Experience, Not Prejudice: Delhi HC Rejects 'Closed Mind' Allegations In Arbitration Proceedings

In the high stakes domain of international commerce, where substantial financial interests hinge upon agreements articulated in tightly, disputes frequently culminate in arbitration for a more expedient and confidential alternative to cumbersome judicial proceedings. However, what transpires when the arbiter (the arbitrator) has previously adjudicated a comparable matter? Can a prior determination compromise their objectivity? The recent decision by the Delhi High Court in the case of Steel Authority of India Limited (SAIL) vs. British Marine PLC¹ (October 13, 2025) provides a definitive response: No, not automatically. This judgment reinforces confidence in the arbitration process by constricting the criteria for disqualifying arbitrators, ensuring that specialized knowledge does not become a detriment.

Background of the Dispute

In the year 2007, Steel Authority of India Limited (SAIL), a prominent entity within the public sector steel manufacturing domain, formalised a long-term Contract of Affreightment (COA) with British Marine PLC, a maritime enterprise based in the United Kingdom. Pursuant to the COA, British Marine was contractually mandated to facilitate the transportation of approximately three million metric tonnes of coking coal from Australia to India over a span of five years. The contract was governed by English law and provided for arbitration in London.

The global financial crisis that transpired in 2008 drastically reduced steel demand, adversely affecting SAIL's dependency on imported coking coal. In February 2010, SAIL exercised its rights under Clause 62 of the COA (a frustration and termination provision) and subsequently rescinded the contract. British Marine regarded the termination as unjustified and repudiatory, initiating arbitration proceedings and seeking considerable damages for the loss of anticipated freight earnings.

Following extensive arbitration proceedings, the tribunal rendered a partial award in 2022 in favour of British Marine, granting an award of approximately ₹480 crore along with accrued interest.

Challenges Before the Delhi High Court

SAIL challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 in the jurisdiction of the Delhi High Court. In addition to substantive arguments, SAIL raised a serious objection concerning the apparent bias exhibited by two arbitrators.

The foundation of this objection rested upon the fact that both arbitrators had previously rendered a decision in an unrelated arbitration (SeaSpray Shipping LLC v. SAIL, 2018), wherein they had interpreted the identical Clause 62 adversely to SAIL, asserting that the clause did not authorise the charterer (SAIL) to unilaterally terminate the contract solely due to a decrease in its own cargo requirements. SAIL argued that this prior unfavourable determination illustrated a "closed mind" and gave rise to reasonable doubts regarding the impartiality of the arbitrators, invoking grounds for disqualification as stipulated under Section 12(3) in conjunction with the Fifth and Seventh Schedules of the Act.

The Court's Reasoning on Disqualification

Justice Jyoti Singh dismissed the plea of bias in clear and definitive terms. The key conclusions were as follows:

1. The criteria for disqualification listed in the Fifth and Seventh Schedules are comprehensive. Previous interpretations of an identical contractual provision are not specified as a basis for disqualification.
2. The mere existence of similar issues between two independent arbitration proceedings does not inherently create an automatic presumption of bias. As articulated by the court, "The interpretation of a similar clause in a prior proceeding does not constitute a legitimate ground for the disqualification of an arbitrator."
3. The expertise and prior exposure to similar legal or contractual matters are inherent strengths of seasoned arbitrators. The disqualification of arbitrators solely on the basis that they have previously expressed a reasoned perspective on the identical clause would significantly deplete the pool of qualified professionals and promote forum-shopping.
4. There was no evidence indicating that the arbitrators approached the current case with a biased mindset or had neglected to consider the arguments anew. The tribunal conducted an independent assessment of the factual circumstances, including SAIL's actions following the alleged frustration (such as the execution of Addendum-2 in 2011), prior to arriving at its conclusion.

The court referenced Supreme Court precedents, such as HRD Corporation v. GAIL (2017) and Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation (2017), which underscore that a reasonable apprehension of bias must be substantiated by cogent evidence, rather than mere apprehension or speculation.

Decision on Merits

On substantive legal grounds, the court affirmed the tribunal's interpretation that Clause 62 was designed to safeguard the parties against frustrations stemming from supplier-side issues, rather than a decrease in demand from the charterer attributable to prevailing market conditions. The assertion of force majeure was likewise repudiated, as SAIL's subsequent actions were at odds with an authentic inability to perform contractual obligations. The damages and interest awarded were deemed to be commercially rational and aligned with the principles of English law. Consequently, the petition filed under Section 34 was dismissed, with the imposition of costs.

Significance of the Judgment

This judicial determination further solidifies the pro-arbitration perspective embraced by Indian judiciary bodies following the 2015 legislative amendments and those that followed. By asserting that prior judicial interpretations of similar contractual clauses do not constitute a disqualifying condition, the Delhi High Court has:

1. Safeguarded the integrity of seasoned arbitrators who frequently navigate recurrent standard provisions in domains such as shipping, construction, and commodity transactions.
2. Averted the potential for parties to exploit disqualification motions as strategic instruments for the delay of enforcement or to intimidate members of the tribunal.
3. Aligned Indian legal doctrine with prevailing international standards, wherein "issue conflict" is acknowledged exclusively in exceptional instances of evident prejudgment.

Conclusion

The judgment in Steel Authority of India Ltd v. British Marine PLC sends a clear message: arbitration thrives when skilled and experienced individuals are allowed to adjudicate without fear that their past reasoned decisions will be weaponised against them. An arbitrator's prior interpretation of a similar clause, in the absence of concrete evidence of bias or prejudgment, remains exactly what it should be is an exercise of judicial function, not a ground for removal.

Footnote

1. Chauhan, M. M., & Law, L. (2025, November 2). Arbitrators cannot be disqualified for merely participating in prior arbitration involving interpretation . . . Live Law.

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