Unilateral Appointment Clause Of Arbitrator Hinders Equal Participation Of Parties In Appointment Process: Patna High Court

The Patna High Court Bench of Chief Justice K. Vinod Chandran held that a clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the parties in the appointment process of arbitrators. Brief Facts: The parties entered into an agreement pursuant to the tender process initiated by the respondent. The separate agreements entered into contained Clause-25 for dispute resolution. The petitioner requests for appointment of an arbitrator under Clause-25 read with the provisions of the Arbitration and Conciliation Act, 1996. The respondent relied on the judgment in The State of Bihar v. Kashish Developers Limited (2024), wherein Clause-25 was interpreted to find that after the 2016 Amendment of the Arbitration and Conciliation Act, 1996, there would be no question of arbitration going by the language employed in Clause-25. Observation of the court: The court observed that therein, an arbitrator was appointed in both the request case and later a review was filed by the State, the review petitioner, contending that the arbitrator was appointed on the first date itself without giving an opportunity to the State to raise its objections. The request petitioner, therein, who was the respondent in the review case, raised the contention that the Government Advocate was present when the arbitrator was appointed. Then, the court noted that though the Government Advocate was present, there is nothing recorded in the order to find the consent of the parties. It was also observed that even if the arbitration clause was invoked by the petitioner, the Engineer-in-Chief could not have appointed the arbitrator due to the disqualification arising from the Arbitration & Conciliation Act, 1996. Hence, the invocation of Clause-25 is inconsequential since the parties have agreed that there would be no arbitration unless the arbitrator is a person appointed by the Engineer-in-Chief or the administrative head, which is not possible by reason of the substitution of Section 12 of the Act by Act 3 of 2016. There is also no further agreement to waive the applicability of Section 12(5). The court relied on the judgment in Central Organisation for Railway Electrification v. M/s ECI SPIC SMO MCML (JV) A Joint Venture Company (2019) and held that a clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the parties in the appointment process of arbitrators. Finally, the court rejected the request case. Case Title: M/s R.S. Contruction Versus Building Construction DepartmentLL Citation: 2025 LiveLaw (Pat) 7 Case Number: REQUEST CASE No.105 of 2024 Counsel for the Petitioners: Mr. Prashant Kumar, Advocate Counsel for the Respondents: Mr. Vikas Kumar, SC-11 Date of Judgment: 19.12.2024 Click Here To Read/Download The Order

Unilateral Appointment Clause Of Arbitrator Hinders Equal Participation Of Parties In Appointment Process: Patna High Court

Soumya Chakrabarti

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