C & E Limited And Others vs Feather Touch Limited And Others

For the appellants : Mr. S. N. Mookherjee, Sr. Adv., Mr. Dhrubo Ghosh, Sr. Adv., Mr. Rajarshi Dutta, Mr. Rahul Poddar, Mr. Yash Singhi, Mr. Ajeya Choudhury, Mr. Arindam Halder, Mr. Sarbesh Choudhury... Advs.

For the respondents : Mr. Dhruv Dewan, Mr. Sandip Agarwal, Mr. Abhishek Swaroop, Mrs. Sulagna Mukherjee, Mr. Tanay Agarwal, Ms. Priyansha Agarwal, Mr. Manav Sharma, Mr. Bharath Krishna... Advs. 2

2026:CHC-OS:14-DB

Heard on : 19.11.2025, 26.11.2025, 03.12.2025, 10.12.2025, & 24.12.2025.

Reserved on : 24.12.2025.

Judgment on : 21.01.2026.

Sabyasachi Bhattacharyya, J.:-

1. The genesis of the present appeals under Section 37 of the Arbitration

and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") is

an award dated February 29, 2020 passed by a learned Senior Advocate

of this Court in the capacity of Arbitrator, who was appointed by Court

on consent, as recorded in the order dated August 1, 2014 passed in a

suit between the parties bearing CS No. 344 of 2014.

2. AP No. 364 of 2020 was filed by one Gopal Das Bagri and AP No. 402 of

2020 by Feather Touch Limited, both award debtors, under Section 34

of the 1996 Act, challenging the said award. The said two applications

appeared before the learned Single Judge along with two connected

applications for enforcement of the award, bearing EC No. 145 of 2020

and EC No. 81 of 2022, and interlocutory applications filed therein.

3. The learned Single Judge took up both the applications under Section

34 for hearing on a preliminary issue as to whether the award was

tainted by fraud, corruption and bias. By a judgment dated July 27,

2023, which is under challenge in the present appeals, the learned

Single Judge held the preliminary issue against award holders, thereby 3

2026:CHC-OS:14-DB

allowing the applications under Section 34 of the 1996 Act and setting

aside the impugned award, coming to a finding that the same fell foul of

the mandate under Section 12 of the 1996 Act, particularly Grounds

11, 15 and 20 of the Fifth Schedule and Ground 15 of the Seventh

Schedule, read with Explanation 2 thereof.

4. The award debtors/applicants under Section 34 had initially challenged

the jurisdiction of the learned Single Judge to take up the same on the

ground that the learned Arbitrator (since deceased) was a Senior

Advocate of this Court having considerable practice, which might sway

the court in upholding his award. Such challenge was turned down by

the learned Single Judge with a token cost of Rs. 11/-. The award

debtors filed Transfer Petition (Civil) Nos. 1173-1174 of 2021, Transfer

Petition (Civil) Nos. 1203-1204 of 2021 and Transfer Petition (Civil) Nos.

282-283 of 2021 for transfer of the Section 34 applications to some

other High Court, which were dismissed by the Hon‟ble Supreme Court

vide order dated September 24, 2021. While dismissing the same, the

Hon‟ble Supreme Court held, inter alia, that even assuming that the

learned Arbitrator was a very respected member of the Bar, it was sure

that the High Court at Calcutta would examine the allegations of

misconduct without being influenced by the alleged status of the

learned Arbitrator. It was also observed that even assuming that five

Hon‟ble Judges of the Calcutta High Court had recused themselves,

that was no ground to express an apprehension about the entire High

Court at Calcutta, then consisting of more than 30 Judges, by 4

2026:CHC-OS:14-DB

contending that the petitioners therein would not get justice from the

said Court.

5. Immediately before the hearing of the present appeals were taken up by

this Court, the Court made it clear to learned counsel for both sides

that the learned Arbitrator was an eminent counsel of this Court and

known to the Bench in such capacity; although none of the members of

the Bench had any personal kinship with the Arbitrator, but since

allegations of fraud and bias were made against the learned Arbitrator,

the parties should express at the outset whether they had any objection

to this Court taking up the matter. Upon such option being given, the

appellants expressed through counsel that they had no objection in the

matter being taken up by this Court; however, the respondents herein

raised an objection on the ground that the learned Arbitrator

commanded respect from the Judges of this Court in view of his

standing at the bar at the relevant point of time.

6. By an order dated August 13, 2025, the then Bench taking up the

appeal, which also included one of us (Sabyasachi Bhattacharyya, J.),

turned down the challenge by a detailed order by relying on the earlier

observations of the Hon‟ble Supreme Court. Thereafter, the matter was

heard on several days, culminating in the present judgment.

7. Learned senior counsel appearing for the appellants argues that the

plinth of the challenge to the award was the appearance of the learned

Arbitrator for a company by the name of M/s. SSSMIL, which was

allegedly an affiliate of C & E Limited and Bulaki Das Bhaiya, since 5

2026:CHC-OS:14-DB

deceased (for short, "BDB"), who were the respondents in the arbitral

proceeding. However, M/s. SSSMIL is not and cannot be an affiliate of

BDB, since an "affiliate" under the Fifth and Seventh Schedules of the

1996 Act must be restricted to corporate entities. The entries in the

Fifth Schedule, along with the definition of "affiliate", have been

borrowed from the IBA Guidelines on Conflicts of Interest in

International Arbitration (in brief, "the 2014 IBA Guidelines"), which

was adopted on October 23, 2014. It was held in HRD Corporation

(Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas

Authority of India Limited), reported at (2018) 12 SCC 471 that

justifiable doubts as to the independence and impartiality of the

proposed Arbitrator requires adopting a broad, commonsensical

approach, requiring a fair construction of the words used in the Fifth

Schedule. However, the argument that the items in the Fifth and

Seventh Schedules must be construed in the most expansive manner,

so that the remotest likelihood of bias gets removed, was not an

acceptable way of interpreting the Schedules.

8. It is argued by the appellants that the IBA Guidelines are revised every

ten years, lastly on May 25, 2024 (2024 IBA Guidelines), which

included within the definition of the term "affiliate" "an individual

having a controlling influence on the party in the arbitration", which is

not merely clarificatory but in the nature of a subsequent updation

incorporated by revision and amendment. Since such revised

guidelines have not been adopted in the Indian statutory framework, it 6

2026:CHC-OS:14-DB

is argued, there is no question of an individual having an „affiliate‟ in

terms of the definition of the said term in the 2024 IBA Guidelines.

9. Learned senior counsel for the appellants distinguishes judgments cited

by the respondents in that regard and argues that, properly read,

Explanation 2 of the Fifth Schedule contemplates that an affiliate must

be a company in a group of companies and would include the parent

company.

10. Learned senior counsel for the appellants cites Black Law‟s Dictionary

(11th Edition) which defines "affiliate" as a corporation that is related to

another corporation by shareholdings or other means of control,

subsidiary, parent or sibling corporation.

11. Next relying on West‟s Legal Thesaurus/Dictionary, the appellants

contend that "affiliate" means (when used as a noun), a branch, a

company controlled by another company, division, sub-division, wing,

subsidiary, unit, part, etc.

12. In Cox & Kings Ltd. v. SAP India (P) Ltd., reported at (2024) 4 SCC 1, the

definition of "group of companies" clearly supports the control by a

parent company or a common entity over the other companies in the

group - supporting the formulation of a solar system arrangement in

the group of companies. In the present case, no parent company is

identifiable to support a „group of companies‟ arrangement.

13. Thus, it is reiterated that only a corporate entity can be an affiliate of

another corporate entity, linked together by shareholding or a parent

company, neither of which is applicable in the present case. 7

2026:CHC-OS:14-DB

14. Secondly, learned senior counsel for the appellants argues that BDB

does not have control over M/s. SSSMIL. The shareholding of the

promoter and promoter group in M/s. SSSMIL is 35.42%, the remaining

64.58% shareholding being held by the public as M/s. SSSMIL is a

public-listed company.

15. Out of 35.42%, individuals hold shares of 9.67% and body corporates,

the remaining 25.75%.

16. Even out of the 25.75% shareholding by body corporates, 25.68% is

held by B.G. Chemicals Private Ltd., in which BDB himself held 80

equity shares and the BDB HUF held 1900 equity shares out of its

issued share capital of 10,000 equity shares.

17. Citing ArcelorMittal India Private Limited v. Satish Kumar Gupta,

reported at (2019) 2 SCC 1, the appellants contend that positive control

arises from a shareholding of above 50%, which confers a proactive

power upon the shareholder.

18. In Vodafone International Holdings BV v. Union of India and another,

reported at (2012) 6 SCC 613, it was held that control is a mixed

question of law and fact, and must be determined from the voting power

of the shareholders and the extent of influence that shareholders

command in the management of the company.

19. In Universal Cables Limited v. Arvind Kumar Newar and Ors. (APO No.

89 of 2020) a Division Bench of this Court held that a controlling

interest is an incidence of ownership of shares in a company, something

which flows out of the holding of such shares. Hence, it is argued, it 8

2026:CHC-OS:14-DB

would be incorrect to say that BDB exerted any control over the

management in M/s. SSSMIL through his shareholding in B.G.

Chemicals Private Ltd., which only has a shareholding of 25.75% in

M/s. SSSMIL.

20. Learned senior counsel for the appellants controverts the reliance of the

respondents on the Achutan Report of the Take Over Regulations

Advisory Committee dated July 29, 2010, in terms of which 25%

shareholding by the promoter is enough for a deemed presumption of

positive control. Rule 13 of the Competition (Criteria for Exemption of

Combination) of Competition Rules has also been cited by the

respondents to show that an affiliate is an enterprise having 10% or

more of the shareholding or voting rights of the enterprise. The

appellants argue that reliance on the said documents is misplaced,

since the said provisions concern special legislations in the field of

acquisition of shares of a target company and combinations to prevent

appreciable adverse effects to competition in the relevant market,

respectively.

21. It is contended by the appellants that the Notification dated July 17,

2008 issued by the Petroleum and Natural Gas Regulatory Board, also

relied on by the respondents, is also not relevant, as the definition of

„affiliate‟ therein is in a completely different context. Thus, it is argued

that even if the 2024 IBA Guidelines were to be made applicable, it

cannot be said that BDB has a controlling influence, let alone

controlling interest, over M/s. SSSMIL, for which the learned Arbitrator 9

2026:CHC-OS:14-DB

appeared on eleven occasions in an unrelated matter during a hiatus

between the conclusion of the hearing in the arbitral proceeding and

the delivery of the award.

22. Learned senior counsel appearing for the appellants further submits

that BDB was not an affiliate of M/s. SSSMIL, since an affiliate is to be

considered qua a party to the arbitration agreement. The Entries of the

Fifth and Seventh Schedules of the 1996 Act, it is contended, support

such submission. Thus, it is submitted that it was not proper for the

learned Single Judge to conclude that BDB, either as an individual or

through his group of family members, would qualify as an affiliate. In

fact, the question was wrongly formulated, as an individual can have no

affiliate. Further, it is nobody‟s case that M/s. SSSMIL controls BDB or

any of his family members are controlled by M/s. SSSMIL. Thus, BDB

cannot be an affiliate of M/s. SSSMIL.

