In O.M.P.(T) (COMM.) 119/2021-DEL HC- Entry 9 of Seventh Schedule of A&C Act does not render distant relative of parties ineligible to be appointed as Arbitrator, if both parties so agree: Delhi HC Justice Vibhu Bakhru [31-05-2022]

Read Order: HIMANSHU SHEKHAR Vs. PRABHAT SHEKHAR

Mansimran Kaur

New Delhi, June 2, 2022: Referring to Entries nos.1 to 9 of the Seventh Schedule of the Arbitration and Conciliation Act, 1996 which relate to an arbitrator’s relations with the parties or the counsel, the Delhi High Court has opined that the plain language of Entry no. 9 indicates that it is not the legislative intent to render a distant relative of the parties to be ineligible for being appointed as an arbitrator, if both the parties so agree.

While observing that Explanation 1 to the Seventh Schedule refers “close family member”  to a spouse, sibling, child, parent or life partner, the Bench of Justice Vibhu Bakhru has dismissed the petition filed under Sections 14 (2) and 15 praying that the mandate of the sole Arbitrator shall be terminated and an independent be appointed in his place, as the arbitrator was claimed to be in close relationship to one of the parties by the petitioner. 

It was the case of the petitioner that the sole Arbitrator was ineligible to act as an Arbitrator as per Section 12(5) of the A&C Act. He further claimed that the Arbitrator was related to the parties and they had not entered into agreement wherein they waived their right to waive the ineligibility. It was also claimed that the Arbitrator conducted the proceedings in a biased manner and the Arbitrator passed orders against the persons, who were not signatories to the Arbitration agreement or the arbitral proceedings. 

While going through the facts, the Court was apprised of the agreement wherein it was stated that in case of any dispute, the matter should be referred to Arbitration. Thereafter, the Court noted that the petitioner had also filed an application under Section 16 read with Sections 12 (5) and 14 wherein he prayed that he would not participate in the arbitral proceedings on the ground that he was not aware of Section 12 (5) at the time when he agreed for referring the disputes to the Arbitrator. The Arbitrator had rejected this application.

Referring to the seventh schedule and Section 12 (5), the Bench held that the expression “ close family relationship” indicates  that the Arbitrator should have a close family relationship with one of the parties and merely being related to the parties is not sufficient, the Court noted. The Bench was of the view that the family relationship between the Arbitrator and the parties couldnot be described as a close family relationship. The Court noted that the Arbitrator’s son is married to the daughter of the eldest brother of the parties and the Arbitrator is not from the same family as that of the parties. It was also clarified by the Bench that the close family relationship of A with B and B with C does not necessarily mean that A and C also have a close family relationship. 

Thus, in view of the aforesaid observations, the Court concluded that the present petition was meritless and accordingly the petition was dismissed.