In a unique fact scenario, the sole arbitrator, in a domain name dispute between parties, named himself in the “Hall of Fame” for giving a particular type of decision in such disputes. Upon challenge to the arbitral award passed, the Hon’ble High Court of Delhi exercised its powers under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) and set it aside.
This article examines the reasoning given by the Hon’ble High Court to determine what would constitute a reasonable apprehension of bias, and the implications of a court setting aside arbitral awards on grounds of bias when an arbitrator has the “propensity” to pass certain types of orders.
BRIEF BACKGROUND LEADING UP TO THE FILING OF A SECTION 34 PETITION
The Petitioner, Microsoft Corporation (“Microsoft”), made a complaint before the National Internet Exchange of India (“NIXI”) against the registration of a disputed domain name by the Respondent, Zoai Founder (“Zoai”). To resolve the dispute, a sole arbitrator was appointed by NIXI (“Arbitrator”) under the “.IN Domain Name Dispute Resolution Policy” (“INDRP”). [1]
Microsoft claimed that it was the owner of the trademark “Zo” and had launched an artificial intelligence chatbot in 2016 by that name. It thus made a complaint against the domain name https://zoai.in/, registered by Zoai.[2]
Zoai did not participate in the arbitral proceedings and Microsoft’s claim was rejected without according any personal hearing to it. Microsoft thus approached the Hon’ble High Court seeking to set aside the said arbitral award.[3]
GROUNDS FOR SETTING ASIDE THE AWARD
General Comments on Applicable Law Versus Propensity and Predisposition of the Arbitrator
Microsoft’s case was that the arbitral award was vitiated by bias, and ought to be set aside on that ground. The Arbitrator had his name appear in the “Hall of Fame” on a website www.indrp.com, under the category of “Arbitrators who have denied most INDRP complaints”. The Arbitrator admitted before the Hon’ble High Court, through an affidavit, that the said website was owned by him prior to him being empanelled as an arbitrator on the panel of NIXI.
The Hon’ble Supreme Court considers independence and impartiality to be key aspects of “public policy”[4]. The Hon’ble High Court examined a series of precedents to determine whether this situation, where the arbitrator has his name appear in such a category, would amount to bias.
The Court examined the distinction between “actual bias” versus “apparent bias”, as laid down in Ranjit Thakur v. Union of India,[5] wherein reasonableness of apprehension in the mind of the party is to be determined. Under such circumstances, the judge need not ask himself/ herself whether he/ she is in fact biased, but whether he/ she appears biased to the party before them.[6] It has been held that actual bias would arise only if the decision-maker is shown to have an interest in the outcome of the case.[7]
The Court also relied on judgments that lay down that apprehension of bias or predisposition present in the mind of the party must be reasonable and based on cogent materials.[8] In State of West Bengal and Others v. Shivananda Pathak,[9] the Hon’ble Supreme Court held that there was a difference between prejudging of facts specifically relating to a party, as against preconceptions or predispositions about general questions of law, policy or discretion. It was held that only the former would get a judge disqualified.[10]
The Hon’ble High Court observed that the test was thus that “the apprehension of bias has to be tested on the yardstick of reasonableness, as seen from the perspective of the affected party”.[11] With this view, the submission of Zoai that the Arbitrator had admitted on affidavit that he had actually decided majority cases in favour of the complainant in INDRP complaints was not accepted by the Court. The Court’s reasoning was that his website found no mention of this, and it in turn gave the impression that the Arbitrator felt denying INDRP complaints was a more laudable achievement.[12]
The Hon’ble High Court also examined the “real danger test” as laid down by the Hon’ble Supreme Court in N.K. Bajpai vs. Union of India.[13] As per this test, it only matters that there appears to be a real danger of bias and not that there is merely a probability or even a preponderance of probability of such bias.[14]
The Court finally came to the conclusion that the arbitrator’s inclusion of his name in a “Hall of Fame” based on his decisions in INDRP complaint cases gave rise to justifiable apprehensions on his neutrality.[15] The Court further reasoned its decision stating that such an inclusion of his name in the “Hall of Fame” was not merely a comment on applicable law or policy, but “a specific indication on how such cases should be finally decided”.[16]
Can Arbitrators Carry Out Independent Research when a Party is Unrepresented?