23. It is also argued that C & E Limited and M/s. SSSMIL are not affiliates,

since there is no cross-holding of shares between the two.

24. The respondents seek to refer to factual documents in a bid to establish

control of BDB and C & E Limited over M/s. SSSMIL and to

demonstrate how the two companies operate within an alleged group of

companies. However, it is argued, such ground has not been

substantiated by the respondents.

25. Learned senior counsel for the appellants then argues that Entry 2 of

the Fifth and the Seventh Schedules cannot apply in any event since

the Arbitrator did not currently represent an affiliate. „Current 10

2026:CHC-OS:14-DB

representation‟ means a continuous engagement to act for a party or its

affiliate, and not appearance in one matter. „Legal representation‟ is not

covered by Entry 2, as Entry 11 of the Fifth and Seventh Schedules of

the 1996 Act relates to the same. It is submitted that „legal

representation‟ is confined to only a party and not its affiliate. As such,

Entry 2 cannot cover a case of an arbitrator representing an affiliate in

a litigation, which is already covered by Entry 11.

26. Relying on HRD Corporation (supra)1, the appellants contend that the

term "currently represents" has to connote some degree of regularity. It

was held in the said judgment that the term "currently" requires

something more, which is an element of being connected in an advisory

capacity with the party.

27. Entry 8 of the Seventh Schedule is also not applicable, as the same

deals with a scenario where the Arbitrator „regularly‟ advised either the

appointing party or an affiliate thereof, none of which applies here.

Moreover, this Entry envisages a scenario where the appointment of the

Arbitrator is made consensually by the parties. In the present case,

however, the learned Arbitrator was appointed pursuant to an order of

the Court.

28. Again, Entry 15 of the Fifth and Seventh Schedules cannot apply,

because it is nobody‟s case that any advice or opinion had been given

by the Arbitrator "in the dispute".

1 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 11

2026:CHC-OS:14-DB

29. Entry 20 of the Fifth Schedule is not attracted as it envisages a

situation where the Arbitrator had previously advised an affiliate of a

party making the appointment in an unrelated matter within the past

three years but there is no ongoing relationship. The Arbitrator, in the

present case, had no past relationship with the alleged affiliate (M/s.

SSSMIL) to invoke the said Entry.

30. The judgments cited by the respondents regarding the continuous duty

of disclosure of the Arbitrator are also not applicable, since the

impartiality of Arbitrators in a curated panel by public sector

undertakings or in private-public contracts, as opposed to the present

case, was considered in such cases.

31. Moving on to his next contention, learned senior counsel for the

appellants submits that several findings of the learned Single Judge in

the impugned judgment under Section 34 of the 1996 Act are without

any basis at all.

32. By way of example, the learned Single Judge held that BDB has overall

control and management of M/s. SSSMIL and that the Managers,

Directors and employees are accustomed to act as per the sole wish and

dictate of BDB. It was further held that BDB would have attended most

of the conferences at the time of the appearance of the Arbitrator for

M/s. SSSMIL in connection with APD No. 252 of 2015.

33. All the above findings, it is submitted, are without any basis

whatsoever. 12

2026:CHC-OS:14-DB

34. The learned Single Judge, after having held that he was hesitant to hold

that M/s. SSSMIL is an affiliate of C & E, went on to observe that an

individual, group of persons or a family in control and management of a

company can qualify as an affiliate. Such finding, it is argued, is

contrary to the statutory framework.

35. Learned senior counsel appearing for the appellants next submits that

the respondents cannot rely on documents which were not referred to

or relied on upon by the learned Single Judge. A Convenience

Compilation, comprised of 77 volumes of paper books, were filed before

the learned Single Judge, as recorded in the order dated March 14,

2023. Extracts of some affidavits/petitions/evidence were furnished to

establish that BDB controlled M/s. SSSMIL, formerly known as

Chemcrown India Private Limited. These documents, however, were not

part of the petitions under Section 34 of the 1996 Act. Thus, those

cannot be looked into by this Court. Moreover, neither such

affidavits/petitions nor the evidence was relied on by the respondents

in the Section 34 petitions to constitute grounds of challenge to the

award.

36. Learned senior counsel relies on Mica Export Promotion Council and

Others v. G.C.L. Joneja & Ors., reported at 72 C.W.N. 117, for the

proposition that parties cannot rely on materials which were not placed

in the body of petitions or applications.

37. Thus, it is argued that the Arbitrator‟s conduct does not fall foul of the

mandate under Section 12 of the 1996 Act, read with Entries 2, 11, 15 13

2026:CHC-OS:14-DB

and 20 of the Fifth Schedule and Entries 2, 8 and 15 of the Seventh

Schedule, for which the appeals deserve to be allowed by setting aside

the impugned judgments.

38. Learned counsel appearing for the respondents in both the appeals, on

the other hand, while controverting the contentions of the appellants,

reiterates that the learned Arbitrator represented M/s. SSSMIL as

counsel on as many as eleven occasions between June, 5, 2018 and

July 19, 2018 in connection with APD No. 252 of 2015.

39. The hearing in the arbitration proceedings stood concluded in the 124th

sitting of the Arbitral Tribunal on December 9, 2017 and the award was

reserved by the learned Arbitrator. On January 3, 2019, another sitting

was held, where the learned Arbitrator apprised the parties that the

draft award was ready and it would take a few days to do the proof-

reading of the same as well as to make necessary corrections of

typographical mistakes and he expected the final copy of the award to

be ready very soon. However, the award was ultimately passed on

February 29, 2020. In the interregnum, the appearances of the learned

Arbitrator for M/s. SSSMIL took place.

40. While highlighting the relation between M/s. SSSMIL with BDB and C

& E Limited, learned counsel points out that admittedly M/s. SSSMIL

(former name, "Chemcrown India Private Ltd.") was incorporated by

BDB in the year 1973 and he was an initial subscriber to the

Memorandum and Articles of Association of the said company. BDB,

simultaneously, was the promoter and largest shareholder of M/s. 14

2026:CHC-OS:14-DB

SSSMIL, which was a listed company, through B.G. Chemicals Private

Limited, which is a company of BDB. The shareholding pattern of M/s.

SSSMIL reflects the promoter and promoter group holding 35.42% of

the total paid-up capital, whereas the balance 64.58% is held by public.

Out of such 35.42%, B.G. Chemicals Private Limited holds 25.68%.

The balance promoter and promoter group shareholding, it is alleged, is

held by around 105 individuals, who are all family members of BDB.

41. Learned counsel for the respondents relies on Regulation 2(1)(e) of the

Securities and Exchange Board of India (Substantial Acquisition of

Shares and Takeovers) Regulations, 2011 (for short, "the SEBI Takeover

Code"), which defines "control" to include the right to appoint majority

of the directors or to control the management or policy decisions

exercisable by a person or persons acting individually or in concert.

Regulation 2(1)(q) thereof defines "persons acting in concert" and

provides in Regulation 2(1)(q)(2)(iv) that promoters and members of the

promoter group shall be deemed to be acting in concert, unless the

contrary is established. Thus, a rebuttable presumption is created that

a promoter and promoter group constitute one single block in exercising

control over the affairs of a company.

42. The report of the "Takeover Regulation Advisory Committee" under the

Chairmanship of Mr. C. Achutan dated July 19, 2010 concluded that

since a holding level of 25% permits the exercise of de facto control over

a company, this could be fixed as the appropriate open offer trigger

threshold in the Indian context. The Committee felt that 25% 15

2026:CHC-OS:14-DB

shareholding would be an appropriate level at which a new incumbent

shareholder could reasonably expect positive control in the current

environment.

43. Such recommendation was ultimately accepted and Regulation 3 of the

SEBI Takeover Code provides 25% as the threshold at which an

acquirer is required to make an open offer.

44. Further arguing on the alleged nexus between the appellants and M/s.

SSSMIL, learned counsel for the respondents submits that BDB‟s e-

mail address is "bdbhaiya@cel.co.in", which is on the domain name of C

& E Limited. In the shareholding structure of M/s. SSSMIL, individuals

comprising the Bagri Group (respondents) were holding a nominal

share capital in the public category up to Rs. 2 lakh only.

45. From the MCA Master Data of M/s. SSSMIL, it is evident that Renu

Bhatter, the daughter of BDB, and Mukund Bhatter, his son-in-law,

were Directors of M/s. SSSMIL since February 14, 2018.

46. Again, Mr. Rajiv Issar, an employee of C & E Limited, which is under

the control of BDB and his family and where BDB was the Executive

Chairman, was another Director of M/s. SSSMIL.

47. Furthermore, the registered office of M/s. SSSMIL, that is, 95, Park

Street, Kolkata, is the same as that of C & E Limited.

48. Even the e-mail address of M/s. SSSMIL provided to the Ministry of

Corporate Affairs used the domain name of C & E Limited, that is

"@cel.co.in". 16

2026:CHC-OS:14-DB

49. One Mr. Arindam Halder, the legal head/law officer of C & E Limited,

while appearing for the claimants in the arbitration, it is submitted, had

instructed the learned Arbitrator on the M/s. SSSMIL in APD No. 252 of

2015, which indicates deep operational and structural inter-

connectedness between the companies, evidencing the structure of

"group of companies". This is sought to be established by the

respondents on the basis of a purported screenshot of the LinkedIn

profile of Mr. Halder and the evidence of Mr. Vijay Kumar Bagri, the

third witness of the claimant in the arbitration proceedings.

50. BDB‟s son Manoj Kumar Bhaiya, it is alleged, was the authorised

signatory of M/s. SSSMIL in WPA No. 46471 of 2006 filed before the

Madras High Court. He was also appointed as the CEO of C & E

Limited on August 18, 2011.

51. The appellants, in their pleadings, have also admitted that M/s.

SSSMIL and C & E Limited were group companies and that BDB had

overarching control over the affairs of M/s. SSSMIL. In support of such

submission, learned counsel for the respondents relies on BDB‟s reply

to CP No. 180 of 2013 affirmed on January 17, 2014 and on Case No.

C/12072 of 2012, filed by C & E Limited against two persons before the

court of the Chief Metropolitan Magistrate at Calcutta in June, 2012, as

well as the cross-examination of BDB before the learned Arbitrator on

December 15, 2015.

52. It is submitted that the general public, which holds around 64.58%

shares of M/s. SSSMIL, can never be said to have or exercise any 17

2026:CHC-OS:14-DB

control over the company, as opposed to the 35.42% shares owned by

the promoter BDB and the promoter‟s group.

53. It is contended that the documents referred to above were filed along

with the Section 34 applications before the learned Single Judge and,

as such, ought to be taken into consideration by this Court as well,

being a part of the records.

54. Those are not new materials but admitted documents, there being no

controversy regarding the veracity of those. Given the nature of the

objection to the arbitral award in the present case, there cannot be any

bar, it is argued, for this Court to consider the said documents.

