Important Judgments on Appointment of Arbitrator

The Delhi High Court recently in Oyo Hotels & Homes Pvt. Ltd. v. Rajan Tewari & Anrwhile deciding a petition under Section 11(6) of the Arbitration & Conciliation Act, 1996, held that a Court has the power to set aside the appointment of an arbitrator, if the appointment is ex-facie contrary to the arbitration clause, and thus is non est in law.

It has so been said in view of pertinent observations of the Hon’ble Supreme Court in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. 2019 SCC Online SC 1517 wherein it has been categorically stated that “in cases where one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.”

The afore-noted dictum of Hon’ble Supreme Court in Perkins Eastman (Supra), has been followed by Coordinate Benches of this Court in Proddatur Cable Tv Digi Services Vs. Siti Cable Network Limited 2020 SCC OnLine Del 350 and VSK Technologies Private Limited and Others Vs. Delhi Jal Board 2021 SCC OnLine Del 3525 in unequivocal terms.

The Hon’ble Supreme Court in Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. 2019 SCC Online SC 1517 has categorically stated that “in cases where one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.”

 Important Supreme Court Judgments

  1. Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd. 2019 SCC Online SC 1517
  2. TRF LimitedVs. Energo Engineering Projects Limited(2017) 8 SCC 377

There is no dispute to the ratio of law laid down by the Hon’ble Supreme Court in Union of India Vs. Pradeep Vinod Construction Company (2020) 2 SCC 464, wherein it is held that when the agreement specifically provides for appointment of a named Arbitrator, the appointment should be done in terms of the Agreement unless there are exceptional reasons. However, the said decision does not deal with the provisions of Section 12(5) of the Act.

Also, decision in Central Organization for Railway Electrification vs. M/s. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company 2020(14) SCC 712 has been referred to the Larger Bench and is thus, not applicable to the present case.

Section 12(5) read with Schedule VII of the Arbitraiton and Concilaition Act deals with the impartiality and independence of arbitrator and prescribes ineligibility of a person to be appointed as an arbitrator.

IBA Guidelines on Conflicts of Interest in International Arbitration

The guidelines consist of three lists  namely the Red list , the orange list and the Green list.

The Red List, consisting of non-waivable and waivable guidelines, covers situations which are “more serious” and “serious”, the “more serious” objections being non-waivable.

The Orange List, on the other hand, is a list of situations that may give rise to doubts as to the arbitrator’s impartiality or independence, as a consequence of which the arbitrator has a duty to disclose such situations.

 The Green List is a list of situations where no actual conflict of interest exists from an objective point of view, as a result of which the arbitrator has no duty of disclosure. These Guidelines were first introduced in the year 2004 and have thereafter been amended, after seeing the experience of arbitration worldwide.

In Part 1 thereof, general standards regarding impartiality, independence and disclosure are set out.

15. General Principle 1 reads as follows:

“IBA Guidelines on Conflicts of Interest in International Arbitration

(1)  General Principle

Every arbitrator shall be impartial and independent of the parties at the time of accepting an appointment to serve and shall remain so until the final award has been rendered or the proceedings have otherwise finally terminated.”

 

“(2) Conflicts of Interest (a) An arbitrator shall decline to accept an appointment or, if the arbitration has already been commenced, refuse to continue to act as an arbitrator, if he or she has any doubt as to his or her ability to be impartial or independent.

 

(b) The same principle applies if facts or circumstances exist, or have arisen since the appointment, which, from the point of view of a reasonable third person having knowledge of the relevant facts and circumstances, would give rise to justifiable doubts as to the arbitrator’s impartiality or independence, unless the parties have accepted the arbitrator in accordance with the requirements set out in General Standard 4.

(c) Doubts are justifiable if a reasonable third person, having knowledge of the relevant facts and circumstances, would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case as presented by the parties in reaching his or her decision. 

(d) Justifiable doubts necessarily exist as to the arbitrator’s impartiality or independence in any of the situations described in the Non-Waivable Red List.”

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