DISQUALIFICATION OR REVOCATION OF ARBITRATORS

The old topic of revoking the authority of an arbitrator and seeking his removal has
been given a new jargon namely challenging the arbitrator. The grounds on which a
challenge can be presented are listed in section 12.
S.12 [1]
Section 12 says that when a person is approached in connection with his possible
appointment as an arbitrator, he is under a duty to disclose in writing any
circumstances likely to give rise to justifiable doubts as to his independence or
impartiality. This act does not contemplate the removal of an arbitrator by the court, it
contemplates the removal of an arbitrator either by the parties themselves or by the
arbitral tribunal.
 In the case of Bharat Cooking Coal –
In a dispute arising out of construction contract, an ex-officer of the employer
authority which had awarded the contract was appointed as the arbitrator. In his
official capacity, he was dealing with all matters of this contract, and he had also
corresponded with the contractor in that capacity. The Supreme Court held his
continuous as an arbitrator would not be fair to the parties.
Disclosure of circumstances by proposed arbitrator.
This section casts a duty upon a person who is approached for appointment as an
arbitrator to disclose in writing any circumstances which are liable to cast justifiable
doubts as to his independence or impartiality. The arbitrator must be and must be
seen to be disinterested and unbiased. For example, no one should except
appointment in a dispute if he holds shares in one of the parties or if he would benefit
in some or the other way from a decision in favour of one of the parties.
The arbitrator should have no connection whether direct or indirect with a party such
that it creates an appearance of partiality for this purpose. Actual bias is irrelevant for
this purpose. The test is whether a reasonable person who is not a party to the dispute
would think it likely that the connection was close enough to cause the arbitrator to
be biased. Thus, personal friendship or hostility, an employment relationship, a
previous professional relationship either direct or through other members of a firm in
which the arbitrator is a partner these are examples of a relationship which might
create in a responsible outsider a reasonable suspicion of bias.
If there is any real doubt about the matter, the arbitrator should disclose the facts to
the parties and should ask if they object to his accepting the appointment. If the facts
become known to him after appointment, he should disclose them and ask if they
object to his continuing.
There must be purity in the administration of justice as well as in administration or
quasi judicial functions as are involved in the adjudicatory process before the
arbitrators.
When the party’s put their fate into the hands of an arbitrator, it is essential that there
must be abundant good faith.
 Kemp v. Rose
An interested person is disqualified from acting as an arbitrator. the test is whether he
is likely to be biased. Actual bias need not be proved.
Section 12 [2] - Disclosure after appointment
This section kas a duty on the arbitrator after his appointment and throughout the
arbitral proceedings to make to the other parties, the disclosures mentioned in 12[1]
relating to the matters which may have arisen after the appointment began. He may
not do so if he has already made the disclosure before the appointment. Section 12 [2]
takes care of doubts which develop after the appointment. It requires the arbitrator to
disclose to the parties in writing and without any delay any circumstances developing
after the time of his appointment and during arbitral proceedings which gives rise to a
justifiable doubt about his independence or impartiality.
Section 12 [3] - Grounds of challenge
The appointment of an arbitrator can be challenged only on one or more of the
following grounds:
a) the circumstances exist which give rise to to justify able doubts as to his
independence or impartiality.
b) that he does not possess the qualifications agreed to by the parties.

 Flaherty v. National Greyhound Racing Club

The test for apparent bias involves a 2-stage process. First, the court must ascertain
all the circumstances which have a bearing on the suggestion that the tribunal was
biased. Secondly, it must ask itself whether those circumstances would lead to a fair
minded and informed observer to conclude that there was a real possibility that the
tribunal was biased.
Section 12 [4] - Parties challenge to his own arbitrator
An arbitrator can be challenged by the party who appointed him or him whose
appointment he participated only for reasons of which the party became aware after
the appointment has been made.
Section 12 [5] - brings in the condition of neutrality in the appointment of an
arbitrator.

