Without having system to ensure impartiality and independence of Arbitrators,
arbitration cannot gain confidence in the minds of the parties to the dispute.
It is not sufficient that many arbitrators by nature are independent and
impartial. To gain the confidence of a common man, the arbitration system
provided in the Procedural law of a country should provide sufficient checks and
balances and make arbitration, an impartial dispute resolution system.
In India, even today parties believe in adhoc arbitration and hence the
responsibility of appointing of arbitrators is either in the hands of High
Courts or in the hands of one of the parties. Where ever the appointment
procedure is not prescribed, parties approach High Court and High Courts appoint
arbitrators after checking their declaration under S.12(5) and hence it is safe.
But the difficulty is in the arbitration clauses allowing the one of the parties
to appoint the arbitrator.
Arbitral institutions and High Courts without fail
collect declarations of Arbitrators regarding their impartiality and
independence and evaluate them before appointment but in the cases of
appointment by one party mostly the party appoints someone who is known to them.
The parties having such a right, consider themselves to be privileged and they
can appoint anybody close to them as the arbitrator.
The said clauses have been
protected by the Courts in India for a long time mostly keeping in mind the
Government Institutions and Public Sector under takings. Even the serving
officers of one of the parties were allowed to act as arbitrators in an
arbitration arising out of the same parties. The said situation became worse
when many private companies also followed such clauses.
In the meantime Government of India, developed a dream of making India as a hub
for international Arbitrations and brought in many changes to the 1996 Act. The
amendments made to the Arbitration and Conciliation Act,1996 in the year
2015 created a lot of enthusiasm among the arbitration community. The
Schedules V, VI & VII were similar to the IBA Rules on Conflict of
interest prohibiting certain category of persons from getting considered to
be an arbitrator because of their relationship with the parties or the counsels.
More over Section 12(5) mandates the arbitrator to declare and disclose any
relationship with the parties or the counsels. Schedule V, is a guideline for
the potential arbitrators to make the declaration under the format provided
under Schedule VI but the relationships listed in schedule V does not disqualify
the arbitrator from getting appointed. But if an arbitrator falls under any of
the items mentioned in Schedule VII, then he is disqualified to be appointed as
If an arbitrator falls in any of the relationships mentioned in
Schedule VII then parties may approach the High Court under S.14 of the Act and
seek for removal of that arbitrator, if the arbitrator does not recuse himself.
If any arbitrator falls within the relationships mentioned in Schedule V, then a
party if having justifiable doubts about the impartiality and independence of
the arbitrator shall file an application under S.13 before the arbitral
tribunal. If the said arbitrator after hearing the application recuse himself
after the said application, then a new arbitrator shall be appointed. But if the
said application is rejected then the aggrieved party will have the liberty to
raise bias as an additional ground while challenging the award under S.34 of the
But still the above amended provisions could not address the problem of “one
party appointed sole Arbitrator”. The most important judgment of Supreme Court
of India that is considered to be a land mark in the objective of achieving a
system that ensures appointment of impartial and independent arbitrators is, TRF
Limited Vs Energo Engineering Projects Limited
(2017) 8 SCC 377. A
three-judge bench of Supreme Court of India held that a disqualified arbitrator
cannot nominate another arbitrator.
While giving the decision it that “which
cannot be done directly cannot be done indirectly by engaging another outside
the prohibited area to do the illegal act within the prohibited area” in TRF
Limited Vs Energo Engineering (2017) 8 SCC 377 case, applying the maxim “What
one does through another is done by oneself
” (qui facit per alium facit per se”
relying on another Judgment of Supreme Court of India Pratap Chand Nopaji Vs
Kotrike Venkata Setty & Sons
(1975) 2 SCC 208.
This Judgment put an end to one
branch of the regime of appointment of Sole Arbitrators, where the arbitration
clause empowered the officer of one party, “either to act as arbitrator or
appoint another person as arbitrator”.
Now the Supreme Court of India dealt with the sustainability of arbitration
clauses empowering of an officer of one of the parties to appoint the sole
arbitrator while dealing the case of Perkins
 case. In the said case the
arbitration clause empowered the Respondent to appoint the sole arbitrator and
the respondent appointed an arbitrator. But the Petitioner Perkins approached
the Hon’ble Supreme Court of India seeking to appoint an arbitrator under
S.11(6) of the Act.
The Supreme Court of India examined various Judgments
including the above said TRF case (supra) and came to the conclusion that an
interested party cannot have the authority to appoint the arbitrator, when sole
arbitrator is provided in the arbitration clause. The said Judgment has put an
end to the era of one party appointing Sole Arbitrator, which is one of the
historical development in the Arbitration history of India.
- Arbitration and Conciliation (Amendment) Act, 2015
- IBA Rules on Conflict of interest in International Arbitration
- TRF Limited Vs Energo Engineering Projects Limited (2017) 8 SCC 377
- Perkinson Eastman Architects DPC Vs HSCC (India) Limited
- Arbitration and Conciliation Act,1996