By Hon’ble Mr. Justice (Retd.) Tapen Sen, Fr. Judge, High Court (Court of Appeals) and Arbitrator. HMJ Tapen Sen has served as a Judge at Calcutta High Court, Punjab & Haryana High Court and Jharkhand High Court.
Arbitration is a mechanism of choice for most contracting parties today and it is also one of the most prompt and efficacious remedies for commercial dispute resolution. The mechanism has a remarkable feature in as much as, it inter alia, offers the liberty of appointing an arbitrator of their choice to settle their dispute. In many cases, however, the parties enter into a contract giving up this flexibility in favour of a sole arbitrator chosen from a panel of persons who may not have had experience either at litigation or judging disputes in Court and are often subject or domain experts. While this is in perfect harmony with the objective of creating a prompt mechanism for initiating proceedings, it does have its own pitfalls. This is because arbitrators, like judges, are bound by the observance of fundamental tenets of judicial propriety, failing which they risk having their awards set aside for reasons expounded under Section 34(2)(b)(iii).
Arbitral awards carry the same force as a decree of a Court, and it is imperative that it commands the same standard of respect and admiration in the eyes of judicial mechanisms without which they are reduced to mere sheets of paper. It is thus essential, that while making the award, an arbitrator, like a judge, must ensure that is it not just legally sound but is also in consonance with the expected standards of judicial discipline failing which, they risk violating the rule of law. They must endeavour to conform to the Lord Hewart’s quote “justice must not only be done but must also be seen to be done” in the famous case of Rex v. Sussex Justices. In other words, arbitrators should tread with care in every facet of the arbitral process to ensure that their award adheres to these foundational rules and does not leave room for even the slightest degree of suspicion in the eyes of parties.
The Supreme Court of India has already laid down that the rule of law is part of the basic structure of the Constitution of India, therefore no derogation from the principle is possible, irrespective of whether or not the same is featured in the Indian arbitration regime. Judges and lawyers being familiar with the standards pertaining to arbitrariness and bias as well as with sound legal principles, such as “Nemo Debet Esse Judex In Propria Sua Causa”, and “Audi Alteram Partem” are best suited to ensure fairness in proceedings and equity and are also adept in giving effect to the rule of law while conducting proceedings as arbitrators. Non-observance of the principles of Audi Alteram Partem and by ignoring the principles of “Nemo Debet…” has been held to be a ground for setting aside the arbitral award. Therefore, diligent selection of an arbitrator by parties greatly reduces the scope of judicial interference under Section 34 as well as enhances their chances of success in enforcement of their awards. Similarly, while dealing with written instruments, only legal experts can appreciate the principles such as “Benignae Faciendae Sunt Interpretationes Propter Simplicitatem Lalcorum Ut Res Magis Valeat Quam Pereat” which means that, a liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention of the parties.
This golden rule of the observance of judicial propriety is not only confined to the stage of making the award, but to the entire arbitral process, including stages that confer upon arbitrators their use of discretionary powers such as, while deciding their jurisdiction, granting interim measures or at the time of admitting and/or taking of evidence, etc. Who else, but a person trained in the tenets of law would have the courage to make himself aware of his own biases? Judge Frank in Re JP Linahan, 138 F.2d 650 (2d Cir. 1943)US Court of Appeals for the Second Circuit – 138 F.2d 650 (2d Cir. 1943) November 8, 1943 had pointed out that the conscientious judge will, as far as possible, make himself aware of his biases, “by that very self-knowledge, nullify their effect”. Merely by playing out the role of a judge or by putting on a black robe and taking the oath of office as a judge, he does not cease to be human and also does not strip himself of all predilections and becomes a passionless thinking machine. Familiarity with the standards of judicial propriety, therefore, greatly limits the whimsical exercise of discretionary powers contrary to the settled practices and greatly reduces the possibility of violation of the Rule of Law. This means that arbitrators lacking experience in facets of judicial procedures need to be extra mindful of adherence to these fundamental rules when donning the arbitrator’s bonnet and even the slightest deviation risks rendering the entire arbitration proceedings futile.
Given that the Indian Courts have in many instances been compelled to step in and correct arbitral latches, which almost always has the effect of nullifying the arbitral award itself, parties must be mindful in their quest to select the appropriate arbitrator. It is always advisable to therefore ensure that, proceedings are conducted by persons seasoned in court craft. For just as domain or subject experts, legal professionals and judges are subject experts in the arena where the award will finally be tested for its legality, as well as take recourse to, for the purpose of enforceability.