The Delhi High Court has recently ruled that a party to an
arbitration cannot nominate its serving or retired officer as its
nominee arbitrator. This view was taken in light of the recent
amendments introduced by the Arbitration and Conciliation
(Amendment) Act, 2015.
The law was earlier governed inter alia by the Supreme
Court judgement in Indian Oil Corporation
Ltd. v Raja Transport (P) Ltd (2009) 8 SCC 520, in which
it was held that while appointment of employees of private parties
is not suitable, there is no bar for an employee of a
government/statutory corporation/PSU acting as arbitrator with the
proviso that he should not have a nexus with the contract in
respect of which the specific dispute may have arisen.
Assignia and the Respondent, Rail Vikas Nigam Ltd entered into
an agreement for the Construction of roadbed and other related
works in the Lucknow Division of Northern Railways. The Contract
contained a procedure for appointment of arbitrators (Clause 20.3)
whereby the Respondent was to forward a panel of 5 names to
Assignia and Assignia would then have to give its consent for any
one name out of the panel to be nominated as arbitrator. The
Respondent was to nominate the second arbitrator from the said
panel and the third arbitrator was to be chosen by the two
arbitrators appointed by the parties.
Disputes arose in relation to the performance of the contract
which ultimately resulted in the Respondent terminating it.
Assignia approached the Delhi High Court under §11 of the
Arbitration & Conciliation Act for appointing a
High Court Proceedings:
One of the issues before the court was whether the tribunal be
constituted in accordance with Clause 20.3 above or in accordance
with the amended Act.
High Court's Decision:
The High Court relied upon §12(5) of the amended Act which
states that notwithstanding any prior agreement to the contrary, a
person, whose relationship with the parties/counsel/subject-matter
of the dispute falls under the categories specified in the Seventh
Schedule, will be ineligible to be appointed as an arbitrator.
The Seventh Schedule of the amended Act contains various
categories relating to the arbitrator's relationship with the
parties or counsel, which make him ineligible to be appointed as an
arbitrator. The first category is "an employee,
consultant, advisor" or a person having any other past or
present business relationship with a party.
Based on the language of the newly inserted provisions, the
court held that "the arbitrator being an employee of one
of the parties would definitely give rise to justifiable doubt as
to his independence and impartiality" and would defeat
the very purpose of amending the Act.
The court also noted that under the Amendment Act, the court is
duty bound to secure the appointment of an independent and
impartial arbitrator as per the amended §12 of the Act.
In light of the above, the court proceeded to appoint a three
member tribunal consisting of retired judges to adjudicate the
disputes between the parties.
The decision is an instance where the courts have taken a
proactive step in implementing the scheme of the Amendment Act in
appointing an independent and impartial tribunal. The decision is
significant for government entities and Public Sector Undertakings,
who would have to revisit their policies on appointment of
arbitrators since similar clauses are likely to be struck down by
courts under the amended Act.
For further information on this topic please contact
Tuli & Co
Tel +91 11 4593 4000, fax +91 11 4593 4001 or email
The Constitution of India is the supreme law of the land and forms the basis of Indian law and the parliamentary system of government – the Indian judiciary is independent of the executive and legislative branches of government.
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