Supreme Court of India

CHENNAI METRO RAIL LIMITED ADMINISTRATIVE BUILDINGversusM/S TRANSTONNELSTROY AFCONS (JV) & ANR.

Citation: 2023 INSC 932
Decided: 19 October 2023
Disposal: Disposed off
Bench: S RAVINDRA BHAT

Holding

A unilateral increase in arbitrators' fees does not render the tribunal ineligible or terminate its mandate; the application under s.14 is not maintainable.

Summary

Chennai Metro Rail Ltd. entered into a Rs 1566‑crore contract with Afcons, which later gave rise to arbitration. The three‑member tribunal initially fixed the arbitrators' hearing fee at Rs 1,00,000 per session, but later unilaterally raised it to Rs 2,00,000. Chennai Metro challenged the fee increase, arguing that the tribunal had become de jure ineligible and its mandate should terminate under s.12 of the Arbitration and Conciliation Act, 1996. The Supreme Court held that fee fixation is contractual and can be altered only with the consent of all parties; a unilateral increase does not render the tribunal ineligible nor trigger termination of its mandate. The Court clarified that challenges to bias or impartiality must follow the procedure in s.12(3) and s.13, and that s.14 can be invoked only for statutory ineligibility under s.12(5). Consequently, the application under s.14 was dismissed and the tribunal was directed to resume proceedings.

Issues considered

Whether a unilateral revision of arbitrators' fees by the tribunal makes it ineligible under s.12 of the Arbitration and Conciliation Act, 1996
Whether the tribunal's mandate terminates under s.14 on the ground of alleged bias arising from the fee dispute
What is the proper procedure for challenging an arbitrator's impartiality or independence under the Act

Legislation cited

Arbitration and Conciliation Act, 1996s. 12, s. 13, s. 14, s. 34

Subjects

ArbitrationFee revisionArbitrator ineligibilitySection 12Section 14BiasImpartialityParty autonomy

Judgment

[2023] 14 S.C.R. 995 : 2023 INSC 932

CASE DETAILS
CHENNAI METRO RAIL LIMITED ADMINISTRATIVE
BUILDING
v.
M/S TRANSTONNELSTROY AFCONS (JV) & ANR.
(Miscellaneous Application No.184 of 2023)
In
(Special Leave Petition (Civil) No.8553 of 2022)
With
(Civil Appeal No(s). 4591 of 2023)
OCTOBER 19, 2023
[S. RAVINDRA BHAT AND ARAVIND KUMAR, JJ.]

HEADNOTES
Issue for consideration: Whether revision of fee by an arbitral tribunal
would terminate the mandate of the tribunal on the ground of ineligibility
as per s. 12 of the Arbitration and Conciliation Act, 1996.
Arbitration and Conciliation Act, 1996 – ss. 12, 13 and 14 –
Grounds and procedure of challenge – Failure or impossibility of the
arbitrator or tribunal to act – Arbitration proceedings between the
parties – Tribunal revised the hearing fee for each arbitrator ﬁxed at
Rs 1,00,000/- per session to Rs 2,00,000/- per session of three hours
– Respondent paid the revised fee for ﬁve hearings – Application
u/s. 14 by the appellant challenging the mandate of the tribunal that
the payment of the disputed increased amount by one party, caused
prejudice to the appellant and not be treated in an impartial manner
by the tribunal, resulting in the tribunal to become de jure unable to
perform its functions as required – Dismissal of the application by the
High Court – Correctness:
Held: Fixation of fee, is contractual, and wherever there is no prior
arrangement or court order, the tribunal has to ﬁx it at the threshold – Fee
increase can be resorted to only with the agreement of parties; in the event

995
996 SUPREME COURT REPORTS [2023] 14 S.C.R.

of disagreement by one party, the tribunal has to continue with the previous
arrangement, or decline to act as arbitrator – By insisting that the increase
of fee should prevail does not amount to a per se ineligibility, reaching to
the level of voiding the tribunal’s appointment, and terminating its mandate
– Plea of the applicant that the concept of de jure ineligibility because
of existence of justiﬁable doubts about impartiality or independence of
the tribunal on unenumerated grounds or other than those outlined as
statutory ineligibility conditions in terms of s.12(5), cannot be sustained –
Grounds other than those mentioned in the said schedule, occasioning an
application in terms of s.12(3) cannot be conceived – In case, applicants
plea is upheld, the consequences could well be an explosion in the court
docket and other unforeseen results – Skipping the statutory route carefully
devised by Parliament can cast yet more spells of uncertainty upon the
arbitration process – De jure condition is not the key which unlocks the
doors that bar challenges, mid-stream, and should “not to unlock the gates
which shuts the court out” from what could potentially become causes of
arbitrator challenge, during the course of arbitration proceedings, other
than what the Act speciﬁcally provides for – Direction to the arbitrators
to resume the proceedings and decide the case in accordance with law.
[Paras 33, 34, 39 and 40]
Arbitration and Conciliation Act, 1996 – s. 12 – Grounds for
challenge of an arbitrator – Determination of ineligibility of an
arbitrator – Elucidated. [Paras 21-24, 28-31]
Arbitration and Conciliation Act, 1996 – Expression ‘bias’ –
Meaning of:
Held: The Act has deliberately avoided an expression ‘bias’, instead
the term used is justiﬁable doubts about the impartiality of an arbitrator,
is an expression with many facets-subject matter bias; pecuniary bias and
personal bias – Predisposition to decide for or against one party, without
proper regard to the true merits of the dispute is bias – There must be
reasonable apprehension of that predisposition. [Para 18]
LIST OF CITATIONS AND OTHER REFERENCES
ONGC v. AFCONS Gunasa JV 2022 (10) SCR 660; State of West
Bengal vs. Shivanand Pathak (1998) 5 SCC 513: [1998] 1 SCR 811; N.K.
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 997
M/S TRANSTONNELSTROY AFCONS (JV)

