HRD Corpn. v. GAIL (India) Ltd.
Arbitrator bias, Fifth vs Seventh Schedules, and IBA Guidelines — Supreme Court of India, (2018) 12 SCC 471.
Supreme Court of India
Year: 2018
Arbitration
Fifth & Seventh Schedules
~6 min read
Quick Summary
This case is about removal of arbitrators for alleged conflicts. HRD Corporation wanted Justice Lahoti and Justice Doabia removed under the Seventh Schedule. The Supreme Court explained how to use the Fifth and Seventh Schedules and looked at the IBA Guidelines on impartiality.
- Seventh Schedule = ineligibility. Fifth Schedule = justifiable doubts.
- On facts, no removal. The challenges were dismissed.
Issues
- Should Justice Lahoti be removed under Items 1, 8, and 15 of the Seventh Schedule?
- Should Justice Doabia be removed under Items 1, 15, and 16 of the Seventh Schedule?
Rules
- IBA Guidelines: An arbitrator must be impartial and independent throughout. If there is doubt, the arbitrator should decline the appointment.
- Fifth vs Seventh Schedules (Arbitration Act): Fifth lists situations raising justifiable doubts (challenge to impartiality). Seventh lists hard bars to appointment—if present, the arbitrator is ineligible.
Facts — Timeline
Supply Contract: GAIL agreed to supply wax to HRD Corporation.
Dispute: HRD alleged wrongful withholding of supplies and invoked arbitration. This was the fourth arbitration between the parties.
Appointments: HRD named Justice K. Ramamoorthy; GAIL named Justice Doabia; both chose Justice K.K. Lahoti as presiding arbitrator.
Change: After Justice Ramamoorthy withdrew, Justice Mukul joined for HRD.
Challenges: HRD sought removal of Justice Doabia (earlier award between same parties) and Justice Lahoti (past advisory role for GAIL).
Orders Below: Justice Mudgal opined to terminate Doabia but not Lahoti; High Court dismissed petitions; HRD appealed to the Supreme Court.
Arguments
Appellant: HRD Corporation
- Past advisory role and prior award create conflicts under the Seventh Schedule.
- Impartiality is doubtful; IBA Guidelines support removal.
- Public confidence needs a clean tribunal.
Respondent: GAIL (India) Ltd.
- Facts do not fit any Seventh Schedule bar; prior involvement alone is insufficient.
- Fifth Schedule doubts, if any, do not equal ineligibility.
- Continuity is important; no proof of actual bias.
Judgment
- Challenges Dismissed: The Supreme Court refused to remove Justice Lahoti and Justice Doabia.
- Schedule Use Clarified: Courts will not stretch the Seventh Schedule. If an award has not yet been made, Fifth Schedule concerns are assessed carefully, but they do not equal automatic ineligibility.
- Prior Award/Advisory Role: On these facts, Items 8, 15, and 16 did not apply as hard bars.
Ratio Decidendi
Seventh Schedule grounds are strict ineligibilities and must be clearly proved. Merely having presided over a different dispute between the same parties, or having a past advisory role, does not by itself trigger removal unless it matches a listed bar.
Why It Matters
- Stops overuse of removal pleas that delay arbitration.
- Shows how IBA Guidelines inform, but do not replace, Indian schedules.
- Guides parties to pick the right schedule and right evidence.
Key Takeaways
- Seventh = ineligible; Fifth = doubts.
- Prior involvement ≠ automatic disqualification.
- Prove a listed Seventh Schedule item or the challenge fails.
Mnemonic + 3-Step Hook
Mnemonic: “FIFTH for Feelings, SEVENTH for Stops”.
- Identify: Is it a doubt (Fifth) or a bar (Seventh)?
- Match: Link facts to a specific item number.
- Proceed: Without a listed bar, removal will fail.
IRAC Outline
| Issue | Whether Justices Lahoti and Doabia were disqualified under the Seventh Schedule. |
|---|---|
| Rule | IBA Guidelines on impartiality; Fifth vs Seventh Schedules of the Arbitration Act (post-2016 amendment). |
| Application | The alleged connections did not fit any Seventh Schedule bar; Fifth Schedule concerns could not justify removal as ineligibility. |
| Conclusion | Challenges dismissed; both arbitrators continued. |
Glossary
- Fifth Schedule
- Situations that may give rise to justifiable doubts as to impartiality.
- Seventh Schedule
- Ineligibility list — if present, a person cannot be appointed as arbitrator.
- IBA Guidelines
- Persuasive international standards on arbitrator independence and impartiality.
FAQs
No. Only if it matches a Seventh Schedule item (hard bar). Otherwise it may be only a Fifth Schedule doubt, not ineligibility.
No. Prior adjudication alone is not a listed bar. Facts must fit a specific Seventh Schedule item.
As helpful guidance to assess impartiality. They do not override the Indian statute and schedules.
Use Fifth Schedule grounds and the challenge mechanism. Without a Seventh Schedule bar, removal is unlikely.
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