No party is permitted to unilaterally appoint an Arbitrator, says Delhi HC

Read Judgment: Sivanssh Infrastructure vs. Army Welfare Housing Organization

Pankaj Bajpai

New Delhi, November 18,2021:The Delhi High Court has rejected the unilateral appointment of Arbitrator by observing that no party can be permitted to unilaterally appoint an Arbitrator, as the same would defeat the purpose of unbiased adjudication of dispute between the parties.

While making such observation, the Bench of Justice Suresh Kumar Kait cited the decision of the Supreme Court in the case of Perkins Eastman Architects DPC & Anr. vs. HSCC (India) Ltd. , wherein it was categorically stated that “in cases where one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution.

The observation came pursuant to a petition seeking appointment of Sole Arbitrator under the provisions of Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996. 

Going by the background of the case, Army Welfare Housing Organization (Respondent) invited bids for development of a Residential Complex to which Sivanssh Infrastructure (Petitioner) had submitted its bid, which was accepted by the respondent. 

Since respondent failed to handover the site to the petitioner, a Revised Work Order was issued by the respondent, for petitioner to commence the project on August 12, 2016 with the Completion Date as February 11, 2019. However, due to delays and defaults on the part of the respondent, the contract completion was delayed and consequently, the petitioner had to seek extension of the project with Completion Period on various occasions. 

In the meanwhile, certain disputes arose between the parties with regard to handing over of the dwelling units, issuance of completion certificate, defects liability period, release of bank guarantees furnished by the petitioner etc. Since respondent was unwilling to release the longstanding dues of the Petitioner, the Petitioner invoked arbitration clause. 

Later, the Chairman of the respondent in complete neglect of petitioner’s letter, unilaterally appointed Mr. S.S. Bansal, ADG (Arbitration Cell), Military Engineering Service (MES) as the Sole Arbitrator. Hence, present petition. 

After considering the arguments, Justice Kait found that the arbitration agreement between the parties and invocation of arbitration are not disputed by the parties.

However, citing the decision of the Supreme Court in the case of Perkins Eastman Architects DPC(Supra), Justice Kait quoted the observation of the Apex Court that the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. 

The High Court therefore appoints Mr. Justice (Retd.) B.D Ahmed as sole arbitrator to adjudicate the dispute between the parties. 

The High Court accordingly disposed of the petition by directing the Arbitrator to ensure compliance of Section 12 of 1996 Act, before commencing the arbitration.