Bombay High Court

Bombay High Court: In a matter pertaining to challenge against appointment of arbitrator by Era International particularly pointing towards Mumbai Centre for International Arbitration (‘MCIA’) Rules as against the applicability of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’), Bharati Dangre, J. clarified that the provisions under the Arbitration Act were above the institutional arbitration rules.

Factual Background

The petitioner in the instant matter was a partnership firm engaged in import of quality coal from global sellers and catering to a diverse clientele operating brick kilns and various industries within India. On the other hand, Aditya Birla was a company involved in supply of thermal, cooking and petroleum coal to energy deficit countries, its sourcing being spread across the globe.

The instant matter pertains to three sale contracts entered into in September 2022 for supply of distinct quantities of US coal. Era International filed petitions under Section 14 read with Section 11 of Arbitration Act seeking reliefs.

Era filed instant petitions stating that though the parties involved chose MCIA as a private arbitral institution, it failed to appoint an unbiased/impartial arbitrator and initiated arbitration in violation of Arbitration Act and MCIA Rules 2017. The process adopted for appointment of arbitrator was also challenged, stating that the Rule required party intending to commence arbitration to furnish written request for MCIA reference and in the instant case, the Advocate/Firm was neither a claimant nor a party to the dispute, thus, could not initiate reference on behalf of Aditya Birla in the absence of any Letter of Authority, Power of Attorney, Vakalatnama, Board Resolution etc.

Era was aggrieved by the appointment of sole arbitrator for being a Partner at a law firm which had previously represented a group of companies of Aditya Birla on numerous occasions. Despite objection, MCIA continued with the said arbitrator’s nomination. While arbitrator continued with proceedings, Era submitted applications under Sections 12 and 13 of Arbitration Act accompanied with relevant documents and copies of internet screenshots hinting towards legal services provided for Aditya Birla by the Law Firm. While Aditya Birla opposed the said application, the arbitrator did not state anything regarding her impartiality and integrity, and forwarded the said communication to MCIA council for resolution in terms of Rule 10 of MCIA Rules 2017, and arbitral proceedings were suspended in the meantime. It was alleged that MCIA did not give Era the opportunity of hearing, but the MCIA dismissed Era’s challenge for being misconceived. Since MCIA permitted nominated arbitrator to proceed with arbitral proceedings, Era through instant matter sought termination and appointment of an independent arbitrator and also sought restraining from proceeding ahead with the arbitral proceedings.

Court’s Analysis

The Court referred to sub-sections (3-A), (6) and (8) of Section 11, Sections 12, 13, 14 of the Arbitration Act and elaborated the concept of disclosure by a person proposed to be appointed as an arbitrator and clarified that the said concept was applicable to institutional arbitration as well.

The Court looked at Rule 10 under MCIA Rules which provide for mechanism to challenge the arbitrator’s appointment, if justifiable doubts arise regarding impartiality or independence of the arbitrator, providing for continuation of arbitral proceedings by the arbitrator in case of rejection of challenge by the Council. The Court compared the said provision with that of Section 14 of Arbitration Act to hold that institutional arbitration will not by itself exclude the applicability of Section 14(2) and denude the Court’s power merely on the ground that the parties agreed to refer their disputes to the same.

The Court clarified that “Once the Arbitral proceedings commence, the power to be exercised by the Arbitral Tribunal as contemplated under Chapter IV also do not make any distinction, whether the arbitration is being conducted through institutional arbitration or it is an ad hoc arbitration.”

It further made it clear regarding MCIA being a recognized arbitral institution and referred to the procedure under its rules in compliance with Arbitration Act. The Court hinted that “merely because the Arbitration is being conducted through MCIA, as an institutional arbitration, it shall not exclude the power of the Court to decide on termination of the mandate, if any controversy remains, concerning any of the grounds referred to in clause (a) of sub-section (1) of Section 14. By no stretch of imagination, the words used in subsection (2) of Section 14 “unless otherwise agreed by the parties” would amount to surrender of this remedy in favour of the MCIA Council. Merely because a party has participated in an Arbitration conducted by an Institute and it being conducted by a set form of rules and the Arbitrators are appointed from a preselected panel, it is nowhere indicative of the Court, being denuded of its statutory power, wherever the statute permit it to be exercised, whether it is at the stage of sub-section (2) of Section 14 or u/s.34 or Section 37, in form of an Appeal.”

It further added that the institutional arbitration shall not deviate and would be still governed by the provisions of Arbitration Act. Since Era in the instant matter had not expressly waived the applicability of Section 14(5) of Arbitration Act or by mere submission to the arbitration process as contemplated by MCIA rules, the Court found the same justified and rejected the finality of Council’s decision as per MCIA’s rules.

The Court directed MCIA to substitute the arbitrator and appoint an independent arbitrator to continue with the arbitral proceedings.

[Era International v. Aditya Birla Global Trading India Private Limited, 2024 SCC OnLine Bom 835, decided on 26-02-2024]

Advocates who appeared in this case :

For Petitioner: Advocate Rahul Totala, Advocate Manish Priyadarshi, Advocate Naman Maheshwari, Advocate Vidisha Rohira, Advocate Apeksha Agarwal, Advocate Ashwin Poojari; R.T. Legal

For Respondent: Advocate Rushabh Sheth, Advocate Sayeed Mulani, Advocate Akshata Kadam, Advocate Ria Goradia; Mulani & Co., Senior Advocate Vikram Nankani, Advocate Sumeer Nankani, Advocate Anuja, Advocate Neha Bhosale, Advocate Laveena Tejwania, Advocate Divadkar; NDB Law

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