# OIL AND CHEMICAL DIVISION) v. GAIL (INDIA) LIMITED - **Citation:** [2017] 11 S.C.R. 857 - **Court:** Supreme Court of India - **Decided:** 2017-08-31 - **Case number:** Civil Appeal No. 111'.f6 of2017 - **Bench:** R. F. Nariman, Sanjay Kishan Kaul - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/oil-and-chemical-division-v-gail-india-limited-31618 - **Pages:** 36 ## Headnote C , Arbitration and Conciliation Act, 1996 - ss. 12, 14 - Grounds of challenge uls.12 - Challenge to persons' possible appointment as an arbitrator - Held: When person is approached in connection with his possible appointment as an arbitrator, he has to make a D disclosure in writing, as to existence of any direct or ind{rect present or past relationship or interest in the parties/dispute, which is likely to give justifiable doubts as to his independence or impartiality - Such disclosure is to be made iii a form specified in Vlth Schedule, guided by grounds. stated in Vth Schedule - By 2016 Amendment Act, a dichotomy is made between persons who become "ineligible" to be appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality - s. 12(5) r/w Vllth Schedule makes' it clear that if the arbitrator falls in any one of the categories specified in VI/th· Schedule, he becomes "ineligible". to act as arbitrator - On facts, challenge to appointment · of two arbitrators-Justice 'D' and Justice 'L' as hit by Vth and VI/th Schedule - As regards Justice 'D', he having already rendered an award in a previous arbitration between the parties would not, by itself, on the ground of reasonable likelihood of bias, render him ineligible to be an arbitrator in a subsequent arbitration - Justice 'D' had no previous involvement in the very dispute - As regards, Justice 'L', he has only given a professional opinion to a company, which has no concern with the instant dispute, he is clearly not disqualified - Thus, challenge to the appointment as arbitrator not . sustainable - Arbitration and Conciliation (Amendment) Act; 2015 - s. 12(5). 857 F G H • 858 SUPREME COURT REPORTS [2017] l 1 S.C.R. A Dfomissing the appeals, the Court B c HELD: 1.1 Under Section 12 of the Arbitration and Conciliation Act, 1996, it is clear that when a person is approached in connection with his possible appointment as an arbitrator, he has to make a disclosure in writing, in which he must state the existence of any direct or indirect present or past relationship or interest in any of the parties or in relation to the subject matter in dispute, which is likely to give justifiable doubts as to his independence or impartiality. He is also to disclose whether he can devote sufficient time to the arbitration, in particular to be able to complete the entire arbitration within a period of 12 months. Such disclosure is to be made in a form specified in the Sixth Schedule, grounds stated in the Fifth Schedule being a guide in determining whether such circumstances exist. Unlike the scheme contained in the IBA Guidelines, where there is a nonwaivable Red List, parties may, subsequent to disputes having D arisen between them, waive the applicability of the items contained in the Seventh Schedule by an express agreement in writing. [Para 12] [868-G-H; 869-A-C] 1.2 After the 2016 Amendment Act, a dichotomy is made by the Act between persons who become "ineligible" to be E appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes to the root of the appointment, Section 12(5) · read with the Seventh Schedule makes it clear that ifthe arbitrator falls in any oue of the categories specified in the Seventh Schedule, F he becomes "ineligible" to act as arbitrator. Once be becomes ineligible, it is clear that, under Section 14(1)(a), he then becomes de jure unable to perform bis functions inasmuch as, in law, be is regarded as "ineligible". In order to determine whether an arbitrator is de jure unable to perform his functions, it is not necessary to go to the Arbitral Tribunal under Section 13. Since G such a person would lack inherent jurisdiction to proceed any further, an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate on this ground. As opposed to this, in a challenge where grounds stated in the ## Text _Characters 0–39,944 of 81,961. This is a partial read: ask again with offset=39944 for what follows._ (2017] 11 S.C.R. 857 HRD CORPORATION A (MARCUS OIL AND CHEMICAL