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TMI Blog2017 (3) TMI 1911X X X X Extracts X X X X X X X X Extracts X X X X ..... firm will brief counsel for one client and on the very next day, or perhaps later that very day, will brief another counsel against the first. At no point in their regular practice do counsel appear 'for ' the law firm that briefs them, leaving aside cases where the briefing lawyer or law firm is itself the litigant. In-house counsel or counsel who receive a fee-paid general retainer or salary from a law firm stand on a different footing - We have seen counsel withdrawing sometimes in court itself because their clients give them fresh instructions contrary to previous ones conveyed to court. In Mumbai at least, counsel from the same chambers often oppose each other in court and there is never a doubt raised about their professional independence. We have, too, in this city an acceptance of a junior counsel being briefed against the senior whose chamber he or she has joined. No one sees this as anything but the fiercest independence; indeed, seniors consider it a badge of honour to be opposed (the more vigorously the better) by their own juniors, for there is perhaps no better indicator of a briefing attorney 's confidence in the capability, integrity and independence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors briefed by various law firm in different matters; one such law firm is the one engaged by one of the parties to the arbitration; the counsel himself has never been briefed by that, or any other, law firm for that particular party, or any of the parties to the arbitration; the arbitrator clarifies in writing that he has never been briefed to appear for that particular party, though he is sometimes briefed in other matters by the law firm in question. Mr Lulia would have it that the fact that the arbitrator, in his practice as counsel, receives with irregular periodicity briefs from the law firm representing a party to the arbitration is sufficient to disqualify him from acting as an arbitrator. It matters not, he says, that the counsel has never acted for that particular client. The counsel is on the 'payroll ' of the law firm. Mr Lulia says he urges no bias against the present arbitrators; he only says that such an appointment is contrary to the amended Act. 3. The facts are few. Respondent No. 1 to this Notice of Motion and Petition is the claimant before the arbitral tribunal. Joined as Respondent No. 2 is an Advocate of our Court of many years standing, Mr Snehal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oughout. Paragraph 2 of that letter is also important because in this the present Petitioner is supposed to have instructed Mr Lulia to say that she could not meet the expenses of the three-member arbitral tribunal and she sought instead the appointment of a sole arbitrator. 8. On 31st January 2017, Mr Shah wrote to Mr Lulia saying that although he had been briefed by M/s Hariani Co in other matters as a practising counsel of the Bombay High Court, he had never appeared for the Claimant (the present 1st Respondent), Metal Power Analytical (India) Pvt Ltd at any time. A copy of this letter is at page 44 of the Petition. On 1st February 2017, Mr Dubash too responded to Mr Lulia in very similar terms. He too confirmed that as counsel he was briefed by several law firms, including M/s Hariani Co. Some of those were even pending at that time. He had, however, not appeared for the Claimants at any time nor had he appeared for M/s Hariani Co in any personal engagement for the firm. The firm had also not done any personal work for Mr Dubash. A copy of this letter is at page 45 of the Petition. 9. Mr Lulia responded on 2nd February 2017 saying that because Mr Shah and Mr Dubash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing: Provided further that this sub-section shall not apply to cases where an arbitrator has already been appointed on or before the commencement of the Arbitration and Conciliation (Amendment) Ordinance, 2015. (Emphasis added) 12. Mr Lulia 's submission is that the wording of Section 12(1)(a), read with Sections 12(3) and 12(5) and item 3 of the VIIth Schedule would operate to automatically disqualify both Mr Shah and Mr Dubash because, as practicing counsel, they are briefed by M/s Hariani Co. It is wholly irrelevant, he says, that M/s Hariani Co have never briefed either Mr Shah or Mr Dubash for the 1st 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors Respondent in any matter. He also readily concedes that neither Mr Shah nor Mr Dubash have some general or non-specific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34. (6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. 16. Mr Lulia 's response to this is that he has demanded that both Mr Shah and Mr Dubash step ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e., freedom from bias. Section 12(1)(a) also speaks of an arbitrator 's relationship with one of the parties. It then describes the types of disqualifying associations. They may be professional, financial, business or of any other kind (and which seems to me to imply that the words are illustrative, not exhaustive). This association must, however, be with the one of the parties, and it must be such as to give rise, within the meaning of Section 12(3) of a justifiable doubt as to the arbitrator 's impartiality or independence. 20. Mr Lulia 's emphasis is, I suspect, more on Section 12(5) and its use of the phrase 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator Clearly, this is must be read with the VIIth Schedule. That lists some 19 different matters. Item 3, quoted above, is only one of them. 21. Prudence dictates we should consider the VIIth Schedule as a whole and all its other items: THE SEVENTH SCHEDULE [See section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the case. 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors ARBITRATOR 'S DIRECT OR INDIRECT INTEREST IN THE DISPUTE 17. The arbitrator holds shares, either directly or indirectly, in one of the parties or an affiliate of one of the parties that is privately held. 18. A close family member of the arbitrator has a significant financial interest in the outcome of the dispute. 19. The arbitrator or a close family member of the arbitrator has a close relationship with a third party who may be liable to recourse on the part of the unsuccessful party in the dispute. Explanation 1.The term close family member refers to a spouse, sibling, child, parent or life partner. Explanation 2.The term affiliate encompasses all companies in one group of companies including the parent company. Explanation 3.For the removal of doubts, it is clarified that it may be the practice in certain specific kinds of arbitration, such as maritime or commodities arbitration, to draw arbitrators from a small, specialised pool. If in such fields it is the custom and practice for parties frequently to appoint the same arbitrator in different cases, this is a releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom. 9. The arbitrator has a close family relationship with one of the parties and in the case of companies with the persons in the management and controlling the company. 