Calcutta High Court Clarifies Standards for Arbitrator Bias in Landmark Ruling
In a significant judgment delivered on January 21, the Calcutta High Court has firmly established that a mere apprehension of bias against arbitrators cannot serve as a valid ground to quash an arbitral award. The division bench, comprising Justices Sabyasachi Bhattacharyya and Supratim Bhattacharya, overturned a Single Judge's order that had previously set aside an award on allegations of arbitrator bias.
Distinguishing Arbitrators from Judges: A Critical Legal Distinction
The bench meticulously addressed claims regarding the standard of fairness required for arbitrators, which some argued must eliminate any reasonable apprehension of bias. In its detailed reasoning, the court highlighted a fundamental distinction between the standards applicable to arbitrators and those governing Courts of Law.
The bench elaborated that under an arbitration agreement, parties possess the autonomy to select any individual as their arbitrator. This person typically hails from a specific professional field relevant to the disputes at hand and may have current or past engagements within that very domain of expertise. This professional background, the court noted, is often integral to the arbitration process itself.
Judicial Conduct Versus Arbitrator Expectations
Clarifying the differing expectations, the bench stated that judges are required to abstain not only from certain aspects of public life but also to refrain from expressing public opinions on matters that could come before them for adjudication. Judges must avoid involvements that might give rise to conflicting interests in the adjudicatory process, upholding exemplary conduct both inside and outside the courtroom to rise above any shadow of doubt regarding their integrity.
However, the court emphasized that imposing such stringent restrictions on arbitrators would be counterproductive. Arbitrators are frequently chosen from a pool of professionals with prior or current engagements in the specific domain of the dispute. Applying overly strict bias standards would, according to the bench, frustrate the very core of party autonomy and undermine the objectives of the Arbitration and Conciliation Act of 1996.
The 1996 Act aims to promote Alternative Dispute Resolution (ADR) and position India as a hub for international arbitration and mediation. The court warned that hindering this process through excessive bias allegations would be detrimental to these national goals.
Case Background: Feather Touch Limited vs. C&E Limited
The litigation stemmed from a dispute between Feather Touch Limited and C&E Limited. Prior to 2020, the court appointed a senior advocate, recognized as a "respectable member of the Bar," as the arbitrator, a selection agreed upon by both parties. On February 29, 2020, the arbitrator issued an award in favor of C&E Limited, designating Gopal Das Bagri and Feather Touch Limited as debtors obligated to pay damages or costs.
Bagri and Feather Touch Limited subsequently challenged this award, alleging that the arbitrator, in his capacity as a lawyer, had represented SSSMIL, which they claimed was affiliated with C&E Limited. The Single Judge accepted this argument and quashed the award based on the arbitrator's representation of SSSMIL.
This decision was then appealed by C&E Limited, leading to the division bench's comprehensive review and the eventual ruling that mere apprehension of such connections does not suffice to invalidate an arbitral award, thereby reinforcing the principles of arbitration and party autonomy in India's legal framework.
