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HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited

Civil Appeal · 2017 INSC 838Decided 31 Aug 2017
Civil Appeal No. 11126 of 2017
Justice Rohinton Fali Nariman · Justice Sanjay Kishan Kaul

Background

GAIL (India) had supplied wax to HRD Corporation under a 20-year exclusive agreement since 1999, with disputes repeatedly going to arbitration: this was the fourth such arbitration, covering 2016-2019. For this round, the respondent appointed Justice T.S. Doabia and, along with the appellant's arbitrator, they appointed Justice K.K. Lahoti as presiding arbitrator. The appellant challenged both appointments as ineligible under the new Fifth and Seventh Schedules to the Arbitration Act (introduced by the 2016 Amendment), arguing conflicts of interest from the arbitrators' repeated appointments in disputes between the same parties. A single judge of the Delhi High Court rejected the challenge, and the appellant appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that neither Justice Doabia's nor Justice Lahoti's appointment was barred by the Fifth or Seventh Schedules. It reasoned that the schedules, drawn from the IBA Guidelines on Conflicts of Interest, must be read in harmony with those guidelines, and that mere repeat appointment of the same arbitrator across different arbitration rounds between the same two parties, without more, does not by itself create "justifiable doubts" about independence or impartiality. The Court also rejected arguments about delayed disclosure by Justice Doabia and about maritime/commodity-arbitration customs, finding neither affected the outcome. It upheld the single judge's judgment and dismissed the appeals.

Lesson Learnt

Being repeatedly appointed as an arbitrator in a long-running series of disputes between the same two parties does not, by itself, disqualify that arbitrator: a party must point to a specific, concrete conflict-of-interest ground recognized under the law, not just the fact of repeat appointment.

Official source (sci.gov.in)View Judgment (PDF)

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