APEX COURT RULING ON UNILATERAL ARBITRATOR APPOINTMENTS: ENSURING NEUTRALITY IN INDIAN ARBITRATION

AUTHOR – ELEENA EAPEN , STUDENT AT SYMBIOSIS LAW SCHOOL, PUNE

BEST CITATION – ELEENA EAPEN, APEX COURT RULING ON UNILATERAL ARBITRATOR APPOINTMENTS: ENSURING NEUTRALITY IN INDIAN ARBITRATION, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 5 (10) OF 2025, PG. 1005-1010, APIS – 3920 – 0001 & ISSN – 2583-2344.

Facts

1. The case revolved around a contractual dispute arising from a construction contract awarded by the Union of India (COFRE) to a private company (JV) for work valued at ₹165.67 crores.
2. The said contract, dated 20.09.2010, contained an arbitration clause under Clause 64 of the General Conditions of Contract (G.C.C.), which was subsequently modified by the Railways through a notification dated 16.11.2016 following the enactment of the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter the “Act“).
3. The modification stipulated that disputes would only be resolved by a three-member arbitral tribunal comprising either serving Railway officers or a mix of serving and retired officers, provided that the parties waive the applicability of Section 12(5) of the Act.
4. The work could not be completed by the respondent company within the stipulated time, resulting in the issue of termination notices by the Railways on 18.10.2017 and 27.10.2017. The contract was subsequently terminated on 01.11.2017 with forfeiture of security deposit.
5. The respondent challenged the termination, but the court dismissed it, directing the respondent to invoke arbitration. Thereafter, on 27.07.2018, the respondent invoked arbitration, claiming ₹73.35 crores and requesting the appointment of arbitrators.
6. In response, COFRE sent two separate panels for the selection of arbitrators:
7. A panel of four currently serving Railway officers (as per Clause 64(3)(a)(ii), subject to waiver of Section 12(5)).
8. After the refusal by the respondent to waive Section 12(5), the second panel of four retired Railway officers (under Clause 64(3)(b)).

7. Instead of making a selection from the provided option, the respondent opted to filed a petition in accordance to Section 11(6) of the Act before the Allahabad High Court, requesting for the appointment of an independent sole arbitrator, by stating that the Railways’ panel-based system violated Section 12(5). The High Court granted relief and appointed a retired High Court judge arbitrator (03.01.2019), thus overruling the G.C.C.’s mechanism.
8. Aggrieved by the decision, the appellant appealed to the Apex Court, which upheld the appointment process by CORE, rejecting ECI’s reliance on TRF Ltd. (2017), where it was held that an ineligible arbitrator cannot nominate another. However, in Tantia Constructions (2021), the Court disagreed with ECI-SPIC, prompting a request for a larger Bench review. Similarly, in JSW Steel (2022), the Court reaffirmed the need for a larger Bench to reassess the issue.