The unilateral appointment of a Sole Arbitrator by a party in conflict with statutory provisions and judicial judgments is impermissible. The waiver of the right to object and the criteria for impartiality of the appointed Arbitrator must be in accordance with the provisions of the Arbitration and Conciliation Act, 1996.

JUDGMENT

Sanjeev Narula, J. - By way of the present petition under Section 14 of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as the Act ], the Petitioner-company, through its Resolution Professional Mr. Satya Prakash Gupta appointed under the provisions of the Insolvency and Bankruptcy Code, 2016 [hereinafter referred to as IBC ], seeks declaration to the effect that Mr. Anil Kumar Kathuria, the Sole Arbitrator is de jure unable to act as an Arbitrator, and further seeks appointment of a substitute Arbitrator.

2. The Petitioner and the Respondent had entered into a Contract dated 11th April, 2011, for construction/development of its housing project at Bhubaneswar consisting 256 flats of different categories [hereinafter referred to as the Contract ]. The Contract provided for dispute resolution through the mechanism of arbitration under clause 18.2 [hereinafter referred to as the Arbitration Agreement ]. The same is reproduced as under:-

All disputes or differences arising between the parties hereto arising out of the subject matter of this agreement or the respective rights and duties of the parties under this agreement except those the decision whereof is specifically provided for in the agreement to be final, shall be referred to on the sole arbitration of an arbitrator, to be only nominated by the Chairman, Air Force Naval Housing Board, New Delhi whose decision thereon shall be final and binding on both the parties provided that if the differences and disputes are claimed by the contractor to have arisen, reference shall only be made if the Contractor has given notice in writing, of the said disputes or differences, within 28 days of cause of action for the same arising to the Chairman Air Force Naval Housing Board, New Delhi.

It is hereby expressly agreed that the sole arbitrator shall not be disqualified by reason of the fact that he had on an earlier occasion dealt with the matter in dispute on the administrative side or his expressed views on an or any of the matters in dispute or difference. In case the person nominated as the sole arbitrator is not available due to certain reasons. The Chairman Air Force Naval Housing Board New Delhi, shall nominate another person in his place, who shall proceed with the arbitration from the stage the arbitration proceedings were last left.

The arbitrator shall have power to open up, review and revise any certificate, opinion, decision requisition or notice and shall determine all matters in dispute, which shall be submitted to him.

It is expressly agreed to by and between the parties that the arbitration proceedings shall be held in Delhi and only Delhi courts shall have jurisdiction."

3. The Respondent invoked the Arbitration Agreement on 29th November, 2019. In terms of the Arbitration Agreement, the appointing authority therein, (i.e. the Chairman of Respondent-Board, Vice Admiral R. Hari Kumar), nominated Mr. Anil Kumar Kathuria as the Sole Arbitrator to adjudicate the disputes and differences between the parties under the Contract.

4. The Petitioner contends that the Arbitration Agreement contained in the Contract, as extracted above, was not fully enforceable in accordance with the law as it stood on 29th November, 2019. The Supreme Court in Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd, (2020) AIR SC 59, has held that dispute resolution clauses which provide rights to the Director/Chairman of a party to nominate an arbitrator will be invalid and unsustainable. The appointing authority, in the present facts (i.e. the Chairman of the Respondent-Board), would naturally be interested in the outcome of the decision in respect of the disputes that have arisen between the parties. Therefore, the prerequisite of an element of impartiality would be absent in such a process. The Arbitration Agreement is thus ex facie in conflict with the aforesaid judgment.

5. The Petitioner further submitted that Schedule V and VII of the Act ought to be taken into consi