55. Learned counsel for the respondents also places reliance on the

language of Section 34(2)(b) of the 1996 Act, where the expression "the

court finds that" is used, as well as on State of Chhattisgarh and

another v. SAL Udyog Private Limited, reported at (2022) 2 SCC 275, to

argue that the court, acting on its own while deciding a petition under

Section 34 of the 1996 Act, exercises powers which would also be

available in an appeal preferred against a judgment passed under such

provision, within the contemplation of Section 37 of the 1996 Act.

56. The above proposition laid down in SAL Udyog Private Limited (supra)2

was followed by the Hon‟ble Bombay High Court in a decision dated

November 19, 2025 in the case of Shri. Ravi Raghunath Khanjode & Ors.

v. Harashiddh Corporation.

2 State of Chhattisgarh and another v. SAL Udyog Private Limited, reported at (2022) 2 SCC 275 18

2026:CHC-OS:14-DB

57. Mica Export Promotion Council (supra)3, relied on by the appellants, is

not applicable, it is contended, since the same was rendered in relation

to a suit in respect of the election of the committee members of Mica

Export Promotion Council and a question of suppression of material

facts was raised, which was sought to be met on the ground that there

was no suppression since the documents were annexed to the petition.

The court did not accept such defence and held that in the facts of that

case it was not enough and the petitioners therein should have clearly

stated these facts in the body of the petition. Such factual matrix, it is

argued, is different from the present case.

58. Moreover, in view of the expression "the court finds that" used in

Section 34(2)(b) of the 1996 Act, which did not come up for

consideration in Mica Export Promotion Council (supra)3, the decision is

not relevant in the context.

59. Learned counsel for the respondents next argues that it is common

ground between the parties that if Entry 2, which is common to the

Fifth and Seventh Schedules of the 1996 Act, applies, then the arbitral

award dated February 29, 2020 would be in violation of Section 12(5) of

the said Act and also in violation of the fundamental policy of Indian

law under Explanation 1 of Section 34(2)(b)(ii) of the 1996 Act.

60. Arguing on the interpretation of the Entries in the Fifth and Seventh

Schedules of the 1996 Act, learned counsel argues that four principles

3 Mica Export Promotion Council and Others v. G.C.L. Joneja & Ors., reported at 72 C.W.N. 117 19

2026:CHC-OS:14-DB

have to be kept in mind while interpreting the various items in the said

Schedules, which are as follows:

(i) Entries should be construed in the light of General Standards

contained in the IBA Guidelines;

(ii) A broad commonsensical approach of the Entries has to be taken;

(iii) Entries must be construed purposively keeping in mind the

objective behind the amendment to the Arbitration Act;

(iv) The construction of the Entries should be elastic and flexible.

61. Learned counsel relies on HRD Corporation (supra)4 and ArcelorMittal

India Private Limited (supra)5, in support of the above contentions. It is

contended that HRD Corporation (supra)4 was also referred with

approval in Central Organisation For Railway Electrification v. ECI SPIC

SMO MCML (JV), reported at (2025) 4 SCC 641.

62. Entry 2 of the Fifth and Seventh Schedules of the 1996 Act, it is

submitted, does not use the expression "counsel" or "legal

representative", although "counsel" is used in Entry 3. However, this is

because the said expression is used in Entry 3 to denote the

Arbitrator‟s representation of the lawyer or the law firm which is acting

as counsel for one of the parties. Entry 3 of the Seventh Schedule,

therefore, does not cover cases where the Arbitrator is acting as counsel

for one of the parties.

4 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 5 ArcelorMittal India Private Limited v. Satish Kumar Gupta, reported at (2019) 2 SCC 1 20

2026:CHC-OS:14-DB

63. In the same vein, the appellants‟ reliance on Entry 11 of the Seventh

Schedule, which provides for a situation where the Arbitrator is a legal

representative of an entity, that is, a party in the arbitration, to suggest

that "legal representation" is outside the purview of Entry 2, also does

not stand to reason. Entry 11, it is argued, deals with a situation

where the Arbitration is the legal representative of an "entity", in the

sense of being the Power of Attorney holder, a person nominated under

a Board resolution or in any other way representative of a body

corporate in the way body corporates appoint representatives for

carriage of business operations.

64. The expression "represents" in Entry 2, it is argued, is used in a broad

sense to cover all manners of representation by an Arbitrator, including

professional representations as counsel/legal advisor.

65. If such professional representation is excluded from Entry 2, there will

be no entry in either of the Schedules which would cover a case where

an Arbitrator represents a party or its affiliate as a lawyer. Such a

result of the appellants‟ contention cannot be countenanced generally,

and more specifically in the light of Entry 20 of the Fifth Schedule,

which covers a situation where the Arbitrator has served as counsel for

one of the parties or an affiliate or has previously advised or been

consulted by the party or an affiliate of the party making the

appointment in an unrelated matter, but does not have any ongoing

relationship. It would be rather odd for the Arbitrator to be obliged to

make a disclosure under Entry 20 of the Fifth Schedule in relation to 21

2026:CHC-OS:14-DB

previous service as counsel, and yet to be completely at liberty to have

an ongoing relationship with a party or its affiliate. Thus, it is argued,

Entry 2 squarely covers the present case.

66. The expression "currently" in Entry 2 as well as Entries 3, 7, 24 and 30

of the Seventh Schedule has been used to denote a point of time in

praesenti and should be contradistinguished from the expression

"previous", occurring in Entries such as Entries 16 and 20, and/or the

expression "past three years" occurring in Entries 20, 29, 31, etc. It,

therefore, cannot be said that the expression "currently‟‟ only refers to a

retained lawyer or standing counsel.

67. Learned counsel for the respondents submits that it is undisputed that

the learned Arbitrator had appeared on behalf of M/s. SSSMIL on

eleven instances, which shows a regularity in professional

representation by the Arbitrator on behalf of the said company.

68. It is submitted that HRD Corporation (supra)6 was rendered in a different

context, where there was a single instance of opinion being given by a

retired Judge on a professional basis at arm‟s length in advisory

capacity.

69. Learned counsel for the respondents next deals with the scope of the

term "affiliate" used in Entry 2 of the Fifth and Seventh Schedules of

the 1996 Act. Explanation 2 uses the expression "encompasses" (seen

in contrast with the term "refers" in Explanation 1), thus, enlarging the

6 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 22

2026:CHC-OS:14-DB

ambit of the expression "affiliate" by including certain Entries while

preserving the otherwise ordinary, natural and popular meaning of the

word "affiliate". The expression "affiliate" is used 29 times in the Fifth

Schedule and 9 times in the Seventh Schedule and it would be

important to note that the same has been used qua the parties to the

arbitration, whereas the expression "close family members" is used qua

the Arbitrator personally.

70. There is nothing in the IBA Guidelines or the 246th Law Commission‟s

report which recommends amendment to Section 12 of the Arbitration

Act, to suggest that only companies were intended to be affiliates.

71. As is clear from Entry 26 of the Fifth Schedule, it is not the way in

which the term "affiliate" is sought to be understood by the Legislature,

since the word "affiliated with‟‟ has been used therein between the

Arbitrator and a partner of or another Arbitrator or any of the counsel

in the same arbitration, that is, between individuals. Thus, close

connection and association is synonymous with the expression

"affiliated with" in Entry 26.

72. An interpretation restricting the term "affiliate" to corporate entities

would be undesirable, as it would severely constrict the nature of

relationships which are sought to be subjected to

disclosure/ineligibility under the Schedules. If such a construction was

to be lent, it would be perfectly acceptable for an Arbitrator to represent

or advice the immediate family members of an individual who happens

to be a party to the dispute. Again, it would be alright for the 23

2026:CHC-OS:14-DB

Arbitrator‟s Law Firm to have a significant commercial relationship with

the close family members of an individual who happens to be a party to

an arbitration, reading Entry 7 in the manner under discussion. The

same problem would arise with a large number of other Entries in the

Schedules where "affiliate" is used.

73. Another problem which would arise is that persons in control of a

company, such as Key Managerial Personnel (KMP), as referred to in

Section 2(51) of the Companies Act, 2013, including majority

shareholders, etc., would be left out of the loop, which again will create

completely unintended consequences.

74. A construction of the expression "affiliate" which dilutes the protection

sought to be provided by the Schedules has to be eschewed in favour of

a construction which promotes and takes forward the purpose sought

to be achieved by the Schedules.

75. Taking the court through several Entries of both the Schedules, learned

counsel for the respondents seeks to reiterate the above proposition. It

is argued that such manner of construction would be in keeping with

the principle expounded in Paragraph No. 20 of HRD Corporation

(supra)7 that a fair construction of the words used therein, neither

tending to enlarge or restrict them undoubtedly, ought to be made.

76. Referring next to the 2024 IBA Guidelines, learned counsel for the

respondents contends that under the same, individuals having a

7 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 24

2026:CHC-OS:14-DB

controlling influence on the party in the arbitration and/or any person

or entity over which a party has a controlling influence have been

included within the term "affiliate". Such definition is to be seen in the

light of General Standard 6(b) of the 2014 IBA Guidelines and the

Explanation to the same, which would make it clear that a natural

person having a controlling influence over a legal entity, being a party

to an arbitration, is considered to bear the identity of such party.

Therefore, non-party individuals, who have controlling influence on a

party to the arbitration, were always within the contemplation of the

2014 IBA guidelines, even though the definition of the expression

"affiliate" therein did not explicitly say so.

77. As per HRD Corporation (supra)8, an unduly formalistic interpretation

ought not to be lent to the provisions of the Schedules.

78. In brief, it is argued that the expression "affiliate" can encompass

individuals as well. In the present case, M/s. SSSMIL is an affiliate of

BDB as also C & E Limited.

79. It is further argued by the respondents that a company can be an

„affiliate‟ even where the party to an arbitration does not have control

over it.

80. Importing the Indian test of control into the meaning of "affiliate" is

counterintuitive, since the Schedules to the 1996 Act have been

borrowed from the IBA Guidelines, which are made in the context of

8 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 25

2026:CHC-OS:14-DB

International Commercial Arbitration by arbitration practitioners and

users who come from several jurisdictions, representing diverse legal

cultures and a range of perspectives, which is stated in the 2014 IBA

Guidelines itself.

81. Where the expression "control" was intended, the draftsman specifically

did so, as exemplified in Entries 5 and 9 of the Seventh Schedule,

where such expression has been categorically used. Thus, by specific

exclusion, Entry 2 does not require controlling interest to exist for

attracting the term "affiliate".

82. Learned counsel for the respondents argues that C & E Limited and

M/s. SSSMIL are also group companies as envisaged in Cox & Kings

Ltd. (supra)9.

83. The only reason why the expression "parent company" is specifically

used in Explanation 2 to the Fifth and Seventh Schedules is because in

ordinary parlance, a parent company is not referred to as an "affiliate"

of its group companies.

