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 What effect does Bias have on an Arbitration Tribunal?

The Article is inscrIbed by Adv. Advait Ghosh.

INTRODUCTION

Arbitration is rapidly becoming the preferred mode of dispute resolution across the globe especially amongst the members of the business community. The reasons for these are convenience, speed of dispute resolution, and availability of subject-matter experts. Adjudication by the traditional Courts carries a seal of government approval, hence the integrity of judges is usually seen to be above-board. Arbitration on the other hand allows parties to choose their adjudicators, and with unilateral appointments still being the norm in many places, questions of bias often arise. This article will endeavor to understand the effect that bias has on an arbitral tribunal.

The meaning of Bias-

As per the Oxford English Concise dictionary, the word “bias” means inclination or prejudice for or against one person or group, especially in a way considered to be unfair. In the legal world, is usually referred to the bias of adjudicators or bias in decision making.

STATUTORY RECOGNITION OF THE CONCEPT OF BIAS

There is almost no statutory recognition of the concept of bias in India, an anomaly that must be rectified by the Legislature soon, and the jurisprudence on bias has been developed mostly through judicial decisions and orders. Let us examine the case of A.K. Kraipak v. Union of India[1], which is a celebrated judgment on the bias.

  1. K KRIPAIK VS UNION OF INDIA – In this case, the Supreme Court of India held that inference of bias even in one of the members of the selection board vitiates the entire selection process, even though other members, against whom there may be no inference of bias may have been a part if the selection committee and take part in the deliberations. The Court opined that –“In a group deliberation each member of the group is bound to influence the others, more so, if the member concerned is a person with special knowledge. Bias is likely to operate in a subtle manner. It is no wonder that the other members of the selection board are unaware of the extent to which his opinion influenced their conclusions. We are unable to accept the contention that in adjudging the suitability of the candidates the members of the board did not have any mutual discussion. It is not as if the records spoke of themselves. We are unable to believe that the members of the selection board functioned like computers.”

In the specific context of arbitration, the question came up for consideration before the Supreme Court of India in the case of Vinod Bhaiyalal Jain vs Parmeshwari Cold Storage Pvt Ltd. [2] 

  1. VINOD BHAIYALAL JAIN VS SUPREME COURT OF INDIA- In this case the arbitral tribunal consisted of a single arbitrator, who was the Lawyer of the Respondent, in whose favor the arbitral award was ultimately made. The petition was preferred under Section 34 of the Arbitration & Conciliation Act, 1996 challenging the arbitral award before the Nagpur Bench of the Bombay, where it met with summary dismissal. The Supreme Court of India in appeal reversed the decision of the High Court and remarked that “There has been a reasonable basis for the appellants to make a claim that in the present circumstance the learned Arbitrator would not be fair to them even if not biased. It could no doubt be only a perception of the appellants herein. Be it so, no room should be given for even such a feeling more particularly when in the matter of arbitration the very basis is that the parties get the opportunity of nominating a judge of their choice in whom they have trust and faith unlike in a normal course of litigation where they do not have much choice.

When the arbitral tribunal consists of a single arbitrator against whom there is a reasonable apprehension of bias, the award will stand annulled due to the clear instance of the arbitrator’s bias. An interesting situation arises when the arbitral tribunal consists of 3 members, and against one of them, there are allegations of bias. This question came up before the High Court of Delhi in the case of Lanco-Rani (JV) v. National Highways Authority of India[3].

3. Lanco – Rani (JV) v. National Highways Authority of India)[4] In this case, The Arbitral Tribunal consisted of 3 arbitrator’s, however one of them had earlier worked in NHAI as their technical advisor. The said person had also not disclosed the same in terms of Section 12 of The Arbitration & Conciliation Act, 1996. The Award was challenged on the grounds of reasonable apprehension of bias. The Delhi High Court opined that that manifest illegality had been committed due to this, and the continuance of that person as an arbitrator would lead to a reasonable apprehension of bias, resulting in the arbitral award being vitiated. The Court also opined that this was a case of “apparent & clear bias”. The Delhi referred to the twin tests to decide whether a decision was vitiated on the ground of bias, which is as follows-

1) Did it appear to the Court that there was a real danger that the Judge had been biased?

2)Would an objective onlooker with knowledge of the material facts have a reasonable suspicion that the Judge might have been biased?

Applying the aforesaid tests to the present case the Delhi High Court annuled the Award and directed for a fresh arbitral tribunal to be constituted to decide the case on merits.

CONCLUSION

There is a saying that Caesar’s wife must always be above suspicion, which means that people in public life must be seen to be above reproach. An arbitrator is no less a public servant as awards and decisions rendered by them have a huge impact on the development of Law. In such a scenario arbitrators should be seen to be above approach, and there should not be an iota of doubt regarding their integrity. Section 12 of The Arbitration & Conciliation Act, 1996 is to some extent an affirmation of this principle. It is also important to note that Section 34 of The Arbitration & Conciliation Act, 1996 which enumerates the grounds on which an arbitral award can be challenged says that an arbitral award can be set aside if such award is against the public policy of the country. A fair and impartial trial is one of the hallmarks of public policy, and it can be argued with a certain amount of conviction that “rule against bias” is very much an integral part of Public Policy, a breach of which will entail a valid challenge to the arbitral award.


References

[1]Writ Petition No. 237/1966

[2]CIVIL APPEAL NO. 6960 OF 2011

[3]O.M.P. 199/2008

[4]SLP (C) No. 7979 of 2019

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