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2025 Supreme(Online)(Kar) 21845
KARNATAKA HIGH COURT
E.S.INDIRESH, J
J M SWAMY – Appellant
Versus
GOVERNMENT OF INDIA CENTRAL PUBLIC WORK DEPARTMENT – Respondent
CIVIL MISC. PETITION NO.8 OF 2025
For the Appellants/Petitioners: SRI. P. HARISCHANDRA REDDY
For the Respondents: SRI. M.N. KUMAR
Unilateral appointment of arbitrators undermines impartiality; equal participation is essential in arbitration proceedings.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11(6) - Dispute resolution - Petition sought appointment of Arbitrator for disputes arising from an Agreement concerning office space extension. Court emphasized equal treatment in arbitration proceedings and the necessity for impartial arbitrator selection based on Supreme Court judgment regarding unilateral appointment clauses. (Paras 5-7)
(B) The principle of equal participation extends to all arbitration stages, including arbitrator appointments. Arbitrators must not be chosen unilaterally by a single party.
(C)
Facts of the case:
The petitioner sought independent arbitration to ensure fairness in dispute resolution, challenging the existing appointment procedures as biased.
(D)
Findings of Court:
The court recognized the necessity for an unbiased arbitrator appointment to ensure fair adjudication. (E)
Issues: The legitimacy of unilaterally appointed arbitrators and the validity of the arbitration agreement's terms were central concerns. (F)
Ratio Decidendi: The court found that unilateral appointment clauses compromise the independence and impartiality essential in arbitration, affirming the need for regulations that ensure equality under Article 14 of the Constitution. (G)
Result: The petition is allowed, and a new Arbitrator is appointed for dispute resolution.
| Table of Content |
|---|
| 1. petitioner seeks appointment of arbitrator. (Para 1 , 2) |
| 2. arguments on fairness and appointment methods in arbitration. (Para 3 , 4 , 5) |
| 3. court's emphasis on equal treatment in arbitration. (Para 6) |
| 4. appointment of independent arbitrator confirmed. (Para 7 , 8) |
| 5. directions for proceeding with arbitration. (Para 9 , 10 , 11) |
ORAL ORDER
In this petition, the petitioner has sought for appointment of an Arbitrator to adjudicate the disputes that have arisen between the parties in relation to the Extension of 1st Floor Office Space for NIRM at GSI Campus, Bangalore-Agreement No.40/EE/BCD-II/2019- 2020" in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’).
2. Heard the learned counsel appearing for the parties.
3. It is contended by Sri. Harishchandra Reddy, learned counsel appearing for the petitioner that, as there is dispute between the parties, the Arbitrator has to be appointed as per Clause 25 of the Agreement produced at Annexure- A to the petition.
4. Per contra, Sri.M.N. Kumar, learned CGC appearing for the respondent Nos.1 and 2, opposed appointment of the Arbitrator by referring to the Clause 25 (i) and (ii) and submitted that in terms of the contract referred to above, no person, other than a person appointed by such Chief Engineer CPWD or Additional Director General or Special Director General or Director General, CPWED, as aforesaid, shoul act as arbitrator and if for any reason that it is not possible, the matter shall not be referred to the arbitration at all.
Accordingly, sought for dismissal of the petition.
5. This submission opposed by the learned counsel appearing for the petitioner and places reliance on the judgment of the Hon'ble Supreme Court in the case of Central Organisation for Railway Electrification vs. ECI SPIC SMO MCML (JV) A Joint Venture Company reported in 2024 INSC 857 and argued that, since the arbitration agreement provides for appointment of such persons as per the wish of the respondents and therefore, such award shall not be fair adjudication.
6. Having taken note of submission learned counsel appearing for the parties, Clause 25 of the Agreement at Annexure-A provides for resolution of the dispute between the parties, though the above said Clause provides for appointment persons of choice of the respondent, however, as the petitioner herein disputes with regard to the same, I am of the view that, it is relevant to cite the judgment of the Hon'ble Supreme Court in the case of Central Organization for Railway Electrification vs. ECI SPIC SMO MCML (JV) A Joint Venture Company and paragraph 169 reads as under:
"169. In view of the above discussion, we conclude that:
a. The principle of equal treatment of parties applies at all stages of arbitration proceedings, including the stage of appointment of arbitrators;
b. The Arbitration Act doe not prohibit PSUs from empanelling potential arbitrators. However, an arbitration Clause cannot mandate the other party to select its arbitrator from the panel curated by PSUs;
c. A Clause that allows one party to unilaterally appoint a sole arbitrator gives rise to justifiable doubts as to the independence and impartiality of the arbitrator. Further, such a unilateral Clause is exclusive and hinders equal participation of the other party in the appointment process of arbitrators;
d. In the appointment of a three-member panel, mandating the other party to select its arbitrator from a curated panel of potential arbitrators is against the principle of equal treatment of parties. In this situation, there is no effective counterbalance because parties do not participate equally in the process of appointing arbitrators. The process of appointing arbitrators in CORE (supra) is unequal and prejudiced in favour of the Railways;
e. Unilateral appointment clauses in public-private contract are violative of Article 14 of the Constitution;
f. The principle of express waiver contained under the provis
