Gaurav Rai[1]
In India, retired judges of the Supreme Court are barred by the Constitution to plead or act in any court or authority within the territory in India.[2] Retired High Court judges are however allowed to practice in the Supreme Court and High Courts other than in those where they presided as judges but they need to get their licence renewed. In my limited experience working as an Assistant to a retired Supreme Court Judge, who regularly acts as an arbitrator, I have witnessed that retired High Court Judges acting as arbitrators do not take up the role of advocacy in the Supreme Court of India or other High Courts. However, one practice which has become quite prominent in Indian scenario is the seeking of an opinion from such retired Supreme Court and High Court judges on legal issues.
These retired judges are approached as consultants for legal dilemmas which the parties or the lawyers themselves may not be able to figure out. The parties and lawyers seeking such legal opinion rely on the vast experience of such judges to provide a way of solving such issues. A situation may therefore arise where a party who has sought such an opinion from a retired Supreme Court or High Court judge may also nominate such Retired Supreme Court or High Court Judge as an arbitrator in another unrelated matter. This may attract item 1, 8 and 14 of the Seventh Schedule of the Arbitration and Conciliation Act, 1996 as amended in 2015. The same is extracted hereunder:
“1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
14. The arbitrator regularly advises the appointing party or an affiliate of the appointing party, and the arbitrator or his or her firm derives a significant financial income therefrom.”
In such cases the opposite party may be able to raise the issue of ineligibility as the arbitrator so appointed by the party has provided an opinion to such party in the past and the person so appointed is ineligible to continue as an arbitrator as they may not be independent and impartial.
Indian Courts have dealt with only a few issues regarding a party appointing its own employee as an arbitrator in a skewed arbitration agreement and notably, the observations of the Indian Courts are limited to the interpretation of upholding such clauses rather than appointment of a balanced and impartial arbitrator.[3] There were hence no clear guidelines for applicability of the justifiable doubts standard which existed in the Indian Arbitration and Conciliation Act,1996 which is premised on the Model Law. Hence the 246th Report had proposed incorporation of schedules which borrowed from the Red and Orange list of the IBA guidelines to the Arbitration Act to act as guide for the applicability of the justifiable doubts’ standard.[4] The only literature on the IBA lists are the guidelines postulated in the 2004 and 2014 notes of the IBA and the Law Commissions 246th Report on Arbitration. The Supreme Court of India, however got the opportunity to delve into the applicability of these Schedule 5 and 7 to the Arbitration and Conciliation Act, 1996 in two cases namely Voelstapine v. DMRC[5] and the case of HMD Corporation v. GAIL India.[6] This working paper series might deal with Voelstapine Case in another context when dealing with pool of arbitrators and appointing authority.
I will limit my focus to one paragraph from the HRD Corporation case which will deal with the issue I have outlined above regarding legal opinions being provided by retired Supreme Court Judges and they being nominated by such opinion seekers in an arbitration in an unrelated matter. Other aspects of HRD Corporation might be relevant in further parts of this working series.
Para 22 is relevant for our discussion and is extracted hereunder. I have inserted the items of the 7th Schedule wherever discussed in this extract accordingly.
"22. Shri Divan has pressed before us that since on a legal issue between GAIL and another public sector undertaking an opinion had been given by Justice Lahoti to GAIL in the year 2014, which had no concern with respect to the present matter, he would stand disqualified under Item 1[7] of the Seventh Schedule. Items 8[8] and 15[9] were also faintly argued as interdicting Justice Lahoti’s appointment. Item 8 would have no application as it is nobody’s case that Justice Lahoti “regularly” advises the respondent and Item 15 cannot apply as no legal opinion qua the dispute at hand was ever given. On reading Item 1 of the Seventh Schedule, it is clear that the item deals with “business relationships”. The words “any other” show that the first part of Item 1 also confines “advisor” to a “business relationship”. The arbitrator must, therefore, be an “advisor” insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2[10], 8, 14 and 15, the last item specifically dealing with “legal advice”. Under Items 2, 8 and 14, advice given need not be advice relating to business but can be advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word “regularly” is missing from Items 1 and 2, it is clear that the arbitrator, if he is an “advisor”, in the sense of being a person who has a business relationship in Item 1, or is a person who “currently” advises a party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm’s length. Something more is required, which is the element of being connected in an advisory capacity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the present dispute, he is clearly not disqualified under Item 1."
Hence this passage from the judgment makes it abundantly clear that Retired Supreme Court Judges or even Retired High Court Judges who provide legal opinions to parties as discussed in the paper, occasionally and on an arm’s length basis, are not ineligible under Item 1 or other items as discussed in the HRD Corporation case, to be appointed as an arbitrator, in an unrelated matter, by the same party, which sought such a legal opinion from them.
[1] Gaurav Rai - The author is Advocate registered in State Bar Council of Delhi and is currently working as a legal assistant to Justice A.K. Patnaik, Former Judge Supreme Court of India and assists Justice Patnaik in his work as an arbitrator. He can be reached at raigaurav.legal@gmail.com
[2] Article 124(7), Constitution of India 1950.
[3] ‘Law Commission of India Report No. 246’ para 56 <http://lawcommissionofindia.nic.in/reports/report246.pdf>.
[4] ‘Law Commission of India Report No. 246’ (n 2) para 59.
[5] Voestalpine Schienen GmbH v Delhi Metro Rail Corporation Ltd (2017) 4 SCC 665.
[6] HRD Corporation v GAIL (India) Ltd (2017) 12 SCC 471 (Supreme Court of India).
[7] 1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party.
[8] 8. The arbitrator regularly advises the appointing party or an affiliate of the appointing party even though neither the arbitrator nor his or her firm derives a significant financial income therefrom.
[9] 15. The arbitrator has given legal advice or provided an expert opinion on the dispute to a party or an affiliate of one of the parties.
[10] The arbitrator currently represents or advises one of the parties or an affiliate of one of the parties.
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