84. However, the choice of the word "group companies" is significant

because it is intended to cover a much larger gamut of corporate

entities than those which are merely subsidiaries of a parent

corporation. The appellants‟ arguments, it is contended, reduces the

complex reality of corporate relationships by oversimplifying the same.

85. Learned counsel for the respondents contends that the learned

Arbitrator disregarded his own initial disclosure dated August 10, 2014,

9 Cox & Kings Ltd. v. SAP India (P) Ltd., reported at (2024) 4 SCC 1 26

2026:CHC-OS:14-DB

where he himself stated about his previous appearances for BDB and

companies within his management and control. Thus, even as per the

perception of the learned Arbitrator, M/s. SSSMIL, which was such a

company, came within the purview of an „affiliate‟ of BDB. The

continuing appearances for the said entity, thus, had to be disclosed,

since a continuous duty of disclosure is envisaged under Section 12 of

the 1996 Act, as stressed by the Hon‟ble Supreme Court in Central

Organisation for Railway Electrification (supra)10.

86. In Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd.,

reported at 2017 SCC OnLine Del 7228, it has been highlighted that a

violation of the disclosure requirement under the 1996 Act is a ground

for setting aside an award under Section 34(2)(b)(ii) of the said Act.

87. Moreover, the award, it is argued, is in contravention of the

fundamental policy of Indian law and most basic notions of justice. The

test as provided in General Standard 2(c) of the 2014 IBA Guidelines is

highlighted in this regard. It is submitted that the said test carries

forward the old line of Indian cases where the standard to recon bias is

reasonable likelihood of bias. The test of a reasonable and fair-minded

person is highlighted in this regard, for which Vinod Bhaiyalal Jain v.

Wadhwani Parmeshwari Cold Storage (P) Ltd., reported at (2020) 15 SCC

726 is relied on.

10 Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV), reported at (2025) 4 SCC 641 27

2026:CHC-OS:14-DB

88. In support of the real likelihood case, learned counsel also cites A.K.

Kraipak & Ors. v. Union of India & Ors., reported at (1969) 2 SCC 262

and International Airports Authority of India v. K.D. Bali & Anr., reported

at (1988) 2 SCC 360.

89. It is lastly pointed out by learned counsel for the respondents that the

learned Single Judge committed an obvious inadvertent error in

paragraph No. 69 of the impugned judgment in recording that the

"corruption and bias" grounds were given up. The other portions of the

judgment would go on to show that the ground of "fraud and

corruption" had been given up, and not "bias". Thus, learned counsel

for the respondents seeks the dismissal of the present appeals.

FINDINGS OF THE COURT

90. Extensive, at times convoluted, arguments have been advanced by the

parties in support of their respective cases. However, the crux of the

matter boils down to the following core issues:

(i) Whether the impugned judgment is sustainable on the grounds

cited by the learned Single Judge;

(ii) Whether the impugned judgment is perverse, being founded on

inferences not supported by materials available before the Section

34 Court;

(iii) Whether this Court, under Section 37 of the 1996 Act, can look into

additional materials not cited before the Section 34 Court; 28

2026:CHC-OS:14-DB

(iv) Whether this Court, under Section 37 of the 1996 Act, can examine

independently grounds of setting aside the arbitral award not cited

by the Section 34 Court; and

(v) Whether the learned Arbitrator violated Entries 2 or 8 of the Fifth

and Seventh Schedules of the 1996 Act.

91. The above issues are discussed below:

(i) Whether the impugned judgment is sustainable on the

grounds cited by the learned Single Judge

92. The learned Single Judge summed up his conclusions in Paragraph No.

107 of the impugned judgment. In the said paragraph, it was held that

the actions of the learned Arbitrator fell foul of the mandate under

Section 12 of the 1996 Act, particularly Grounds 11, 15, and 20 of the

Fifth Schedule and Ground 15 of the Seventh Schedule, read with

Explanation 2 thereof.

93. Whereas the Fifth Schedule contains more Entries than the Seventh

Schedule, all the grounds set forth in the Seventh Schedule also find

place in the Fifth Schedule and the language of the respective Entries in

both are identical to that extent.

94. Entry 11 in both the Schedules contemplates a bar when the Arbitrator

is a legal representative of an entity that is a party in the arbitration.

However, it is the case of none of the parties that the learned Arbitrator

appeared for any of the parties to the arbitration during the

continuance of the arbitral proceeding. Conspicuously, the term 29

2026:CHC-OS:14-DB

"affiliate" is missing in the said Entry. Thus, the legal representation in

the Entry is restricted only to "a party" in the arbitration. Since M/s.

SSSMIL, for which the learned Arbitrator appeared, is not a party to the

proceeding, Entry 11 is automatically excluded.

95. Entry 15 provides for a situation where the Arbitrator has given legal

advice or provided expert opinion on the dispute to a party or an

affiliate of one of the parties.

96. The appearances of the learned Arbitrator, which are set forth as the

ground of challenge by the respondents, was not in connection with the

present dispute at all but in a completely different proceeding where

none of the present parties were impleaded. Thus, the expression "on

the dispute", as used in Entry 15, is not satisfied in the present case.

97. Insofar as Entry 20 is concerned, the same refers to previous services of

the Arbitrator. To come within the purview of the same, the Arbitrator

had to serve as counsel within the "past three years" for one of the

parties or an affiliate thereof or had to previously advise or been

consulted by the party or an affiliate making the appointment in an

unrelated matter, but where the Arbitrator and the party or the affiliate

of the party "have no ongoing relationship".

98. Thus, three different scenarios are contemplated in Entry 20. First, the

Arbitrator had served as counsel within the past three years for a party

or its affiliate; secondly, he/she had previously advised or been

consulted by the party or an affiliate making the appointment in an 30

2026:CHC-OS:14-DB

unrelated matter and thirdly, that the Arbitrator and the party or its

affiliate do have any ongoing relationship.

99. Insofar as the previous appearances of the Arbitrator as counsel for one

of the parties, namely BDB and his companies, is concerned, the said

fact was clearly disclosed in the initial disclosure of the Arbitrator,

despite which both parties consented to his appointment. Thus, the

said ground cannot be cited anew to vitiate his appointment.

100. In the present case, none of the parties appointed the Arbitrator, thus,

taking the facts of the case outside the ambit of the second scenario as

well. Both parties had agreed in a pending suit between them to the

reference of the dispute to arbitration, upon which it is the Court which

appointed the learned Arbitrator. Thus, no question of previous advice

to or consultation with the "appointing party" or its affiliate arises.

101. Moreover, the umbrella provision governing both the first and second

scenarios, that is, the Arbitrator and the party or its affiliate have no

ongoing relationship, is also not attracted in the present case, since the

very premise of the challenge to the Arbitrator‟s mandate is that the

learned Arbitrator had an ongoing relationship with M/s. SSSMIL.

102. In view of the above, none of the criteria stipulated in Entry 20 are also

applicable to the present case.

103. Hence, all the Entries cited by the learned Single Judge in the

impugned judgment for holding the learned Arbitrator to be ineligible or

there being a reasonable apprehension of bias fall flat. 31

2026:CHC-OS:14-DB

104. The learned Single Judge also referred in general to Section 12, but

qualified such reference with the expression "in particular", restricting

such reference to the mentioned Entries of the Fifth and Seventh

Schedules.

105. In any event, the Fifth Schedule acquires relevance in the context of

Section 12(1)(a), Explanation 1 in the present case. For a proper

adjudication of the matter, Section 12 of the 1996 Act is set out in its

entirely hereinbelow:

"12. Grounds for challenge.-- (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,-- (a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject-matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and (b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months. Explanation1.--The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. Explanation 2.--The disclosure shall be made by such person in the form specified in the Sixth Schedule. (2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him. (3) An arbitrator may be challenged only if-- (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made. 32

2026:CHC-OS:14-DB

(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator: Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing."

106. Thus, where a person is approached in connection with his possible

appointment as an Arbitrator, such person is to disclose any

circumstances such as contemplated in Clause (a) of sub-section (1) of

Section 12 which is likely to give rise to justifiable doubt as to his

independence or impartiality.

107. Clause (b), pertaining the ability of the Arbitrator to devote sufficient

time to the arbitration, is not applicable in the present case at all.

108. Explanation 1 to Section 12(1) provides that the grounds stated in the

Fifth Schedule shall guide in determining whether circumstances exist

which give rise to justifiable doubts as to the independence or

impartiality of an Arbitrator, thus, tying up the Fifth Schedule

exclusively to Section 12(1) of the 1996 Act.

109. Under Section 12(2), the liability of such disclosure is continuous, from

the time of appointment of the learned Arbitrator throughout the

arbitral proceedings. Thus, in the facts of the present case, there was a

continuous liability of the learned Arbitrator to disclose his appearance

for any party or its affiliate, even if in a different proceeding, within the

contemplation of the Fifth Schedule, if at all. 33

2026:CHC-OS:14-DB

110. On the other hand, the Seventh Schedule is to be read in the context of

sub-section (5) of Section 12 which provides that notwithstanding any

prior agreement to the contrary, any person whose relationship with the

parties or counsel or the subject-matter of the dispute falls under any

of the categories specified in the Seventh Schedule shall be ineligible to

be appointed as an arbitrator, which can be subsequently waived by an

express agreement in writing.

111. The marked difference between sub-sections (1) and (5) of Section 12 is

that whereas the former provides for situations which are likely to give

rise to justifiable doubts as to the independence or impartiality of the

Arbitrator, saddling the Arbitrator with a continuous liability under

sub-section (2) of Section12 to disclose to the parties in writing such

circumstances, thereby permeating throughout the arbitral proceedings

till the award is passed, sub-section (5) is a threshold bar, which hits at

the very eligibility of the Arbitrator to be so appointed.

112. Thus, Section 12(5), read in conjunction with the Seventh Schedule,

operates at the threshold level of appointment of the Arbitrator. The

placement of sub-section (2) after sub-section (1) and its language,

which casts a liability of disclosure on the Arbitrator only in respect of

circumstances referred to in sub-section (1) and not sub-section (5),

clearly shows that, as opposed to Section 12(1), read with the Fifth

Schedule, Section 12(5) read with the Seventh Schedule only debar an

Arbitrator at the appointment stage and not thereafter. Thus, the

Entries in the Seventh Schedule, read in the light of sub-section (5) of 34

2026:CHC-OS:14-DB

Section 12, cannot operate beyond the appointment of the Arbitrator

and/or continue throughout the arbitration proceeding till the award.

Thus, by necessary implication, sub-section (5), read with the Seventh

Schedule, can at best invalidate the appointment of the Arbitrator at

that stage and cannot be a subsequent ground for vitiating the award.

113. In the present case, the learned Arbitrator categorically disclosed his

links with BDB and his companies at the stage of his appointment,

despite which such appointment was accepted and none of the parties

raised objection to the same. Hence, the Seventh Schedule cannot be a

guiding factor in vitiating the award on the ground of subsequent

appearances by the learned Arbitrator, during the arbitral proceedings,

for M/s SSSMIL.

