The petitioner, a Government company, approached the Patna High Court challenging an order of the District Judge, Patna, which had refused to terminate the mandate of a sole arbitrator under Section 14 of the Arbitration and Conciliation Act, 1996. The writ petition sought quashing of the District Judge’s order dated 26.04.2022 and a declaration that the arbitrator had become de jure and de facto unable to perform his functions. The High Court (Hon’ble Mr. Justice Sanjeev Prakash Sharma) dismissed the writ petition on 01.12.2022 and directed that the arbitration be completed expeditiously, preferably within four months.
Simplified Explanation of the Judgment
Background and how the dispute reached the High Court:
An arbitral tribunal was constituted in 2017 when the High Court, on an application under Section 11, appointed a former Judge of the Patna High Court as the sole arbitrator in a commercial dispute between the petitioner (a State Government company) and a private claimant. During the proceedings, disputes arose over the arbitrator’s fee. The petitioner asserted that the fee had to conform to the Fourth Schedule (often referred to as “Schedule IV”) introduced by the 2015 amendments, whereas the arbitrator expected higher fees in view of the claim’s magnitude. The petitioner sought review of the fee orders; interim skirmishes even reached the High Court earlier on the fee question. Eventually, the petitioner moved an application under Section 14 before the arbitral tribunal and then before the District Judge, asserting that because of the fee controversy and other conduct, the arbitrator was biased and had lost his mandate. The District Judge rejected that application; hence this writ petition.
Petitioner’s key grievances:
The petitioner argued that: (i) the arbitrator insisted on higher fees contrary to Schedule IV; (ii) the arbitrator directed deposits of fees in a manner prejudicial to the petitioner (including a threat to reject the statement of defence for non-payment); (iii) after the High Court clarified that fees must align with Schedule IV, the arbitrator did not promptly re-fix his fee; and (iv) the arbitrator personally appeared when the High Court issued notice to his secretary in fee-related litigation, which, according to the petitioner, reinforced an apprehension of bias. On this cumulative foundation, the petitioner urged that the arbitrator had become de jure and de facto unable to act under Section 14.
Respondent’s stand:
The claimant/respondent countered that fee disagreements, by themselves, do not establish bias or any legal disability of the arbitrator. It emphasized that challenges alleging bias must ordinarily be pursued under Section 13 read with Section 12; Section 14 is not meant to entertain “perceived doubts” about impartiality unless the arbitrator is rendered ineligible under Section 12(5) read with the Seventh Schedule. The respondent further pointed out that the arbitration had substantially progressed to final stages, and no conduct other than fee-related orders suggested prejudice.
What the High Court examined first:
The Court mapped the statutory scheme—Sections 12, 13, 14, and 29A—to ascertain the proper route for complaints about bias and for termination of an arbitrator’s mandate. Summarizing precedent, it noted that after the 2016 amendments, a dichotomy exists: (a) cases of ineligibility under Section 12(5)/Seventh Schedule, which go to de jure inability and can be addressed through Section 14; and (b) cases of justifiable doubts (Fifth Schedule type concerns), which are to be raised before the tribunal under Section 13 and, if rejected, revisited only in a Section 34 petition after award.
Crucially, how the Court read Section 14:
While acknowledging the general framework above, the Court held that Section 14 is independent of Section 13 and can apply where, during the course of ongoing arbitration, circumstances arise that render an arbitrator de jure or de facto unable to perform his functions. In other words, if bias or prejudice surfaces mid-proceeding and amounts to a legal disability, Section 14 can be invoked. The Court endorsed a Rajasthan High Court approach that recognized bias developing during proceedings as a possible ground for termination under Section 14—though it cautioned that any such finding must rest on a “higher pedestal.”
Application to the facts:
Having kept the door open in principle for Section 14 to address mid-stream bias, the Court then examined whether the petitioner’s apprehensions were reasonably substantiated. It concluded they were not. Fee insistence—even if higher before later judicial clarification—did not show prejudice or partiality, particularly once the fee issue had been settled by superior courts. The record did not demonstrate that the arbitrator had obstructed the petitioner’s defence or conducted the case unfairly; to the contrary, evidence had advanced and proceedings continued. The arbitrator’s personal appearance in the High Court in earlier fee-related skirmishes, after a notice had been issued to his secretary, was not—by itself—indicative of bias against the petitioner.
The Court found support in the Supreme Court’s ruling in NHAI v. Gayatri Jhansi Roadways Ltd. (2020), which held that an arbitrator does not become de jure unable to act merely because he followed then-prevailing High Court law on fees. Applying that logic, fee-related orders cannot, without more, justify termination under Section 14.
Outcome and directions:
The High Court dismissed the writ petition as meritless. Recognizing the age of the dispute and prior interim interruptions, it directed the parties to complete pleadings promptly and for the arbitration to conclude at the earliest, within four months.
Bottom line:
The judgment clarifies that while Section 14 can theoretically be used to end an arbitrator’s mandate when new, disqualifying circumstances arise mid-proceeding, fee disputes—absent concrete indicators of unfairness—do not meet that threshold. For parties in Bihar, especially public sector entities, the decision signals that the proper path for “doubts” about impartiality remains Section 13 (and, later, Section 34), and that courts will be reluctant to derail arbitrations simply over fee controversies once the law on fee fixation stands clarified.
