MAHARASHTRA NATIONAL LAW UNIVERSITY, AURANGABAD

ALTERNATE DISPUTE RESOLUTION

RESEARCH PROJECT

On

“Recent Developments in the Legality of Unilateral Appointment of Sole

Arbitrator”

Submitted by

PARAS NAGRARE
B.A.LL.B. (Hons.) Semester-VIII
Roll No. 2019/BALLB/49

Submitted to

Under the guidance of

Ms. SAKSHI GUPTA
Faculty of law,
MNLU, Aurangabad
March 2023

DECLARATION
I hereby declare that the project entitled is an outcome of my own efforts under
the guidance of Ms. Sakshi Gupta the project is submitted to Maharashtra
National Law University, Aurangabad, for the partial fulfilment of the
B.A.LL.B. (Hons.) examination (Semester- VIII)2023.

I also declare that this project report has not been previously submitted to any
other university.

March, 2023
MNLU Aurangabad

PARAS NAGRARE
2019/BALLB/49

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Sr. Table of Contents Pg No.
no.
1. DECLARATION 2
2. INTRODUCTION 4
3. Prior to the 2015 Amendment 6
4. The Arbitration and Conciliation (Amendment) Act, 2015 6
5. Post 2015 Amendment 7
6. TRF Ltd. vs. Energo Engineering Projects Ltd 8
7. Perkins Eastman Architects vs. HSCC (India) Ltd 8
8. Proddatur Cable TV Digi Services vs. SITI Cable Network Limited 9
9. SC refuses unilateral appointment of single arbitrator 10
10. Conclusion 12

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 INTRODUCTION

The unilateral appointment of an arbitrator is considered to be a major example of

wrongful use of party autonomy which eventually stalls justice. Although the Arbitration and
Conciliation Act, 1996 laid down rules ensuring an independent and impartial decision-
making procedure, it did allow the appointment of an employee or persons related to either of
the parties to become an arbitrator. Nevertheless, the Arbitration and Conciliation
(Amendment) Act, 2015 along with several judgments of the courts have resolved such issues
to a great extent.

The clause of the unilateral appointment of an arbitrator goes fundamentally against the
well-known principle of “A man cannot be appointed as a judge in his own cause”. However,
many parties continue to preserve the clause of unilateral appointment in their arbitration
agreements in spite of this glaring fallacy so as to render this entire arbitration process biased
and coloured. 
Section 12 of the Arbitration and Conciliation Act, 1996 (“Act”) lays down provisions
for the appointment of an arbitrator and conditions where the appointment may be valid or
invalid. This article will delve into the practice of unilateral appointment of arbitrators in
India, the internationally recognised principle of unilateral appointment of arbitrators in India
and important rulings of the courts as an attempt to evade this practice. 
The jurisprudence on appointment of an arbitrator is filled with plethora of judgments by
various High Courts and the Supreme Court. Yet, the law on appointment of an arbitrator
always throws up some challenges, which results in new decisions being rendered by Courts.
One such recent decision, which has set a new benchmark, is the decision of the Supreme
Court in the case of Perkins Eastman Architects DPC and Ors. v. HSCC (India) Ltd.
(“Perkins”).1 The Supreme Court in order to ensure neutrality of arbitrators, has interpreted
Section 11 and the Schedules to the Arbitration and Conciliation Act, 1996 (“the Act”), as
amended by the Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”),
to hold that a person who is disqualified from acting as an “Arbitrator” is also disqualified to
appoint an “Arbitrator”. Pursuant to the above said decision, several sole arbitrators
appointed by one party to the arbitration agreement have resigned either on their own or at
the instance of the other party to the agreement in view of the said decision which has created
a flutter in various ongoing arbitration proceedings in the country. Further, we understand
that petitions have been filed under Section 14 and Section 15 of the Act seeking termination
of mandate of arbitrators appointed by one of the parties to an arbitration agreement even in