DIVISION) v. GAIL (INDIA) LIMITED (FORMERLY GAS AUTHORITY OF INDIA LTD.) B (Civil Appeal No. 111'.f6 of2017) AUGUST 31, 2017 [R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.] C , Arbitration and Conciliation Act, 1996 - ss. 12, 14 - Grounds of challenge uls.12 - Challenge to persons' possible appointment as an arbitrator - Held: When person is approached in connection with his possible appointment as an arbitrator, he has to make a D disclosure in writing, as to existence of any direct or ind{rect present or past relationship or interest in the parties/dispute, which is likely to give justifiable doubts as to his independence or impartiality - Such disclosure is to be made iii a form specified in Vlth Schedule, guided by grounds. stated in Vth Schedule - By 2016 Amendment Act, a dichotomy is made between persons who become "ineligible" to be appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality - s. 12(5) r/w Vllth Schedule makes' it clear that if the arbitrator falls in any one of the categories specified in VI/th· Schedule, he becomes "ineligible". to act as arbitrator - On facts, challenge to appointment · of two arbitrators-Justice 'D' and Justice 'L' as hit by Vth and VI/th Schedule - As regards Justice 'D', he having already rendered an award in a previous arbitration between the parties would not, by itself, on the ground of reasonable likelihood of bias, render him ineligible to be an arbitrator in a subsequent arbitration - Justice 'D' had no previous involvement in the very dispute - As regards, Justice 'L', he has only given a professional opinion to a company, which has no concern with the instant dispute, he is clearly not disqualified - Thus, challenge to the appointment as arbitrator not . sustainable - Arbitration and Conciliation (Amendment) Act; 2015 - s. 12(5). 857 F G H • 858 SUPREME COURT REPORTS [2017] l 1 S.C.R. A Dfomissing the appeals, the Court B c HELD: 1.1 Under Section 12 of the Arbitration and Conciliation Act, 1996, it is clear that when a person is approached in connection with his possible appointment as an arbitrator, he has to make a disclosure in writing, in which he must state the existence of any direct or indirect present or past relationship or interest in any of the parties or in relation to the subject matter in dispute, which is likely to give justifiable doubts as to his independence or impartiality. He is also to disclose whether he can devote sufficient time to the arbitration, in particular to be able to complete the entire arbitration within a period of 12 months. Such disclosure is to be made in a form specified in the Sixth Schedule, grounds stated in the Fifth Schedule being a guide in determining whether such circumstances exist. Unlike the scheme contained in the IBA Guidelines, where there is a nonwaivable Red List, parties may, subsequent to disputes having D arisen between them, waive the applicability of the items contained in the Seventh Schedule by an express agreement in writing. [Para 12] [868-G-H; 869-A-C] 1.2 After the 2016 Amendment Act, a dichotomy is made by the Act between persons who become "ineligible" to be E appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes to the root of the appointment, Section 12(5) · read with the Seventh Schedule makes it clear that ifthe arbitrator falls in any oue of the categories specified in the Seventh Schedule, F he becomes "ineligible" to act as arbitrator. Once be becomes ineligible, it is clear that, under Section 14(1)(a), he then becomes de jure unable to perform bis functions inasmuch as, in law, be is regarded as "ineligible". In order to determine whether an arbitrator is de jure unable to perform his functions, it is not necessary to go to the Arbitral Tribunal under Section 13. Since G such a person would lack inherent jurisdiction to proceed any further, an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate on this ground. As opposed to this, in a challenge where grounds stated in the Fifth Schedule arc disclosed, which give rise to justifiable H doubts as to the arbitrator's independence or impartiality, such HRD CORPORATION v. GAIL (INDIA) LIMITED 859 doubts as to independence or .impartiality have to be determined A as a matter of fact in the facts of the particular challenge by the Arbitral Tribunal under Section 13. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the independence or impartiality of the arbitrator/ arbitrators, the Tribunal must then continue the arbitral B proceedings under Section 13(4) and make an award. It is only after such award is made, that the party challenging the arbitrator's appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section 34 on the aforesaid grounds. It is clear, therefore, that any challenge contained in the Fifth Schedule against the C appointment of Justice 'D' and Justice 'L' cannot be gone into at this stage, but will be gone into only after the Arbitral Tribunal has given an award. Therefore, no opinion is expressed on items contained in the Fifth Schedule under which the appellant may challenge the appointment of either arbitrator. They will be free D to do so only after an award is rendered by the Tribunal. [Para 13) [877-H; 878-A-F] 1.3 Items 1 to 19 of the Fifth Schedule are identical with the said items in the Seventh Schedule. The only reason that these items also appear in the Fifth Schedule is for purposes of disclosure by the arbitrator, as unless the proposed arbitrator E discloses in writing his involvement in terms of Items 1 to 34 of the Fifth Schedule, such disclosure would be lacking, in which case the parties would be put at a disadvantage as such information is often within the personal knowledge of the arbitrator only. It is for this reason that it appears that Items 1 to F 19 also appear in the Fifth Schedule. [Para 17) [883-D-E] 1.4 The items contained in the Schedules owe their origin to the IBA Guidelines, which are to be construed in the light of the general principles contained therein-that every arbitrator shall be impartial and independent of the parties at the time of accepting G his/her appointment. Doubts as to the above are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case in reaching his or her decision. This H 860 SUPREME COURT REPORTS [2017] 11 S.C.R. A test requires taking a broad common-sensical approach to the items stated in the Fifth and Seventh Schedules. This approach would, therefore, require a fair construction of the words used therein, [Para 20] [884-F-H; 885-A] 1.5 On reading Item 1 of the Seventh Schedule, it is clear B that the item deals with "business relationships". The words "any other" show that the first part of Item 1 also confines "advisor" to a "business relationship". The arbitrator must, therefore, be an "advisor" insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, C in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2, 8, 14 and 15, the last item specifically dealing with "legal advice". Under Items 2, 8 and 14, advice given need not be advice relating to business but can be D advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word "regularly" is missing from Items 1 and 2, it is clear that the E F arbitrator, if he is an "advisor", in the sense of being a person who has a business relationship in Item 1, or is a person who "currently" advises a party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm's length. Something more is required, which is the element of being connected in an advisory ca1>acity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the instant dispute, he is clearly not disqualified under Item 1. [Para 22] (885-F-H; 886-A-B] G 1.6 On reading the IBA guidelines and the heading which H 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 'D' has no such involvement. Further, Item 16 must be read along with Items 22 and 24 of the HRD CORPQRATION v. GAIL (INDIA) LIMITED , 861 Fifth Schedule; The disqualification contained in Items 22 and 24 A is not absolute, as an arbitrator who has, within the past three · years, been appointed as arbitrator on two or more occasions by one of the parties or an affiliate, may yet not be disqualified on his showing that he was independent and impartial on the earlier two occasions. Also, if he currently serves or has served within B the past three years as arbitrator in another arbitration on a related issue, he may be disqualified under Item 24, which must then be contrasted with Item 16. Item 16 cannot be read as including . previous involvements in another arbitration on a related issue involving one of the parties as otherwise Item 24 will be rendered largely ineffective. It must not be forgotten that Item 16 also C appears in the Fifth Schedule and has, therefore, to