Person Having Controlling Influence On One Party Cannot Act As Arbitrator: J&K&L High Court
The petitioner had filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an independent arbitrator.
The Jammu and Kashmir High Court ruled that a party cannot be compelled to accept an arbitrator who has a conflict of interest, as doing so would violate the principles of a fair trial.
The petitioner had filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an independent arbitrator.
The Court specifically found that the Perpetual Lease Deed and the Byelaws, which designate the Registrar of Cooperative Societies as the sole arbitrator for disputes between the petitioner and the department, were contrary to the law.
A Bench of Chief Justice Tashi Rabstan noted that the Registrar, who had been appointed as the sole arbitrator under the lease deed, also served as the head of the respondent cooperative society. This dual role created a potential conflict of interest, as there was a possibility of bias, which could affect the impartiality of the arbitration process.
The Court added, “a perusal of the Schedule VII of the Arbitration and Conciliation Act, 1996, a person having a controlling influence in any respect on one of the party or the guide for the purposes of affairs of one of the party, cannot act as an Arbitrator for adjudication of dispute arisen between the parties.”
In light of this conflict, the petitioner sought the appointment of an independent arbitrator under Section 12(5) of the Arbitration and Conciliation Act, arguing that the Registrar was disqualified due to his vested interest in the matter. The Court referred to Schedule VII of the Arbitration and Conciliation Act, which explicitly states that anyone with controlling influence over a party cannot act as an arbitrator in a dispute involving that party.
The Court added, “I, appoint Mr. Suneet Gupta, retired District & Sessions Judge, as sole Arbitrator in this case, who shall proceed in the matter in accordance with the provisions of the Act to make an award within the time provided in the Act itself, after charging the prescribed fee along with incidental expenses to be shared by the parties.”
The Court also emphasized that the wider the powers granted to an arbitrator under the arbitration agreement, the greater the care that must be taken by the Court to prevent any injustice, particularly when the arbitrator holds significant influence or control over the dispute.
Cause Title: Meena Kumari v. Sainik Cooperative House Society Ltd. & Ors.
Appearance:
Petitioner: Senior Advocate RK Jain, Advocate Pranav Jain
Respondents: Senior AAG Monika Kohli, Advocate Nirmal Kotwal
