SC: Sole arbitrator must not be appointed by person interested in outcome

The Hon’ble Supreme Court, on 26th November 2019, in the matter of Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. pronounced that the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator.

The Hon’ble Supreme Court observed that:

Where, in a “Declaration for Lead Member of the Consortium (Form E)” a member of the consortium is declared to  be a lead member, the fact that the declared lead member and another member are jointly and severely responsible for the execution of the project as per the terms of the consortium agreement would not change the “lead member” status of the declared member. (This inference has been drawn on the basis of Para 8)

Where, the lead member of the consortium company is a member having its registered office outside India, requirements of Section 2(1)(f) of The Arbitration and Conciliation Act, 1996 are satisfied and the arbitration in such case would be an “International Commercial Arbitration”. (This inference has been drawn on the basis of Para 10)

In a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. 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. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015. (Para 16)

Copy of judgement: Judgement_26-Nov-2019

-Adv. Tushar Kaushik

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