Newsletter - November, 2024

The Supreme Court reiterates the settled position of law that unilateral appointment of arbitrator is contrary to Section 18 of the Arbitration and Conciliation Act, 1996 by virtue of Article 14 of the Constitution of India

[Central Organisation for Railway Electrification v. M/s ECI SPIC SMO MCML (JV) A Joint Venture Company, (Civil Appeal Nos. 9486 9487 of 2019)]

The Supreme Court decided in a recent case that a clause that allows a party to unilaterally appoint a sole arbitrator violates Section 18 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) that mirrors the principle of equality enshrined in Article 14 of the Constitution of India because such a clause can give rise to justifiable doubts as to the independence and impartiality of the arbitrator and consequently violate the principles of natural justice. Section 18 of the Arbitration Act mandates equal treatment of the parties.

The Apex Court deliberated upon three issues the dispute presented:
1. Whether an appointment process which allows a party who has an interest in the dispute to (a) unilaterally appoint a sole arbitrator, or (b) curate a panel of arbitrators and mandate that the other party select their arbitrator from the panel, valid in law;
2. Whether the principle of equal treatment of parties applies at the stage of the appointment of arbitrators; and
3. Whether an appointment process in a public-private contract which allows a government entity to unilaterally appoint a sole arbitrator or majority of the arbitrators of the arbitral tribunal is violative of Article 14 of the Constitution.