Bajpai vs. Union of India (2012) 4 SCC 653 : [2012] 2 SCR 433; State
of Punjab vs. Devenderpal Singh Bhuller (2011) 14 SCC 770: [2011] 15
SCR 540; Supreme Court Advocates on record Association vs. Union of
India (2016) 5 SCC 808: HRD Corporations v. Gas Authority of India
Ltd. [2017] 11 SCR 857; Bharat Broadband Network Limited v. United
Telecoms Ltd [2019] 6 SCR 97; International Airport Authority v. K.D. Bali
& Another [1988] 3 SCR 370; G. Sarana v University of Lucknow & Ors.
[1977] 1 SCR 64; Secretary to Government, Transport Deptt., Madras v.
Munuswamy Mudaliar & Anr [1988] Supp 2 SCR 673; G.N. Nayak v Goa
University [2002] 1 SCR 636; S. Parthasarathi v. State of Andhra Pradesh
[1974 ] 1 SCR 697; Kumaon Vikas Mandal v Girija Shankar Pant (2000)
Supp 4 SCC 248; Ranjit Thakur v Union of India [1988] 1 SCR 512; M/s.
Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd [2017]
1 SCR 798; Manak Lal v Dr. Prem Chand [1957] 1 SCR 575; National
Highways Authority of India & Ors. vs. Gayatri Jhansi Roadways Limited
& Ors [2019] 9 SCR 1001 – referred to.
R. v. Bow Street Metropolitan Stipendiary Magistrate, ex p Pinochet
Ugarte (No. 2) [2000] 1 AC 119; Halliburton Company v Chubb Bermuda
Insurance Ltd. 2021 [2] All E.R. 1175 – referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Miscellaneous Application No.
184 of 2023 in Special Leave Petition (Civil) No. 8553 of 2022.
From the Judgment and Order dated 13.05.2022 in SLP (C) No.8553
of 2022 of the Supreme Court of India.
With
C.A. No.4591 of 2023.
Appearances:
R Venkatramani, AG, Darius Khambata, N Venkatraman, Ritin Rai, Sr.
Advs., Manu Seshadri, Anirudh Krishnan, Adith Narayan, Aveak Ganguly,
Abhijit Lal, Ms. Soumya Shering, Anubhav Mishra, Ms. Mithu Jain, Sairam
Arjun Suresh, Chitranshul A. Sinha, Raghavendra Ross Divakar, Jaskaran
Singh Bhatia, Ms. Namrata Langade, M/s. Dua Associates, Raman Yadav,
998 SUPREME COURT REPORTS [2023] 14 S.C.R.

Ms. Neetika Bajaj, Ms. Kopal Mittal, Ms. Astha Garg, Sameer Abhyankar,
Ms. Nishi Sangtani, Ms. Vani Vandana Chhetri, Ms. Sugandh Rathore,
Naman Jain, Amish Tandon, Rahul Kumar, Harsh, Aakash Thakur, Ms.
Anushree Kulkarni, Advs. for the appearing parties.
JUDGMENT / ORDER OF THE SUPREME COURT

JUDGMENT

S. RAVINDRA BHAT, J.
1. Chennai Metro Rail Limited, the applicant (hereinafter referred to
as “Chennai Metro”), a joint venture between the Central Government and
the Government of Tamil Nadu, had, pursuant to a public tender, awarded
the contract to the respondent (hereafter referred to as “Afcons”) have called
for a project the total value of Rs. 1566 crores. The contract was signed on
31.01.2011. Eventually, on 15.04.2021, Afcons sought a reference of several
heads of disputes to arbitration after certain interlocutory proceedings.
Eventually on 29.04.2021, it was agreed that two dispute heads (claim
2(b) to 2(d)) and the Chennai Metro’s counter claim would be referred to
a three-member tribunal under the Arbitration and Conciliation Act, 1996
(hereafter “the Act”). The tribunal was then constituted.
2. The tribunal by Minutes dated 14.05.2021 recorded the agreement
of parties, that the hearing fee for each arbitrator (there were three members
of the Tribunal) was ﬁxed at ₹ 1,00,000/- per session of hearing date. During
the course of the proceedings, one member of the tribunal passed away and
had to be substituted, which was done on 12.08.2021. The parties proceeded
with the conduct of arbitration. In the mean-while, another tribunal had dealt
with two claims of Afcons. The award passed in those proceedings became
the subject matter of challenge (by Afcons) under Section 34 which was
declined by an order of the Madras High Court. The appeal against that
order was thereafter pending.
3. The tribunal in the present case on 13.04.2022 decided that
suspension of its proceedings due to the pendency of the appeal, to await
the outcome of the Division Bench was not in the larger interest of justice
and proceeded with other part of the claim which was pending before it.
The 10th Meeting/hearing was held on 28.06.2022 and its minutes were
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 999
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

issued on 01.07.2022. The tribunal sought to revise the fee payable from ₹
1,00,000/- to ₹ 2,00,000/- for each session of three hours. Chennai Metro
objected to this revision on 08.07.2022 through an aﬃdavit. Expressing
its disagreement with the enhancement, Afcons by its aﬃdavit dated
10.07.2022 submitted that the applicability of Schedule IV of the Act, and
the issue of increase of tribunals’ fee, after initial ﬁxation, was sub-judice
before this court and the arguments were concluded on 11.05.2022. Afcons
therefore requested the tribunal to keep its direction for modiﬁcation of
fee, in abeyance till the decision of this court. In these circumstances, the
proceedings continued and cross-examination of Afcons’ witnesses was
taken up by Chennai Metro on three later dates of hearing. According to
Chennai Metro, the issue of fees was not taken up; yet in the minutes of
these proceedings issued on 24.07.2022, the tribunal reiterated its stand
about entitlement of revised fee. The tribunal also stated that the session
would be considered one complete session for four and a half hours i.e.
between 3.30 p.m. to 8 PM. The parties were directed to pay the revised
fee from the 10th Virtual Meeting onwards i.e. in eﬀect for the past hearings
too. The Tribunal further stated that it was not known when this court
would deliver its judgment and also raised doubts about the applicability
of the said decision on the present tribunal.
4. Afcons, by its e-mail dated 28.07.2022 informed Chennai Metro
that it had paid the revised fee for ﬁve hearings (i.e., for 10th to 14th virtual
hearings). Chennai Metro therefore ﬁled an application before the Madras
High Court on 10.08.2022. In this proceeding under Section 14, the relief
sought was a declaration that the mandate of the tribunal (whose members
were impleaded as second to the fourth respondents, hereafter collectively
referred to as “the tribunal”) was terminated in respect of the disputes
referred to them. It was highlighted in these proceedings, that the payment
of the disputed increased amount by one party, placed Chennai Metro “in
an embarrassing situation and cause the petitioner to be prejudiced and not
be treated in an impartial manner by the Ld. Arbitral Tribunal, resulting in
the Ld. Arbitral Tribunal to become de jure unable to perform its functions
as required.”1