be harmoniously read with Item 24. The submission that the expression "the arbitrator" in Item 16 cannot possibly mean "the arbitrator" acting as an arbitrator, but must mean that the proposed arbitrator is a person who has liad previous involvement D in the case in some other avatar, is a sound submission as ''the arbitrator" refers to the proposed arbitrator. This becomes clear, when contrasted with Items 22 and 24, where the arbitrator must .have served "as arbitrator" before he can be disqualified. Obviously, Item 16 refers to previous involvement in an advisory or other capacity in the very dispute, but not as arbitrator. E Appointment as an arbitrator is not a "business relationship" with the respondent under Item 1. Nor is the delivery of an award providing an expert "opinion" i.e. advice to a party covered by Item 15 .. [Para 24) (886-F-H; 887-A-D] 1.7 The fact that Justice 'D' has already rendered an award· F in a previous arbitration between the parties would not, by itself, · on the ground of reasonable likelihood of bias, render him ineligible to be an arbitrator in a subsequent arbitration. Nothing is shown to indicate th.at Justice 'D' would be a person holding a pronounced anti-claimant view. Therefore, there is no real possibility that Justice 'D' will not bring an open mind and objective judgment to bear on arguments made by the parties in the fourth arbitration, which may or may not differ from arguments made in the third arbitration. [Para 25, 28] [887-D-E; 891-A-B] G H· 862 SUPREME COURT REPORTS [2017) ll S.C.R. A 1.8 The appointment of Justice 'D' was attacked on the ground that he had not made a complete disclosure, his disclosure statement did not indicate as to whether he was likely to devote sufficient time to the arbitration and would be able to complete it within 12 months. The appellant cannot be allowed to raise this B point at this stage as it. was never raised earlier. Obviously, if Justice 'D' did not indicate anything to the contrary, he would be able to devote sufficient time to arbitration and complete the process within 12 months.[Para 29) [891-C-D] 1.9 The submission that the arbitrator must without delay make a disclosure to the parties in writing need not detain this C Court. Justice 'D"s disclosure was by a letter dated 31.10.2016 which was sent to the Secretary General of the International Centre for Alternative Dispute Resolution (ICADR) and for no fault of Justice 'D', the ICADR, through oversight, did not handover the said letter or a copy thereof to the appellant until D 24.11.2016, which is stated in its letter dated 29.11.2016. [Para 30] [891-E-F] 1.10 The submission that under Explanation 3 to VII Schedule, maritime or commodities arbitration may draw arbitrators from a small, specialized pool, in which case it is the E custom and practice for parties to appoint the same arbitrator in different cases, and this is in contrast to an arbitrator in other cases where he should not be appointed more than once, cannot be accepted. Explanation 3 stands by itself and has to be applied as a relevant fact to be taken into account. It has no indirect bearing on any of the other items mentioned in the Seventh F Schedule. Thus, the Single Judge's judgment requires no G H interference.[Para 31, 32] [891-G-H; 892-A] Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd. (2017) 4 SCC 665 ; ONGC v. Saw Pipes Ltd (2003) 5 SCC 705 : [2003] 3 SCR 691 ; ONGC v. Western Geco International Ltd. (2014) 9 SCC 263 : [2014] 12 SCR 1 ; Renusagar Power Plant Co Ltd. v. General Electric Co. (1994) Supp (1) SCC 644 ; Associate Builders v. Delhi Development Authority (2015) 3 sec 49 - referred to. HRD CORPORATION v. GAIL (INDIA) LIMITED 863 H. v. L & others [2017) 1 W.L.R. 2280 ; Locabail v. A Bayfield (2000) 1 All E.R. 65 - referred to. Arbitration by Russell 23rd Edn - referred to. Case Law Reference (2011) 4 sec 665 [2003) 3 SCR 691 [2014) 1 SCR 1 (1994) Supp (1) sec 644 (2015) 3 sec 49 referred to referred to referred to referred to referred to Para 16 Para 18 Para 18 Para 18 Para 18 CIVIL APPELLATE JURISDICTION : Civil Appeal No.11126 of2017. B c From the final impugned Judgment and Order dated 24.04.2017 of the High Court of Delhi at New Delhi in OMP (T)(COMM.) 22 of D 2017 WITH Civil Appeal No.11127 of2017. Sh yam Divan, Gopal Jain, Sr. Advs, Bindu Saxena, Ms.Aprajita E · Swamp, Ms.Chimayee Chandra, Ms. Krita Awasthi, Shailendra Swamp, Ad vs for the Appellant. Ms. Vanita Bhargava, Ajay Bhargava, Jeevan B. Panda, Abhisaar Bairagi (for Mis Khaitan & Co.), Advs for the Respondent. The Judgment of the Court was delivered by F R. F. NARIMAN, J. 1. Leave granted. 