Can A Person Who Is Ineligible To Be An Arbitrator Nominate Arbitrator? Supreme Court Reserves Judgment

The Supreme Court today (August 30) reserved its judgment on the reference issue of whether a person, who is ineligible to be appointed as an arbitrator, can appoint an arbitrator.The Constitution Bench comprising Chief Justice of India DY Chandrachud, Justice Hrishikesh Roy, Justice PS Narasimha, Justice JB Pardiwala, and Justice Manoj Misra was considering the validity of an arbitration clause which prescribes that the appointment of the arbitrator will happen from a panel of arbitrators curated by one of the parties, which is mostly a public sector undertaking (PSU) in majority of the cases.In a three-day long deliberation, the Court examined the aspects of 'Party Autonomy' principle enshrined under the Arbitration and Concilation Act of 1996; the issue of ensuring independence and impartiality of arbitrators selections from a unilaterally curated panel by PSUs and possible policy solution that the Union may have to offer in devising a system for penal selections. ODR : A Potential Solution For Resolving Issues Of Expensive Arbitration, SG Highlights During the third day of hearing, Solicitor General Tushar Mehta (SG)appearing for the Union addressed the issue of struggles faced by small private stakeholders in affording expensive arbitrators. To resolves this, he highlighted the benefit of 'Online Dispute Resolution' (ODR). Advocate Sushant Garg explained to the bench that under the ODR there was a comprehensive list of arbitrators empaneled by individual institutions like SAMA and PreSolv360 which includes technical arbitrators as well as former judges. The fees schedule of the arbitrators is also cost-effective and affordable. "Sometimes the arbitrator is already aware that if a dispute comes to him, he will be paid 2000-5000 Rs. Most of these awards are given in a 45 days time period and there is no interference by either of the parties."He added that many private parties including NBFCs (non-banking financial companies) already include ODR in their dispute resolution clauses. "They have already incorporated a clause in their own agreement that it would (arbitration) go to PreSolv or SAMA or any other ODR platform"However the CJI reiterated the main issue - "the question is whether the NBFC can themselves appoint an arbitrator and say look we are going to send this dispute to you?" The SG answered that it was crucial to look at the larger picture when considering arbitration dealings with NBFC. He stressed that the ODR mechanism is very practical for the majority of the instances where small claims by non-banking depositors are involved. The cases involving multiple stakeholders in big arbitrations can be segregated from the former. Whether The Court Should Give A Prospective Overruling If It Decides To Set Aside Decisions In TRF And Perkins Eastman? Garg on behalf of the Union argued that it would not be desirable for the Court to give a prospective application of its judgement in the present case in the event it overrules the decisions in TRF Ltd. v Energo Engineering Projects Ltd, and Perkins Eastman Architects DPC v HSCC (India) Ltd in 2020. A detailed report on the Doctrine of Prospective Overruling can be read here. In TRF, the Supreme Court had first held that a person ineligible to be an arbitrator cannot nominate a person to be an arbitrator. A similar conclusion was reached by the Apex Court in Perkins Eastman. However, in the case of Central Organisation For Railway Electrification (CORE) v ECL-SPIC-SMO-MCML (JV), (2020) the Supreme Court permitted the appointment by an ineligible person as arbitrator on grounds that the facts of Energo Engineering and Perkins Eastmen did not apply to the case at hand.He pointed that if the Courts gives a prospective overruling, then those arbitration awards which have been set aside in light of CORE decisions will have to be reopened de novo. The prospective overruling would mean that the decision in TRF and Perkins was good law in the past which would be contrary to the Court's ruling if it holds the decisions to be incorrect in the present case. During the hearing, Senior Advocate Mahesh Jethmalani appearing for one the intervenors defended the unilateral appointments and argued that there is no ban on the persons mentioned under the 7th Schedule in appointing an arbitrator. Notably 7th Schedule lays down the list of persons who may not be appointed as an arbitrator. "If they wanted to ban , the legislators could have just added another clause saying arbitrators appointed by persons in clauses 1-19 above." Senior Advocate PV Dinesh also appearing for one of the NBFCs briefly submitted that the very arbitrability of the dispute has to be dealt with objectively, inviting no room for subjectivity. Thus even if it is assumed that the appointing authority or the arbitrator himself is biased, logic would still prevail in deciding certain subject matters like money recovery. "If the subject matter can only be adjudged objectively, there is no subjective...

Can A Person Who Is Ineligible To Be An Arbitrator Nominate Arbitrator? Supreme Court Reserves Judgment

Anmol Kaur Bawa

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