1 As per petition ﬁled by Chennai Metro before HC under section 14 and 15 of the Act.
1000 SUPREME COURT REPORTS [2023] 14 S.C.R.

5. On 15.09.2022, all three members of the tribunal ﬁled aﬃdavits,
in response to the Section 14 petition acknowledging that this court’s
judgment in ONGC v. AFCONS Gunasa JV2 (hereafter “ONGC”) delivered
on 30.08.2022 had decided the issue and thus members of the tribunal
decided to revert back to the originally agreed fee i.e., ₹1,00,000. In
identically worded aﬃdavits, members of the tribunal stated that orders
would not create any prejudice to any party and they were in agreement
that they would continue to discharge their duty in an independent and
impartial manner in deciding the dispute and that parties need not have
any apprehensions. Afcons too resisted the application. Initially, the High
Court granted an interim order, staying the proceedings.3 However, after
hearing counsel for the parties, and considering the materials on the record,
the court dismissed the application, ﬁled by Chennai Metro through the
impugned judgment.
Contentions of Chennai Metro
6. The learned Additional Solicitor General Mr. N. Venkataraman,
(hereafter referred to as “ASG”) and Mr. Ritin Rai argued that the unilateral
increase of fee by the tribunal despite the protests or objections of one of
the disputing parties, is impermissible in law, which renders the tribunal
being exposed to the charge that justiﬁable grounds about their continuing
to be impartial, arises. Reliance was placed on the judgment of this Court
in ONGC (supra). In that judgment the court had emphasized that the entire
philosophy of arbitration is premised on party autonomy; thus parties are at
liberty to ﬁx the fee payable to the Arbitrator. Furthermore, and importantly
the court had stressed that once the terms of engagement are ﬁnalized it is not
open to the tribunal to either vary the fee ﬁxed or the heads under which fee
may be charged. It was urged that this court ruled that any deviation from the
original terms, [which are in the form of a tripartite arrangement, between
the parties and the tribunal], mean that any amendments or modiﬁcations can
only be with the consent of all the parties; it cannot be unilateral. The ASG
relied upon various observations in ONGC (supra) and highlighted that the

2 2022 (10) SCR 660
3 By interim order dated 25.08.2022 in A. No 3566/2022.
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1001
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

High Court by the impugned order fell into error in selectively considering
portions of the judgment. It is submitted that observations made casually
cannot form the basis of this court’s ratio.
7. The Learned ASG relied upon other judgments such as State of
West Bengal vs. Shivanand Pathak4 where it was held that bias has many
forms which includes judicial obstinacy. Likewise, he relied upon N.K.
Bajpai vs. Union of India5, State of Punjab vs. Devenderpal Singh Bhuller6
and Supreme Court Advocates on record Association vs. Union of India7,
to elaborate the various forms or heads of bias. According to the ASG, the
facts of this case satisfy and attract the principle of bias. Despite resistance
by Chennai Metro, the tribunal’s insistence that it would continue with the
proceedings and charge the higher amount which was not agreed by both
parties, led to a reasonable apprehension of bias which goes into the root
of the proceedings.
8. It was submitted that Chennai Metro is justiﬁed in arguing that the
apprehension that the proceedings or the outcome would not be conducted
and ﬁnalized with an impartial mind. It was argued that the impugned
judgment is in error in as much as accepted its face value of the aﬃdavits
and the statements contained in it of the members of the tribunal, [who
stated that no prejudice would be caused, and that they would conduct
the proceedings impartially]. It was highlighted that whether there is a
reasonable apprehension of bias or circumstances exist that the conduct of the
arbitrator has led to justiﬁable doubts as to her or his conduct of proceedings
not being partial are not based on a subjective statement but rather application
of an objective test which is that –‘whether the circumstances are such that
a reasonable man having due regard to the facts, would conclude that bias
exists’.
9. It was submitted that the tribunal also withheld and suppressed the
fact that the members had received payment of the revised fee from Afcons

4 (1998) 5 SCC 513
5 (2012) 4 SCC 653
6 (2011) 14 SCC 770
7 (2016) 5 SCC 808
1002 SUPREME COURT REPORTS [2023] 14 S.C.R.

on 25.07.2022. This is one more aspect which ought to have been duly noted
by the High Court. This conduct and the persistence of the members of the
tribunal to insist that the higher fee should be paid - and for the past period
too, would lead any reasonable man to conclude that there was bias or real
likelihood of bias and that the tribunal would not conduct its proceedings
in an impartial manner.
10. It was further submitted that the High Court fell into error in holding
that the issue of non-payment of fees was a mere temporary phenomenon.
The ASG further urged that the reversal of its earlier position by the tribunal
did not remove Chennai Metro’s apprehensions that the proceedings would
not be conducted in an impartial manner, or the outcome may not be based
on objective consideration of the merits of the dispute only. It was submitted
that permitting the tribunal to continue the proceedings despite these facts
would set a wrong precedent.
11. Learned counsel submitted that the decisions relied upon by
respondent Afcons which are HRD Corporations v. Gas Authority of India
Ltd.8 (hereafter “HRD”) and Bharat Broadband Network Limited v. United
Telecoms Ltd9 (hereafter “Bharat Broad Band”) to the extent that the
application under Section 14 is not maintainable unless the party applies to
the Tribunal in the ﬁrst instance, are inapplicable. It is submitted that this
was a clear case where both de facto and de jure, the conduct of the tribunal’s
members had terminated their mandate.
Contentions of Afcons
12. Mr. Darius J. Kambhatta, urged the court not to interfere with the
impugned order. It was submitted that the application under Section 14 was
not maintainable; counsel joined issue with the ASG on the applicability
of Section 14.
13. It was highlighted that Section 12(5) read with Seventh Schedule
[to the Act] provides a comprehensive framework for addressing speciﬁc
instances of ineligibility and if an arbitrator, is challenged only on those
grounds, the parties can directly approach the court under Section 14. The