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ongoing arbitrations. In this article, we propose to closely/critically examine the said
judgment in the context of the express provisions of the statue, 246th Law Commission
Report (hereinafter referred to as “Law Commission Report”) including several other High
Court decisions regarding appointment of arbitrator under Part I of the Act, both pre and post
amendment in 2015 on the subject. The jurisprudence on appointment of an arbitrator is filled
with plethora of judgments by various High Courts and the Supreme Court. Yet, the law on
appointment of an arbitrator always throws up some challenges, which results in new
decisions being rendered by Courts. One such recent decision, which has set a new
benchmark, is the decision of the Supreme Court in the case of Perkins Eastman Architects
DPC and Ors. v. HSCC (India) Ltd. (“Perkins”). The Supreme Court in order to ensure
neutrality of arbitrators, has interpreted Section 11 and the Schedules to the Arbitration and
Conciliation Act, 1996 (“the Act”), as amended by the Arbitration and Conciliation
(Amendment) Act, 2015 (“Amendment Act”), to hold that a person who is disqualified from
acting as an “Arbitrator” is also disqualified to appoint an “Arbitrator”. Pursuant to the above
said decision, several sole arbitrators appointed by one party to the arbitration agreement
have resigned either on their own or at the instance of the other party to the agreement in
view of the said decision which has created a flutter in various ongoing arbitration
proceedings in the country. Further, we understand that petitions have been filed under
Section 14 and Section 15 of the Act seeking termination of mandate of arbitrators appointed
by one of the parties to an arbitration agreement even in ongoing arbitrations. In this article,
we propose to closely/critically examine the said judgment in the context of the express
provisions of the statue, 246th Law Commission Report (hereinafter referred to as “Law
Commission Report”) including several other High Court decisions regarding appointment of
arbitrator under Part I of the Act, both pre and post amendment in 2015 on the subject.

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 Prior to the 2015 Amendment
Prior to the Arbitration and Conciliation (Amendment) Act, 2015 (“2015 Amendment”),
unilateral appointments were allowed in India without any restrictions. Such appointments,
specially by PSU’s, were done either from the panel of arbitrators nominated by one of the
parties to the dispute or the employees of one of the parties were nominated as the sole
arbitrator. Of course, this would tilt the balance of power in favour of the party nominating/
acting as an arbitrator.
The practice of appointment of employees as arbitrators was, in fact, upheld by the
Hon’ble Apex Court in the matter of Indian Oil Corporation Ltd. v Raja Transport
Ltd.   wherein it was held that while appointment of employees of private parties is not
suitable, there is no bar for an employee of a government /statutory corporation/ PSU acting
as arbitrator, so far as the person being appointed as an arbitrator has no nexus with the
contract in respect of which such dispute has arisen.  
Thus, the practice of appointing the employees of one of the parties to a dispute became
prevalent, especially in cases of PSU’s and government organisations. This went against the
very root of the Act, as the main essence of an arbitration is that the arbitrator should be
independent and impartial.

The Arbitration and Conciliation (Amendment) Act, 2015

Before the said amendment a person who is the employee, advisor, director or, any
person that is directly or indirectly related to either of the parties could be appointed as a sole
arbitrator, and the question of prevailing bias if any would only be considered after the
appointment. Such appointments not only benefited one party over the other but also
hampered the entire arbitration process. This issue was dealt with by the amendment of 2015
under Section 12(5) and Schedule 7(1) of the act. The list of persons ineligible to arbitrate
now included consultants, advisors, employees, or any person having past or present business
relationships with either of the parties. Thus, such persons were debarred from being
appointed as an arbitrator irrespective of them being independent and impartial. Hence, the
Arbitration and Conciliation (Amendment) Act, 2015 was a step forward in discouraging the
unilateral appointment of arbitrators as persons having any interest in the outcome of the
dispute were debarred from being appointed. 

