Non-disclosure of financial relationships with proposed impleaded parties warrants termination of mandate under Section 12(5).

The parties are brothers engaged in a family jewellery business, MLSSJPL, in which they and a third brother, Sh. Sudhir Singhal, hold equal shares

An arbitrator was appointed by mutual agreement to resolve settlement disputes

Initially, the Petitioner challenged the arbitrator’s mandate based on family relations, which was rejected

Subsequently, the Respondent moved an application to implead Sh. Sudhir Singhal and MLSSJPL

The Petitioner then presented evidence of a financial transaction—a cheque of Rs. 1 crore issued by the arbitrator to Sh. Sudhir Singhal—and requested a fresh declaration under Section 12

The arbitrator refused to file a fresh declaration, proceeded to dismiss the impleadment application, and ruled that his original declaration was sufficient

The Petitioner sought termination of the mandate under Section 14 read with Section 12(5)

1. Whether the arbitrator became de jure ineligible to act under Section 12(5) read with the Seventh Schedule due to undisclosed financial interests with a proposed party

2. Whether the disclosure requirement under Section 12 of the Arbitration and Conciliation Act, 1996, is a continuing obligation throughout the proceedings

3. Whether an arbitrator can validly decide an impleadment application under Section 16 without first complying with disclosure requirements when a conflict of interest is alleged

The Court applied Section 12(5) and Section 14 of the Arbitration and Conciliation Act, 1996, which govern the ineligibility and termination of an arbitrator's mandate

It relied on HRD Corporation v. GAIL (India) Limited (2018), establishing that an arbitrator falling under any category of the Seventh Schedule becomes de jure ineligible, and their mandate can be terminated by the Court under Section 14(2)

It further applied the principle from Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) (2025), which mandates that the duty of disclosure is a "continuing requirement" to secure information about circumstances arising at a later stage, such as new business affiliations

Additionally, it noted from ASF Buildtech (P) Ltd. v. Shapoorji Pallonji & Co. (P) Ltd. (2025) that while an Arbitral Tribunal has the power to implead non-signatories under Section 16, such powers are subject to the arbitrator's independence

The Court observed that the filing of the impleadment application for Sh. Sudhir Singhal created a change in circumstances necessitating a fresh disclosure

The Petitioner produced specific evidence of a financial relationship (the Rs. 1 crore cheque) between the arbitrator and the person sought to be impleaded

The Court found that the arbitrator adopted a "novel method" by deciding the impleadment application under Section 16 to avoid filing a Section 12 declaration

It reasoned that an arbitrator cannot decide their own jurisdiction or competence regarding a party with whom they have an undisclosed financial interest, as this violates the statutory mandate of neutrality

The Court held that since the arbitrator failed to deny or explain the financial transaction and refused to file a continuing disclosure, he became de jure ineligible under Section 12(5) read with the Seventh Schedule

The Court allowed the petition, terminated the mandate of the existing arbitrator, and appointed Ms. Justice (Retd.) Mukta Gupta as the substitute sole arbitrator

The new arbitrator was directed to comply with Section 12 before entering upon the reference, with fees governed by Schedule IV of the Act