8 2017 (11) SCR 857
9 (2019) 6 SCR 97
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1003
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

contents of Fifth Schedule [read with Explanation to Section 12 (1)] on
the other hand provide a list of relationships which can lead to justiﬁable
grounds that need disclosure at the time of appointment and further, by
Section 12 (2) during the course of proceedings, whenever they occur. It is
contended that this list includes the “orange” and “red” lists from the IBA10
guidelines. There is no doubt about an overlap of about 19 items which are
of the most serious types. If the circumstances fall within those enumerated
19 items [in the seventh schedule] the party aggrieved can directly approach
the court under Section 14; whereas this is not so in other cases. Learned
counsel submitted that all other circumstances of justiﬁable reason to
doubt the tribunal’s impartiality fall within the ambit of Section 12(3). The
remedy in such cases is to approach the tribunal under Section 13(2) and
in the eventuality of no success, challenge the award if it is adverse, under
Section 34 of the Act.
14. Learned Senior Counsel relied upon the observations of this court
in HRD (supra), which he said categorically held that Section 12(5) read
with the Seventh Schedule, render the arbitrator ineligible and that in such
event it is de jure unable to perform its functions under Section 14(1)(a). On
the other hand, if the grounds are those enumerated in the Fifth Schedule
with respect to independence or impartiality, the same has to be decided as a
matter of fact by the Tribunal. If unsuccessful, that becomes the ground for
challenge by virtue of Section 13(5), under Section 34. Learned Counsel also
relied upon the observations in Bharat Broadband (supra), which recognize
that Section 12(5) is a new provision.
15. Refuting the submissions of the ASG that there is a distinction
between two terms “bias and impartiality” it was submitted that bias
is synonymous with partiality and therefore opposed to the concept of
impartiality. If an individual is biased, automatically he cannot be deemed
impartial. Both bias and partiality are interchangeable, and the underlying
premise for both is the existence of a prejudiced outlook which is opposed
to the fundamental tenet of impartiality. Learned counsel points out that
the expression used by the Chennai Metro in its Section 14 petition is only
“impartial”.

10 International Bar Association
1004 SUPREME COURT REPORTS [2023] 14 S.C.R.

16. It is pointed out that in two other references, the Tribunal members,
had directed parties to pay revised fees on 09.11.2020 and 15.09.2021. Both
Afcons and Chennai Metro paid the revised fee. It was submitted that the
tribunal’s order dated 09.11.2020 in the other arbitration (UAA-01 reference
I-A) and its order dated 15.09.2021 and UAA-05 (reference I-A) and its
order in the present case demonstrate these facts. Learned counsel stated
that on this premise, having regard to the past conduct of Chennai Metro in
paying the revised fee, Afcons informed Chennai Metro by an e-mail dated
28.07.2022 that they had paid the revised fee in the present case. It was lastly
argued that the threshold for establishing bias, is extremely high; reliance
was placed on International Airport Authority v. K.D. Bali & Another11,
where it was underlined that there must be a real likelihood of bias and not
mere suspicion of bias.
Legal provisions
17. The relevant provisions of the Act, after its amendments in 2015
and 2019, read as follows:
“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.
Explanation1.—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.

11 1988 (3) SWWCR 370
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1005
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

Explanation 2.—The disclosure shall be made by such person in the
form speciﬁed in the Sixth Schedule.]
(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.
13.Challenge procedure.—(1) 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 (1), 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 sub-section(3) of
section 12, send a written statement of the reasons for the challenge
to the arbitral tribunal.
(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 under the procedure under sub- section (2) is not successful, the
arbitral tribunal shall continue the arbitral proceedings and make an
arbitral award.
1006 SUPREME COURT REPORTS [2023] 14 S.C.R.

(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.
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
(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 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)
of section 12.
15. Termination of mandate and substitution of arbitrator.—(1) In
addition to the circumstances referred to in section 13 or section 14,the
mandate of an arbitrator shall terminate—
(a) where he withdraws from oﬃce for any reason; or
(b) by or pursuant to agreement of the parties.
(2) Where the mandate of an arbitrator terminates, a substitute
arbitrator shall be appointed according to the rules that were
applicable to the appointment of the arbitrator being replaced.
[..]”
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1007
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

Analysis and ﬁndings
18. Bias (an expression that the Act has deliberately avoided; instead
the term used is justiﬁable doubts about the… impartiality of an arbitrator)
is an expression with many facets: subject matter bias; pecuniary bias and
personal bias.12 It is also described as a “predisposition to decide for or
against one party, without proper regard to the true merits of the dispute is
bias. There must be reasonable apprehension of that predisposition.” 13 It
has also been held, in G.N. Nayak v Goa University14 that:
“Bias may be generally deﬁned as partially or preference. It is true that
any person or authority required to act in a judicial or quasi-judicial
matter must act impartially.”
19. In S. Parthasarathi v. State of Andhra Pradesh (hereafter,
“Parthasarathi”)15 this court observed that:
“The tests of ‘real likelihood’ and reasonable suspicion’ are really
inconsistent with each other. We think that the reviewing authority
must make a determination on the basis of the whole evidence before
it, whether a reasonable man would in the circumstances infer that
there is real likelihood of bias. The Court must look at the impression
which other people have.”
Later, in Kumaon Vikas Mandal v Girija Shankar Pant (hereafter,
“Kumaon Vikas Mandal”)16 the court while agreeing with the position
taken in Parthasarathi (supra) relied on below observations of this court
in Parthasarathi (supra):
“If right-minded persons would think that there is real likelihood
of bias on the part of an inquiring oﬃcer, he must not conduct the
inquiry; nevertheless, there must be a real likelihood of bias. Surmise
or conjecture would not be enough. There must exist circumstances