2. The present appeals raise interesting questions relating to the applicability of Sections 12 and 14 of the Arbitration and Conciliation Act, 1996, in particular with respect to sub-section (5) of Section 12 G added by the Arbitration and Conciliation (Amendment) Act, 2015 (Act 3 of 2016) (hereinafter referred to as the 2016 Amendment Act). 3. Briefly stated, the relevant facts necessary to decide this case are as follows. The respondent, GAIL (India), issued a notice inviting tenders for supply of wax generated at GAIL's plant at Pata, Uttar H . 864 SUPREME COURT REPORTS [2017] 11 S.C.R. A Pradesh for a period of 20 years on an exclusive basis. The appellant successfully tendered for the said contract and the parties entered into an agreement dated April I, 1999. Disputes arose between the parties, the appellant claiming that GAIL had wrongfully withheld supplies of wax, as a result of which the appellant invoked the arbitration clause B included in the agreement. 4. Three earlier arbitrations have taken place between the parties. The present dispute arises from the fourth such arbitration. For the period 2004-2007, an Arbitral Tribunal consisting of Justice AB. Rohatgi (presiding arbitrator), Justice J.K. Mehra and Justice N.N. Goswamy published an award on April 8, 2006 in which they directed specific C performance of the agreement dated April 1, 1999. This award was never challenged and has since become final. 5. For the period 2007-2010, a second arbitration was held consisting of the same panel as the first arbitration. D 6. For the period 2010-2013, the same Arbitral Tribunal was constituted. However, while the proceedings were pending, Justice· Goswamy expired and Justice T.S. Doabia was appointed in his place. Justice A.B. Rohatgi resigned on February 17, 2013 as the presiding arbitrator, as a result of which Justice S.S. Chadha was appointed to fill his vacancy. This third arbitration proceeding culminated into two separate E awards, both dated July 22, 2015. The appellant has filed a petition under Section 34 of the Act assailing the said awards, which is pending before the Delhi High Court. 7. In respect of the period from 2016 to 2019, initially, the appellant nominated Justice K. Ramamoorthy as its arbitrator. However, he F withdrew from the case on December 14, 2016 and Justice Mukul Mudgal was nominated as arbitrator in his place. The respondent appointed Justice Doabia, and Justice Doabia and Justice K. Ramamoorthy appointed Justice K.K. Lahoti to be the presiding arbitrator, before Justice K. Ramamoorthy withdrew from the case. Two applications have been G filed by the appellant under Section 12 of the Act, one seeking termination of the mandate of Justice Doabia and the other seeking termination of the mandate of Justice Lahoti. These two applications were heard and disposed of by an order dated February 16, 2017. Justice Lahoti, with whom Justice Doabia concurred, held that they were entitled to continue with the arbitration. Justice Mukul Mudgal, on the other hand, concurred H HRD CORPORATION v. GAIL (INDIA) LIMITED 865 [R. F. NARIMAN, J.] in the appointment of Justice Lahoti but held that Justice Doabia's A appointment was hit by certain clauses of the Fifth and Seventh Schedules to the Act and, therefore, that his mandate has terminated. As against this order, OMP No.22/2017 was filed before a single Judge of the Delhi High Court who then dismissed both the petitions. 