Misconduct by the Arbitrator /Arbitral Tribunal
Arbitrator misconduct undermines this integrity and can lead to the setting aside of arbitral awards, loss of confidence in the system, and miscarriage of justice. The integrity of arbitral proceedings is central to the credibility of arbitration as an effective mode of alternative dispute resolution (ADR). This blog explores the concept of misconduct by an arbitrator under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”)
Arbitration as a dispute resolution mechanism relies heavily on the impartiality, independence, and ethical conduct of arbitrators. However, instances of misconduct — ranging from bias, conflict of interest, breach of confidentiality, or procedural improprieties — challenge the fairness and efficacy of arbitration. While the Act does not explicitly define “misconduct,” Indian courts have played a pivotal role in interpreting this concept.
Halsbury defines legal misconduct as “neglect of duty and responsibility by the arbitrator” reflecting on the impartiality and integrity of the arbitrator. For example, an arbitrator giving decision on his personal knowledge is not per se misconduct but when arbitral tribunal is giving award upon his personal knowledge without a chance of rebuttal is misconduct. Although the arbitral tribunal is not bound by the Indian Evidence Act, principles of natural justice is a standard for the courts to determine in cases of procedural impropriety.
Moreover, the 176th Law Commission Report provides that there is no express ground for misconduct under the 1996 Act and it is mostly apprehended that if misconduct is included as an express provision, it would open the floodgates of litigation. The judicial exploration of guideline on misconduct under the 1996 Act is not much explored but there is a shift from the 1940 mindset to the UNCITRAL model wherein more strict construction of words giving more validity to finality of awards is the new trend and appeal under Section 34 or Section 37of the Arbitration and Conciliation Act, 1996 is to be scoped on limited grounds so that there is no lawlessness as to challenging the award but towards a striking the balance approach. In 2015 Supreme Court while interpreting a challenge to the Arbitral Award under the Arbitration Act, 1940 the Court held that legal misconduct must manifest from the proceedings before the arbitrator and the things under the scope of moral misconduct or other misconduct not amounting to legal misconduct does not arise.
Relevant Provisions of the Act under which the Misconduct may be constituted
Key provisions under the Act relating to arbitrator conduct include:
- Section 12 & 13– The Misconduct of the Arbitrator or the Arbitral Tribunal Could be challenged Under Section 13 (2) READ WITH SECTION 12 (3)(a) OF THE ARBITRATON AND CONCILIATION ACT, 1996
- Section 34(2)(a)(iii) – An award may be set aside if the arbitral procedure was not in accordance with the agreement or law.
- Section 34(2)(b)(ii) – Allows setting aside of awards that are in conflict with the public policy of India, which may include instances of misconduct.
The Following could constitute the Arbitrator/Arbitral Tribunal’s Misconduct
- Bias or Conflict of Interest
Failure to disclose relationship with parties or counsel.
Prejudgment of issues or evident partiality
- Breach of Natural Justice
Denial of equal opportunity to parties.
Arbitrator acting beyond the scope of reference.
- Non-Disclosure under Section 12(1)(b)
Failure to disclose relevant facts that can affect the arbitrator’s independence leads to a challenge under Section 12.
- Improper Delegation or Ex Parte Proceedings
Conducting proceedings without notice.
Allowing non-delegable functions to be carried out by third parties.
- Financial or Professional Misconduct
Demanding excessive fees or delays for monetary gain.
Arbitrators not following timelines or misusing authority.
The ‘impartiality’ and ‘unbiased’ character of the Arbitrator/Arbitral Tribunal is an essential part of an Arbitration proceedings and if the Arbitrator or Arbitral Tribunal commit illegality in not adopting the fair procedure, unbiasedness, essential disclosures, breach of natural justice in the Arbitration Proceedings then it is a serious misconduct which could defeat the whole purpose of Arbitration Proceedings as Misconduct by arbitrators erodes the sanctity of the arbitration process and can result in injustice.