12 G. Sarana v University of Lucknow & Ors., 1977 (1) SCR 64
13 Secretary to Government, Transport Deptt., Madras v. Munuswamy Mudaliar &
Anr.1988 (Supp) (2) SCR 673
14 2002 (1) SCR 636
15 1974 (1) SCR 697
16 2000 Supp (4) SCC 248
1008 SUPREME COURT REPORTS [2023] 14 S.C.R.

from which reasonable men would think it probable or likely that the
inquiring oﬃcer will be prejudiced.”
The court [in Kumaon Vikas Mandal (supra)], at the same time,
remarked on the futility to ‘deﬁne or list the factors which may or may not
give rise to a real danger of bias.”
The other important judgment, which has enriched the discourse on
what could be a reasonable apprehension of bias, is Ranjit Thakur v Union
of India17:
“The test of real likelihood of bias is whether a reasonable person, in
possession of relevant information, would have thought that bias was
likely and is whether respondent 4 was likely to be disposed to decide
the matter only in a particular way’.
[..]
As to the tests of the likelihood of bias what is relevant is the
reasonableness of the apprehension in that regard in the mind of the
party. The proper approach for the Indian Judge is not to look at his
own mind and ask himself, however, honestly, “Am I biased?”; but to
look at the mind of the party before him.”
(emphasis supplied)
20. One of the most signiﬁcant rulings on the issue of bias, was
rendered in R. v. Bow Street Metropolitan Stipendiary Magistrate, ex p
Pinochet Ugarte (No. 2)18. The court reviewed the jurisprudence, and
several previous precedents, and in Kumaon Vikas Mandal (supra) observed
that:
“The test, therefore, is as to whether a mere apprehension of bias
or there being a real danger of bias and it is on this score that the
surrounding circumstances must and ought to be collated and necessary
conclusion drawn therefrom--in the event however the conclusion is
otherwise inescapable that there is existing a real danger of bias…”

17 1988 (1) SCR 512
18 [2000] 1 AC 119
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1009
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

21. Returning to the present case, Section 12 (1) of the Act applies
at the stage of appointment – which mandates disclosure requirements
applicable to arbitrators; (a) sets out the kinds of inﬂuence which may lead
to ‘justiﬁable doubts’ about ‘independence and impartibility’; Section 12 (1)
(b) sets out the disclosure requirement with respect to the arbitrator’s ability
to “devote suﬃcient time”. Explanation (1) refers to the grounds of possible
conﬂicts, which need disclosure: they are enumerated under separate heads
under Section 34 of the Act, and grouped in seven broad categories in the
Fifth Schedule to the Act. The second explanation to Section 12(1) requires
disclosure in the form set out in the Sixth Schedule.
22. Section 12(2) requires disclosure of any event or circumstance
which is mandatorily to be shared with the parties – if such circumstances
arise after the appointment. Section 12(3) lays out the grounds of challenge
to an arbitrator if “justiﬁable doubts” exist in relation to his “independence
or impartiality”. Section 12(4) restricts challenge by parties – after
appointment “only for reasons which he becomes aware after appointment
is made”.
23. Section 12(5) was inserted w.e.f. 23.10.2016; it begins with a
non-obstante clause overriding any “prior agreement to the contrary” and
stipulates that any person with any kind of relationship set out in the Seventh
Schedule (which outlines 19 speciﬁc heads and types of relationships -
professional, familiar or associational) would be ineligible for appointment
as arbitrator. The proviso to Section 12(5) enables the parties to waive the
ineligibility conditions under Section 12(5) (read with Seventh Schedule)
by express agreement in writing.
24. Section 13 (1) deals with the challenge procedure and enables
parties to agree on a procedure to challenge the arbitrator. By Section 13(2),
if there is no agreement, the party who intends to challenge the arbitrator
has to within 15 days after becoming aware of the tribunal’s constitution or
within ﬁfteen days after becoming aware of any circumstances referred to
in Section 12(3) apply in writing to the reasons for challenge to a tribunal.
Section 12(3), as noticed earlier, states that the grounds of challenge to
existence of circumstances, giving rise to justiﬁable doubts about tribunal’s
independence or impartiality. Section 13(3) states that if the arbitrator does
1010 SUPREME COURT REPORTS [2023] 14 S.C.R.

not withdraw or the other party does not in the absence of the other party
agreeing according to the challenge; the tribunal has to decide upon it. By
Section 13(4) if the challenge is unsuccessful the tribunal would continue
with the proceedings and ﬁnalize its award. Section 13(5) states that any
party can challenge the arbitrator’s decision, after the award is made under
Section 34. Section 13(6) keeps open the issue of fee to be payable to the
arbitrator in the event, the award is set aside on the ground under Section
13(5).
25. Section 14 deals with the contingency of failure or impossibility of
the arbitrator or tribunal to act and stipulates that the mandate of an arbitrator
shall terminate and he shall be substituted by another “if he becomes de
jure or de facto unable to perform its functions or for other reasons fails to
act without undue delay or withdraws from his oﬃce or parties agrees to
the termination of his mandate”. By Section 14(2) if a controversy remains,
concerning the grounds referred to in Section 14 (1), the Court may be
approached by the parties to decide upon the issue of termination on mandate.
26. Having regard to the above statutory position it would be
necessary to consider the judgments cited. The ﬁrst in this series would be
M/s. Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd., 19
where taking note of the amendment made to the Act in 2015, the Court
underlined that it was with the objective to induce neutrality of arbitrators
especially their independence and impartiality that the amendment act of
2015 was introduced. The amended provision was enacted to identify the
circumstances that gave rise to justiﬁable doubts about the independence
or impartiality of the arbitrator and in the event, any of those circumstances
exist, the remedy provided is under Section 12. The court particularly
underlined Section 12(5) which nulliﬁed prior agreements to the contrary.
In the facts of that case, it was held that if an advisor had any past or present
business relationship with a party, he was ineligible to act as arbitrator.
27. The next case HRD (supra),needs to be closely analyzed. The court
ﬁrst examined with some detail, the background of the 2015 amendment,

