Unilateral Arbitrator Appointment Deemed Illegal Without Express Waiver, Upholding Supreme Court Precedents
In a significant ruling, the Delhi High Court has invalidated the appointment of a sole arbitrator in the case of M/S. M.V. Omni Projects (India) Ltd. v. Union of India, reiterating the legal principles established by the Supreme Court concerning arbitrator appointments. The division bench, comprising Justices C. Hari Shankar and Om Prakash Shukla, upheld a previous judgment that found the arbitrator's appointment invalid due to non-compliance with Section 12(5) of the Arbitration and Conciliation Act, 1996.
The conflict originated from a contract dated January 12, 2016, between M.V. Omni Projects and the Union of India, leading to arbitration proceedings that resulted in an award unfavorable to the respondent, Union of India. The respondent challenged this award, arguing that the arbitrator's appointment was unilaterally made by the appellant, violating the statutory requirements.
The crux of the court's decision hinged on the Supreme Court's rulings in cases such as Bharat Broadband Network Ltd. v. United Telecoms Ltd. and Perkins Eastman Architects DPC v. HSCC (India) Ltd., which underscore that any person whose relationship with the parties falls within the categories specified in the Seventh Schedule of the Act is ineligible to be appointed as an arbitrator, unless both parties explicitly waive this ineligibility in writing after a dispute arises.
The court noted that while the appellant had moved the High Court under Section 11(6) for appointing an arbitrator, the actual appointment by the respondent was unilateral and not in compliance with the necessary legal framework. The judgment emphasized that mere participation in proceedings or procedural orders does not fulfill the requirement of an express agreement in writing to waive the ineligibility under Section 12(5).
The judgment is a reaffirmation of the legal standards set by the Supreme Court, ensuring that arbitrator appointments are conducted with fairness and mutual consent, maintaining the integrity of the arbitration process. The appeal by M.V. Omni Projects was dismissed, with the court upholding the invalidation of the arbitral award.
Bottom Line:
Arbitration - An arbitrator unilaterally appointed by one of the parties is ineligible to act as per Section 12(5) of the Arbitration and Conciliation Act, 1996 unless there is an express agreement in writing by both parties waiving such ineligibility after disputes have arisen.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 12(5), 11(6)
M/S. M.V. Omni Projects (India) Ltd. v. Union of India, (Delhi)(DB) : Law Finder Doc Id # 2837757
