The Delhi High Court clarified the term “close family member” and the possibility of prejudice resulting in an arbitrator’s ineligibility to be appointed through Justice Vibhu Bhakru in the case of Himanshu Shekhar v. Prabhat Shekhar (O.M.P. (T) (COMM.) 119/2021).
FACTS OF THE CASE:
In this case, the petitioner filed a petition under Sections 14(2) and 15 of the Arbitration and Conciliation Act, 1996 (A &C Act) requesting, among other things, that the Sole Arbitrator’s mandate be discontinued and an independent arbitrator be appointed in his place.
The petitioner claimed that the Arbitrator was ineligible to act as an arbitrator under Section 12(5) of the A&C Act because he was related to the parties and they had not entered into any agreement waiving their right to waive the ineligibility, in accordance with the proviso to Section 12(5) of the Arbitration and Conciliation Act, 1996.
The petitioner explicitly indicated in his application to the arbitrator that he had not placed any doubt on the arbitrator’s honesty or character. The petitioner’s recusal was requested exclusively on the grounds that he was ineligible to serve as an arbitrator and to ensure that neither side could make a challenge on that basis at a later stage.
It was observed above that it is not enough that the arbitrator is related to one of the parties; the relationship must be a ‘family relationship’ and one that is close. If an arbitrator has a close family relationship with one of the parties, his independence and impartiality are likely to be called into question. Furthermore, the High Court stated that where there is a possibility of bias, such as when a family member of an arbitrator has a strong financial stake, the same is only applicable if the family member is a “spouse, sibling, child, parent, or life partner.”
According to the facts above, the parties and the arbitrator have a close familial relationship simply because the arbitrator’s son is married to their niece. As per the judge, Entry No. 9’s clear language shows that the legislature did not intend for a distant relative of the parties to lose their eligibility to serve as an arbitrator if they agree to it.
Finally, despite the fact that neither Sudhir Singhal nor the Company were parties to the proceedings, the respondent insisted on continuing with the arbitration before the Arbitrator. Thus, the petition was dismissed by the High Court because it was determined to be unmerited.
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JUDGEMENT REVIEWED BY REETI SHETTY