Exploring Conflicting Views On The Impact Of Unilateral Fee Increases By Arbitrators On Bias: Supreme Court Directs Registry To Constitute Special Bench For Arbitration Matters

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The issue of bias of an arbitrator is not a new one, but recent judgments by the Supreme Court of India have shed new light on this topic. In particular, two conflicting views have emerged on the question of whether an arbitrator’s unilateral increase in fees can be considered evidence of bias. This article will examine these views and explore their implications for arbitration in India.

The first view, represented by Mr. N. Venkataraman, relies on the judgment in Union of India vs. Singh Builders Syndicate (2009) 4 SCC 523 and Oil and Natural Gas Corporation Ltd. vs. Afcons Gunanusa JV (2022 SCC OnLine SC 1122). According to this view, if an arbitrator unilaterally increases their fees and one party opposes the increase while the other party accepts it, there is a likelihood of bias in the arbitrator’s mind against the party who opposed the increase. This view suggests that such bias can be used to challenge the award under Section 13 of the Arbitration and Conciliation Act, 1996.

The second view, represented by Shri C.A. Sundaram, relies on the judgment in HRD Corporation (Marcus Oil and Chemical Division) vs. Gail (India limited (Formerly Gas Authority of India Limited) (2018) 12 SCC 471. This view holds that a claim of bias must be based on Section 13 of the Act and can only be raised after the award is passed by the tribunal. Shri Sundaram also argues that bias does not fall under Section 14 of the Act, which means that it would not automatically lead to termination of the arbitrator’s mandate.

These conflicting views are important because they have significant implications for the conduct of arbitrations in India. If the first view is accepted, then any unilateral increase in fees by an arbitrator could be used as evidence of bias and potentially challenge the award. On the other hand, if the second view is accepted, then parties may not be able to challenge the arbitrator’s mandate based on bias until after the award is passed.

It is worth noting that the judgments cited by both parties were rendered by different benches of the Supreme Court. The Singh Builders Syndicate case was decided by a bench of two judges, while the HRD Corporation case was decided by two judges as well. However, the Afcons Gunanusa JV case was decided by a bench of three judges. This indicates that the issue of bias is not only complex but also contentious, as evidenced by the divergent views of different benches.

Given the importance of this issue and its potential impact on arbitration in India, it is encouraging to see that the Supreme Court has recognized the need for a special bench to handle arbitration matters. This move should ensure that cases are heard expeditiously and with the expertise needed to fully understand the nuances of these complex cases.

In conclusion, the issue of an arbitrator’s bias is a crucial one that requires careful consideration by the courts. While conflicting views exist on the issue, it is encouraging to see that steps are being taken to ensure that these matters are handled expeditiously and with the expertise needed to reach fair and just outcomes. As the law in this area continues to evolve, it will be important for all parties involved in arbitrations to stay abreast of the latest developments and to seek out expert legal advice to ensure that their interests are protected.