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 Post 2015 Amendment
However, post the 2015 Amendment, the law with respect to unilateral appointment was
made a bit stringent, and a host of restrictions were put in place as to who cannot be
appointed as an arbitrator. The law however remains silent on the point “who can appoint an
arbitrator”. Many big corporates and PSU’s still continue the practice of appointing
arbitrators unilaterally.
The 2015 Amendment included a fifth schedule which provided a comprehensive list of when
an arbitrator would be considered independent or impartial. The Report, which was the
driving force behind the amendment, discussed impartiality and independence of the
arbitrator, and, significantly, not of the person nominating them. It bears reiterating that the
Report is essential in interpreting the 2015 Act since this amendment was majorly
encouraged by this report. The Report had made no mention of the ineligibility of the person
appointing the arbitrator. Nevertheless, the Supreme Court decided that the person appointing
the arbitrator also came under the fifth schedule’s purview. This could be clearly seen in TRF
Limited v. Energo Engineering Projects Limited. In this case, the Supreme Court dealt with
the issue of whether an ineligible arbitrator could nominate another arbitrator. The agreement
between the parties stated that any dispute would be referred to arbitration with the managing
director of the buyer acting as the sole arbitrator or nominating another arbitrator. The court
held that an ineligible arbitrator nominating another person to act as a sole arbitrator would
be “tantamount to carrying on the proceeding of arbitration by himself.” The court followed
the line of logic that if the managing director is ineligible to act as an arbitrator, then that
person cannot nominate another arbitrator. While dealing a considerable blow to party
autonomy and contradicting the DBM Geotechnics judgment, the court failed to consider the
perspective that the power to appoint an arbitrator is an independent right and separable from
the right to act as an arbitrator. After this judgment, this issue was raised in multiple cases in
high courts across India. However, many of the high courts did not agree with the view taken
by the apex court in this judgment.

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TRF Ltd. vs. Energo Engineering Projects Ltd

In this case, the Supreme Court held that no party can unilaterally appoint a sole
arbitrator and the Managing Director or any other person related to either of the parties is
declared ineligible to act as an arbitrator as per Section 12(5) and has no right to nominate
another arbitrator.

Based on TRF Ltd. vs. Energo Engineering Projects Ltd. (“TRF”), the Supreme Court, in
this case, observed that prima facie both these cases might appear to be different as TRF dealt
with the appointment of Managing Director as the sole arbitrator and his authority to appoint
any other person as an arbitrator whereas the present case only dealt with the question of the
authority of the Managing Director to appoint an arbitrator. But the result of both these cases
would be the same, since, in both circumstances, there can be a possibility of bias or
underlying interest in the outcome of the dispute. 

The court further added that, when only one party is given the right to appoint a sole
arbitrator, it gets an element of exclusivity in determining the course of the arbitration and
hence persons having an interest in the ongoing dispute should not be permitted to appoint
the arbitrator. 

Despite the TRF Judgement (Supra), big corporates, mostly banks, non-banking financial
companies, infrastructure companies, financial sector entities etc. kept unilaterally appointing
their own arbitrators in numerous cases.

Subsequently, organisations resorted to another practice of appointing their retired

employees or people having some other relationship or nexus with the organisation, as
arbitrators. A very common trend observed in large conglomerates particularly, government
run entities or NBFCs etc, is the appointment of senior level employees or previously retired
employees as arbitrators in a dispute. The former instance has been explicitly made invalid by
Section 12(5) of the Act, but the latter still remains as a grey area. Since it is not practical to
impose a blanket ban on the appointment on all people related to an organisation, section
12(5) read with the seventh schedule lays down conditions when such individuals may be
unbiasedly appointed. 