8. Shri Shyam Divan, learned senior advocate appearing in civil B appeal arising out of SLP(C) No. 20679 of 2017 and Shri Gopal Jain, learned senior advocate, appearing in civil appeal arising ofSLP(C)No. 20675 of2017 have assailed the judgment of the single Judge. According to Shri Divan, the appointment of Justice Lahoti squarely attracted Items 1, 8 and 15 of the Seventh Schedule thereby making him ineligible to act as arbitrator. He also argued that Items 20 and 22 contained in the Fifth C Schedule are also attracted to the facts of this case, thereby giving rise to justifiable doubts as to his independence or impartiality. He further argued that if for any reason Justice Doabia's appointment is held to be bad, Justice Lahoti 's appointment must follow as being bad as an ineligible arbitrator cannot appoint another arbitrator. He has argued before us D that the 2016 Amendment Act, which substituted Section 12(1), read with the Fifth and Seventh Schedules and introduced Section 12(5), has to be read in the context of the grounds for challenge to awards being made narrower than they were under Section 34 of the Act. This being so, it is extremely important that the independence and impartiality of an arbitrator be squarely and unequivocally established, and for this purpose, E the grounds contained in the Fifth and Seventh Schedules should be construed in a manner that heightens independence and impartiality. According to learned counsel, once a Seventh Schedule challenge is presented before the Court, the arbitrator becomes ineligible and consequently becomes de jure unable to perform his functions under F Section 14 of the Act. 9. Shri Gopal Jain, learned senior advocate appearing in civil appeal arising from SLP(C) No. 20679 of2017, argued that the object of the 2016 Amendment Act is to appoint neutral arbitrators who are independent and fair in their decision making. According to learned G counsel, Justice Doabia was ineligible as he squarely fell within Items 1, 15 and 16 of the Seventh Schedule, the last Item 16 being contrasted with Explanation 3 thereof. According to him, Justice Doabia has not disclosed in writing circumstances which are likely to affect his ability to devote sufficient time to the arbitration and for this reason also, his H 866 SUPREME COURT REPORTS (2017) l I S.C.R. A appointment should be set aside. According to learned counsel, once Justice Doabia's appointment falls, Justice Lahoti's appointment also falls. · I 0. Ms. Vanita Bhargava, learned counsel appearing on behalf of the respondent, has argued, referring to various provisions of the Seventh B Schedule, that neither Justice Doabia nor Justice Lahoti are ineligible to act as arbitrators. According to her, the list in the Fifth and Seventh Schedules is taken from the International Bar Association Guidelines on Conflicts oflnterest in International Arbitration, 2014 (hereinafterreferred to as IBA Guidelines) and must be read in consonance therewith. Once c that is done, it becomes plain that Item 16 would not apply to Justice Doabia for the simple reason that he should be an arbitrator who has had previous involvement in the very dispute at hand and not in an earlier arbitration. For this purpose, she contrasted Item 16 with Items 22 and 24 of the Fifth Schedule. She also argued that the point regarding non disclosure on grounds contained in Section 12(1 )(b) is an afterthought D and has never been argu~d before either the Arbitral Tribunal or the single Judge. According to her, the single Judge is right in holding that Justice Lahoti's appointment is not hit by Item I of the Seventh Schedule nor is Justice Doabia's appointment hit by Item 16 of the same Schedule, and the reasoning contained in the judgment being correct need not be interfered with. E 11. Having heard learned counsel for both the sides, it is necessary to first set out the statutory scheme contained in Sections 12 to 14 of the Act. These Sections read as under:- "Sec. 12 Grounds for challenge.- F (I) 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 G 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 H the entire arbitration within a period of twelve months. HRD CORPORATION v. GAIL (INDIA) LIMITED 867 [R. F. NARIMAN, J.] Explanation 1.-The grounds stated in the Fifth Schedule shall A 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. B (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. c D (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the E 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 F express agreement in writing." "Sec. 13 Challenge procedure.