Appointment of An Arbitrator By A Person Ineligible Under Section 12(5) Of Arbitration & Conciliation Act, 1996
The Arbitration and Conciliation Act allows the parties to choose their arbitrator. The selection of an arbitrator is one of the first stages that the parties do to resolve a dispute through arbitration. The independence, impartiality, and neutrality of the arbitrator are critical for the parties to have total trust in the dispute. A person whose relationship with the parties, counsel, or the subject matter of the dispute falls into any of the categories mentioned in the seventh schedule to the Act is ineligible to be appointed as an arbitrator, according to section 12(5) of the act. The sole exception is if (i) the parties expressly waive the disqualification's application; (ii) the waiver is agreed upon only after the dispute has arisen; and (iii) the waiver is expressed in writing.
Supreme Court’s Stance on appointment by an ineligible person
The Supreme Court issued the first authoritative decision on the nomination of an arbitrator by an ineligible individual in TRF Limited vs. Energo Engineering Pvt. Ltd... The court had to decide whether a person who was disqualified from nominating an arbitrator under Section 12(5) was also ineligible to nominate an arbitrator. Using the maxim qui facit per alium facit per se, i.e., what one does through another is done by oneself, or, as the court elucidated, what cannot be done immediately may not be done indirectly by involving another outside the prohibited area, the court reached a positive conclusion and held that once an arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. If an ineligible individual is permitted to choose an arbitrator, he will conduct the arbitration proceedings on his own.
In the case of Central Organization for Railway Electrification vs. M/s ECI-SPIC-SMO-MCML (JV), the Supreme Court contradicted itself, upholding the competence of the Railways to select an Arbitral Tribunal unilaterally.
After that, very recently in the case of Union of India vs. Tantia Constructions Limited, Following that, in the case of Union of India vs. Tantia Constructions Limited, the apex court disagreed with the decision of Central Organization for Railway Electrification vs. M/s ECI-SPIC-SMO-MCML (JV), reasoning that once the appointing authority is incapacitated from referring the matter to arbitration, it does not follow that it can still refer the matter to arbitration despite the incapacity it can still make valid appointments depending on the facts of the case. The court has now referred the issue to a larger bench. However, the larger bench has not been constituted as of now.
The Supreme Court has essentially introduced another ineligibility condition to the already overburdened Seventh Schedule with these decisions. The current Indian attitude on the nomination of an arbitrator by an ineligible individual is unclear.
 World Business Solutions Pvt. Ltd. vs. Delhi Metro Rail Corporation Ltd, MANU/DE/0797/2021
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