Arbitration and Conciliation Act, 1996
Section 12 of the Arbitration Act: Grounds for Challenge of an Arbitrator
Section 12 of the Arbitration and Conciliation Act, 1996 governs disclosure by a proposed or appointed arbitrator, the grounds on which an arbitrator may be challenged, and statutory ineligibility arising from relationships listed in the Seventh Schedule.
Meaning and purpose of Section 12
Section 12 is intended to protect the independence and impartiality of the arbitral process. It requires disclosure before appointment and, under subsection (2), imposes a continuing obligation on an arbitrator throughout the proceedings to disclose relevant circumstances without delay.
- Section 12(1): a proposed arbitrator must make written disclosures about relevant relationships, interests and circumstances affecting availability.
- Section 12(2): the disclosure duty continues throughout the arbitral proceedings.
- Section 12(3): a challenge may be made for justifiable doubts about independence or impartiality, or lack of agreed qualifications.
- Section 12(4): a party that participated in the appointment may challenge only on grounds discovered after the appointment.
- Section 12(5): a person falling within a Seventh Schedule category is ineligible, despite a prior agreement to the contrary, unless the parties expressly waive the rule in writing after the dispute has arisen.
Section 12 - Grounds for challenge
(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,
(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.
Explanation 1. The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
Explanation 2. The disclosure shall be made by such person in the form specified in the Sixth Schedule.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if,
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality; or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
(5) Notwithstanding any prior agreement to the contrary, 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.
Amendment note: Subsection (1) was substituted and subsection (5) was inserted by Section 8 of the Arbitration and Conciliation (Amendment) Act, 2015, brought into force with effect from 23 October 2015.
Fifth, Sixth and Seventh Schedules under Section 12
Fifth Schedule - circumstances creating justifiable doubts
The Fifth Schedule is a guiding list for determining whether circumstances give rise to justifiable doubts about an arbitrator's independence or impartiality. It covers, among other matters, relationships with parties or counsel, relationships to the dispute, direct or indirect interests in the dispute, prior services, repeat appointments and other circumstances relevant to neutrality.
Sixth Schedule - disclosure by the proposed arbitrator
The Sixth Schedule prescribes the disclosure format contemplated by Explanation 2 to Section 12(1). It requires information including contact details, prior experience, ongoing arbitrations, relevant relationships or interests, and circumstances that may affect the arbitrator's ability to devote sufficient time to the arbitration.
Seventh Schedule - statutory ineligibility
The Seventh Schedule is linked to Section 12(5). If the proposed arbitrator's relationship with a party, counsel or the subject-matter falls within a listed category, the person is ineligible to be appointed. A prior contractual clause cannot override this rule. The statutory proviso allows waiver only after the dispute has arisen and only through an express agreement in writing.
Challenge under Section 12(3) and ineligibility under Section 12(5)
Section 12 distinguishes between a challenge based on circumstances giving rise to justifiable doubts and statutory ineligibility. A challenge under subsection (3) is connected with the procedure in Section 13 of the Arbitration and Conciliation Act, 1996. Section 12(5), by contrast, deals with persons who are ineligible because a Seventh Schedule relationship exists.
Where the concern relates to an arbitrator's mandate becoming legally or factually incapable of performance, Section 14 - Failure or impossibility to act may also become relevant. The precise remedy depends on the nature of the objection and the stage of the arbitral proceedings.