What is Section 12 of Arbitration and Conciliation Act

Section 12. Grounds for challenge of appointment of Arbitrator

CHAPTER III
Composition of arbitral tribunal of Arbitration and Conciliation Act, 1996

Section 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.

Explanation 1. - 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.

Explanation 2. - The disclosure shall be made by such person in the form specified in the Sixth Schedule.]

(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.

(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.]

Scope of Section 12 of Arbitration and Conciliation Act

Section 12 of Arbitration and Conciliation Amendment Act, 2015 mainly deals with the neutrality of the arbitrators. Section 12 does not allow an arbitrator to conduct an arbitration proceeding, if the arbitrator is biased towards the parties or party in that particular proceeding.

The amendment in Arbitration and Conciliation Act in 2015, a special provision was inserted which is, according to Section 12 of Arbitration and Conciliation (Amendment) Act, 2015 “Every person who has been contacted by the parties to select an arbitrator shall report in writing, expressly or indirectly, all the particulars of the past or current relationship with the parties, the lawyer or the subject-matter concerned and also the result of the arbitration, which could be financial, professional, commercial or some other kind likely to give rise to justifiable concerns as to impartiality and freedom, which may also contribute to the failure to commit adequate time to the arbitration and to the willingness of the arbitrator to operate and to give the parties a verdict within 12 months”.

According to the rules and regulation of 6^th  Schedule, every arbitrator has a duty to disclose all the facts before the beginning of the Arbitration proceedings and on the basis of the disclosure provided by the arbitrator, it will be decided whether any such condition occurs or whether it comes under the scope of any of the grounds set out in the Fifth or Sixth Schedule.