Unilateral choice of arbitrators by one party is violative of the principle of impartiality: Delhi High Court

Unilateral choice of arbitrators by one party is violative of the principle of impartiality: Delhi High Court

The High Court of Delhi held that in arbitration, when one party unilaterally chooses names from a panel of arbitrators and forwards it to the other party to select its arbitrator from these names, violates the principle of impartiality in arbitration.

Justice Neena Bansal Krishna held that such a unilateral exercise of power creates space for suspicion regardless of the merit of the selected arbitrators who happens to be retired District Judges.

As to the facts of the case, the parties entered into four license agreements dated 25.04.2019 wherein the respondent licensed few commercial spaces to the petitioner on 'as is where is' basis. A dispute arose between the parties due to the condition and area of the licensed premises.

Accordingly, the petitioner issued the notice of arbitration and suggested the name of the sole arbitrator. However, the respondent did not agree with the proposal of the petitioner and stated that in view of the agreement between the parties, the petitioner can nominate its arbitrator from a panel of 5 arbitrators to be chosen by the respondent.

Thereafter, the petitioner filed an application for appointment of the sole arbitrator.

The Court took a different view of its judgment in IWorld Business Solutions v. DMRC, wherein similar panel of five Members who were all retired District Judges was considered and it was held that considering that they were all retired Addl. District Judges/ District Judges, their impartiality and neutrality could not be questioned and the panel was held to be valid for nomination of any one as an Arbitrator.

The Court relied on the judgment of the Hon'ble Supreme Court in Voestelpine v. DMRC, (2017) 4 SCC 665 to hold that such a unilateral exercise of power creates space for suspicion regardless of the merit of the selected arbitrators who happens to be retired District Judges in the present case.

Accordingly, the Court allowed the petition and appointed an independent arbitrator.