114. Thus, it is only the Fifth Schedule which, in the light of sub-sections (1)

and (2) of Section 12, acquires relevance for considering whether the

award was vitiated by justifiable doubts as to the independence or

impartiality of the Arbitrator on the grounds set forth in the Fifth

Schedule, regarding which the learned Arbitrator had a continuous

liability to disclose in writing any circumstances coming within the

ambit of the same throughout the arbitration proceeding. Accordingly,

this Court confines its examination only to the Fifth Schedule.

115. Even otherwise, the language of the Entries in the Seventh Schedule is

identical with the corresponding Entries in the Fifth Schedule. Hence,

consideration of one would automatically amount to consideration of

the other. 35

2026:CHC-OS:14-DB

116. Going by the above discussions, we find that the impugned judgment is

not sustainable, since none of the Entries of the Fifth Schedule, read

with Section 12(1) of the 1996 Act (or for that matter the Seventh

Schedule), which were cited by the learned Single Judge, fits the

allegations against the learned Arbitrator in the present case.

117. This issue, thus, is held in the negative.

(ii) Whether the impugned judgment is perverse, being founded

on inferences not supported by materials available before

the Section 34 Court

118. From the impugned judgment, several premises for the final conclusion

of the learned Single Judge are reflected. For example, in Paragraph

No. 49 of the said judgment, the learned Single Judge held outright that

from the shareholding pattern of M/s. B.G. Chemicals Private Ltd., that

is, 27-odd percentage shareholding in M/s. SSSMIL and the other

holders of the said entity, it could be inferred that BDB had overall

control and management of M/s. SSSMIL and M/s. C & E Limited.

However, there is no preceding reason or discussion in the impugned

judgment to back up such findings or any examination of the inter-

relation between the companies-in-question and BDB to substantiate

the finding as to such control. More importantly, the learned Single

Judge went on to hold that it can also be inferred that the Managers,

Directors and employees are accustomed to acting as per the "sole wish 36

2026:CHC-OS:14-DB

and dictate" of BDB, which is also not borne out by the records, nor any

reason therefor was attributed by the learned Single Judge.

119. Again, in Paragraph No. 50 of the impugned judgment, it was observed

that BDB was personally present in most of the sittings in the

arbitration and it could, therefore, not be difficult to believe that he

"must have personally attended most of the conferences" with the

learned Arbitrator at the time of his appearances in connection with

APD No. 252 of 2015 between January and December, 2018.

120. With utmost respect, the above observations are without any material

basis whatsoever, being not substantiated by any material and or

preceding advertence to facts by the learned Single Judge.

121. Again, in Paragraph No. 54 of the impugned judgment, the learned

Single Judge held that BDB and his family members, directly or

indirectly, do control and manage M/s. SSSMIL and M/s. C & E

Limited and "the latter two companies function as per the wishes and

dictates of" BDB. The above findings are also not borne out by any

reasoning or materials.

122. In view of the above findings being patently perverse, being not

supported by evidence and falling in the realm of conjecture, the same

could not form the basis for reaching the conclusion that a reasonable

apprehension of bias was raised against the learned Arbitrator.

123. Thus, the impugned judgment is perverse, being founded on inferences

not supported by the materials available or discussed by the learned

Single Judge. 37

2026:CHC-OS:14-DB

(iii) Whether this Court, under Section 37 of the 1996 Act, can

look into additional materials not cited before the Section

34 Court

124. The 1996 Act, like most other appellate hierarchies, provides for a

pyramidal structure of challenge, tapering off as it goes upwards.

125. Section 5 of the 1996 Act precludes judicial intervention except as

provided for in Part-I of the said Act, pertaining to domestic

arbitrations. Thus, unlike the general powers of a civil appellate court,

the contours of interference under Section 34 of the 1996 Act are to be

strictly construed, being confined within the limits of the said provision.

126. An appeal under Section 37 against a judgment passed under Section

34 derives colour from the parameters of Section 34. In fact, the scope

of interference under Section 37, being an appellate court, is stricter

than the Section 34 Court itself.

127. There is nothing in the 1996 Act comparable to the provisions of Order

XLI Rule 27 of the Code of Civil Procedure, which is available in a

regular civil appeal, in order to permit the production of additional

evidence in a Section 37 Appeal under the 1996 Act. Furthermore,

Order XLI Rule 33 of the Code of Civil Procedure lends wings to the

appellate court in a regular civil suit to travel beyond the contours of

the specific challenge before it and explore whether further or other

decrees can be granted, even in cases there is no challenge to a

particular portion or component of the decree impugned therein. 38

2026:CHC-OS:14-DB

However, such luxury is not available to an appellate court under

Section 37 of the 1996 Act. Hence, the scope of an appeal under

Section 37 is extremely limited and cannot accommodate the

consideration of further and new documents which were not specifically

available before the Section 34 Court, unless there is some completely

new development subsequent to the disposal of a Section 34 application

which hits at the root of the matter, in which case there might be a

restricted power of the Section 37 Court to consider the same.

128. Hence, completely new materials, which could be obtained during

pendency of the Section 34 application but were not furnished before

the court taking up the challenge under Section 34, cannot be

permitted to be produced before the Section 37 court for the first time.

129. A question which arises consequentially is whether documents which

were not specifically referred to in the Section 34 applications but were

produced before the Section 34 Court can be looked into under Section

37. The answer to that is, in our opinion, in the positive. It is well-

settled that proof need not be pleaded and if the rudiments of pleadings

to support evidence are there, the court is duty-bound to look into the

materials produced in support of such pleadings. Hence, there is no

reason as to why documents which were produced before the Section

34 Court and thus were available for consideration by the said Court,

although not specifically mentioned in the Section 34 applications,

cannot be looked into by the Section 37 Court. 39

2026:CHC-OS:14-DB

130. Such proposition holds true particularly in the facts of the present case,

where the challenge under Section 34 of the 1996 Act was on the basis

of acts of the learned Arbitrator which came to the knowledge of the

award debtors only after the passing of the award.

131. The reliance of the appellants on Mica Export Promotion Council (supra)11

is not quite apt in the context of the present case. In the said case, the

court was considering whether the suppression of material facts from

the court was bona fide. In such context, it was held that the

petitioners should have clearly stated the relevant facts in the body of

the petition and should have offered their explanation with regard to

the same if they had any to offer. Thus, the facts of the said case were

different from the case at hand and the said report cannot be an apt

precedent for the present consideration.

132. As opposed thereto, the documents relied on by the present

respondents were produced in support of their contentions before the

Section 34 Court and were available for consideration by the said court.

No useful purpose would be subserved insofar as the present

respondents are concerned in withholding such documents or not

mentioning them specifically in the pleadings, since such documents

could only enure to their benefit. Thus, the context of Mica Export

Promotion Council (supra)11 is not applicable in the present case at all.

Although it is well-settled that there cannot be any proof beyond

11 Mica Export Promotion Council and Others v. G.C.L. Joneja & Ors., reported at 72 C.W.N. 117 40

2026:CHC-OS:14-DB

pleadings, in the present case, the rigours of the Code of Civil Procedure

are not applicable per se to an arbitral proceeding or a proceeding in

connection therewith. In fact, it was the duty of the Section 34 Court to

look into the materials produced before it in the backdrop of the

allegation that the present respondents, the challengers in the Section

34 applications, only came to know about the alleged offending acts of

the learned Arbitrator after the passing of the award. Hence, for all

practical purposes, the Section 34 Court was the original court taking

up the said issues and it was the incumbent duty of the said court to

look into the same. Thus, the said court had power to look into the

documents produced before it to ascertain whether the yardsticks of the

Fifth and Seventh Schedules were met.

133. The language of sub-sections (2) and (2A) of Section 34 of the 1996 Act

make it abundantly clear that if the court finds, in an application under

Section 34, the infraction of any of the Entries in the said Schedules,

there might be an interference on the ground of patent illegality or

contravention of the public policy of law in India and/or basic

principles of morality and justice. The expression "if the court finds"

confers wide powers on the court itself to look into the materials placed

before it, without being unnecessarily fettered by the restrictions of the

pleadings of the parties.

134. The powers available to the Section 34 Court are, in any event,

applicable to the court taking up an appeal under Section 37 from the

judgment passed under Section 34 of the 1996 Act. Such proposition is 41

2026:CHC-OS:14-DB

strengthened by the observations made by the Hon‟ble Supreme Court

in SAL Udyog Private Limited (supra)12, as followed by a learned Single

Judge of the Bombay High Court in the matter of Shri. Ravi Raghunath

Khanjode (supra)13.

135. A careful examination of the above go on to show that although the

court, under Section 34 and under Section 37 (in an appeal from a

Section 34 judgment) can look into the materials produced before the

Section 34 Court, additional materials not before the Section 34 Court

cannot, for the first time, be considered by the Section 37 Court at all.

(iv) Whether this Court, under Section 37 of the 1996 Act, can

examine independently grounds of setting aside the arbitral

award not cited by the Section 34 Court

136. As discussed while deciding Issue No. (iii) above, in terms of the ratio of

SAL Udyog Private Limited (supra)13, followed by different High Courts,

the Section 34 Court and, consequentially, the appellate court in an

appeal under Section 37 against a Section 34 judgment, are not fettered

by the restrictions of the pleadings and can, by themselves, look into all

materials produced before the Section 34 Court.

137. In view of the expression "the court finds" as used in sub-sections (2)(b)

and (2A) of Section 34 of the 1996 Act, the Section 34 Court as well as

the Section 37 Court can independently examine whether the grounds

12 State of Chhattisgarh and another v. SAL Udyog Private Limited, reported at (2022) 2 SCC 275 13 Shri. Ravi Raghunath Khanjode & Ors. v. Harashiddh Corporation 42

2026:CHC-OS:14-DB

stipulated in law for setting aside an arbitral award, even if not cited by

the Section 34 Court, can be looked into.

138. In view of the above, this Court can, sitting in judgment over the

decision of the Section 34 Court, independently consider as to whether

the tests laid down in the relevant Entries under the Fifth and Seventh

Schedules as well as Section 12 of the 1996 Act are met in the present

case, to ascertain whether justifiable doubts as to the independence

and integrity of the learned Arbitrator were raised.

(v) Whether the learned Arbitrator violated Entries 2 or 8 of the

Fifth and Seventh Schedules of the 1996 Act

139. This issue comprehensively covers the merits of the case and can be

sub-divided into several sub-issues, which we proceed to deal with

hereinbelow:

(a) HRD Corporation (supra) principle

140. The Two-Judge Bench decision in HRD Corporation (supra)14 is the

guiding light for interpretation of the Fifth and Seventh Schedules of

the 1996 Act. Paragraph No. 20 of the said judgment is set forth

hereinbelow for the sake of convenience:

"20.However, to accede to Shri Divan's submission that because the grounds for challenge have been narrowed as aforesaid, we must construe the items in the Fifth and Seventh Schedules in the most expansive manner, so that the remotest likelihood of bias gets removed, is not an acceptable way of interpreting the Schedules. As has been pointed out by us hereinabove, the items contained in the

14 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 43

2026:CHC-OS:14-DB

Schedules owe their origin to the IBA Guidelines, which are to be construed in the light of the general principles contained therein--that every arbitrator shall be impartial and independent of the parties at the time of accepting his/her appointment. Doubts as to the above are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case in reaching his or her decision. This test requires taking a broad commonsensical approach to the items stated in the Fifth and Seventh Schedules. This approach would, therefore, require a fair construction of the words used therein, neither tending to enlarge or restrict them unduly. It is with these prefatory remarks that we proceed to deal with the arguments of both sides in construing the language of the Seventh Schedule."

