On the issue of appointment of Arbitrators, Supreme Court refers the matter to larger bench

On the issue of appointment of Arbitrators, Supreme Court refers the matter to larger bench

The Supreme Court, in light of the existence of conflicting decisions on the issue of appointment of Arbitrators under Section 11 of the Arbitration and Conciliation Act, 1996 referred the matter to a larger bench. Given the frequent recurrence of the issue, the Apex Court also observed that the question of law be resolved at the earliest.

"In the circumstances, we direct that the papers of the present matter be placed before the Hon'ble the Chief Justice of India for constituting a larger Bench."

It was noted by the Court that the case Union of India v. M/s. Tantia Constructions Ltd. have already made a reference to a larger Bench to look into the correctness of the decision in Central Organisation forRailway Electrification V. ECI-SPIC-SMO-MCML (JV) A Joint Venture Company (2020) 14 SCC 712(CORE), which, was stated, to have taken a divergent view.

Before the Bench presided by Justice Lalit was a matter which assailed the appointment of the Arbitrator for being contrary to the law laid down by the Apex Court in TRF Ltd. v. Energo Engineering Projects Ltd, (2017) 8 SCC 377 and Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2020) 20 SCC 760. The Bench noted that the High Court had relied on the judgment in CORE (supra).

In TRF (supra), the a 3-Judge Bench of the Apex Court had held that a person who himself becomes ineligible to be appointed as an arbitrator by operation of law cannot nominate an arbitrator.

In Perkins (supra), the decision in TRF was followed by a Division Bench and the person who was ineligible to be appointed as an arbitrator was disqualified from nominating one. It was so held that a person having an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator unilaterally. However, a conflicting view was taken by a 3-Judge Bench in CORE (supra), wherein the validity of an arbitration clause giving power to an ineligible person to appoint arbitrator was affirmed by the Apex Court. Subsequently, in Tantia (supra), a 3-Judge Bench expressed disagreement with CORE and referred the issue to a larger Bench.