Misconduct Before Arbitral Tribunal Or Sole Arbitrator Can Constitute Contempt Of Court: Delhi High Court

The Delhi High Court observed that any misconduct before the Arbitral Tribunal or Sole Arbitrator can constitute Contempt of Court.

The Court observed thus in a contempt petition arising out of an order of the Sole Arbitrator by which he took severe umbrage to the conduct of parties during the arbitral proceedings.

A Division Bench of Justice Prathiba M. Singh and Justice Amit Sharma held, “… if such allegations were made before the Arbitral Tribunal, as would have been made before a Judge hearing a civil suit, clearly a reference for criminal contempt could have been made. The Arbitral Tribunal is no different from a Civil Court in respect of dealing with contempt against itself. Thus, any misconduct before an Arbitral Tribunal or a Sole Arbitrator would be liable to be dealt with in accordance with law, if the same constitutes civil law contempt.”

Advocate Siddhant Kumar appeared on behalf of the petitioners while Senior Advocate Sandeep Sethi appeared on behalf of the respondents.

Brief Facts -

The Arbitrator made a reference to the High Court under Section 27(5) of the Arbitration and Conciliation Act, 1996 (A&C Act) for issuance of appropriate orders and directions, in accordance with law, for initiating proceedings for perjury as also criminal contempt against the respondents. The Arbitrator also directed initiation of proceedings against an Advocate. The said reference order was passed by the Arbitrator in arbitration proceedings pending between the petitioners (Dalmia Group) and the respondents (ATS Group). The allegation of the petitioners against the respondents was that between 2013-2015, they entered into nine independent sets of transactions with different companies of the respondents.

It was alleged that the respondents failed to repay the investments made by the petitioners in terms of the respective agreements between the parties. The parties filed eleven petitions under Section 11 of A&C Act, seeking constitution of an Arbitral Tribunal for adjudicating the disputes between them. The respondents filed applications and sought recusal of the Arbitrator from the arbitration proceedings. The Arbitrator dismissed all applications and invoked Section 27(5) of A&C Act for initiating criminal contempt against the respondents.

The High Court in view of the above facts, noted, “In the present system of adjudication of disputes that is currently prevalent, there can be no doubt that the Tribunals and ld. Arbitrators are adjudicating disputes in place of Civil Courts. Making baseless and untenable allegations against the ld. Arbitrators cannot be permitted. Arbitrators, who are currently being appointed are either retired judges or even practising lawyers. That by itself cannot lead to allegations of conflict by mere speculation, resulting in recusal, without actual conflict being there. Ld. Arbitrators are put in tenuous positions when such applications are moved and any reckless or baseless allegations thus require to be dealt with strictly.”

The Court added that, while the integrity of the arbitration ecosystem needs to be maintained, the same cannot also be made fragile by giving room to unsubstantiated or speculative allegations against arbitrators and any such allegations would constitute interference in the arbitral process.

“Even today, the Contemnor/Respondent No.1 is present before the Court and tenders an unconditional and unqualified apology for his conduct before the ld. Arbitral Tribunal. Moreover, the proceedings before the Arbitral Tribunal have been substantially delayed due to the aforesaid conduct of the Respondents, which clearly appears to have been the purpose of the Respondent No.1 and the ATS Group”, it said.

The Court accepted the apology of the respondents but directed them to pay a sum of Rs. 10 lakhs via demand draft to any charitable organisation. In addition, for the costs incurred by the petitioners in the proceedings, the respondents were directed to pay Rs. 3 lakhs to the petitioners within one week.

Accordingly, the High Court cautioned the respondents for not repeating such conduct in future and disposed of the contempt reference.

Cause Title- Dalmia Family Office Trust & Anr. v. Getamber Anand & Ors. (Neutral Citation: 2024:DHC:7895-DB)

Appearance:

Petitioners: Advocates Siddhant Kumar, Ajay Bhargava, Wamika Trehan, Radhika Khanna, and Varun Chopra.

Respondents: Senior Advocate Sandeep Sethi, Krish Kalra, Kashish Bansal, and Riya Kumar.

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