'Vague Intuition' Of Arbitrator Bias Not Enough To Set Aside Award: Delhi High Court

The Delhi High Court has recently dismissed a challenge to an arbitral award, holding that a belated suspicion of bias cannot by itself justify interference with an award.

“According to this Court, a vague intuition of biasness at such a belated stage or a simple suspicion by an unhappy party of biasness is not enough to claim biasness, as any such allegation must rest on solid facts, clear evidence, or statutory conflicts,” Justice Om Prakash Shukla held.

The court was hearing a petition filed by Lanco-Rani (JV) under Section 34 of the Arbitration and Conciliation Act, 1996, challenging a majority arbitral award in its dispute with the National Highways Authority of India (NHAI).

The dispute arose from a contract dated August 30, 2001, for four-laning of the Purnea-Gayakota section of NH-31 in Bihar, covering Km 419.000 to Km 447.000. The arbitral tribunal passed the majority award on June 7, 2008.

Lanco-Rani confined its challenge before the high court to allegations of bias.

The company questioned the appointment of Dr. C.S. Suryawanshi as NHAI's nominee arbitrator. It alleged that Dr. Suryawanshi was an employee of Consulting Engineering Services (India) Private Limited (CES), which had an ongoing professional and commercial relationship with NHAI and had acted as its consultant/Engineer on several highway projects.

Lanco-Rani claimed that it was unaware of Dr. Suryawanshi's employment with CES and CES's professional relationship with NHAI when he was appointed. It argued that these circumstances ought to have been disclosed by the arbitrator before the reference.

The company accepted, however, that CES was not the Engineer for the particular project involved in the arbitration. It argued that Dr. Suryawanshi's professional association with CES, coupled with CES's substantial business relationship with NHAI, was itself a circumstance that ought to have been disclosed.

The court did not accept this contention.

Referring to the Supreme Court's decisions in Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd. and Aravali Power Co. Pvt. Ltd. v. Era Infra Engineering Ltd., the court observed that even where an arbitrator is an employee of one of the parties, that fact alone does not establish bias. It noted that there must be a justifiable apprehension arising from specific circumstances.

The court also examined the issue of non-disclosure. It observed that every instance of non-disclosure does not automatically justify a challenge to an arbitrator.

“The real enquiry remains whether the undisclosed circumstance itself gives rise to justifiable doubts regarding the arbitrator's independence or impartiality,” the court held.

Applying this principle, the court observed that Lanco-Rani had to establish something more than CES simply having a relationship with NHAI as a client.

After examining the record and submissions, the court found that the allegations were not borne out by the material on record. It also held that no causal link had been established between the allegations and the records.

The court found no material showing that the majority members of the arbitral tribunal were “improbably influenced” by NHAI. There was also no evidence that their decision was the product of a “disqualifying interest”.

The court further held that bias could not be inferred merely because the majority conclusion did not advert to the petitioner. It noted that the award contained extensive consideration of the contractual provisions and reasoning.

The court also held that the disqualifications specified in the Seventh Schedule of the Arbitration Act were not attracted in the present case.

The court ultimately held that Lanco-Rani had failed to establish any ground under Section 34 warranting interference with the majority award dated June 7, 2008.

The petition was accordingly dismissed, along with all pending applications.

For Petitioner: Senior Advocate A.K. Singla, Advocates Sayantani Basak, Sahil Kumar, Nandini Gupta and Drishti Sarin

For Respondent: Advocates Madhu Sweta, Arnav Mathur, Srishti Bajpai, R. Suhani and Ayush Kumar