impartiality of an arbitrator.
Moreover, Section 12(2) of the Arbitration and Conciliation Act, 1996 makes
compulsory for an appointed arbitrator to disclose all such above mentioned
circumstances through form provided in the Sixth Schedule of the said act respectively.
When an Arbitrator can be challenged: –
According Section 12(3) of the Arbitration and Conciliation Act, 1996 an arbitrator can
be challenged in the situations stated below:-
Existence of certain circumstances which give rise to justifiable doubts as to his
independence or impartiality; or
Where he doesn’t possess the qualifications agreed to by the parties respectively.
Section 13 of the above-mentioned act provides the challenge procedure in the case as
referred to Section 12 of the Arbitration and Conciliation Act, 1996.
Section 12(5) of the Arbitration and Conciliation Act, 1996 was inserted through 2015
amendment which states the following:-
“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.”
The Amendment made in the year 2015 to the Arbitration and Conciliation Act, 1996
provides the Seventh Schedule which lays down the additional criterions on which the
competency of an arbitrator can be challenged. The said schedule of the above-
mentioned act consists of 34 entries in total falling which an arbitrator can be
challenged.
Fifth Schedule of Arbitration and Conciliation Act, 1996: –
The Fifth Schedule of the Arbitration and Conciliation Act, 1996 consists of certain
kinds of relations which might give rise to justifiable doubts to the competency of an
arbitrator and are stated as follows: –
Relationship with Parties involved in the dispute;
Relationship with Counsel;
Relationship to the dispute;
Any sort of interest in the subject-matter of the dispute;
Any past involvement in the dispute;
Relationship with co-arbitrator’s (if exist);
Other circumstances.
Seventh Schedule of the Arbitration and Conciliation Act, 1996:-
The Seventh Schedule was inserted in the above-mentioned act through an amendment
made in the year 2015 which covers most of the grounds laid down in Fifth Schedule
of the said act along with certain additional criterions. This list is not exhaustive like
Fifth Schedule, but acts as a bar to appointment of an arbitrator in any dispute
respectively.
The Seventh Schedule covers following grounds: –
Arbitrator’s relationship with the parties involved in the dispute;
Arbitrator’s relationship with the Counsel;
Arbitrator’s any sort of interest in the dispute;
Other Circumstances.
Conclusion:-
The 2015 Amendment done in Arbitration and Conciliation Act, 1996 targets to
promote free, fair, impartial and independent arbitration in India with a view to provide
transparency and reliability on the same.
Section 12 was regarded of utmost importance in light of the new amendment made in
the year 2015 and seeks to make arbitration a more and reasonable legal recourse or
legal remedy then relying upon the Indian Courts and also aims to reduce the burden of
cases from the Judiciary simultaneously.