A case heard by a two-judge bench comprising Justice U.U. Lalit and Justice
Indu Malhotra, in the Supreme Court upon the appointment of Sole Arbitrator as
per Section 11 of the Act. Mr Amar Dave, learned Advocate represented for the
Applicants and Mr Guru Krishna Kumar, learned Senior Advocate for the
Perkins Eastman Architects DPC is an architectural firm having its headquarters
in New York City, USA. Edifice Consultants Private Limited is a Mumbai-based
firm. Both of them submitted their application in response to the proposal to
HSCC and therefore were declared as successful bidders. Consequently, the
project was awarded to the applicants. As per the contract, clause 24 stated
that the chairman and the managing director of the respondent company should
appoint a sole arbitrator to adjudicate upon the disputes arising between the
It is important to note that the Applicants are a consortium. Following the
Consortium Agreement, Perkins Eastman (the foreign party registered in New York
City, United States of America) was the focal point for the Agreement.
Within six days of signing the work contract, the respondent alleged that there
was a failure on the part of applicants to stop the said project. Subsequently,
a termination notice was issued stating that there was a non-compliance of
contractual obligations on the part of the applicants. The applicants denied
On such a turf between the parties, clause 24 of the contract was invoked
through the advocates of the applicants. Adhering to the terms enshrined in
Clause 24 of the Agreement, a decision in regard to the notice was required to
be taken within a month. But the communication was issued after the prescribed
period of 30days which subsequently intimated that a reply to notice would be
sent within 30 days.
An appeal was filed by the applicants before the director in terms of said
clause 24, but there was a complete failure on the director ( Engineering ) to
discharge the obligations in terms of said clause 24.
Therefore, by a letter addressed by the applicants, the chief managing director
of the respondent was called upon to appoint a sole arbitrator. However, no
appointment of an arbitrator was made within the stipulated 30 days. a letter
was issued by the chief general manager of the respondent after the period of 30
days stating that Major General KT Gajria is appointed as the sole arbitrator.
The application was filed under section 11(6) read with section 11(12) of the
Act before the Court seeking the appointment of a sole arbitrator in accordance
with terms of the contract between the parties.
The issues brought in front of the bench were whether this arbitration is
regarded as a case of International Commercial Arbitration and whether the Court
can appoint the arbitrator in this present case?
The petitioner brought that as per the argument, the chairman and the managing
director were the competent authorities to appoint a sole arbitrator. However, a
failure on the part of the respondent in appointing an arbitrator within the
stipulated period entitled the petitioners to seek such appointment under
section 11 of the Act.
The chairman and managing director of the respondent would naturally be
interested in the outcome or decision in respect of the dispute, and therefore
the prerequisite element of impartiality would conspicuously be absent in the
Reliance was made on the case of TRF Ltd v Energo Engineering Projects Ltd in
bringing contentions towards application, and furthermore, it was stated that
this matter is to be regarded as an International Commercial Arbitration since,
as per the Consortium Agreement entered between the Applicants, Perkins was
described as the lead member of the consortium.
The respondents state that they exhausted the period of requisition on a Friday,
and therefore the arbitrator was appointed on the very next working day. The
appointment of the said arbitrator was made by the chairman and the managing
director, but it was only communicated by the chief managing director and as
such, infirmities were utterly non-existent.
It was contented by the respondents that this case does not qualify as a case of
international commercial arbitration as clause 9 of the contract states that
both the applicants were jointly responsible for the execution of the project.
The bench held that the issue arbitration was to be regarded as an international
commercial arbitration as the lead member of the said consortium agreement was
applicant no 1, Perkins Eastman, who has its headquarters in New York. Such a
statement clarifies and satisfies the requirements of Section 2(1)f of the Act.
The bench also noted that the Court wouldn't have entertained this application
under section 11(6) read with section 11(12) and of the Act if the said
arbitration was an International Commercial Arbitration. Emphasis was made on
Section 11(6) upon the powers vested to the competent Court when there is any
trouble in appointing the arbitrator.