Section 13 - Procedure of challenge

Section 13[1] - The act gives freedom to the parties to settle by agreement the
procedure by which the arbitrator in question would be challenged.
Section 13[2] – If there is no agreement on the point or the parties have failed to
agree, then the procedure is to be followed that the party wishing to present the
challenge must inform the arbitral tribunal of the matter. This should be done within
15 days.
Section 13[3] – if the other party agrees to the challenge and the arbitrator does not
voluntarily withdraw, the tribunal shall decide the matter.
Section 13 [4, 5] - If the challenge is not successful, the tribunal shall continue with
the proceeding and make an award. The party who challenged the arbitrator may
challenge the award also and make an application for setting aside in accordance with
section 34. If the award Is set aside, the court can consider whether the arbitrator
should be entitled to his remuneration or not.
 Amarchand v. Shree Ambika Mills
A seller of raw jute entered into an agreement to supply jute to a mill. The bylaws
provided for arbitration by the Chamber of Commerce. The seller failed to supply, and
the mill demanded difference in prices and upon his failure to pay, the matter was
referred to the chamber for arbitration. The seller applied for revocation of authority of
the chamber on the ground that an emergency had caused scarcity of jute the prices
had shot up and placed the seller and buyer in 2 opposite camps; and the chamber
being in the buyers camp it was disqualified from acting as an impartial arbitrator. the
seller’s application was rejected, and it was pointed out that the normal periodical
fluctuation in the price of raw jute was not an emergency.
The grounds on which leave to revoke could be given were put under 5 heads:
a) Excess or refusal of jurisdiction by the arbitrator
b) Misconduct of arbitrator
c) Disqualification of arbitrator
d) Charges of fraud
e) Exceptional cases

Jurisdiction for challenge

The appropriate code for the purpose of exercising this power is the quote in whose
jurisdiction the contract was executed or the work was performed. But in the court in
whose jurisdiction the office of the arbitrator whose authority is sought to be revoked
is situated would also have jurisdiction to entertain such a petition. Section 2 of the
Act provides that the code means the principal civil court of original jurisdiction in a
particular district. It also includes the High Court to the extent to which it exercises its
ordinary original civil jurisdiction. The word the word quote for this purpose does not
include any civil court of a grade inferior to such principal civil court or any court of
small causes.
Section 14 - Failure or impossibility to act
The mandate of an arbitrator shall terminate and he shall be substituted by another
arbitrator if:
a) He becomes de jure or de facto Unable to perform his functions or for other
reasons fails to act without undue delay and;
b) He withdraws from his office or the parties agree to the termination of his
mandate.

 NBCC v. J.G. Engineering

Where the court has fixed a time limit for concluding a highly technical and complex
arbitration proceeding which was extended by the parties in accordance with the
procedure provided in the arbitration clause but was not further extended and the
arbitrator, without any concrete reasons failed to conclude his proceedings within the
extended time it was held that his mandate was liable to be terminated.

Section 15 - Termination of mandate and substitution of arbitrator

In addition to the above-mentioned circumstances, we mandate of an arbitrator shall
terminate:
a) Where he withdraws from office for any reason.
b) By or pursuant to agreement of the parties.
Where the mandate of an arbitrator terminates, a substitute arbitrator shall be
appointed according to the rules that were applicable to the appointment of the
arbitrator being replaced.
De novo proceedings
After substitution proceedings have to begin de Novo, so that all the arbitrators may
have the benefit of hearing. The parties may however agree that the proceedings may
be continued from the stage at which the substitution took place.
Previous orders or rulings
The orders or rulings made by the arbitral tribunal before the replacement would not
be invalidated merely because of the change in the composition of the tribunal. The
parties may however agree to ignore earlier proceedings and then all orders etc would
become ineffective.
Section 13 [6] - No remuneration to removed arbitrator
Where an arbitrator is challenged and the challenge being not successful if an award
is delivered and the award also having been challenged by the party, it is set aside, the
court may decide as to whether the arbitrator who was challenged should be entitled
to any fee.