141. The Hon‟ble Supreme Court, in the above judgment, laid stress on the

"reasonable third person" test. Such reasonable third person, however,

has to have knowledge of the relevant facts and circumstances to

assess whether there was a likelihood of the Arbitrator being influenced

by extraneous factors other than the merits of the case in reaching

his/her decision.

142. The contours of such test are defined to incorporate a "broad

commonsensical approach" to the items stated in the Fifth and Seventh

Schedules. It was further stressed by the Hon‟ble Supreme Court that

this approach would require "a fair construction of the words used

therein, neither tending to enlarge or restrict them unduly". The

Hon‟ble Supreme Court recognized in Paragraph No. 14 of the said

report the fact that the enumeration of grounds given in the Fifth and

Seventh Schedules of the 1996 Act, as amended with effect from 2015,

have been taken from the IBA Guidelines, particularly from the Red and

Orange Lists thereof. 44

2026:CHC-OS:14-DB

143. The said judgment of the Hon‟ble Supreme Court was delivered on

August 31, 2017, when the 2014 IBA Guidelines were in force. It is

relevant to note that the Fifth and Seventh Schedules were incorporated

by the 2015 Amendment to the 1996 Act, which was notified on

November 12, 2018, with retrospective effect from October 23, 2015.

By bodily lifting provisions from the 2014 IBA Guidelines, the

Legislature resorted to the doctrine of "legislation by incorporation",

thereby incorporating portions of the then existing 2014 IBA

Guidelines, to the extent as chosen by the Legislature, into and as a

part of the 1996 Act. Once incorporated, as opposed to "legislation by

reference", the said provisions became a part of the statute and derived

force therefrom.

144. In legislation by incorporation, as opposed to legislation by reference,

the incorporated portion of a piece of legislation/guidelines becomes a

part of the incorporating statute. On the other hand, in case of

legislation by reference, the incorporating statute merely refers to the

other statute and, as a result, if the other statute is subsequently

amended or undergoes a change or is repealed, the same would affect

the incorporating statute.

145. However, in the present case, since the relevant provisions of the 2014

IBA Guidelines were made a part of the 1996 Act, the subsequent

changes to the 2014 Guidelines or amendments thereto could not have

any effect on the Fifth and Seventh Schedules, which had already

become a part of the 1996 Statute and derived force therefrom. 45

2026:CHC-OS:14-DB

146. In such view of the matter, construed in proper context, it is the 2014

Guidelines which was prevalent at the time when the amendment with

effect from October 23, 2015 took place and the judgment in HRD

Corporation (supra)15 was delivered, which is germane for the present

consideration. The subsequent amendments to the IBA Guidelines in

the year 2024 do not have any material bearing whatsoever in

construing the Fifth and Seventh Schedules. Hence, the reference of

the respondents to the 2024 IBA Guidelines is completely misplaced.

147. In such backdrop, the court has to adopt a fair construction of the

words used in the Fifth and Seventh Schedules, neither tending to

enlarge nor restrict them unduly, in the light of the general principles

contained in the then-existing 2014 IBA Guidelines.

(b) Whether Seventh Schedule of the 1996 Act is

applicable

148. As discussed above, Section 12(5) of the 1996 Act provides that any

person whose relationship with the parties or counsel or the subject-

matter of dispute falls under any of the categories specified in the

Seventh Schedule shall be ineligible to be appointed as an Arbitrator.

Again, the Seventh Schedule refers to Section 12(5) as its source. In

view of the language employed in sub-section (5) of Section 12, the

Entries in the Seventh Schedule pertain only to the eligibility at the

15 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 46

2026:CHC-OS:14-DB

juncture of appointment of an Arbitrator and not thereafter. Hence, the

Seventh Schedule is not germane in the present context at all.

149. As opposed thereto, the Fifth Schedule refers to Section 12(1).

Complementarily, Explanation 1 to Section 12(1) also provides that the

grounds stated in the Fifth Schedule shall guide in determining whether

circumstances exist which give rise to justifiable doubts as to the

independence or impartiality of an Arbitrator.

150. Section 12 (1)(a) speaks about circumstances which are likely to give

rise to justifiable doubts as to the independence or impartiality of an

Arbitrator which are mandatorily to be disclosed at the time of his

appointment.

151. Sub-section (2) of Section 12 extends the time of such disclosure

throughout the arbitral proceedings by referring specifically to the

circumstances referred to in sub-section (1), unless the parties have

already been informed of the circumstances of the Arbitrator.

152. Thus, the requirement of continuous disclosure as envisaged in Section

12 (2), throughout the arbitral proceedings, pertains only to the

circumstances relating to justifiable doubts as to the

impartiality/independence of the Arbitrator, as specified in Section 12,

sub-Section (1), read with the Fifth Schedule, of the 1996 Act and not

to the threshold ineligibility of appointment as Arbitrator as stipulated

in Section 12 (5), read with the Seventh Schedule.

153. Hence, it is the Fifth Schedule which is to be looked into in the present

case, and not the Seventh Schedule. In any event, since the relevant 47

2026:CHC-OS:14-DB

Entries are identical in both the Schedules, such distinction does not

make much of a difference insofar as the present consideration is

concerned.

(c) Entry 2 of the Fifth Schedule of the 1996 Act

154. Both the parties have laid pivotal stress on Entry 2 in their arguments.

155. Entry 2 of the Fifth Schedule provides that the Arbitrator currently

represents or advises one of the parties or the affiliate of one of the

parties and comes under the head "Arbitrator‟s relationship with the

parties or counsel".

156. There are two aspects of consideration here - the connotation of the

expression "currently represents" and the term "affiliate". The term

"advises" is not germane as such, since the allegations of the

respondents primarily concerns the appearance of the learned

Arbitrator for M/s. SSSMIL on eleven occasions during the pendency of

the arbitral proceedings, and not any advice given by him to the said

company.

157. Insofar as the expression "currently represents" is concerned, the

appellants have placed reliance on HRD Corporation (supra)16. However,

the context of the said case was entirely different, where a single

instance of legal advice in an unrelated matter was cited as a ground of

ineligibility of the Arbitrator, which was turned down by the Hon‟ble

16 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 48

2026:CHC-OS:14-DB

Supreme Court by observing that such single instance could not be

construed as the services of the learned Arbitrator as a regular advisor

or a person who currently advises a party to the arbitration. In such

context, it was held that the element of being connected in an advisory

capacity with a party is to be looked into. Hence, HRD Corporation

(supra)17 is not squarely applicable in the facts of the present case.

158. The allegation in the instant case is that the learned Arbitrator had

appeared as counsel for M/s. SSSMIL in an unrelated proceeding

during the arbitration proceeding. The expression "currently

represents" has two facets - „currently‟ and „represents‟, both of which

have a flavour of the present continuous tense.

159. Borrowing the principles of Order III of the Code of Civil Procedure, a

person can act as a representative of a party before a court of law if

given a Power of Attorney to do so or a Vakalatnama as an Advocate on

Record. An Arbitral Tribunal is a judicial forum for all practical

purposes and, as such, the same principle should be applied for

construction of the term "representation".

160. A counsel, as opposed to an Advocate on Record, is engaged for specific,

discrete and isolated appearances, on each such occasion. It may very

well be that a particular counsel of preference is engaged for appearing

for a party on several occasions. However, neither does a counsel, as

opposed to an Advocate on Record, have the liability to mandatorily

appear on each and every occasion on behalf of a party, nor does a

party to a litigation have the duty to engage a particular counsel on 49

2026:CHC-OS:14-DB

every occasion when the matter is taken up for hearing. It may

perchance happen that a particular preferred counsel is engaged for

appearing on several occasions, consecutive or otherwise, while in some

other cases, there may be an off-and-on engagement, to appear for

important hearings or on particular occasions. Thus, there is no

mutual liability or relationship between a party and its counsel to

engage or act for each other respectively in a case on a continuous

basis. The very nature of the engagement of a counsel has, thus, an

element of independence on behalf of both the counsel and the party

and a counsel or a party may choose not to represent or engage, as

applicable, each other continuously. Hence, the expression "currently

represents" is not strictly applicable to a counsel-party relationship.

161. The matter would be otherwise in respect of an Advocate on Record,

who has the continuous liability, unless a change is given, to act on

behalf of the party who empowers him to so appear by executing a

Vakalatnama. The party also cannot appear through other advocates

unless a „No Objection‟ is specifically given or obtained from its

Advocate on Record or engaged law firm. Hence, the expression

"currently represents", as used in Entry 2 of the Fifth Schedule, is

strictly not applicable to a counsel, irrespective of the number of

occasions on which such counsel was engaged in a particular matter

during a particular period.

162. Moreover, unless the same counsel is consistently engaged over a

period of time to appear for a particular party in all or most of its 50

2026:CHC-OS:14-DB

litigations, no element of regularity can be attributed to such

representation.

163. The argument of the appellants that Entry 2 does not take within its

fold "legal" representation, however, cannot be accepted, since the

expression "represents or advises" has been kept by the Legislature

deliberately wide enough to encompass relationships of all natures, be

it representation or advice in the field of law or otherwise.

164. Yet, in view of the above discussions, the expression "currently

represents" could not be said to be applicable to the learned Arbitrator

in the present case, who was engaged in the capacity of counsel to

represent M/s. SSSMIL in a particular case during the relevant period.

165. Moving on to the next component, it is to be ascertained whether M/s.

SSSMIL was an "affiliate" of any of the parties to the arbitration within

the contemplation of Explanation 2 to the Fifth Schedule of the 1996

Act.

166. Elaborate arguments have been extended by both parties on the said

question. However, certain arguments can be eliminated at the

threshold. Reliance of the respondents on S. Sundaram Pillai and

Others v. V.R. Pattabiraman and Others, reported at (1985) 1 SCC 591 is

not apt in the context of the case. In the said case, the Supreme Court

laid down the proposition that the Explanation is merely to incorporate

an instance of the main provision and cannot negate rights conferred by

the main provision. Explanation 2 of the Fifth Schedule does not do

anything of that sort and in no way negates the effect of the main 51

2026:CHC-OS:14-DB

Entries to the Fifth Schedule where the term "affiliate" has been used;

rather, it elaborates and illustrates the applicability of the term

"affiliate" as used in the relevant Entries of the Fifth Schedule. Thus,

the S. Sundaram Pillai17 proposition is not applicable at all in the facts

of the present case.