Section 11 (12) (a) read with Section 11 (6) provides that an Application for
the appointment of an arbitrator can be maintained before the Supreme Court only
if it is international commercial arbitration. Therefore, it was necessary to
determine whether this specific dispute arose out of international commercial
arbitration. In an arbitration with respect to a commercial dispute arising out
of legal relationships, if one of the parties fall within the scope of
sub-clauses (i) to (iv) of Section 2 (1) (f), the arbitration would be an
international commercial one.
The Court deliberated on the TRF case, where the Supreme Court observed that
only one party has the right and power to appoint a sole arbitrator. Such choice
shall hold an element of exclusivity in determining or charting the course for
It furthermore noted that any person who holds an interest in the outcome of the
dispute should not have the power to appoint a sole arbitrator in such a
resolution process. This was made with the essence of amendments brought in by
the Arbitration and Conciliation (Amendment) Act, 2015 and the judgment of the
Reliance was made to another Supreme court case, Indian Oil Corporation Limited
v Raja Transportation P Ltd, 2009. wherein it was observed that if justifiable
doubts are arising out in accordance to independence and impartiality of the
person nominated as an arbitrator, and if other circumstances warrant the
appointment of an independent arbitrator by ignoring the procedure prescribed,
such appointment can be made by the competent Court in order to necessitate the
importance of impartial and independent arbitrators.
The bench annulled the effect of the letter issued by the Supreme Court by the
respondents appointing the sole arbitrator to adjudicate the dispute between the
Furthermore, the appointment of the said arbitrator was subject to the mandatory
declaration under the amended Section 12 of the Act with respect to the
independence and impartiality and the ability to devote sufficient time to
complete the arbitration within the stipulated time as stated in the section 29A
of the Act. Notably, the SC clearly indicated that its decision in no way
reflected upon the appointed arbitrator's competence and standing. The SC
further exercised its power under Section 11(6) of the Act and appointed Dr
Justice A.K Sikri (Retd.) as the sole arbitrator.
On account of the far-reaching nature of its observations, there is a widely
held belief that the judgment in Perkins is a panacea for any and all
possibilities of a party attempting to secure a unilateral, possibly
self-serving, appointment of a sole arbitrator. As a conceptual clarification,
the unilateral appointment that is being adverted to for the present analysis is
one where a party is ultimately able to, by whatever means, secure the
appointment of a sole arbitrator purely of its choosing, even if the process of
appointment itself might seem neutral in this regard. The appointment being
considered is also in the limited context of a sole arbitrator. The power
dynamics to appoint a nominee arbitrator or a presiding arbitrator are not being
dealt with herein.
It is relevant to note at this juncture that the judgment in Perkins arrived at
the conclusion that it did on the basic underlying premise that the significant
and unfair advantage to be gained by a party to a dispute by being able to
appoint a sole arbitrator of its choosing at the stage of the disputes having
arisen was quite evident. However, it can well be argued that this underlying
context of the judgment would limit its applicability to cases where this
identification of the control exercised by one party would not be so evident.
However, the combined effect of the Supreme Court of both TRF and Perkins
judgment has taken away the right to appoint the sole arbitrator by one of the
parties to the arbitration agreement. As held in the discussion hereinabove,
this was never the intent of Parliament, and the express provisions of the
statute could not deduce the same.
The Supreme Court, through these two judgments, has made clear that the only
option remaining with the parties is to approach the Court for appointment of an
arbitrator in agreements which provide for the appointment of sole arbitrator
agreement by one party if there is no consensus between the parties on the
choice of arbitrator. Such practice will also be against the golden rule of
minimum Court intervention, as provided under the Act.
As a result, all the ongoing arbitration proceedings where one party has
appointed an independent and impartial sole arbitrator as per the Act and
agreements where one party has the right to select the sole arbitrator have been
put in jeopardy.
The judgment in Perkins is, however, significant and breaks new ground because
it is the most explicit recognition yet of a power imbalance in the methodology
of appointment of an arbitrator being by itself an express indicator of a
possibility of latent bias and the corresponding obligation of the Court to
interfere in such a scenario, even if it means giving a go-by to the general
principle of party autonomy.