Certain thoughts on the rule against bias vis-a-vis the Arbitration Act
The Schedule of the Arbitration Act comprehensively addresses concerns of bias. But there are rare and exceptional circumstances when a departure can be concerned, and while a 2023 Delhi HC verdict illustrates that, it should not treated as a general standard.
Deepti Priya
Published on: 15 July 2025, 02:40 pm
This is the second in the Role of a Judge series. Please click here to read the first.
RULE AGAINST BIAS is one of the fundamental principles of natural justice which applies to all judicial and quasi-judicial proceedings. The requirement of impartiality is sometimes expressed in the form nemo judex in re sua or no man should be judge in his own cause.
A judge cannot be considered competent to adjudicate a matter in which he is directly or indirectly interested. The question, then, is what constitutes interest in light of the amended provisions of the Arbitration and Conciliation Act, 1996 (‘1996 Act’).
A plain reading of the 1996 Act demonstrates that the principles of natural justice is an inalienable part of the arbitral proceedings. The 1996 Act lays down a clear process to be followed - starting with the appointment of an arbitrator, followed by the passing of an arbitral award, and finally, the process to challenge and/or enforce the same.
Section 12 of the 1996 Act
Independence and impartiality of the arbitrator are the hallmarks of any arbitration proceedings. Section 12 of the 1996 Act has the objective to induce neutrality of arbitrators viz their independence and impartiality.
Section 12 of the 1996 Act mandates that an arbitrator “…shall disclose in writing any circumstances,-(a)such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality…”.
A plain reading of the 1996 Act demonstrates that the principles of natural justice is an inalienable part of the arbitral proceedings.
Fifth and Seventh Schedule of the 1996 Act
Explanation 1 to Section 12 states “the grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.” In other words, an arbitrator is statutorily obligated to disclose the existence of any financial or business or professional relationship or interest with any party in the arbitral proceedings. It is manifest that the main purpose of Section 12 is to provide for neutrality of arbitrators.
The Fifth Schedule of the 1996 Act enlists 34 circumstances that “give rise to justifiable doubts as to the independence or impartiality of arbitrators.” The rationale for these grounds is that an arbitrator must not be engaged with any party in any mode or manner wherefrom he derives a financial benefit, or is in a capacity to influence or impact the management or administration of the concerned party. This restriction extends beyond the arbitrator to include their close family members. In essence, neither the arbitrator nor their close family members should be in a position to gain—financially or otherwise—from the success or failure of any party involved in the arbitration. The 1996 Act mandates that an arbitrator must disclose any such engagement or association at the time of appointment, or as soon as it arises during the course of the arbitral proceedings.
