The Delhi High Court recently held that misconduct against an arbitrator is akin to contempt of a civil court, against which proceedings can be initiated under the Contempt of Courts Act [Dalmia Family Office Trust & Anr v. Getamber Anand & Ors].

The Bench of Justices Prathiba M Singh and Amit Sharma held,

The Court was hearing a matter related to a dispute between Dalmia Group and ATS Group. During arbitration proceedings between the parties, ATS Group had produced a legal notice received from an advocate alleging conflict of interest with respect to the arbitrator. ATS Group counsel then refused to make further arguments in the arbitration and moved the High Court challenging the continuation of the arbitrator. These applications were withdrawn with liberty to approach the sole arbitrator.

The sole arbitrator (former Supreme Court judge Justice Swatanter Kumar), after examining the said legal notice, came to the conclusion that the conflict of interest argument was a tactic by ATS Group to unduly delay and frustrate the arbitration proceedings on baseless and frivolous grounds.  

He thus invoked Section 27(5) of the Arbitration Act for initiating contempt proceedings against the ATS Group representatives.

On the directions of the High Court, the respondents then tendered unconditional apologies to the arbitrator. While the arbitrator accepted the apologies of two of the respondents, he refused to accept the first respondent's apology.

At the outset, the Court was puzzled by the fact that a legal notice was relied upon to seek recusal/termination of the mandate of the arbitrator.

"The allegation was that the ld. Arbitrator was conflicted due to work which he or his family had done for the ATS Group. If this is accepted as correct, the request for recusal ought to have been from the opposite side i.e., from the Petitioners, not the Respondents. However, that was not so. ATS, who was allegedly responsible for the conflicting position, itself sought recusal – which therefore led the ld. Arbitrator to clearly doubt their intentions," the Court said.

The Court went on to say that arbitrators are adjudicating disputes in place of civil courts, and that making baseless and untenable allegations against them cannot be permitted.

“While the integrity of the arbitration ecosystem needs to be maintained, the same cannot also be made fragile by giving room to unsubstantiated or speculative allegations against arbitrators. Any such allegations would constitute interference in the arbitral process,” the court observed.

The Court placed reliance on Sections 17(2) and 27(5) of the Arbitration and Conciliation Act, 1996.

Section 27(5) mandates that any person guilty of contempt of the arbitral tribunal shall be penalised by the courts. Section 17(2) states any order issued by the arbitral tribunal shall be deemed to be an order of the court.

“A perusal of the two provisions i.e., Section 17(2) and Section 27(5) of the Act, would also show that Section 27(5) stipulates specifically that if any person is guilty of contempt of the Arbitral Tribunal, during the conduct of arbitral proceedings, the punishments would be as though the said offences had taken place in suits before the Civil Court,” the Court observed.

While ultimately accepting the first respondent's apology, the Court directed him to pay ₹10 lakh to any charitable organisation decided by the arbitrator. Further, a sum of ₹3 lakh was directed to be paid to the petitioners for costs incurred.

Advocates Ajay Bhargava, Siddhant Kumar, Wamika Trehan, Radhika Khanna and Varun Chopra appeared for Dalmia Group. 

Senior Advocate Sandeep Sethi and Advocates Krish Kalra, Kashish Bansal and Riya Kumar represented the respondents.

[Read order]