Whether Enforcement Of A Foreign Arbitration Award Can Be Challenged On The Ground That The Arbitrator Was Biased – Supreme Court Of India – Arbitration & Dispute Resolution

Brief Facts:

This issue was decided in the case of AVITEL POST STUDIOZ
LIMITED V. HSBC PI HOLDINGS (MAURITIUS) LIMITED¹
wherein the AVITEL had challenged the enforcement proceedings of a
SIAC arbitration award under S. 48 of the Indian Arbitration Act,
1996 on the premise that presiding arbitrator of the tribunal
failed to make a full and frank disclosure of material facts and
circumstances concerning conflict of interest and therefore the
Award rendered by the tribunal cannot be enforced as it is against
public policy in terms of Section 48(2) (b)of the Indian
Arbitration Act.

Avitel case of bias against the arbitrator:

1. Presiding arbitrator was an independent director and chairman
   of the audit and risk committee of a company called Wing Tai. HSBC
   (Singapore) Nominees Pte Ltd held 6.29% of Wing Tai’s equity
   capital on a trustee/nominee basis.




2. This relationship of the presiding arbitrator with HSBC
   (Singapore) Nominees Pte Ltd through Wing Tai constitutes
   bias.

Arguments of HSBC PI HOLDINGS (MAURITIUS) LIMITED:

1. The award holder and HSBC (Singapore) Nominees Pte Ltd are
   different companies and the relationship of Wing Tai with HSBC
   (Singapore) Nominees Pte would not constitute bias.




2. The presiding arbitrator is not an employee of Wing Tai and
   therefore it is contended that it is wrong to say that he cannot
   discharge responsibility as an independent arbitrator or was
   incapacitated in any manner, in rendering the final Award.




3. Wing Tai had no relationship with the Award Holder and was not
   part of the HSBC Group

Decision of Supreme Court of India

1. There can be no difficulty in holding that the most basic
   notions of morality and justice under the concept of ‘public
   policy’ would include bias. However, Courts must endeavour to
   adopt international best practices instead of domestic standards,
   while determining bias. It is only in exceptional circumstances
   that enforcement should be refused on the ground of bias.




2. None of the other grounds now being pressed were raised
   during the arbitration or in the time period available to the
   appellants to apply, to set aside the Award in Singapore




3. It needs emphasizing that bonafide challenges to arbitral
   appointments have to be made in a timely fashion and should not be
   used strategically to delay the enforcement process. In other
   words, the Award Debtors should have applied for setting aside of
   the Award before the Singapore Courts at the earliest point of
   time.




4. This sort of challenge where arbitral bias is raised at the
   enforcement stage, must be discouraged by our Courts to send out a
   clear message to the stakeholders that Indian Courts would ensure
   enforcement of a foreign Award unless it is demonstrable that there
   is a clear violation of morality and justice. The determination of
   bias should only be done by applying international standards.
   Refusal of enforcement of foreign award should only be in a rare
   case where non- adherence to International Standards is clearly
   demonstrable.

Conclusion

Supreme Court of India took the right decision in holding that
concept of “public policy” would include bias. In the
facts of the given case, Supreme Court of India took the correct
step in refusing to set aside the enforcement proceeding as Avitel
neither raised these grounds bias before the tribunal nor did they
challenge the award before courts in Singapore.

Footnote

1. 2024 INSC 242

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