Arbitration notice and arbitrator disclosure requirements can invalidate an award when service and neutrality safeguards are breached.
A valid commencement of arbitration requires receipt by the respondent of a proper notice referring the dispute to arbitration; a unilateral assertion of intent to arbitrate or an appointment letter not shown to have been served on the respondent is insufficient. The court found Section 21 non-compliance and no waiver of notice. It also held that an arbitrator must make the mandatory written disclosure of circumstances creating justifiable doubts as to independence or impartiality, and that prior engagement for a party must be disclosed in the prescribed manner. Because the disclosure was not made and the challenge was not barred on these facts, the award was liable to be set aside.
Issues: (i) whether the Section 34 application was within limitation; (ii) whether the arbitral proceedings were vitiated for non-compliance with the notice requirement for commencement of arbitration; (iii) whether the award was liable to be set aside for want of the arbitrator's mandatory disclosure and the resulting challenge to his appointment.
Issue (i): Whether the Section 34 application was within limitation.
Analysis: The application under Section 34 had to be filed within three months from receipt of the award, with a further condonable period of 30 days only. The award was received by the respondent on 20.07.2019, and the Section 34 petition was filed on 18.10.2019. On that basis, the filing was within time.
Conclusion: The limitation objection failed and was decided against the appellant.
Issue (ii): Whether the arbitral proceedings were vitiated for non-compliance with the notice requirement for commencement of arbitration.
Analysis: Section 21 requires a request for reference of a dispute to arbitration to be received by the respondent before arbitral proceedings commence. A unilateral letter merely asserting a right to initiate arbitration, without naming the arbitrator or securing receipt of a proper commencement notice, was held insufficient. The later appointment letter was addressed only to the arbitrator and was not shown to have been served on the respondent. No waiver of notice was established. The court therefore held that the appointment and commencement process did not conform to Section 21.
Conclusion: Non-compliance with Section 21 was established, against the appellant.
Issue (iii): Whether the award was liable to be set aside for want of the arbitrator's mandatory disclosure and the resulting challenge to his appointment.
Analysis: Section 12 mandates disclosure in writing of circumstances giving rise to justifiable doubts as to independence or impartiality, and the duty continues throughout the proceedings. The record showed that the arbitrator had earlier acted for the appellant, but this was not disclosed in the prescribed manner. The challenge procedure under Section 13 was held not to bar the respondent, because the relevant circumstances became known only after the ex parte award was received. In these facts, the absence of disclosure and the resulting doubt as to impartiality justified the setting aside of the award.
Conclusion: The challenge based on Section 12 and Section 13 was upheld, in favour of the respondent.
Final Conclusion: The award could not be sustained because the arbitral process was found defective both at the stage of commencement and at the stage of the arbitrator's disclosure and neutrality, and the appellate court refused to interfere with the order setting aside the award.
Ratio Decidendi: A valid commencement of arbitration requires receipt by the respondent of a proper notice referring the dispute to arbitration, and an arbitrator who has previously acted for a party must make the mandatory written disclosure of circumstances creating justifiable doubts as to independence or impartiality; failure on either count can justify setting aside the award.
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