Balance Between Independence Of Arbitrator & Party Autonomy Preserved By Introducing S.12(5) Of Arbitration Act: Justice J.K. Maheshwari

Supreme Court judge Justice J.K. Maheshwari speaking at a penal discussion on the topic “Appointment of Independent Arbitrations: Party Autonomy Conundrum” organised by the Delhi Arbitration Weekend 2025 (“DAW”) focused upon the inherent tension between the principles of party autonomy on one hand and party equality and independence of arbitral tribunal on the other.He stated that the tension can be diffused by striking a delicate balance between the freedom of parties to appoint an arbitrator and the independence and impartiality. To achieve this balance, a collaborative effort of thoughtful legislative reforms, nuanced judicial interpretation, and active engagement of the arbitration fraternity is required, he said.The panel comprised Justice Anand Pathak, Professor Maria Chiara Malaguti, Senior Advocate Mr Dama Seshadri Naidu, Ms Sapna Jhangiani KC, Barrister. Justice Maheshwari stressed on the practice prevalent in Indian and global contracts, where the contracts are drafted by the financially stronger party. He stated that the balance of scale in such contacts is often tilted towards the party that drafts the contract, granting the party exclusive control over the appointment of the Arbitrator. The same raises legitimate concern, especially concerning the appointment of an arbitrator. He stated that thus Indian lawmakers attempted to draw a fine line between ensuring the independence of Arbitrators and preserving party autonomy in their appointment by introducing Section 12(5) via the 2015 amendment to the A&C Act, 1996. The section works hand in hand with Schedule V and Schedule VII of the A&C Act, he said. Justice Anand Pathak, observed that Arbitration brings confidentiality, a brisk pace of litigation and inherent flexibility. Arbitration should also be allowed to bring peace and finality to litigation. He stated that the meaning of party autonomy is that a party is free to choose the Arbitrator, the seat, the venue, the laws governing the proceedings, etc. The conundrum is seen between two private entities or an arbitration agreement in a public-private dispute, where one party can appoint an arbitrator and impose that choice on the other party, he explained. He further referred to the decision of the Supreme Court in CORE v. ECI (2025) wherein it held that every action of a public authority or a person acting in a public interest, or any act that gives rise to public elements, must be based on the principles of fairness and non-arbitrariness, Section 12(5) of the A&C Act. The Arbitration Act does not prohibit PSUs from empanelling potential Arbitrators. However, an arbitration clause cannot mandate the other party to select its Arbitrator from the panel curated by PSUs, he said. Mr D. Seshadri Naidu, Sr. Adv., observed that what applies to a small society might not apply to India. In Arbitration, the terms of the contract and the proceedings move forward concerning the dispute adjudication. Till the 2015 amendment to Section 12 of the A&C Act, the contract dictates the terms, and one cannot wrestle out by relying upon propositions like bias or lack of independence. He explained that in CORE II (supra), the Supreme Court conducted a jurisprudential experiment by relying upon Article 14 of the Constitution of India. “The moot point is, can we import Chapter III of the Constitution of India into private contracts? If a State is a contracting party, imposing its own panel of Arbitrators to be chosen from, therefore, having a huge bargaining power, the same could have been struck down relying upon common law principles, without invoking the principles of Article 14,” he elaborated. Professor Malaguti talked about the origin of Arbitration being based on party autonomy and being a private method to resolve disputes. Some member states want to institutionalise the Arbitration, and make it follow the methodology of the Court to protect some of the general principles. However, even if we do not go to an international court, we definitely affect the parties' autonomy in Arbitration through these approaches, it was said. Ms Sapna Jhangiani KC cited the Rockhopper case against Italy, where the ICSID award was set aside for improper institution of the Arbitral Tribunal. The crux of the case was not whether it was non-independent or non-autonomous. In fact, ICSIC has a standard of moral spending; therefore, the ad-hoc committee is very strict when analysing these criteria. “If the Arbitrator had disclosed the facts, then the parties would have a better look at the case and the situation concerning the arbitration proceedings. Therefore, in essence, if the parties were comfortable in moving ahead with the Arbitrator, the party's autonomy would have been protected,” she stated.

Balance Between Independence Of Arbitrator & Party Autonomy Preserved By Introducing S.12(5) Of Arbitration Act: Justice J.K. Maheshwari

Mohd Talha Hasan

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