Legal Brief: Misconduct before Arbitral Tribunal or Sole Arbitrator can constitute Contempt of Court
Case Name: Dalmia Family Office Trust & Anr. v. Getamber Anand & Ors.
Court: Delhi High Court
Date of Judgment: 08.10.2024
By- Aakanksha Bhatia
Facts
The Dalmia Family Office Trust and Dalmia Family Holdings LLP (Dalmia Group) entered into nine separate transactions with various companies of the ATS Group between 2013 and 2015. The ATS Group failed to repay these investments as agreed, leading to the parties signing a Supplementary Agreement on October 18, 2019, where the ATS Group acknowledged its liabilities and committed to repayment by March 31, 2020.
Subsequently, the ATS Group and its promoter/director, Mr. Getamber Anand, filed eleven petitions under Section 11 of the Arbitration and Conciliation Act, 1996 (the Act), requesting the formation of an arbitral tribunal to resolve the disputes. On January 8, 2021, a Sole Arbitrator, Hon’ble Mr. Justice Swatanter Kumar (Retd.), was appointed by the Hon’ble Delhi High Court with the consent of both parties to adjudicate all disputes arising from these transactions.
The ATS Group claimed the disputed transactions were settled and sought declaratory relief from the Learned Arbitrator. The Dalmia Group, as counter-claimant, sought recovery of the unpaid investments with interest. The Learned Arbitrator commenced proceedings, and both parties filed applications under Section 17 of the Act, which were heard between February 17, 2021, and April 5, 2021.
During a hearing on June 10, 2021, the ATS Group presented a legal notice dated June 8, 2021, from Mr. Vaibhav Luthra, an advocate representing a home buyer (Respondent No. 3). This notice alleged collusion between the Dalmia Group and ATS Infrastructure Limited in the arbitration, potentially creating a conflict of interest for the Arbitrator, and argued against the continuation of the proceedings.
The ATS Group, after initially not mentioning the legal notice, used it in the post-lunch session to request the Arbitrator’s recusal and refused to proceed with arguments on their Section 17 applications. The legal notice, not initially submitted, was later added to the record through an application for additional documents.
On 14.06.2021, the ATS Group and Mr. Anand filed applications with the Hon’ble Delhi High Court, which were withdrawn on 18.06.2021, with permission to approach the Learned Arbitrator. Subsequently, they filed applications under Sections 12 and 13 of the Act with the Learned Arbitrator, again seeking recusal.
The Learned Arbitrator, in an order dated 5.10.2021, addressed these recusal applications, concluding that the legal notice was likely a pre-planned attempt by the ATS Group and Mr. Luthra to delay and disrupt the arbitration process with baseless claims. The Learned Arbitrator rejected all grounds for recusal and dismissed the applications under Sections 12 and 13 of the Act, 1996.
The Learned Arbitrator, invoking Section 27(5) of the Act of 1996, then referred the matter to the Hon’ble Delhi High Court to initiate criminal contempt proceedings against the respondents for their conduct. The Hon’ble Court issued notices to the respondents and on 28.08.2023, directed them to apologize to the Learned Arbitrator.
Respondent No. 1, Mr. Anand, apologized on December 5, 202312. The Arbitrator accepted the apologies of Respondent No. 2 (Mr. Shailendra Pandey) and Respondent No. 3 (Ms. Saloni Adarsh) but declined to accept Mr. Anand’s apology, citing his insincere and delayed actions as part of a strategy to evade consequences.
Issues
- Did the conduct of the Respondents, specifically relying on a potentially fabricated legal notice to seek the Arbitrator’s recusal, constitute contempt of the Arbitral Tribunal?
- Does an Arbitral Tribunal have the authority to initiate contempt proceedings, and are its powers equivalent to those of a Civil Court in such matters?
- Was the Respondent No. 1’s apology sincere, and should it be accepted to mitigate the contempt charges?
Arguments Advanced
- Petitioners (Dalmia Group): The Petitioners argued that the respondents acted unfairly and with the sole intention of removing the Learned Arbitrator from the proceedings through baseless allegations. They emphasized the significant delays caused by the Respondent’s actions and argued that the Learned Arbitrator’s powers are equivalent to those of a Civil Court, especially under Sections 17(2) and 27(5) of the Act, allowing for contempt proceedings.
- Respondent No. 1 (Mr. Anand): The Respondent No. 1 claimed that their intention was not simply to seek recusal but to act cautiously based on the allegations of collusion in the legal notice. He emphasized the acceptance of apologies from other respondents and maintained that he had tendered an unqualified apology for his conduct before the Arbitrator and the Court.
Judgment
The Hon’ble Court accepted the respondent No. 1’s apology while directing him to pay Rs. 10,00,000/- to a charitable organization designated by the Learned Arbitrator and Rs. 3,00,000/- to the petitioners as costs. The Hon’ble Court cautioned the Respondent No. 1 against repeating such conduct in the future and disposed of the contempt reference.
Legal Analysis
The Hon’ble Court recognized that the legal notice, even if genuine, should have been addressed by the ATS Group independently and not used as a basis for the Learned Arbitrator’s recusal, especially given the alleged conflict of interest was in their favour. TheHon’ble Court noted the Arbitrator’s frustration with the Respondents’ conduct, highlighting the illogicality of the ATS Group seeking recusal based on allegations of collusion with the Arbitrator.
The Hon’ble Court emphasized the importance of protecting the integrity of the arbitration process and preventing unsubstantiated allegations against arbitrators. It affirmed the authority of Arbitral Tribunals to adjudicate disputes in place of Civil Courts and to deal with contempt against themselves. Citing the Supreme Court’s decision in Alka Chandewar v. Shamshul Ishrar Khan, the Court reiterated the purpose of amending Section 17 of the Act, emphasizing the enforceability of orders passed by Arbitral Tribunals.
The Hon’ble Court analysed Sections 17(2) and 27(5) of the Act of 1996, concluding that an Arbitral Tribunal possesses the power to initiate contempt proceedings and is no different from a Civil Court in this regard. The Court found the Respondent No. 1’s conduct reprehensible, acknowledging the significant delays caused in the arbitration proceedings.
Conclusion
The Hon’ble Court, while acknowledging the Respondent No. 1’s apology and remorse, imposed financial penalties to address his contemptuous conduct before the Arbitral Tribunal. The judgment emphasizes the importance of upholding the integrity of the arbitration process, protecting the authority of Arbitral Tribunals, and discouraging baseless and disruptive tactics employed to delay or derail proceedings.