Significance or Implication of the Judgment (For general public or government)
- Stability of arbitral process: The ruling discourages attempts to terminate arbitrations mid-course on the basis of fee disagreements alone, thereby ensuring continuity and efficiency in dispute resolution.
- Clarified procedural routes: Parties alleging bias must generally use Section 13 and then Section 34, unless clear de jure ineligibility exists under Section 12(5). This guides strategy and reduces procedural missteps.
- Public sector comfort: Government companies often face scrutiny over payments to arbitrators. The Court’s approach reassures them that law-compliant fee fixation will not, by itself, taint proceedings.
- Timelines matter: The Court’s four-month completion directive underscores judicial emphasis on timely arbitration under the framework of Section 29A.
Legal Issue(s) Decided and the Court’s Decision with Reasoning
- Can Section 14 be invoked to terminate mandate for bias that emerges during proceedings?
Answer: Yes, Section 14 is independent of Section 13 and can address de jure or de facto inability arising mid-proceeding; however, allegations must be assessed on a “higher pedestal.” - Do fee disputes and related orders establish de jure inability or reasonable apprehension of bias?
Answer: No, not on these facts. The insistence on higher fees, later aligned with Schedule IV, and the arbitrator’s appearance in court on fee issues, did not show prejudice or unfair conduct affecting the merits. - What is the appropriate procedural path for “justifiable doubts” about impartiality?
Answer: Ordinarily Section 13 (tribunal decides), with a challenge at Section 34 stage if needed; Section 14 is reserved for clear de jure or de facto inability, including ineligibility under Section 12(5). - Final disposition:
Decision: Writ petition dismissed; arbitration to be completed expeditiously, preferably within four months.
Judgments Referred by Parties (with citations)
- P.D. Dinakaran v. Judges Inquiry Committee (2011) 8 SCC 380 — relied upon by the petitioner to emphasize the principle that justice must be free from bias and must appear to be so.
- Union of India v. Singh Builders Syndicate (2009) 4 SCC 523 — cited by the petitioner regarding arbitrators’ fees and concerns over practical conduct.
- Doshion Pvt. Ltd. v. Hindustan Zinc Ltd. (Rajasthan HC) 2019 SCC OnLine Raj 6 — cited by the petitioner on termination of mandate where confidence is lost due to fee controversies.
- National Highways Authority of India v. Gayatri Jhansi Roadways Ltd. (2020) 17 SCC 626 — cited by the respondent to argue that fee-related orders do not make an arbitrator de jure unable to act.
- Delhi Tourism & Transportation Development Corporation v. Swadeshi Civil Infrastructure Pvt. Ltd. (Delhi HC, 31.07.2021) — cited by the respondent to limit Section 14’s scope for bias claims.
- Clarke Energy India Pvt. Ltd. v. SAS EPC Solution Pvt. Ltd. (Madras HC, 2022 SCC OnLine MAD 6121/ARBLR 104) — cited by the respondent in support of its Section 14 stance.
Judgments Relied Upon or Cited by Court (with citations)
- HRD Corporation (Marcus Oil) v. GAIL (India) Ltd. (2018) 12 SCC 471 — explaining the dichotomy between ineligibility (Section 12(5)/Seventh Schedule) and justifiable doubts (Fifth Schedule) and the procedural channels (Sections 13 and 34).
- DTTDC v. Swadeshi Civil Infrastructure (Delhi HC) — discussed and distinguished; not a bar to examining mid-proceeding bias under Section 14 in appropriate cases.
- Swadesh Kumar (2022 SCC OnLine SC 556) — on the scope of “Court” under Section 14 and mandate termination.
- Doshion Pvt. Ltd. v. Hindustan Zinc Ltd. (Raj HC) — its approach on Section 14 and loss of confidence noted as a correct interpretation in principle.
- NHAI v. Gayatri Jhansi Roadways Ltd. (2020) 17 SCC 626 — central authority holding that compliance with then-prevailing fee law does not make an arbitrator de jure unable; used to reject the petitioner’s prejudice theory.
- Ranjeet Thakur v. Union of India (1987) 4 SCC 611 — on the test of reasonable apprehension of bias.
Case Title
The Bihar State Electronics Development Corporation Ltd. & Anr. v. The State of Bihar & Ors. (CWJC jurisdiction)
Case Number
Civil Writ Jurisdiction Case No. 7337 of 2022
Citation(s)
2023 (1) PLJR 421
Coram and Names of Judges
Hon’ble Mr. Justice Sanjeev Prakash Sharma (Oral Judgment dated 01.12.2022).
Names of Advocates and who they appeared for
- For the petitioner(s): Mr. P.K. Shahi, Senior Advocate with Mr. Girijish Kumar and Mr. Vikash Kumar.
- For respondent/claimant (private company): Mr. Kunwar Shashank and Mr. Ankit Katriar.
- For the State: Mr. Sunil Kumar Mandal, SC-3 with Mr. Arjun Prasad, AC to SC-3.
Link to Judgment
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