Court Appoints Substitute Arbitrator Following Unilateral Constitution of Tribunal by Railways
In a pivotal decision, the Madhya Pradesh High Court has terminated the mandate of an Arbitral Tribunal constituted by the Indian Railways in a contractual dispute with Continental Telepower Industries Limited. The judgment was delivered by Justice Vivek Jain on December 22, 2025, in response to a petition filed under Section 14 of the Arbitration and Conciliation Act, 1996.
Continental Telepower, a contractor engaged to supply PVC insulated armored underground signaling cables to the Indian Railways, had objected to the unilateral appointment of arbitrators by the Railways. Despite the contractor's refusal to waive the applicability of Section 12(5) of the Arbitration Act, which mandates impartiality and independence of arbitrators, the Railways proceeded to form an Arbitral Tribunal with retired railway officers, prompting legal challenges from the contractor.
The court ruled that the unilateral appointment of arbitrators by the Railways violated Section 12(5) of the Act, which safeguards against bias in arbitration proceedings. Justice Jain emphasized that the mandate of the arbitral panel was invalid, as it was formed without the necessary waiver from the petitioner, leading to its termination under Section 14 of the Act.
The judgment echoes the recent Supreme Court decision in the case of "Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV)," which clarified that public sector undertakings cannot compel contractors to select arbitrators from their curated panels. Although the Supreme Court's decision applies prospectively, the Madhya Pradesh High Court found merit in the petitioner's objections, given the clear refusal to waive Section 12(5) well before the Supreme Court's ruling.
To ensure the continuation of arbitration proceedings, the court appointed Justice Pritinker Diwakar, former Chief Justice of the Allahabad High Court, as the sole arbitrator. This decision aligns with the provisions of Sections 14 and 15 of the Arbitration Act, which allow for the appointment of substitute arbitrators to maintain the integrity and continuity of arbitration processes.
The court has directed the Registrar (Judicial-I) to obtain the consent and disclosure of the proposed arbitrator in accordance with Sections 11(8) and 12(1) of the Arbitration Act within ten days, with further orders scheduled for January 6, 2026.
Bottom Line:
Arbitration Law - Mandate of Arbitral Tribunal terminated under Section 14 of Arbitration and Conciliation Act, 1996 due to unilateral appointment of arbitrators by one party despite refusal of other party to waive applicability of Section 12(5) - Substitute arbitrator appointed to maintain continuity of arbitration proceedings.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 12(5), 14, 15
