Arbitration Agreements providing for appointment of one arbitrator by each of the parties who in turn may appoint a third Arbitrator or an Umpire, or the agreements providing that both the parties shall mutually agree to the name of Sole Arbitrator are not rare and in such case, failure of appointment mechanism at any stage will enable a party to approach concerned High Court or the Supreme Court of India(In case of International Commercial Arbitration) for appointment of an arbitrator or an Umpire.
However, it is commonly seen that in a commercial agreement, terms of arbitration clause are frequently settled in a way to give power to more influential parties to appoint an Independent Arbitrator e.g. the Managing Director of one of the parties shall appoint the Sole Arbitrator. The other party, in case of a dispute, remains under apprehension that an arbitrator Unilaterally appointed by the first party may not be impartial.
In the case of TRF v Energo, Supreme Court of India has held that “if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself”. The decision was again considered and upheld by the Supreme Court in the case of Bharat Broadband Network Limited v. United Telecoms Limited.
In other words, the Supreme Court has held that a person to act as an arbitrator by virtue of his relationship with parties (covered under the Seventh Schedule) or counsel cannot unilaterally appoint an arbitrator to adjudicate upon disputes between the parties. It is the author’s understanding that these judgments mean that the Managing Director or an employee etc. of one of the parties could not nominate any person as an arbitrator (even if such person is otherwise an independent and impartial one or a retired High Court or Supreme Court Judge). It is author’s view that if one of the parties appoint such arbitrator, other party could approach concerned High Court or Supreme Court (in case of International Commercial Arbitration) for appointment of an arbitrator u/s.11(6) of the Act, notwithstanding the unilateral appointment made by the first party.
*The position as regards contract term prescribing an appointment from the panel maintained by one of the parties is different and little uncertain at the time.
# Supreme Court # Unilateral Appointment of Arbitrator # Independent Arbitrator
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