After the 2015 Amendment to the Arbitration and Conciliation Act, 1996, a few changes were brought into the arbitration laws making them stricter. The 7th schedule of the Arbitration and Conciliation Act, 1996, declared a few persons ineligible to be appointed as arbitrators. The parties can waive the objections after the disputes arise.
It was stated that a few persons could not act as arbitrators, but this can be done if the impartiality and independence objection is waived off in writing according to Section 12(5) of the Arbitration and Conciliation Act 1996.
Because of the Supreme Court decisions of TRF Ltd. v. Energo Engineering Projects Ltd.: (2017) 8 SCC 377 and Perkins Eastman Architects DPC v. HSCC (India) Ltd. 2019 SCC OnLine SC 1517, the appointing authority, i.e., the Executive Director of RITES cannot appoint an arbitrator, without the written consent of TKE after disputes arise. However, this would not mean that the arbitration clause stands nullified.
In Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd.: (2017) 4 SCC 665, the Supreme Court had noted the recommendations made by the Law Commission of India in its 246th Report and had explained the legislative intent of introducing the statutory amendments in Section 12 of the A&C Act. The said decision encapsulates the Court’s view regarding the importance of independence and impartiality of the arbitrators.
In TRF Ltd. v. Energo Engineering Projects Ltd.: (2017) 8 SCC 377 Supreme Court had decided that a person who is ineligible by the operation of law to act as an arbitrator would also be ineligible to nominate another person to act as an arbitrator. The said decision was founded on the express language and legislative intent of Section 12(5) of the A&C Act.
In Perkins Eastman Architects DPC v. HSCC (India) Ltd. 2019 SCC OnLine SC 1517 Supreme Court interpreted the provisions of Section 12(5) of the A&C Act expansively. It held that even in cases where the power to appoint an arbitrator was vested with the person who was otherwise ineligible to be appointed as an arbitrator, it would be impermissible for him to exercise the same because of the ineligibility referred to in TRF Ltd. Thus, a person who is ineligible to act as an arbitrator, would also not be eligible to appoint anyone else as an arbitrator.
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