167. The respondents seek to rely on several documents in a bid to explain

the expression "affiliate‟‟, which however, have no direct bearing on the

present consideration. For example, the Achutan Report of the

Takeover Regulations Advisory Committee operates in an entirely

different field than the present one, in respect of corporate takeovers

within the contemplation of the SEBI Guidelines. The context and

perspective of the term „affiliate‟ in a special delegated legislation in the

specific context of acquisition of shares of a target company has no

manner of bearing in interpreting the provisions of the 1996 Act, where

the expression is used merely to establish a nexus between the

Arbitrator and one of the parties.

168. As held in HRD Corporation (supra)18, an unnecessarily expansive

construction cannot be attributed to the provisions of the Fifth

Schedule, even going by the 2014 IBA Guidelines.

169. Again, Rule 13 of the Competition Rules operates in a completely

different field, in respect of the effects of competition in the market.

17 S. Sundaram Pillai and Others v. V.R. Pattabiraman and Others, reported at (1985) 1 SCC 591 18 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 52

2026:CHC-OS:14-DB

The definition of "affiliate" in such specific and limited context cannot

be equated with the normal connotation of the term „affiliate‟ in

corporate law, insofar as the eligibility of an Arbitrator is concerned.

The same ratio applies to the Notification dated July 17, 2008 issued by

the Petroleum and Natural Gas Regulatory Board, which operates in its

own sphere and cannot be imported to a completely unrelated

consideration than that under the 1996 Act.

170. Rather, in construing the said provision, the "Group of Companies"

doctrine, as laid down in Cox & Kings Ltd. (supra)19, also relied on by

the respondents, is required to be looked into. Certain paragraphs of

the said judgment are of utmost importance in understanding the

concept laid down therein. The said paragraphs are set out

hereinbelow:

"87. The phenomenon of group companies is the modern reality of economic life and business organisation. Group companies are a set of separate firms linked together in formal or informal structures under the control of a parent company. The group companies can be defined in the Indian context as "an agglomeration of privately held and publicly traded firms operating in different lines of business, each of which is incorporated as a separate legal entity, but which are collectively under the entrepreneurial, financial, and strategic control of a common authority, typically a family, and are linked by trust-based relationships forged around a similar persona, ethnicity, or community." [ Jayati Sarkar, "Business Groups in India" in Asli Coplan, Takashi Hikino & James Lincoln (Eds.), The Oxford Handbook of Business Groups (2010) 299] A group company involving the parent and subsidiary companies is created for myriad purposes such as limiting the liability of the parent corporation, facilitating international trade, entering into business ventures with investors, establishing domestic corporate residence, and avoiding tax liability.

19 Cox & Kings Ltd. v. SAP India (P) Ltd., reported at (2024) 4 SCC 1 53

2026:CHC-OS:14-DB

***

90. The separateness of corporate personality will be ignored by courts in exceptional situations where a company is used as a means by the members and shareholders to carry out fraud or evade tax liabilities. If the Court, on the basis of factual evidence, determines that the company was acting as an agent of the members or shareholders, it will ignore the separate personality of the company to attribute liability to the individuals. In Telco Ltd. v. State of Bihar [Telco Ltd. v. State of Bihar, 1964 SCC OnLine SC 111 : (1964) 6 SCR 885] , the issue before a Constitution Bench of this Court was whether a company could be treated as a citizen for the purposes of maintaining a writ petition under Article 32 of the Constitution. The Company urged that the corporate veil should be lifted to treat the petition as one filed by the shareholders. This Court held that the veil of a corporation can be lifted where fraud is intended to be prevented or trading with an enemy is sought to be defeated.

***

92. The application of the doctrine of lifting the corporate veil rests on the overriding considerations of justice and equity. [DDA v. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622] Often, the Courts pierce the corporate veil when maintaining the separateness of corporate personality is found opposed to justice, convenience, and public interests. [Kapila Hingorani (1) v. State of Bihar, (2003) 6 SCC 1 : 2004 SCC (L&S) 586] In Balwant Rai Saluja v. Air India Ltd. [Balwant Rai Saluja v. Air India Ltd., (2014) 9 SCC 407 : (2014) 2 SCC (L&S) 804] , this Court cautioned that the principle of piercing the corporate veil should be applied in a restrictive manner and only in scenarios where it is evident that the subsidiary company was a mere camouflage deliberately created by the holding company for the purpose of avoiding liability. It was further observed that the intent of piercing the corporate veil must be such that would seek to remedy a wrong done by the holding company. In the context of arbitration, the principle of piercing the corporate veil has been sparingly used because it disregards the intention of the parties by emphasising on the overriding considerations of good faith and equity to bind the non-signatories to an arbitration agreement.

93. Moreover, since the companies in a group have separate legal personality, the presence of common shareholders or Directors cannot lead to the conclusion that the subsidiary company will be bound by the acts of the holding company. The statements or representations made by promoters or Directors in their personal capacity would not bind a company. Similarly, the mere fact that the two companies have common shareholders or a common Board of Directors will not constitute a sufficient ground to conclude that they are a single economic entity. The single economic entity or the single economic unit theory imposes general enterprise liability on the corporate group. In D.H.N. Food 54

2026:CHC-OS:14-DB

Distributors Ltd. v. Tower Hamlets London Borough Council [D.H.N. Food Distributors Ltd. v. Tower Hamlets London Borough Council, (1976) 1 WLR 852 (2) (CA)] , Lord Denning held that a group of three companies should be treated as a single economic entity on the basis of two factors : first, the parent company owned all the shares of the subsidiary companies to the extent that it controlled every movement of the given subsidiary companies; and second, all the three companies in the group virtually acted as partners and could not be treated separately. Thus, the determination of whether two or more companies constitute a single economic entity depends upon the concerted efforts of the companies to act in pursuance of a common endeavour or enterprise."

171. The Group of Companies doctrine was propounded and explained in the

said judgment while considering whether non-signatories to an

arbitration agreement can, under certain circumstances, be brought

within the fold of arbitration between the signatories. The Hon‟ble

Supreme Court, in Paragraph No. 87, categorically laid down that the

phenomenon of group companies is a modern reality of economic life

and that group companies are a set of separate firms linked together in

formal or informal structures under the control of a parent company

(emphasis supplied). Companies under the strategic control of a

common authority, typically a family, were taken into consideration. At

the same time, involvement of parent and subsidiary companies or a

parent corporation was highlighted in the said report. In fact, the

Hon‟ble Supreme Court, in Paragraph No. 91 of the decision, took note

of situations where a holding company completely dominates the affairs

of the subsidiary company to the extent of misusing its control, to avoid

or conceal the liability.

172. In Paragraph No. 92, again, it was observed that the intent of piercing

the corporate veil must be such that would seek to remedy a wrong 55

2026:CHC-OS:14-DB

done by the holding company. Under the normal company

jurisprudence, only in cases of fraud or manifest evasion of tax

liabilities, the doctrine of piercing of corporate veil is used. However,

the Hon‟ble Supreme Court cautioned that in the context of arbitration,

the said principle has been sparingly used because it disregards the

intention of the parties by emphasising on the overriding considerations

of good faith and equity to bind the non-signatories to an arbitration

agreement. It was highlighted that, as opposed to the doctrine of alter-

ego or piercing the corporate veil, which operates in the sphere of

misuse of control to avoid or conceal liability, the Group of Companies

doctrine would be deployed to test the intention of parties by

emphasising on considerations of good faith and equity.

173. Read in such context, an affiliate has to be the part of a "solar system"

revolving around the parent/holding company, as rightly argued by the

appellants in the present case, there being a parent company or a

holding company under which there are subsidiary companies which

are sibling companies inter se.

174. Such an interpretation is also in consonance with Explanation 2 to the

Fifth Schedule of the 1996 Act, which provides that the term "affiliate"

encompasses all companies in one group of companies including the

parent company.

175. Although the expression "encompasses" has been used in Explanation

2, it is a sufficient indicator as to the meaning intended to be lent to the

term "affiliate" in the relevant Entries of the said Schedule. The use of 56

2026:CHC-OS:14-DB

the expression "encompasses" is only to highlight that not only all

companies in a group of companies are covered by affiliate but that the

parent company is also included. Such choice of language has been

deliberately used since, in general, the parent company itself is

sometimes excluded in the common perception from the group of

companies which are subsidiaries thereto. The expression

"encompasses", although indicating under normal circumstances that

the definition is inclusive, such inclusivity simultaneously indicates

that the expression is intended to be applied only to corporate entities.

Otherwise, there would be no need for the Legislature to provide for

Explanations 1 and 2 separately. Explanation 1 defines the term "close

family member" and refers to biological individuals or natural entities.

On the other hand, Explanation 2 defines "affiliate", which refers to

corporate entities. The segregation of Explanations 1 and 2 is also an

indicator of the intention of the Legislature to refer respectively to

natural persons and corporate entities in the said two Explanations.

176. There would be no necessity for the Legislature to use the term

"affiliate" if it was intended to be used for natural entities, in which case

the term "family member" or "close family member" could very well be

used. The expression "close family member" and "close family

relationship" has, in fact, been used in several entries of the Fifth

Schedule and the Seventh Schedule where it refers to biological entities,

where the intention of the Legislature was to refer to natural persons.

As opposed thereto, the expression "affiliate" has been used only with 57

2026:CHC-OS:14-DB

reference to corporate entities. Nothing prevented the Legislature, in its

wisdom, to use the expression "affiliate or family members", if it

intended to do so in Entry 2 as well. Having deliberately not done so, it

is clear that only corporate entities were sought to be covered by the

umbrella term "affiliate".

177. Even otherwise, if applied to natural persons or biological entities, the

term "affiliate", as derived from its etymological root, refers to a filial

relationship only and cannot refer to a cross-relation between a natural

person and a corporate entity. Thus, the interpretation sought to be

lent to the term "affiliate" by the present respondents is not tenable in

the eye of law.

178. If the term "affiliate" is construed to apply in the context of natural

persons too, it would not only go against the grain of Explanation 2 to

the Fifth Schedule, but would then throw open a wide variety of

possible relationships between individuals, without any governing

parameter being provided in the Statute. Since the Legislative intent, as

evident from Explanation 1 of the Fifth Schedule and the Entries where

the expression "close family relation" has been deployed, is to

specifically use such term within the limits defined by Explanation 1

where natural persons are concerned, the interpretation sought to be

lent to "affiliate" in respect of natural persons would defy such

intention. In that event, a Pandora‟s Box would be cracked open,

permitting the expression "affiliate" to be applied to an infinite range of 58

2026:CHC-OS:14-DB

relations of the parties to an arbitration proceeding, without there being

any legislative boundary or parameter to restrict it.

179. Hence, the term "affiliate" has to be used in respect of corporate entities

only. Furthermore, since Explanation 2 of the Fifth Schedule

contemplates a "solar system" structure (borrowing from the expression

as used by learned senior counsel for the appellants), where there is a

parent/holding company having sibling companies under it, an element

of „control‟ exerted by the parent company over the group companies is

also required to be established to bring a corporate party within the fold

of "affiliate", as envisaged in Entry 2 of the Fifth Schedule.

