An arbitration clause mandating appointment from a biased source is invalid; courts can appoint an independent arbitrator to ensure impartiality.

CORAM:

HON'BLE MS. JUSTICE MINI PUSHKARNA

MINI PUSHKARNA, J. (Oral):

1. The present petition has been filed under Sections 11 (4) read with 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) filed on behalf of Kalpataru Projects International Limited. The petition initially sought appointment of the respondent’s nominee Arbitrator in terms of the Arbitration Clause between the parties, however, at the time of hearing of the petition, the petitioner has prayed for appointment of a Sole Arbitrator.

2. It is the case of the petitioner that in terms of the agreed procedure, the petitioner by way of Notice of dispute dated 13^th June, 2025, under Section 21 of the Arbitration Act, nominated Justice (Retd.) Kamalkishore Kapoorchandji Tated, Former Judge, High Court of Bombay as its nominee Arbitrator. Since the respondent failed to appoint its nominee Arbitrator, the present petition has been filed.

3. Learned Senior Counsel appearing for the petitioner submits that an independent Arbitrator be appointed by this Court, and the Arbitral Tribunal constituted by the Central Organisation for Railway Electrification (“CORE”), for adjudication of disputes between the parties arising out of the Engineering Procurement and Construction Agreement dated 25^th February, 2021 (“Agreement”), be set aside.

4. Learned Senior Counsel for the petitioner raises objection as regards the legality of the Arbitration Clause, i.e., Clause 24 of the Agreement between the parties, which envisages three retired Railway Officers, not below the grade JA, for the constitution of the Arbitral Tribunal. He submits that the said Arbitration Clause is invalid, in view of the law laid down by the Supreme Court.

5. Per contra, learned counsel appearing for the respondent has justified the terms of the Arbitration Clause as contained in the Agreement. He submits that the present is not a case of unilateral appointment of Arbitrator, since in the present case there is a three member Tribunal, and the petitioner has a choice of choosing one nominee Arbitrator from the list of panel of three names of retired Railway Officers.

6. In response, learned Senior Counsel appearing for the petitioner relies upon the order dated 14^th August, 2024, passed by the Supreme Court in SLP (C) 2777/2024, titled as “M/s. Kalpataru Projects International Limited Versus Central Organisation for Railway Electrification & Anr.”, to submit that disputes arising out of the same Agreement were referred to a Sole Arbitrator, as appointed by the Supreme Court. He submits that a similar order for appointment of a Sole Arbitrator be also passed by this Court.

7. Having heard learned counsels for the parties, at the outset, this Court notes that in the present case, the Arbitration Clause as contained in Article 24 of the Agreement dated 25^th February, 2021, includes Clause 24.1, which details the procedure for appointment of Arbitral Tribunal, and the same reads as under:

“xxx xxx xxx xxx xxx xxx”

8. Perusal of the aforesaid Arbitration Clause shows that the same envisages that the Arbitral Tribunal shall consist of three retired Railway Officers, not below JA grade. For the constitution of an Arbitral Tribunal, the authority will recommend a panel of three names of retired Railway Officers and the contractor is required to intimate in writing, two names from the said list to the authority. Accordingly, the authority shall appoint at least one of them as the contractor’s nominee. Further, the authority will also simu