Latest News
UNILATERAL APPOINTMENT OF ARBITRATORS : AN INVALID ACTION
UNILATERAL APPOINTMENT OF ARBITRATORS: AN INVALID ACTION
Despite having several advantages for arbitration, there has been apprehension regarding the lack of independence or impartiality of arbitrator is a hurdle for this process. It is generally perceived that the arbitrators appointed by the parties to the dispute may act in a way to safeguard the interest of the respective parties appointing them which leads to an unbiased and unfair decision. This apprehension may increase when there is a unilateral appointment of arbitrators for dispute agreements.
The Indian Arbitration and Conciliation Act,1996, and the Amendment Act of 2019 provided various safeguards and solutions to tackle the issue smoothly and effectively. Prior to the 2015 Amendments, there were no restrictions and no effective to curb the problem. Even an employee or a consultant of the parties specifically Government Department Undertakings could also act as an arbitrator for any of the parties and it was termed to be valid unless certain facts or circumstances specified any unreasonable doubts regarding the biased or unfair decision rendered by the arbitrator. However, in order to a fair and justifiable process, the Arbitration Amendment Act, 2015 provided several conditions for the appointment of an arbitrator and also set criteria for ineligibility for the appointment of arbitrators. The Arbitration Act specifically mentioned that employees/consultants/advisors of the parties cannot be an arbitrator for neither of the parties. Thus, it disqualifies the employee of the organization to act as an arbitrator in its dispute to ensure adherence to the principles of neutrality.
However, a question may arise where the unilateral appointment of arbitrators is considered to be valid? Does such a unilateral appointment run contrary to the principles of neutrality adopted under this Act?
Unilateral appointment: Invalid Arbitrators
The case TRF Limited vs. Energo Engineering [1]projects limited was the case to deal with the issue of unilateral arbitrators. The question raised before the Supreme court was that the ineligible person cannot be nominated that as an arbitrator The Court held that employees are ineligible to act as arbitrator for the organization as the decision may be biased or unfair The case also laid down the ineligibility criteria for appointment of arbitrators by the disputant parties and no appropriated remedy will be rendered to the parties.
A similar judgment was also provided by the Apex Court in the case of Perkins Eastman Architect DPC Vs HSCC (India Limited)[2]. The Court held that where only one party has the right to appoint the sole proprietor, its choice will be based on the element of exclusivity in determining the remedy for the dispute mechanism.
Also in the case Central Organization for Railway Vs ECI-SPIC-SMO-MCML where the Apex Court mentioned that merely being a retired employee of the organization does not necessarily be bias while being arbitrator for the party. But Supreme Court decided to the contractor should be given the full freedom to nominate an arbitrator from the panel and the court also mentioned the panel should be broad-based. I should have people from different fields and experiences.
[1]{ [2017] 8 SCC 377}
[2] 2019 SC 1517
- Brief on Unilateral Appointment of Arbitrators
- Legislation and Provisions
- Case laws