- (!) Subject to sub-section ( 4 ), the parties are free to agree on a procedure for challenging an arbitrator. (2) Failing any agreement referred to in sub-section (I), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in subsection (3) of section 12, send a written statement of the reasons for the challenge to the arbitral tribunal. G H 868 SUPREME COURT REPORTS [2017] 11 S.C.R. A (3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. (4) If a challenge under any procedure agreed upon by the parties or tinder the procedure under sub-section (2) is not successful, B the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award. c D (5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34. (6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees." "Sec. 14. Failure or impossibility to act. - ( 1) The mandate of an arbitrator shall terminate and he shall be substituted by another arbitrator, if- ( a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and E (b) he withdraws from his office or the parties agree to the termination of his mandate. (2) If a controversy remains concerning any of the grounds referred to in clause (a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination F of the mandate. (3) If, under this section or sub-section (3) of section 13, an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) G of section 12." H 12. Under Section 12, it is clear that when a person is approached in connection with his possible appointment as an arbitrator, he has to make a disclosure in writing, in which he must state the existence of any direct or indirect present or past relationship or . HRD CORPORATION v. GAIL (INDIA) LIMITED [R. F. NARIMAN, J.] interest in any of the parties or in relation to the s_ubject matter in dispute, which is likely to give justifiable doubts as to his independence or impartiality. He is also to disclose whether he can devote sufficient time to the arbitration, in particular to be - able to complete the entire arbitration within a period of 12 months. Such disclosure is to be made in a form specified in the Sixth Schedule, grounds stated in the Fifth Schedule being a guide in determining whether such circumstances exist. Unlike the scheme contained in the IBA Guidelines, where there is a non-waivable Red List, parties may, subsequent to disputes having arisen between them, waive the applicability of the items contained in the Seventh Schedule by an express agreement in writing. The Fifth, Sixth and Seventh Schedules are important for determination of the present disputes, and are set out with the corresponding provisions of the IBA Guidelines hereunder: "THE FIFTH SCHEDULE [See section 12 (1) (b)] The following grounds give rise to jurstifiable doubts as to the independence or impartiality of arbitrators: "'";.:·:,.,,;;;.~ .:,;. 0; ,_;.;,..:~~ :·.;··:~=,,;;;;.;:···,;wo~;;;,"·:·~:;;-,,;;="""rr'==·,:;;;:;·;iii'"'""";""""<:·'~'-""F'''-'-F;'';~-;;~;:: '.'.'"b''~•""P<;;_"""·W''".o''(i:,.;"'-·"-"'"i:'.;:;:7: Fifth S~hedull! · · ··. . _ . i Correspm:ul,ing, proy~~l()l). m __ .. _·. . .. . . the.IBA,-Guicle(ipes, __ -· ... ·· - 1.·-The~bliritl-;;;:--;s·~a:~ e~pl oyeeT(Non-W;iV"~bkRed Lisir----·-'-~' consultant, advisor or has any other! . . . past or present business relationshipi I.I There 1s an 1den11ty with a party. I between a party and the I arbitrator, or the alb itrator is a I legal representative or I employee of an entity that is a _____ ... .. _ ····-········--··-····-· Jparty_int~~ nrivatelv held. 18. A close family member of the (Waivable Red List) arbitrator has a significant financiaL interest in the outcome of the dispute.· 2.2.2 A close family member of , the arbitrator has a significant · financial interest in the outcome of ' the dispute. 19. The arbitrator or a close family (Waivable Red List) member of the arbitrator has a close : relationship with a third party who ' 2.2.3 The arbitrator, or a close may be liable to recourse on the part . family member of the arbitrator, of the unsuccessful party in the has a close relationship with a dispute. ; non-party who may be liable to ! recourse on the part of the · unsuccessful oa1ty in the dispute; 20. The arbitrator has within the past; (Orange List) three yearn Serl'cd US counsel for one: of the pmtie' or an affiliate of one ofi 3.1.l The arbitrator has, within the the pa1ties or has previously advised! past three years, served as counsel or been consulted by the party or an. for one of the parties, or an affiliate of the party making the, affiliate of one of the parties, or appointment in an unrelated matter,, has previously ad vised or been but the arbitrator and the party or the 1 consulted by the party, or an affiliate of the party have no ongoing; affiliate of the pa1ty, making the relations hip. · appointment in' an unrelated matter, but the arbitrator and the , party, or the affiliate of the party, [ have no ongoing relationship. 