A Single Bench of the Delhi High Court in the case of, Microsoft Corporation v. ZOAI Founder, [O.M.P. (Comm) No. 188 of 2019], decided on July 3, 2023, inter- alia held that (i) the apprehension of bias has to be tested on the yardstick of reasonableness, as seen from the perspective of the affected party and (ii) it is not open for the arbitrator to conduct independent research to supply evidence which the party has not cared to place before it.

Facts in Brief:-

1. The Petitioner claimed to be the owner of various trademarks, including the trademark “Zo” which relates to its artificial intelligence chatbot developed in December 2016.
2. The Petitioner made a complaint before the National Internet Exchange of India (“NIXI”) against registration of disputed domain name “Zo” by the Respondent.
3. The dispute was resolved by an Arbitrator appointed by NIXI in terms of “.In Domain Name Dispute Resolution Policy” (“INDRP”). The Respondent did not enter its appearance in the arbitral proceedings.
4. Without any personal hearing the Arbitrator passed an Award dated January 24, 2019, and thereby rejected the claim of the Petitioner. While passing the Award, the Arbitrator undertook independent research, on factual and legal aspects. The outcome of such research was neither put to the Petitioner nor to the Respondent.
5. Thereafter, the Arbitrator’s name appeared on the webpage titled “Hall of Fame” on the website viz. www.indrp.com in the category “Arbitrators who have denied most INDRP complaints: 4(four)”. The said website is owned by the Arbitrator himself.

Grounds:-

The Petitioner challenged the award under section 34(2) of the Arbitration and Conciliation Act, 1996 (“The Arbitration Act”) inter alia on following grounds:

1. The impugned award is vitiated by bias on the part of the learned Arbitrator. The name of the Arbitrator appearing in the list of “Hall of Fame” on the said website shows a distinct predisposition to deny INDRP complaints, such as the one made by the Petitioner.
2. An opportunity was not given to the Petitioner to present its case with respect to the outcome of the research conducted by the Arbitrator.

Observations by the Court:-

While allowing the petition on both the aforesaid grounds, the Court made important observations which are as under:-

On the ground of bias:

1. While adjudicating a claim of bias against an Arbitrator, the Court must tread carefully. The independence and impartiality of the Arbitrator is undoubtedly central to the very integrity of the arbitral process. The claims of bias must be carefully scrutinized to avoid misuse at the hands of an unsuccessful litigant.
2. An award can be set aside on grounds of “apparent” bias, or propensity to decide one way rather than the other.
3. The apprehension of bias has to be tested on the yardstick of reasonableness, as seen from the perspective of the affected party.
4. Any doubt regarding the Arbitrator’s fairness or neutrality must be justifiable, not whimsical or fanciful, and must give rise to a real danger of bias or partiality.
5. The award can be challenged, even if the fact relating to Arbitrator’s status or conduct, (e.g. conflict of interests, relationship with one of the parties, evidence of fraud or misconduct etc.), are discovered after the award has been passed.

On the ground of the Arbitrator’s reliance on his own research:

1. It is not open to the Arbitrator to conduct independent research to supply evidence which an absent Respondent has not cared to place before it.
2. The Arbitrator should not rely upon evidence which he/she has gathered– at least, without putting it to the affected party. This is against an aspect of fairness, and of giving the party an opportunity to be heard in terms of Section 18 of the Act.
3. The Arbitrator clearly fallen out of the mandate laid down in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), (2019) 15 SCC 131 [paragraph 52]- which is as under
   “ …where materials are taken behind the back of the parties by the Arbitrator, on which the parties have had no opportunity to comment, the ground under Section 34(2)(a)(iii) would be made out.”
4. In Fox v. Wellfair Limited (1981 (2) Lloyd's Rep. 514 [at page No. 522]) it is inter alia held that
   “….In particular, he (i.e., the Arbitrator) must not throw his own evidence into the scale on behalf of the unrepresented party  or use his own special knowledge for the benefit of the unrepresented party - at any rate he must not do so without giving the plaintiff's experts a chance of dealing with it….”

Please find attached a copy of the judgment.

This update has been contributed by Ranjit Shetty (Senior Partner) and Tejas Gokhale (Senior Associate).

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