TaxTMI 
TaxTMI 
TaxTMI 
2025 (1) TMI 1613
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.... the application for a reference to arbitration is premature. 3. Learned Counsel on behalf of Respondent No.2 submits that disputes and differences between the parties relate to very same Loan Agreement that had already been referred by a Learned Single Judge of this Court to arbitration, by an order dated March 15, 2022, which culminated in an Arbitral Award dated March 2, 2023. The Arbitral Award, essentially rejected the declaratory relief sought by Respondent No. 2 (the Claimant in that arbitration) that the guarantee issued by him stood extinguished. 4. Respondent No.2, among others, is a guarantor of a loan of Rs.6.95 crores given by the Petitioner to the Respondent No.1, a Limited Liability Partnership, where Respondent No.2 is one of the partners. Two other partners of Respondent No.1 i.e. Respondent No.3 and Respondent No.4 were also guarantors in respect of the obligations owed by Respondent No.1 to the Petitioner, under the aforesaid Loan Agreement. 5. The Arbitral Award passed by Justice (Retd.) Akil Kureshi, deals with certain issues extensively. The core issue presented before the Learned Sole Arbitrator in the last round was whether the Petitioner's dual ent....
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....6A) of the Act as being confined to examining the existence of an arbitration agreement - a position that is now clearly declared as the law, by the Supreme Court. 9. Only to deal with the contentions raised, it is noted that on the face of the earlier Arbitral Award, it effectively rejected declaratory relief sought by Respondent No.2 that the Petitioner was not entitled to invoke the guarantee. The arbitral proceedings did not, prima facie, deal with whether there is a payment default, and did not adjudicate the cause of action being pursued now. In the course of such arbitral proceedings, the Learned Sole Arbitrator found that the Petitioner in this case indeed had a right to claim repayment of the loan. The loan not having been paid till date the cause of action today is the recovery of the loan, and the invocation of the guarantee, since the Petitioner had elected for recovery of the loan instead of reinstatement as partner. Prima facie, that would give rise to a new cause of action under an agreement that contains an arbitration agreement, and therefore, this Court ought to make a reference to arbitration, particularly when the Respondents are refusing to arbitrate despite....
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.... being posed by these two provisions. 15. The Fifth Schedule is a guide to an arbitrator in discharging his obligation to make a disclosure under Section 12(1) of the Act - in particular, clause (a) of that sub-section, which requires disclosure of the existence of direct or indirect past or present relationship or interest in a party, or relation to the subject matter of dispute. Such relationship or interest could be in the nature of financial, business, professional or other kind of relationship or interest, which is likely to give rise to justifiable doubts as to independence or impartiality. 16. In my opinion, the relationship of having been an independent adjudicator in the past cannot fall within the parameters of relationship or interest in a party to the dispute or an interest in the subject matter of the dispute. 17. According to the Learned Counsel for Respondent No. 2, under Item 16, if an arbitrator "has previous involvement in the case", justifiable doubts as to his independence can be said to arise. This objection has to be stated to be rejected. The arbitrator in question was not "involved" in the case as advisor to, or representative of, any of the parties....
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....m but a servant of the Arbitral Tribunal that is a quasi-judicial forum adjudicating the cause of action presented to the Arbitral Tribunal. 20. Be that as it may, the emphasis in Item 24 of the Fifth Schedule is to eliminate any conflict of interest arising out of appointing an arbitrator who would already have a point of view on a "related issue". If a view is already formed by an arbitrator, that view is something to be examined as to whether it could raise a doubt on independence or impartiality. It is a guideline for making a disclosure to the parties. The underlying theme appears to be to disclose any facts that can lead to the parties drawing an inference of a pre-disposition on an issue related to one of the parties, and that too in another arbitration. 21. Here again, the wider theme is the sub-heading under which Items 20 to 24 are placed in the Fifth Schedule. Items 20 and 21 deal with situations where the arbitrator has acted as counsel for or against one of the parties or their affiliates. Item 22 deals with the arbitrator having been appointed twice or more in the past three years by one of the parties or their affiliates - a pointer to deep comfort that one of ....
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....nt "in the case". From the italicized words, it was sought to be argued that "the case" is an ongoing one, and a previous arbitration award delivered by Justice Doabia between the same parties and arising out of the same agreement would incapacitate his appointment in the present case. We are afraid we are unable to agree with this contention. In this context, it is important to refer to the IBA Guidelines, which are the genesis of the items contained in the Seventh Schedule. Under the waivable Red List of the IBA Guidelines, para 2.1.2 states: "The Arbitrator had a prior involvement in the dispute." 24. On reading the aforesaid guideline and reading the heading which appears with Item 16, namely "Relationship of the arbitrator to the dispute", it is obvious that the arbitrator has to have a previous involvement in the very dispute contained in the present arbitration. Admittedly, Justice Doabia has no such involvement. Further, Item 16 must be read along with Items 22 and 24 of the Fifth Schedule. The disqualification contained in Items 22 and 24 is not absolute, as an arbitrator who has, within the past three years, been appointed as arbitrator on two or more oc....