21. The arbitrator has within the pas( (Orange List) three years served as counsel againsf one of the parties or an affiliate of: 3.1.2 The arbitrator has. within the one of the patties in an unrelated' past three years, served as counsel matter. . against one of the parties, or an affiliate of one of the paities, in an unrelated matter. 22. The arbitrator has within itie pasii (Orange List) three years been appointed as' arbitrator on two or more occasions 3.1.3 The arbitrator has, within the by one of the parties or an affiliate of: past three years, been appointed as one of the parties. : arbitrator on two or more j occasions by one of the parties, or ~ an affiliate of one of the parties. HRD CORPORATION v. GAIL (INDIA) LIMITED [R. F. NARIMAN, J.] 23. The arbitrator's law film has within! (Orange List) the past three years acted for one of the I parties or an affiliate of one of the parties j 3. I .4 The arbitrator's law firm has, in an unrelated matter without the! within the past three years, acted involvement of the arbitrator. i for or against one of the parties, or I an affiliate of one of the parties, in i an unrelated matter without the .. . . ___ --··. _. __ , _ji~v()Jvement()ft~j!atbitJ:11tor, _ _ 24. The arbitrator currently serves, or has! (Orange List) served within the past three years, as! . . atbitrator in another arbitration on a! 3.1.5 The arb1tmtor currently related issue involving one of the parties I serves, or has served within the or an affiliate of one of the parties. i past three years, as arbitrator in I i another atbitmtion on a related issue involving one of the parties, ! or an affiliate of one of the parties. 25. The arbitrator and another arbitrator! (Orange List) are lawyers in the same Jaw firm. i I 3.3. I The arbitrator and another I arbitmtor are lawyers in the same I law firm. 26. The arbitrator was within the past! (Orange List) three years a partner of, or otherwise I . affiliated with, another arbitrator or any! 3.3.3 The atbitmtor was, within of the counsel in the same arbitmtion. I the past three years, a partner of, l or otherwise affiliated with, · another atbitrator or any of the , counsel in the arbitration. 27. A lawyer i Ii the arbitmtor' s law firmi (Orange List) is an arbitrator in another disputei involving the same party or parties or anl 3.3.4 A lawyer in the atbitrator's affiliate of one of the parties. ! law firm is an atbitmtor in another [ dispute involving the same party ! or parties, or an affiliate of one of I h • _____ _l!_~_pa.=r,t"'1e,sc_· --~-----· __ 28. A ·close family member of the I (Orange List) atbitrator is a partner or employee of the! law finn representing one of the parties, J 3.3.5 A close family member of but is not assisting with the dispute. 1· the arbitrator is a partner or employee of the law firm i representing one of the parties, but i is not assisting with the dispute. 29. The atbitrator has within the past! (Orange List) three years received more than three! appointments by the·same counsel or the! 3.3.8 The atbitmtorhas, within the same law firm. past three years, been appointed on more than three occasions by the same counsel, or the same law , ________________ f_i_r_m_. ____________ _ 873 A B c D E F G H 874 A B c D E F G H SUPREME COURT REPORTS [2017] ll S.C.R. 3o. The arbitrator'Slaw finn is currentfy(Orange Li.St) -- acting adverse to one of the parties or ani affiliate of one of the parties. ; 3 .4.1 The arbitrator's law firm is I currently acting adversely to one of the parties. or an affiliate of one of ______ .. ___________ --;J!!e_(Jarti~s. _______ _ 31. The arbitrator had been associated I (Orange List) within the past three years with a party! or an affiliate of one of the parties in a: 3.4.2 · The arbitrator has been professional capacity. such as a former associated with a party. or an employee or partner. . affiliate of one of the parties, in a ! professional capacity. such as a I fonner employee or partner. 32. The arbitrator holds shares. either I. (Orange List) directly or indirectly, which by reason of' number or denomination constitute a; 3 .5.1 The arbitrator holds shares, material holding in one of the parties orl either directly or indirectly.