Misconduct Before Arbitral Tribunal Can Constitute Contempt Of Court
Introduction
Arbitration is a party driven dispute resolution mechanism. One of the most significant aspects of arbitration is its flexibility and the convenience that it provides to its parties, unlike the rigors of a court room proceeding. However, these aspects are not at the cost of the integrity of the arbitral proceedings. Arbitral proceedings are not toothless. A party can be punished for the offence of criminal contempt even in the proceedings before the arbitral tribunal.
Recently, the Delhi High Court in Dalmia Family Office Trust & Anr. vs. Getamber Anand & Ors. has ruled that making unfounded allegations against an arbitrator constitutes contempt of court.
Facts
A dispute arose between two groups of companies, the Dalmia Group and the ATS Group, regarding a series of transactions involving their affiliated companies. In accordance with the dispute resolution clause in the underlying agreement, the Delhi High Court appointed a retired Supreme Court Justice as the sole arbitrator to resolve the matter. During the ongoing arbitral proceedings, ATS Group filed application for recusal of the Arbitrator on grounds of conflict of interest between the Arbitrator and the ATS Group itself, allegations were made that the “Law Firm” related with the Arbitrator, or managed by his family members, has represented ATS Group in the past, and continues to advice the ATS Group. The Arbitrator by way of a common order rejected the allegations of conflict of interest on account of (a) absence of supporting evidence and (b) omission on part of the ATS Group in raising any objection prior to the appointment of the Arbitrator based on the declaration made by him.
In the same order, the Arbitrator invoked Section 27(5) of Arbitration and Conciliation Act, 1996[i] (A&C Act) and sought the Delhi High Court’s assistance for initiating criminal contempt against ATS Group for deliberately delaying the arbitral proceedings and for their non-complying conduct throughout the proceedings.
Court’s ruling
The Delhi High Court ruled that any misconduct by a party before an Arbitral Tribunal or a Sole Arbitrator may constitute contempt of court. The court emphasized that Section 17(2) of the A&C Act, which was introduced in 2015 [ii], deems any interim order of an arbitral tribunal as an order of the court for “all purposes” and renders it “enforceable” under the Code of Civil Procedure, 1908, as though it were a court order. Thus, Sections 17(2) and 27(5) of the A&C Act enable an arbitral tribunal to initiate contempt proceedings by referring cases to the court when a party fails to comply with an interim order.
The High Court noted that, Arbitral Tribunals and Arbitrators effectively adjudicate disputes in place of Civil Courts. It held that baseless or speculative allegations against Arbitrators cannot be tolerated. Arbitrators, often retired judges or practicing lawyers, should not face allegations of conflict based solely on speculation, especially when no actual conflict exists. Such allegations put Arbitrators in a precarious position, and reckless or baseless claims must be addressed strictly.
The Court acknowledged that ATS Group appeared before it to offer an unconditional apology for its conduct before the Arbitrator. While the Court accepted this apology, it imposed a substantial cost on ATS Group and warned them against any future recurrence.
Our thoughts
The decision in Dalmia Family Office Trust & Anr. v. Getamber Anand & Ors. reflects a strong pro-arbitration stance, effectively discouraging parties from engaging in tactics to delay or obstruct arbitration proceedings. This ruling sends a clear message: non-compliance with arbitral orders or attempts to undermine the arbitration process will result in robust judicial scrutiny and serious consequences. For parties awarded interim reliefs by arbitral tribunals, this High Court’s ruling offers reassurance that if the opposing party fails to comply, both the arbitrator and the winning party have recourse. They can approach the High Courts to initiate contempt proceedings, with confidence that the courts will act decisively against those attempting to thwart enforcement.
This judgment also reinforces India’s alignment with global arbitration standards and signals to the international business community that Indian courts are dedicated to protecting the integrity of arbitration proceedings.
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[i] Section 27 of the A&C Act allows the arbitral tribunal to seek court assistance in taking evidence. Under Section 27(5), individuals who fail to attend, default, refuse to provide evidence, or commit contempt during arbitral proceedings may face penalties and punishments, as ordered by the court, similar to those for analogous offenses in court trials, based on the arbitral tribunal’s representation.
[ii] 2015 Amendment in the Act inserted section 17 (2) that deemed interim orders passed under section 17 (1) as an order of a civil court, hence enforceable under the Civil Procedure Code, 1908 (CPC).