Equilibrium Is Disturbed Where The Party Drawing Up The Panel Of Arbitrator Is Given A Further Right To Accord Its “Confirmation” To Nomination Made By Other Party: Delhi High Court

The bench of Justice Sachin Datta held that in terms of the judgment of the Supreme Court in Central Organisation for Railway Electrification (CORE), the appointment of an arbitrator from a panel maintained by the other party is not invalid as it seeks to counterbalance the right of one party to draw a panel of arbitrator with the right of the other party to make the appointment from such a panel, however, it must  be a broad panel as held by the Apex Court in Voestalpine Schienen.

The Court held that this counterbalance is disturbed when the party drawing up the panel is further given the power to afford confirmation to the choice made by the other party. It held that it tilts the balance in favour of the party drawing the panel.

Facts

The respondent placed upon the petitioner, a purchase order dated 12.10.2018. Clause 14 of the agreement provided for resolution of dispute through arbitration. Thereafter, the parties entered into a contract dated 05.11.2018 and the terms of the purchase order dated 12.10.2018 were incorporated therein.

A dispute arose between the parties over the non-payment of dues to the petitioner. Accordingly, the arbitration clause was invoked and the notice of arbitration was issued by the petitioner. On failure of the parties to mutually appoint the arbitrator, the petitioner filed an application under Section 11(6) of the A&C Act.

Contention of the Parties

The petitioner sought the appointment of arbitrator on the following grounds:

• The procedure for the appointment of arbitrator provided under Clause 14 of the agreement is non-est and void as against the mandate of Section 12(5) of the A&C Act
• The procedure prescribed under Clause 14 tilts the balance in favour of the respondent as it confers on it, the right to confirm the arbitrator that the petitioner appoints from the panel maintained by the respondent.
• The above procedure is in contravention of the judgments of the Supreme Court as well as various High Courts.
• By merely providing a panel of arbitrators the respondent has sought to defeat the purport of Section 12(5) r/w the Schedule VII of the Arbitration and Conciliation Act, 1996.

The respondent countered the above submissions by making the following counter-arguments:

• The procedure provided under Clase 14 is completely valid as the panel maintained by it is a broad panel consisting of names of retired Supreme Court and High Court Judges.
• The counterbalance is achieved by conferring on the respondent, the right to make an appointment from the 31 names given in the panel.
• The Supreme Court in its judgment in Voestalpine has upheld the validity of a similar panel.
• The right of confirmation provided under the agreement is a mere formality and does not infringe upon the right of appointment conferred on the petitioner.

Analysis by the Court

The Court observed that Clause 14 of the purchase order provides for the appointment of arbitrator from a panel of 31 names maintained by the respondent. Further, it provides that the nomination of arbitrator made by the petitioner would be subject to confirmation by the respondent.

The Court held that that the equilibrium is disturbed where the party drawing up the panel of arbitrator is given a further right to accord its “confirmation” to nomination made by other party.

The Court held that in terms of the judgment of the Supreme Court in Central Organisation for Railway Electrification (CORE), the appointment of an arbitrator from a panel maintained by the other party is not invalid as it seeks to counterbalance the right of one party to draw a panel of arbitrator with the right of the other party to make the appointment from such a panel, however, it must be a broad panel as held by the Apex Court in Voestalpine Schienen.

The Court held that this counterbalance is disturbed when the party drawing up the panel is further given the power to afford confirmation to the choice made by the other party. It held that it tilts the balance in favour of the party drawing the panel.

Accordingly, the Court allowed the arbitration petition and appointed Justice (Retd.) Najmi Waziri as the sole arbitrator.

Case Title: Steelman Telecom Limited v. Power Grid Corporation of India Limited

Citation: 2023 LiveLaw (Del) 703

Date: 14.08.2023

Counsel for the Petitioner: Mr. Aniruddha Bhattacharaya and Mr. Aditya S. Pandey

Counsel for the Respondent: Mr. Sudhir Nandrajog, Sr. Adv. with Azmat H. Amanullah and Mr. Hardik Choudhary.

Click Here To Read/Download Order