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Perkins Eastman Architects vs. HSCC (India) Ltd

In the 2015 amendment, the question of unilateral appointment of a sole arbitrator is

discussed at great length in Perkins Eastman Architects vs. HSCC (India) Ltd. In this case,
the applicants are architectural firms and the respondent is an executing agency of the
Ministry of Health and Family Welfare. The applicants entered into an agreement for
providing architectural design and planning for the respondent. Due to several disputes
between the two, the applicants invoked the dispute resolution clause. As per this clause, the
respondent was to appoint a sole arbitrator within 30 days. The learned counsel for the
applicants raised contentions that the appointment of the sole arbitrator was wrongfully done
by the Chief General Manager after the stipulated period of time given in the dispute
resolution clause and that such appointment cannot be termed as independent or impartial as
it is in the interest of the respondent. The learned counsel for the respondent stated that there
is nothing illegal in the appointment of the sole arbitrator as the appointment was carried out
as per the dispute resolution clause and immediately on the next working day after 30 days.  

Thus, the Hon’ble Court had to address whether it could exercise its power of appointing a
sole arbitrator in cases where the dispute resolution clause already stipulates the unilateral
appointment procedure for a sole arbitrator.

Proddatur Cable TV Digi Services vs. SITI Cable Network Limited

The validity of the unilateral appointment of a sole arbitrator was discussed and heavy
reliance was placed on the judgment of Perkins Eastman Architects vs. HSCC (India) Ltd.
Placing reliance on the case laws, the Delhi High Court concluded that the unilateral
appointment of sole arbitrator is invalid as the same is impermissible by law and would
temper the virtues of impartiality, fairness, and transparency. It also stated that party
autonomy is an important characteristic of arbitration but these virtues are equally important
and cannot be overridden. Thus, the present petition was allowed by terminating the mandate
of the unilaterally appointed arbitrator and with the appointment of a new sole arbitrator.  

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 SC refuses unilateral appointment of single arbitrator

Arbitration is a method of alternate dispute resolution wherein a third party is appointed for
adjudication of disputes between the concerned parties. In such a scenario, preserving the
sanctity of the judicial process becomes imperative. As arbitration requires adjudication on
rights of the parties involved, principles of natural justice play a critical role in avoiding any
potential risk of miscarriage of justice. The first principle of natural justice is ‘nemo judex in
causa sua’, which means ‘no man can be a judge in his own cause’. This principle intends to
avoid any ‘reasonable apprehension of bias’ that may arise during any judicial process.

In the recent years, arbitration has increasingly gained popularity as a preferred method of
dispute resolution. The reasons being the extensive party autonomy and the flexibility it
offers. Over the years, various situations have arisen, putting courts in dilemma to decide
between upholding party autonomy or the principles of natural justice. However, as party
autonomy is the cornerstone of arbitration, courts have been hesitant in interfering with party
autonomy.

The courts faced a similar dilemma in the case of Perkins Eastman Architects DPC & Anr. v
HSCC (India) Ltd (“Perkins”), which was decided by a division bench of the Supreme Court
in November 2019. In the case of Perkins, the Supreme Court, while interpreting the
provisions of the Arbitration and Conciliation Act, 1996, and juggling between party
autonomy and the principles of natural justice, held that a person who has an interest in
outcome or award passed by the arbitrator during arbitration, cannot be entitled to appoint the
sole arbitrator, irrespective of the fact that the parties agreed to it at the time of entering into
the contract.

Hence, as per the decision of the Supreme Court in Perkins, no party to a dispute shall be
allowed to unilaterally appoint an arbitrator, even though the terms of the contract may entitle
them to do the same. This decision was later upheld by the Delhi High Court in Proddatur
Cable TV Digi Services v Siti Cable Network Limited (“Proddatur Cable TV”)

The stance taken by the Supreme Court is in consonance with the principle of ‘nemo judex in
causa sua’ and the international principle of equal treatment of parties in the constitution of
the arbitral tribunal. The decision of the Supreme Court in TRF Limited was predominantly
based on its reading of Section 12 of the Act wherein it dealt with ineligibility of an arbitrator

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under Schedule VII of the Act highlighting the essence of the Amendment Act of 2015. The
case of Perkins has placed heavy reliance on the case of TRF Limited and observed

“Naturally, the person who has an interest in the outcome or decision of the dispute must not
have the power to appoint a sole arbitrator.”

