- Case
- DIPL INGENIEURE RAINER AND OLIVER PULS GMBH GERMANY v. FORCE MOTORS LIMITED INDIA (Bombay High Court, 10-01-2025)
- Law
- Arbitration and Conciliation Act.
Facts: Dipl.-Ingenieure Rainer & Oliver PULS GmbH (Germany) (Petitioner) and Force Motors Limited (India) (Respondent No. 1) entered into a Technology Transfer Agreement (TTA) in 2019, which contained an arbitration clause designating the Indo-German Chamber of Commerce (IGCC) as the arbitral institution. Disputes arose, and Respondent No. 1 initiated arbitration. Mr. R.A. Shah was nominated as an arbitrator. The Petitioner later discovered that Mr. Shah and Dr. Abhaykumar N. Firodia, Chairman of Respondent No. 1, were both members of the IGCC committee for a long time, a fact not fully disclosed. The Petitioner filed an application before the Arbitral Tribunal seeking Mr. Shah's recusal and removal of IGCC as the arbitral institution, alleging a likelihood of bias. The Arbitral Tribunal dismissed this application as barred by limitation.Procedural Posture: The Petitioner filed a Commercial Arbitration Petition in the Bombay High Court under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996, seeking the removal of Mr. R.A. Shah as arbitrator and IGCC as the arbitral institution. This petition was filed after the Arbitral Tribunal dismissed the Petitioner's application for recusal and removal.Issue: (1) What is the nature and extent of disclosure required under Section 12 of the Arbitration and Conciliation Act, 1996, read with Schedules 5 and 7? (2) Was the disclosure made by Mr. R.A. Shah adequate in light of his relationship with the IGCC and Dr. Firodia? (3) Is the petition under Sections 14 and 15 maintainable given the Arbitral Tribunal's order dismissing the challenge under Section 13(2) as time-barred?Holding: The Bombay High Court allowed the Commercial Arbitration Petition, holding that Mr. R.A. Shah failed to make a complete disclosure of his relationship with IGCC and Dr. Firodia, rendering him ineligible to act as an arbitrator under Section 14(1)(a) of the Act. The Court terminated his mandate.Reasoning: The Court reasoned that Section 12 of the Arbitration and Conciliation Act, 1996 mandates complete disclosure of any past or present relationships or interests that could give rise to justifiable doubts about an arbitrator's independence or impartiality. The Court found that Mr. Shah's disclosure was incomplete because he did not adequately disclose his long-standing association with the IGCC committee and his shared position with Dr. Firodia, the Chairman of Respondent No. 1. This created a reasonable apprehension of bias. The Court emphasized that the burden to ascertain and disclose such circumstances lies with the person being appointed as arbitrator, not the parties. The Court also distinguished between ineligibility under Section 12(5) (Seventh Schedule) and justifiable doubts under Section 12(3) (Fifth Schedule), noting that while a challenge under Section 13 before the Arbitral Tribunal is appropriate for the latter, ineligibility under Section 12(5) allows for a direct application to the Court under Section 14. The Court concluded that Mr. Shah's non-disclosure rendered him de jure unable to perform his functions, justifying the termination of his mandate under Section 14(1)(a).
