Union of India v. Tantia Constructions Limited, 2021 SCC OnLine SC 271 prima facie disagreed with Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), [2019] 16 SCR 1234.

In present reference, we have upheld decisions of this Court in TRF Ltd. v. Energo Engineering Projects Ltd., [2017] 7 SCR 409  and Perkins Eastman Architects DPC v. HSCC (India) Ltd., [2019] 17 SCR 275 which dealt with situations dealing with Sole Arbitrators. The law laid down in present reference will apply prospectively to appointments of Arbitrators.

A clause which allows one party to unilaterally appoint a Sole Arbitrator gives rise to justifiable doubts as to independence and impartiality of such Arbitrator. Further, such a unilateral clause is exclusive and hinders equal participation of the other party in appointment process of Arbitrators.

– Hon’ble Chief Justice of India, Hon’ble Justice Dr. D.Y. Chandrachud, Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), [Civil Appeal Nos. 9486-9487 of 2019].

It is not possible for me to agree, Constitutional Law can be invoked to reinforce Doctrine of Equality in realm of Arbitration. On this aspect, Justice Narasimha has rightly opined.

Court’s role in ensuring an Arbitrator’s impartiality and independence is indeed essential. However, this duty, must be grounded in Section 12 of Arbitration Act which provides adequate standards for dealing with potential conflicts or biases. In my view, all unilateral appointments must not be declared void by way of a declaration of this Court. As long as an Arbitrator nominated by a party is eligible under Seventh Schedule, appointment (unilateral or otherwise) should be permissible.

– Hon’ble Justice Hrishikesh Roy, Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), [Civil Appeal Nos. 9486-9487 of 2019].

I am of opinion that we cannot, as an advance ruling, give a declaration, all Arbitration Causes enabling unilateral appointments are null and void at this stage. Rather than declaring all such appointments are void, it would be better to strengthen remedial mechanisms available. There could be situations where unilateral constitution of Panel of Arbitrators could have credibility to which no one can have an objection. It is said, key difference between humans and other beings lies in their ability to think independently and even against our own interests. While it is important to acknowledge potential conflicts of interest, it does not mean, system must bend backward to cater to unending suspicion and doubt. If we focus solely on identifying and disqualifying individuals for perceived conflicts, the process becomes an endless cycle of mistrust.

– Hon’ble Justice Pamidighantam Sri Narasimha, Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), [Civil Appeal Nos. 9486-9487 of 2019].