10. A close family member of the arbitrator has a significant financial interest in one of the parties or an affiliate of one of the parties. 11. The arbitrator is a legal representative of an entity that is a party in the arbitration. 12. The arbitrator is a manager, director or part of the management, or has a similar controlling influence in one of the parties. 13. The arbitrator has a significant financial interest in one of the parties or the outcome of the case. 14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom. RELATIONSHIP OF THE ARBITRATOR TO THE DISPUTE 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors 15. The arbitrator has given legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties. 28. A close family member of the arbitrator is a partner or employee of the law firm representing one of the parties, but is not assisting with the dispute. 29. The arbitrator has within the past three years received more than three appointments by the same counsel or the same law firm. RELATIONSHIP BETWEEN ARBITRATOR AND PARTY AND OTHERS INVOLVED IN THE ARBITRATION 30. The arbitrator 's law firm is currently acting adverse to one of the parties or an affiliate of one of the parties. 31. The arbitrator had been associated within the past three years with a party or an affiliate of one of the parties 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors in a professional capacity, such as a former employee or partner. OTHER CIRCUMSTANCES 32. The arbitrator holds shares, either directly or indirectly, which by reason of number or denomination constitute a material holding in one of the parties or an affiliate of one of the parties that is publicly listed. 33. The arbitrator holds a position in an arbitration institution with appointing authority over the dispute. 34. The arbitrator is a manager, director or part of the manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent footing. In our profession it very often happens that on a given day a law firm will brief counsel for one client and on the very next day, or perhaps later that very day, will brief another counsel against the first. At no point in their regular practice do counsel appear 'for ' the law firm that briefs them, leaving aside cases where the briefing lawyer or law firm is itself the litigant. In-house counsel or counsel who receive a fee-paid general retainer or salary from a law firm stand on a different footing. We are here concerned with independent counsel, those in the profession who in 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors the course of their daily practice receive briefs from many attorneys, law firms or individual practitioners. This is a remnant of the 'dual system ', now abolished, and a central feature of that system, one that continues to this day in practice, is the independence of counsel. They accept briefs from multiple attorneys (often on the same day at the same time in different courts). They are not always briefed at every stage of the case, nor is there any rule that they perform the same functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for that correctness and fairness. The rule against bias may, I think, be traced to well-established principles in administrative law, and, specifically the rules against a pecuniary bias and a personal bias. In Craig 's Administrative Law,1 it is said: The Courts have long insisted that any pecuniary interest disqualifies the decision-maker, be he high or low. The Courts have consistently held that if there was a pecuniary interest, it was not necessary to go on to consider reasonable suspicion or real likelihood of basis. It is therefore important to establish what will constitute a pecuniary interest. Blackburn J held that any pecuniary 1 Paul Craig, Administrative Law, 6th Edition. 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors interest however small will be sufficient. Some qualification is however required to the breadth of this statement. If the pecuniary interest is not personal to the decision maker, then the matter will fall to be considered as a challenge on the grounds of favour. Moreover, if the alleged pecuniary interest is extremely remote or based on contingencies that are unlikely to materialize then the matter will similarly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll. And a judge who was the director of a property company, which was the landlord of one of the parties, was not disqualified. The judge did not know of this link but even if he had known, there could in the circumstances, 'not be a real danger of bias. The interest was so minimal that no reasonable and fair-minded person sitting in court would have considered there was a real as opposed to a fanciful danger of a fair trial not being possible. '. 32. I will accept that the statutory enunciation we have before us eliminates even the smallest interest it is not a question of degree. But that interest must not be too remote, nor fanciful. The case here is not of either Mr Shah or Mr Dubash ever having appeared for the 1st Respondent on M/s Hariani Co 's brief, but of them ever having been briefed by M/s Hariani Co at all, a very 5 10th edition, pp. 385-386. The internal citations have been omitted for clarity. 2nd March 2017 Sheetal Maruti Kurundwade v Metal Power Analytical Pvt Ltd Ors different thing. No law or principle demands this level of distancing. The Arbitration Act speaks of 'justifiable doubt '. I would venture to suggest that this lies some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal, 'the majority of the members of which are practising barristers, is incapable of considering fairly a charge of misconduct brought against a fellow barrister '. Because judges live in society, they are bound to be affected by the result of many cases that come before the courts. In one of A. P. Herbert 's Misleading Cases, Sir Ethelred Rutt KC persuaded three Court of Appeal judges that neither they nor any other judges could properly hear an income-tax appeal because the judiciary, being paid by the Crown, had a direct interest in increasing the sums due to the Inland Revenue. In the non-fictional Court of Appeal, a rather more realistic approach is necessarily taken when the legality of a policy of cheaper public transport in London was challenged in the Court of Appeal in 1981, Lord Denning explained that all three members of this court are interested on all sides. We are all fare-paying passengers on the tubes and buses and benefit from the 25 per cent cut in fares. My wife and I also have the benefit of senior citizens to travel free. We are all ratepayers in the area of Greater London and have to pay the increase in rates [to cover the revenue lost by reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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