Past employee can be appointed as an Arbitrator: SC

The Supreme Court of India reiterated that being a past employee is not a disqualification for becoming an arbitrator provided there are no justifiable doubts as to the person’s independence and impartiality.

The Court clarified that the argument that the nominee arbitrator was a Chief Engineer who retired over 10 years ago from the services of the State was unjustified since the test to be applied for bias is whether the circumstances are such as would lead to a fair-minded and informed person to conclude that the arbitrator was in-fact biased. The Court further clarified that mere allegations of bias are not a ground for removal of an arbitrator.

The Court held that even as per the amended Arbitration and Conciliation Act, 2015 (“Act”), there was no restriction on former employees to act as an arbitrator.

Taking note of Entry 1 in the Fifth Schedule of the Act that contains grounds to determine whether circumstances exist which could give rise to justifiable doubts as to the independence or impartiality of an arbitrator, the Court observed, “the words ‘is an’ indicates that the person so nominated is only disqualified if he/she is a present/current employee, consultant, or advisor of one of the parties. An arbitrator who has ‘any other’ past or present ‘business relationship’ with the party is also disqualified. The word ‘other’ used in Entry 1, would indicate a relationship other than an employee, consultant or an advisor. The word ‘other’ cannot be used to widen the scope of the entry to include past/former employees.”

Relying on Section 15(2) of the Arbitration & Conciliation Act, 1996, the Court further mentioned that a substituted arbitrator has to be appointed following the same procedure as was followed for appointment of the original arbitrator.

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