19 2017 (1) SCR 798
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1011
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

the circumstances leading to it which is the Law Commission Report and
eventually, the amendment. The Court then signiﬁcantly ruled as follows:
“15. The enumeration of grounds given in the Fifth and Seventh
Schedules have been taken from the IBA Guidelines, particularly from
the Red and Orange Lists thereof. The aforesaid guidelines consist
of three lists. The Red List, consisting of non-waivable and waivable
guidelines, covers situations which are “more serious” and “serious”,
the “more serious” objections being non-waivable. The Orange List,
on the other hand, is a list of situations that may give rise to doubts as
to the arbitrator’s impartiality or independence, as a consequence of
which the arbitrator has a duty to disclose such situations. The Green
List is a list of situations where no actual conﬂict of interest exists from
an objective point of view, as a result of which the arbitrator has no
duty of disclosure. These guidelines were ﬁrst introduced in the year
2004 and have thereafter been amended, after seeing the experience of
arbitration worldwide. In Part 1 thereof, general standards regarding
impartiality, independence and disclosure are set out.
******************** ******************
17. It will be noticed that Items 1 to 19 of the Fifth Schedule are
identical with the aforesaid 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 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 19 also appear in the
Fifth Schedule.
******************** ******************
20. However, to accede to Shri Divan’s submission that because the
grounds for challenge have been narrowed as aforesaid, we must
construe the items in the Fifth and Seventh Schedules in the most
expansive manner, so that the remotest likelihood of bias gets removed,
1012 SUPREME COURT REPORTS [2023] 14 S.C.R.

is not an acceptable way of interpreting the Schedules. As has been
pointed out by us hereinabove, 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 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 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, neither tending
to enlarge or restrict them unduly. It is with these prefatory remarks
that we proceed to deal with the arguments of both sides in construing
the language of the Seventh Schedule.”
28. At this stage it would be crucial to notice that the court made
a differentiation. It stated, firstly, that a disclosure in writing about
circumstances likely to give justiﬁable doubts is to be made, at the stage
of appointment, and then stated that the disclosure can be challenged
under Sections 12(1) to 12(4) read with Section 13. The court however
underlined that in the next category where the person became ineligible
to be appointed as arbitrator, there was no need for a challenge to be laid
before the arbitrator. In such circumstances outlined in Section 12(5), the
party aggrieved could directly approach the court under Section 14(1)(a).
It was further underlined that in all cases under Section 12(5), there is no
challenge procedure to be availed of and that if the arbitrator continues at
such, the ground of being unable to perform his function since he falls in
any of the categories enumerated in the Seventh Schedule, the party concern
may apply to the court.
29. It is, therefore, evident that the rules for disqualiﬁcation or
ineligibility are fairly clear. The ineligibility which attaches to the
appointment is the ﬁrst category: it is contained in Section 12(1) read with
the explanation and the Fifth Schedule to the Act. As recounted earlier
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1013
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

this schedule has 34 items. In the event any of these circumstances exist,
the appointment of the arbitrator is barred. The second category is where
the arbitrator to start with is eligible but after appointment incurs any,
or becomes subject, to any of the conditions, as enumerated in the Fifth
Schedule. In that event, it is open to the party to claim that there could be
justiﬁable doubts about his independence or impartiality. The remedy even
then, would be that the party has to seek recourse and apply to the arbitrator
in the ﬁrst stance by virtue of Section 13(2). The wording of Section 13(2)
clariﬁes that a party who intends to challenge the arbitrator, after becoming
aware of certain circumstances which lead to justiﬁable doubts, that party
has to within 15 days [of becoming aware] approach the tribunal and seek
a ruling. In the event the party is not successful under Section 13(4), the
tribunal is duty bound to continue with the proceedings. When the award
is made, it can be subjected to challenge under Section 34, by operation
of Section 13(5). Clearly, then the substantive grounds and the procedure
applicable in relation to situations where justiﬁable reasons exist or arise,
for questioning the eligibility of a tribunal to decide the reference are
enumerated in Sections 12 and 13.
30. As clariﬁed in HRD (supra), the grounds of ineligibility which
would apply at the appointment stage, would also continue during the
proceedings by virtue of Section 12(2). In other words, if during the
continuance of the proceedings, the arbitrator becomes subject to any
eligibility condition outlying in the Fifth Schedule, the application for his
removal on the grounds of justiﬁable doubts about his impartiality and
independence, can be made. According to the procedure outlined in Section
13(2) read with Section 12, such a procedure has to ﬁrst be followed
which means that the party should ﬁrst appear before the arbitrator and
object to his continuance. In case of ineligibility which goes the root
of the appointment - and this is the consequence of the introduction of
Section 12(5) [which is in emphatic terms and overrides other previous
agreements], the arbitrator’s relationship with the parties or counsel or the
subject matter of the dispute or the existence of any of the categories of
the Seventh Schedule (which are 19 speciﬁc enumerated grounds) render
that tribunal ineligible to even continue. The only exception is if the party
waives that ineligibility expressly in writing in terms of the proviso to
1014 SUPREME COURT REPORTS [2023] 14 S.C.R.

