HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471

HRD CORPORATION V. GAIL INDIA LTD

Whether Justice Lahoti should be removed as an Arbitrator under Items 1, 8 and 15 of the seventh schedule of the Arbitration and Conciliation Act 1996?
Whether Justice Doabia should be removed as an Arbitrator under Items 1, 15 and 16 of the Act?

The IBA Guidelines on Conflicts of Interest in International Arbitration lay down the general principles on the appointment of an arbitrator, wherein, it is mandated that every arbitrator shall be impartial and independent and shall remain so until the final award has been declared. The Guidelines also state that an Arbitrator must also decline said appointments if he/she has doubts regarding the ability to be impartial and independent.

The Respondents entered into a contract with the Appellants for the supply of wax, produced at the respondents plant. The Apellants later contended that the Respondents had wrongfully withheld the wax supplies and thus, invoked the arbitration clauses of the general agreement signed between both parties. Since three arbitrations had already taken place, the current dispute is a matter in relation to the fourth arbitration.
The Appellants appointed Justice K. Ramamoorthy and the Respondents appointed Justice Doabia as arbitrators respectfully. The two parties also mutually appointed Justice KK Lahoti as the presiding arbitrator. After Justice K. Ramamoorthy withdrew from the case, Justice Mukul was appointed to Appellants.
The Appellants challenged the appointment of Justice Doabia, stating that he had presided and rendered an award in another dispute between the two parties, and prayed that he must be removed as an arbitrator. Justice Lahoti’s appointment was also challenged since he was an advisor to the Respondents in a previous matter.
Justice Lahoti and Justice Doabia stated that they should be entitled to continue with the arbitration proceedings, and Justice Mugdal held that Justice Doabia’s appointment must be terminated whereas Justice Lahoti’s appointment was not to be challenged. The High Court dismissed the petitions, and the matter was then appealed to the Supreme Court.

The Apex Court also dismissed the challenges regarding the appointments of Justice Doabia and Justice Lahoti and emphasized the difference between the fifth and seventh schedules of the Act in pursuance to the 2016 amendment. The Court stated that since in this case the Arbitral Tribunal did not declare an award, challenges pertaining to the fifth schedule could not be delved into by the Court.
The challenge regarding Justice Lahoti and Justice Doabia’s appointments were dismissed and the dispute which Justice Lahoti had delivered an opinion upon was not in concern with the present dispute at hand, and Items 8 and 15 could not stand as eligible arguments. The Court held that Justice Doabia could not be disqualified by the fact that he had rendered an award in a different dispute between the two parties.