Another key ground on which the arbitral award passed by the Arbitrator was assailed was independent research undertaken by the arbitrator. A reading of the arbitral award indicated that the Arbitrator had relied upon Google searches of the trademark “Zo” and had undertaken independent research of its popularity and reputation.[17]
In this regard, the Court relied upon the Hon’ble Supreme Court’s decision in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI)[18] wherein it was held that under the pretext of one party being unable to represent itself, reliance on materials taken “behind the back” of parties by the arbitral tribunal on which they have had no opportunity to be heard would form a ground for setting aside of the arbitral award under Section 34(2)(a)(iii) of the Act.
The Court examined both domestic and English precedents on the importance of the arbitrator’s neutrality and refraining from gathering independent evidence and materials in relation to the dispute.[19] Zoai argued that the Arbitrator’s independent research would not affect the outcome in the present case as Microsoft had not put forth material that it was dutybound to establish. The Court rejected the argument[20] and expressed that at this stage, it was difficult to separate admissible evidence from inadmissible, to conclude that in any event the Arbitrator would have arrived at the same outcome.[21]
COULD REPEATEDLY GRANTING A CERTAIN TYPE OF RELIEF IN A CATEGORY OF CASES AMOUNT TO BIAS?
The Hon’ble High Court set aside the arbitral award, granting Microsoft the liberty to invoke arbitration proceedings afresh on the same claims.[22] A question that may arise on a reading of the Microsoft v. Zoai judgment is whether an arbitrator’s neutrality can be doubted if he has taken a particular view in a majority of decisions? As is common practice, arbitrators who specialise in certain legal or technical aspects are repeatedly appointed by parties to adjudicate disputes arising in those fields. In such cases, could a party assail the arbitral award under Section 34 of the Act on grounds of bias by merely showing “cogent material”, namely past decisions passed by the same arbitrator, which uniformly tend to allow or refuse a particular type of relief? This would set a dangerous precedent as no arbitrator would be safe of such accusations, whether there exists actual bias in their case or not.
The Microsoft v. Zoai judgment handles the subject with a defined nuance – despite the fact that the Arbitrator submitted on affidavit that he had allowed more INDRP complaints than he had denied, the Court looked unfavourably upon the aspect that the Arbitrator saw denial of INDRP complaints as per se a positive achievement.[23] By including his name in the “Hall of Fame” for denying the maximum number of INDRP complaints, the Arbitrator gave a specific indication on how such cases should be decided.
The test of bias applied was the age-old and well-settled test of establishing apprehension of bias in the mind of a party. The Court was charged with the duty of applying this test to a set of facts which alleged the arbitrator’s bias, basis his decisions – a dangerous proposition. However, Microsoft v. Zoai treats thesubject of bias with care and carefully scrutinizes the unique situation in this case, supported by enduring precedents of impartiality of adjudicators.
For further information, please contact:
Gauhar Mirza, Partner, Cyril Amarchand Mangaldas
gauhar.mirza@cyrilshroff.com
[1] Microsoft Corporation v. Zoai Founder, OMP (COMM) 188/2019 [Delhi High Court; judgment dated 03.07.2023]; at Para 3.
[2] Ibid.; at Para 2, 3.
[3] Ibid.; at Para 4, 5.
[4] Ibid.; at Para 11.
[5] (1987) 4 SCC 611.
[6] Supra note 1; at Para 17.
[7] Bihar State Mineral Development Corporation v. Encon Builders(I)(P) Limited, (2003) 7 SCC 418.
[8] T.N. v. Munuswamy Mudaliar, 1988 Supp SCC 651.
[9] (1998) 5 SCC 51.
[10] Supra note 1; at Para 30, 33.
[11] Ibid.; at Para 13.
[12] Ibid.; at Para 16.
[13] (2012) 4 SCC 653.
[14] Supra note 1; at Para 48.
[15] Ibid.; at Para 13.
[16] Ibid.; at Para 15.
[17] Ibid.; at Para 18-19.
[18] (2019) 15 SCC 131.
[19] Reliance was placed on M/s. Tribol Engineering Pvt. Ltd. v. Indian Oil Corporation Ltd. & Others, (1998) (III) CTC 385; Fleetwood Wanderers Limited v. AFC Fylde Ltd., [2018] EWHC 3318 (COMM); Fox vs. Wellfair Limited, 1981 (2) Lloyd’s Rep. 514.
[20] Supra note 1; at Para 23.
[21] Ibid.; Reliance was placed on Dhirajlal Girdharilal v. CIT, AIR 1955 SC 271 and Swami Motor Transport (Private) Limited vs. Raman and Raman (Private) Limited 1960 SCC OnLine Mad 16.
[22] Ibid.; at Para 26.
[23] Ibid.; see Para 14-16.