Section 12(5). Per HRD (supra),in that event, the Arbitral Tribunal becomes
de jure, unable to perform its functions.
31. The analysis in HRD (supra), and the subsequent decision in
Bharat Broad Band (supra), therefore are clear enunciations of law in that
any legal disability which attaches on the grounds enumerated in the Fifth
Schedule [or any other circumstance, given the terminology of Section 12
(3) which is not restricted to ﬁfth schedule ineligibility], the aggrieved party
has to ﬁrst apply before the tribunal as a matter of law. In other words, the
tribunal should be given the opportunity to deal with the party’s reservations
and decide whether or not to continue with the proceedings. This view is in
accord with the long line of decisions of this court rendered in the context
of reasonable apprehension of bias by courts and quasi-judicial authorities
starting from Manak Lal v Dr. Prem Chand20 to raise the issue, at the earliest
opportunity before same forum.
32. The decisions in HRD (supra) and Bharat Broadband (supra)
are unequivocal and to the eﬀect that the issue of bias should be raised
before the same tribunal at the earliest opportunity. The advertence of
the time limit of 15 days is nothing but a statutory incorporation of that
idea. However, when the grounds enumerated in the Seventh Schedule
occur or are brought to the notice of one party unless such party expressly
waives its objections, it is ipso facto suﬃcient for that party, to say that
the Tribunal’s mandate is automatically terminated. The party aggrieved
then can go ahead and challenge the tribunal’s continuation with the
proceedings under Section 14.
33. In the present case, this court is conscious of the fact that ONGC
(supra) is the authority for the proposition that the issue of ﬁxation of fee,
is contractual, and wherever there is no prior arrangement or court order,
the tribunal has to ﬁx it at the threshold. The arrangement is by way of a
tripartite agreement, which means that regardless of what mode of payment
(ad-valorem or sitting fee, or diﬀerent rates, depending upon the number
of hearings, or the issue of fee increase being contemplated allowing the

20 1957 [1] SCR 575
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1015
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

tribunal to revise its fee at a later stage), any revision or revisiting of the fee
condition, should be based on consultation, and agreement of both contesting
parties, and the tribunal. This is clear from the directives enunciated by
ONGC (supra), through the majority opinion, which has the concurrence
of the third judge as well:
“1. [..]
2. In cases where the arbitrator(s) are appointed by parties in the
manner set out in the arbitration agreement, the fees payable to the
arbitrators would be in accordance with the arbitration agreement.
However, if the arbitral tribunal considers that the fee stipulated
in the arbitration agreement is unacceptable, the fee proposed by
the arbitral tribunal must be indicated with clarity in the course of
the preliminary hearings in accordance with these directives. In the
preliminary hearings, if all the parties and the arbitral tribunal agree
to a revised fee, then that fee would be payable to the arbitrator(s).
However, if any of the parties raises an objection to the fee proposed
by the arbitrator(s) and no consensus can be arrived at between such
a party and the tribunal or a member of the tribunal, then the tribunal
or the member of the tribunal should decline the assignment.
3. Once the Terms of Reference have been ﬁnalised and issued, it would
not be open for the arbitral tribunal to vary either the fee ﬁxed or the
heads under which the fee may be charged.
4. The parties and the arbitral tribunal may make a carve out in the
Terms of Reference during the preliminary hearings that the fee ﬁxed
therein may be revised upon completion of a speciﬁc number of sittings.
The quantum of revision and the stage at which such revision would
take place must be clearly speciﬁed. The parties and the arbitral
tribunal may hold another meeting at the stage speciﬁed for revision
to ascertain the additional number of sittings that may be required
for the ﬁnal adjudication of the dispute which number may then be
incorporated in the Terms of Reference as an additional term.”
34. The ruling in ONGC (supra) is undoubtedly clear that fee
increase can be resorted to only with the agreement of parties; in the
1016 SUPREME COURT REPORTS [2023] 14 S.C.R.

event of disagreement by one party, the tribunal has to continue with the
previous arrangement, or decline to act as arbitrator. Yet, whether the
breach of that rule, as in the present case, by insisting that the increase
of fee should prevail does not in this court’s opinion, amount to a per se
ineligibility, reaching to the level of voiding the tribunal’s appointment,
and terminating its mandate. This can be illustrated with the facts in HRD
(supra), where the challenge was on the ground of existence of factors
mentioned in the ﬁfth schedule, i.e. rendering of opinion by a former Chief
Justice, to one of the parties to the dispute, in relation to an unconnected
case. The court rejected the plea of ineligibility. Similarly, the objection
to the continuance of another arbitrator, a former judge, because he had
rendered an award in a previous reference between the same party, and
the assumption that he would have some kind of subject matter bias, was
overruled. The other case, where this court noted that a fee increase was
sought and was warranted, because of revision of fee in a schedule referred
to for the purpose of ascertaining fee, became the focus of dispute. The
tribunal noted the need to increase the fee; yet after justifying it, declined
to actually direct its increase, because of a previous High Court judgment
to the contrary. This court held that such conduct did not render the tribunal
ineligible from continuing and deciding the reference. It would be useful
to advert to the decision of this court in National Highways Authority
of India & Ors. vs. Gayatri Jhansi Roadways Limited & Ors.21 where in
an analogous fact situation, where the tribunal felt that fee increase was
justiﬁed, its mandate was challenged. The court overruled the plea, and
held that:
“12. We have heard learned Counsel for the both the sides. In our view,
Shri Narasimha, learned senior Counsel, is right in stating that in the
facts of this case, the fee Schedule was, in fact, ﬁxed by the agreement
between the parties. This fee schedule, being based on an earlier
circular of 2004, was now liable to be amended from time to time in
view of the long passage of time that has ensued between the date of
the agreement and the date of the disputes that have arisen under the