180. As such, we now proceed to assess whether such element of „control‟

has been established in the present case.

(d) Control

181. It has been argued by the appellants that for an entity to be an

"affiliate" of a party to the arbitration, there has to be an element of

control exerted by such party on its affiliate. Such view is supported by

the definition of the term "affiliate" as given in Explanation 2 to the

Fifth Schedule.

182. Thus, the next aspect which is required to be considered is the meaning

of "control", as construed generally in Indian company jurisprudence. 59

2026:CHC-OS:14-DB

183. As explained in ArcelorMittal India Private Limited (supra)20 as well as

Vodafone International Holdings BV (supra)21 and referred to in the

unreported judgment of this Court in Universal Cables Limited (supra)22,

the control over a company is the direct fall-out of the shareholding of a

person or entity in a company and is tied up inextricably with the

shareholding and the incidents of shareholding.

184. The respondents in the instant case have not produced any document

to show cross-holdings among C & E Limited and M/s. SSSMIL. Even

going by the admitted position in the present case, the shareholding of

the so-called promoter group of BDB in M/s. SSSMIL comes to about

35.42%, which is much less than 50%. The argument of the

respondents that the remaining 64.58% shareholding, being held by the

public, cannot be said to confer any control on the other shareholders,

cannot be accepted. It can very well be that the public in general is an

unorganised body of persons. However, fact remains that even if the

promoter and promoter group of M/s. SSSMIL wanted to have positive

control over the decisions of the said company, the mere shareholding

of 35.42% would not confer such power on the said group.

185. Even otherwise, individuals in the promoter group have a shareholding

of only 9.67% and the remaining 25.75% is held by body corporates.

Among the body corporates, 25.68% is held by B.G. Chemicals Private

20 ArcelorMittal India Private Limited v. Satish Kumar Gupta, reported at (2019) 2 SCC 1 21 Vodafone International Holdings BV v. Union of India and another, reported at (2012) 6 SCC 613 22 Universal Cables Limited v. Arvind Kumar Newar and Ors. (APO No. 89 of 2020) 60

2026:CHC-OS:14-DB

Limited, where BDB himself has only 80 equity shares and his HUF

holds 1900 equity shares out of the total issued share capital of 10,000.

Thus, even in the capacity of shareholders, it cannot be said that BDB

had unfettered and pervasive control over B.G. Chemicals Private

Limited. The tertiary relationship, thus, between BDB and M/s.

SSSMIL, for which the learned Arbitrator appeared, is extremely remote

and in the absence of any positive proof of the cross-shareholdings

between the said companies, or between M/s. C & E Limited, the other

party to the arbitration proceeding, and M/s. SSSMIL to such an extent

to vest absolute controlling power on BDB or M/s. C & E Limited, it

cannot, by any stretch of imagination, be held that M/s. SSSMIL was

an affiliate of M/s. C & E Limited or BDB or vice versa.

186. In fact, the context in which Cox & Kings Ltd. (supra)23 laid down the

proposition of Group of Companies was that a non-signatory to an

arbitration agreement, under certain circumstances, by application of

such doctrine, can be construed to be a party to the arbitration.

However, in the present case, no proof comes forth before any of the

forums that the cross-holdings of shares between BDB, M/s. C& E

Limited and M/s. SSSMIL was of such a nature that the group of

companies doctrine would be applicable and M/s. SSSMIL would be

elevated to the platform of a party to the arbitration proceeding even

without being a signatory to the arbitration clause. Hence, per se, the

23 Cox & Kings Ltd. v. SAP India (P) Ltd., reported at (2024) 4 SCC 1 61

2026:CHC-OS:14-DB

Cox & Kings Ltd. (supra)23 principle cannot come to the aid of the

respondents at all.

187. In the light of the above discussions, this Court is of the firm opinion

that the respondents have failed to prove the criteria set out in Entry 2

of the Fifth Schedule to be applicable to the present case merely in view

of the appearance on certain occasions by the learned Arbitrator as

counsel of M/s. SSSMIL during the present arbitral proceedings.

188. For the sake of completion, even though the respondents have not

argued specifically the applicability of Entry 8 of the Fifth Schedule, for

the ends of justice, this Court chooses to look into the said aspect of the

matter as well.

189. However, the said Entry is also not attracted in the present case, since

it is the case of neither party that the learned Arbitrator advised the

appointing party or an affiliate. First, there was no "appointing party"

in the present case, as the appointment was by the court. Secondly,

appearance as counsel does not tantamount to "advising" a party or its

affiliate. Thirdly, the question of regularity of any such "advice" does

not arise at all, having not been pleaded by the respondents at any

stage.

190. Thus, this issue is held in favour of the appellants and against the

respondents.

62

2026:CHC-OS:14-DB

CONCLUSION

191. There cannot be any manner of doubt that an Arbitrator has the

continuous duty to disclose any circumstances which might create

justifiable doubts to his independence and integrity throughout the

arbitral proceedings. Such duty is cast by Section 12 (2) and has been

reaffirmed in Central Organisation For Railway Electrification (supra)24.

However, in view of our finding that none of the Entries in the Fifth

Schedule, read with Section 12 (1) of the 1996 Act, are attracted in the

instant case, such duty did not arise at all insofar of the learned

Arbitrator in the present case is concerned.

192. Before parting with the matter, another facet of the same is required to

be adverted to.

193. During arguments, learned counsel for the respondents insinuates that

the standard of fairness of the Arbitrator has to be such that it

eliminates any reasonable apprehension of bias. The learned Single

Judge also proceeded on the premise that Justice must not only be

done but must be manifestly seen to have been done. Yet, we have to

draw a line of distinction in that regard between the standards to be

applied to an Arbitrator and those applicable to courts of law.

194. In respect of the latter, the Bangalore Principles of Judicial Conduct is

generally taken to be the touchstone of judicial independence and

integrity. Yet, such strict yardsticks cannot be made applicable in

24 Central Organisation For Railway Electrification v. ECI SPIC SMO MCML (JV), reported at (2025) 4 SCC 641 63

2026:CHC-OS:14-DB

respect of Arbitrators, for the simple reason that the premise of the

Alternative Dispute Resolution mode of arbitration is party autonomy.

The parties to an arbitration agreement are free to choose any person

whomsoever as their chosen arbiter. Thus, arbitrators may come from a

wide pool of people, from varied walks of life. By the very nature of such

choice, arbitrators are generally chosen from the specific field of

knowledge pertaining to the disputes involved and, as such, have

current and/or past professional engagements in the very domain of

expertise involved in such disputes, as opposed to Judges in courts of

law, who are expected by and large to abstain not only from public life

and to refrain from expressing their opinions in public about subject-

matters which are or might come before them for adjudication, but also

to avoid having involvements which may give rise to conflicting interests

in the adjudicatory process. After all, judges are supposed to be

exemplary in conduct, both in and out of the court, rising above any

shadow of doubt regarding their integrity.

195. However, if such strict restrictions are imposed on arbitrators, who are

otherwise largely chosen from a pool of professionals having prior or

current engagements in the specific domain of expertise involved in the

dispute, the very core of party autonomy would be frustrated, since

then the range of choice of arbitrators will get severely restricted to

persons having little or no practice in the field, which will in turn give a

premium to incompetent persons having little experience in the domain

being left to be appointed as arbitrators. This would be counter- 64

2026:CHC-OS:14-DB

productive to the very purpose of the 1996 Act, which is to give a fillip

to Alternative Dispute Resolution in order to make India a hub of

international arbitration and mediation.

196. Viewed from such perspective, while assessing whether circumstances

exist to raise justifiable doubts as to the independence/impartiality of

an arbitrator, it would be profitable to stick to the specific grounds and

guidelines provided in the Fifth and Seventh Schedules of the 1996 Act

and not enlarge the scope of Section 12, sub-Sections (1) and (5) by

leaving it to the personal perspectives of the Courts dealing with

proceedings under Sections 34 and 37 of the said Act, as to what

relations would come within the term „affiliate‟, if used with regard to a

natural person, as the statute does not provide any parameter in that

regard. In fact, in HRD Corporation (supra)25, the Hon‟ble Supreme

Court encouraged a commonsensical approach, requiring a fair

construction of the words used in the Fifth Schedule, turning down the

argument that the items in the Fifth and Seventh Schedules must be

construed in the most expansive manner so that the "remotest

likelihood of bias" gets removed and holding that the same was not an

acceptable way of interpreting the Schedules.

197. Such view is also in consonance with the mandate of least judicial

interference (in the present context, under Section 34 of the 1996 Act),

25 HRD Corporation (Marcus Oil and Chemical Division). v. GAIL (India) Limited (formerly Gas Authority of India Limited), reported at (2018) 12 SCC 471 65

2026:CHC-OS:14-DB

except where statutorily provided for, as incorporated in Section 5 of

the 1996 Act.

198. In the light of the above observations, this Court comes to the

conclusion that the learned Single Judge committed a perversity and

erred in law in allowing the applications under Section 34 of the 1996

Act, thereby setting aside the arbitral award dated February 29, 2020.

199. Accordingly, APO No. 184 of 2023 and APO No. 185 of 2023 are allowed

on contest, thereby setting aside the impugned judgment allowing AP

No. 364 of 2020 and AP No. 402 of 2020 and dismissing EC No. 145 of

2020 and EC No. 81 of 2020.

200. The preliminary issue is, thus, decided in favour of the present

appellants, turning down the challenge to the arbitral award on the

ground of fraud/corruption/bias of the learned Arbitrator. The two

applications under Section 34 of the Arbitration and Conciliation Act,

1996, bearing APO No. 184 of 2023 and APO No. 185 of 2023 shall now

be heard by the learned Single Judge having determination for

adjudication on merits on the other grounds, if any, on which challenge

has been preferred to the arbitral award.

201. Consequential to the setting aside of the judgments impugned in the

present appeals, EC No. 145 of 2020 and EC No.81 of 2020 are hereby

revived and it will be open to the award holders to proceed with the said

applications for enforcement of the arbitral award before the

appropriate Bench having determination. It will also be open to the 66

2026:CHC-OS:14-DB

award debtors to seek appropriate orders of stay of the award before the

court taking up the enforcement applications.

202. Accordingly, two applications, bearing GA 2 of 2023, filed in connection

with both the appeals, stand disposed of as well.

203. There will be no order as to costs.

204. Urgent certified copies, if applied for, be supplied to the parties upon

compliance of all requisite formalities.

(Sabyasachi Bhattacharyya, J.)

I agree.

(Supratim Bhattacharya, J.)

Later

After the above judgment is passed, a stay of the same for four weeks

is prayed for on behalf of the award debtors. However, since we have already

granted liberty to the award debtors to approach the Executing Court for

seeking such stay, the prayer for stay is refused.

(Supratim Bhattacharya, J.) (Sabyasachi Bhattacharyya, J.)