This decision will result in reduction of abuse of power by the party with higher bargaining
power, thereby compelling parties to appoint the arbitral tribunals by mutual consent of
parties or by arbitral institutions designated by the Supreme Court in accordance with the
Arbitration and Conciliation (Amendment) Act, 2019.

Additionally, it is also important to understand that awards passed by sole arbitrators, who
have been appointed unilaterally appointed have been under scrutiny on the grounds of
apprehensions of bias and have led to further litigation. This decision of the Supreme Court is
aimed at reducing such further litigation and strengthening the faith of parties in the process
of arbitration by removing such apprehension of bias.

The decision will also require parties to introspect and relook at the dispute resolution clauses
agreed upon in order to avoid future disputes on similar grounds.

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 Conclusion

The practice of unilateral appointments can be said to defeat the very essence of the Act
by giving one party a right over the other, which goes against the basic notions of natural
justice. In one-sided arbitration clauses, especially in contacts of private parties (not being
government entities) or entities which are not PSU’s, enforceability of such clause becomes
difficult to achieve. While a party may get the counter party to sign an agreement with a
unilateral appointment clause should the counter party, at the time of appointment of an
arbitrator, raise an issue with respect to the validity of the clause and/or refuse to give consent
under Section 12(5), the manner of appointment becomes infructuous and the party pressing
the arbitration in that scenario would need to approach the courts for appointment of an
arbitrator.

Though, courts in India have made a conscious attempt to put to rest the ethical dilemma
of unilateral appointments of arbitrators, however, the practice of appointing arbitrators from
a panel, maintained and formulated by one of the parties to the dispute.

Although the issue of unilateral appointment of a sole arbitrator has been dealt with
convincingly in judgments like Perkins Eastman Architects vs. HSCC (India)
Ltd and Proddatur Cable TV Digi Services vs. SITI Cable Network Limited, the retrospective
invalidity of unilaterally appointing an arbitrator has also increased the chaos between the
parties whose agreements or contracts were made before the amendment of 2015.
Undoubtedly, it is a step forward in making the arbitration process conducive but as a matter
of fact, it has also increased the burden of courts with a rise in arbitral proceedings.
Moreover, there have been some contradicting judgments, for instance in the case of Central
Organization for Railway Electrification vs. M/S ECI-SPIC-SMO-MCML (JV), the Supreme
Court observed that being a retired employee of either of the parties does not automatically
indicate bias against such an employee to act as an arbitrator. Further, the judgment did not
follow the procedure of nominating an arbitrator from a broad-based panel that was laid down
in M/S. Voestalpine Schienen Gmbh vs. Delhi Metro Rail Corporation Limited. 

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 Nevertheless, with the joint efforts of legislature and judiciary, it is evident that India is
making some noteworthy changes in its legal system to uphold the true spirit of arbitration
which can distinctly be observed from the judgments like Perkins Eastman Architects v
HSCC (India) Ltd and Proddatur Cable TV Digi Services vs. SITI Cable Network
Limited that restricts the unilateral appointment of a sole arbitrator.

We recommend that unilateral appointment clauses be avoided at all times. Parties can

mutually agree on a list of arbitrators from which the party initiating the arbitration may
nominate an arbitrator. This would reduce the time and energy of commencing arbitration
through appointment of an arbitrator under Section 11 by filing an application either before
the High Court and/or the Supreme Court. 

Also, in the light of 2019 amendment to the Act which seeks to promote institutional
arbitration, it is also seen that in many contracts, parties have been giving the power of
appointment of an arbitrator to an arbitration institution. Considering the time taken for
Section 11 matters to be decided by Courts along with the expenses incurred, appointment of
arbitrators through an institution would be faster and efficient as compared to the route under
Section 11. With the time limits imposed by the arbitration act for newer arbitration and
quick resolution for appointment of arbitrator, arbitration does emerge as an effective mode
of dispute resolution.

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