21 2019 [9] SCR 1001
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1017
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

agreement. We, therefore, hold that the fee Schedule that is contained
in the Circular dated 01.06.2017, substituting the earlier fee schedule,
will now operate and the arbitrators will be entitled to charge their
fees in accordance with this Schedule and not in accordance with the
Fourth Schedule to the Arbitration Act.
13. We may, however, indicate that the application that was ﬁled
before the High Court to remove the arbitrators stating that their
mandate must terminate, is wholly disingenuous and would not lie for
the simple reason that an arbitrator does not become de jure unable
to perform his functions if, by an order passed by such arbitrator(s),
all that they have done is to state that, in point of fact, the agreement
does govern the arbitral fees to be charged, but that they were bound
to follow the Delhi High Court in Gayatri Jhansi Roadways Limited
case which clearly mandated that the Fourth Schedule and not the
agreement would govern.
14. The arbitrators merely followed the law laid down by the Delhi
High Court and cannot, on that count, be said to have done anything
wrong so that their mandate may be terminated as if they have now
become de jure unable to perform their functions. The learned Single
Judge, in allowing the Section 14 application, therefore, was in error
and we set aside the judgment of the learned Single Judge on this
count.”
35. In a recent decision of the UK Supreme Court, in Halliburton
Company v Chubb Bermuda Insurance Ltd22., (hereafter, “Halliburton”) it
was held, that arbitrators were under a duty of disclosure under the English
law. The principle of party autonomy, the court concluded that, by an
agreement, could be waived by the parties. This duty itself is implied in a
mandatory provision of the UK Arbitration Act (of 1996).
36. Halliburton (supra) was concerned an ad hoc arbitration governed
by the laws of New York but seated in London. The removal of the presiding
arbitrator became the subject of an application on various grounds, including

22 2021 [2] All E.R. 1175
1018 SUPREME COURT REPORTS [2023] 14 S.C.R.

his failure to disclose certain appointments had given rise to justiﬁable
doubts regarding his impartiality. The applicant alleged this duty meant
that he should have disclosed various previous arbitration engagements by
the insurance company, which nominated him, especially in some cases,
where the claims were somewhat similar to those that the applicant had been
exposed to, but the insurer had denied its liability for. The Supreme Court
underlined that arbitrators perform judicial functions and are required to
act as judges would, without fear or favour, aﬀection or ill-will. One way
of satisfying the parties as to an arbitrator’s impartiality is disclosure. The
role of disclosure was summarised by the Lord Hodge who delivered the
opinion of the Court:
“70. An arbitrator, like a judge, must always be alive to the possibility
of apparent bias and of actual but unconscious bias. … One way in
which an arbitrator can avoid the appearance of bias is by disclosing
matters which could arguably be said to give rise to a real possibility
of bias. Such disclosure allows the parties to consider the disclosed
circumstances, obtain necessary advice, and decide whether there is
a problem with the involvement of the arbitrator in the reference and,
if so, whether to object or otherwise to act to mitigate or remove the
problem…”
The UK Act does not place any express obligation on potential or
serving arbitrators to disclose to parties regarding matters that concern their
independence or impartiality. This duty was not previously recognized by the
courts in the UK. The Supreme Court in Halliburton (supra) had to uniquely
determine where such a duty existed in English law. The Court found that the
duty of disclosure for arbitrators was implicitly based on section 33 of the
1996 Act (Arbitration Act, 1996), which provides that arbitral tribunals shall
act fairly and impartially as between the parties. As the Court said that the
legal obligation to disclose matters that could give rise to justiﬁable doubts
as to an arbitrator’s impartiality was “encompassed within the statutory
obligation of fairness” it was “also an essential corollary of the statutory
obligation of impartiality.”
37. Discussing the duty, the UK Supreme Court considered if an
arbitrator with a ﬁnancial relationship with a party to the dispute in which
CHENNAI METRO RAIL LTD. ADMIN. BUILDING v. 1019
M/S TRANSTONNELSTROY AFCONS (JV) [S. RAVINDRA BHAT, J.]

he or she was appointed was under a duty to disclose it; and held that it
would “be incumbent on the arbitrator to disclose the relationship in order
to comply with his statutory duty of fairness under section 33 of the 1996
Act.” The court held that there was a legal duty of disclosure in English law
which was “encompassed within the statutory duties of an arbitrator under
section 33,” while adding that this was “a component of the arbitrator’s
statutory duty to act fairly and impartially,” and that it did not override the
separate duty of privacy and conﬁdentiality under the English law.
38. Our enactment is in a sense, an improvement. Parliament’s
conscious eﬀort in amending the Act, because of the inclusion of the ﬁfth
schedule, as a disclosure requirement, as an eligibility condition [Section
12 (1)] and a continuing eligibility condition, for functioning [Section 12
(2)] and later, through Section 12 (5), the absolute ineligibility conditions
that render the appointment, and participation illegal, going to the root of
the jurisdiction, divesting the authority of the tribunal, thus terminating the
mandate of the arbitrator, as a consequence of the existence of any condition
enumerated in the seventh schedule, are to clear the air of any ambiguities.
The only manner of escaping the wrath, so to say of Section 12 (5) is the
waiver- in writing by the party likely to be aggrieved.
39. The attempt by Chennai Metro to say that the concept of de jure
ineligibility because of existence of justiﬁable doubts about impartiality or
independence of the tribunal on unenumerated grounds [or other than those
outlined as statutory ineligibility conditions in terms of Sections 12 (5)],
therefore cannot be sustained. We can hardly conceive of grounds other
than those mentioned in the said schedule, occasioning an application in
terms of Section 12 (3). In case, this court were in fact make an exception
to uphold Chennai Metro’s plea, the consequences could well be an
explosion in the court docket and other unforeseen results. Skipping the
statutory route carefully devised by Parliament can cast yet more spells
of uncertainty upon the arbitration process. In other words, the de jure
condition is not the key which unlocks the doors that bar challenges, mid-
stream, and should “not to unlock the gates which shuts the court out”23

23 Union of India v Hindustan Development Corporation 1993 (3) SCR 108- so said in a
diﬀerent context, about the applicability of the doctrine of legitimate expectation.
1020 SUPREME COURT REPORTS [2023] 14 S.C.R.

from what could potentially become causes of arbitrator challenge, during
the course of arbitration proceedings, other than what the Act speciﬁcally
provides for.
40. For the foregoing reasons, this court holds that Chennai Metro’s
application cannot succeed. The Arbitrators are directed to resume the
proceedings and decide the case in accordance with law. The impugned
order is upheld. The application is accordingly dismissed and the appeal is
disposed of in above terms.

Headnotes prepared by: Appeal disposed of and application dismissed.
Nidhi Jain

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