Karnataka HC Upholds SIAC Arbitrator Appointment, Rejects Hotel Owner’s Institutional-Bias Claim Over Opposing Counsel’s Panel Role

The parties’ Management Agreement provided for arbitration under the Arbitration and Conciliation Act, 1996 and the SIAC Rules, with the sole arbitrator to be appointed by mutual agreement or, failing agreement, by the SIAC Chairman.

After disputes arose, the appellant objected that SIAC was not neutral because respondents’ counsel was on its panel of arbitrators. SIAC initially stated that the Chairman could not act and invited the parties to agree to appointment by the President; it later proceeded with an appointment through SIAC.

The arbitrator rejected the appellant’s jurisdictional objections in a Partial Award dated 12 June 2019 and made a Final Award dated 28 December 2020.

The appellant challenged both awards under Section 34. The Single Judge rejected the challenge to the Partial Award and directed that the challenge to the Final Award be heard on its merits; the appellant appealed under Section 37.

Section 34(2)(a)(v) of the Arbitration and Conciliation Act, 1996 permits a challenge where the tribunal’s composition or procedure was not in accordance with the parties’ agreement, subject to the Act’s provisions; Section 16 empowers the tribunal to rule on its own jurisdiction.

Under Narayan Prasad Lohia v. Nikunj Kumar Lohia, arbitration is founded on party agreement, and a composition challenge must be assessed against that agreement and the Act.

SBP & Co. v. Patel Engineering Ltd. concerns the judicial function exercised by the court under Section 11(6), which is distinct from an arbitral institution acting under a procedure chosen by the parties.

Under HRD Corporation v. GAIL (India) Ltd., justifiable doubts about impartiality require a commonsense assessment of whether a reasonable third person would conclude that the arbitrator is likely to be influenced by matters other than the merits.

The Court also relied on the SIAC Rules, including Rules 9.3, 12.1 and 40.1, and held that Section 37 review was not warranted on the facts.

The Court held that the parties had agreed to SIAC arbitration and that SIAC’s appointment was made under the applicable SIAC Rules; the appointment did not decide the parties’ rights with the finality associated with a Section 11(6) judicial determination.

The earlier communications concerning the Chairman’s inability to act did not establish that SIAC as an institution was disqualified or that the later appointment was an impermissible review of a binding decision.

The appellant showed no personal bias by the Chairman, President or arbitrator, and no connection between the arbitrator and respondents’ counsel falling within the Fifth or Seventh Schedule.

Counsel’s place on a panel of more than 500 arbitrators, and another counsel’s later appointment to the SIAC Court, did not establish institutional bias or a reasonable apprehension that the arbitrator would be influenced by extraneous considerations.

The Court therefore found no basis to disturb the Single Judge’s decision.

It found no reason to interfere with the Single Judge’s order under Section 37 and dismissed the Commercial Appeal; pending interlocutory applications were disposed of.