The Delhi High Court expounded that in case where appointment has to be from a panel, it is essential that the panel is broad-based and as per the principles laid down in Voestalpine Schienen Gmbh v. Delhi Metro Rail Corporation Ltd. 2017 4 SCC 665 (“Voestalpine”).
Another prerequisite is that the right of one party to provide a panel of persons is counter balanced from the right of the other party to choose from such panel.
It was further clarified that in a situation where the party has the right to choose an arbitrator from a panel and remaining arbitrators are to be appointed by the other party, the same does not fall under the ambit of counter-balancing.
In the present case, the Respondent had the right to appoint 2/3 of the arbitrators, hence, the same was found to be impermissible in law.
Brief Facts:
The present petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act”) seeking appointment of 3 arbitrators to adjudicate.
Brief Background:
The Respondent issued a request for proposal and awarded the work to the Petitioner No. 1. The Petitioner No.2 issued a performance bank guarantee on behalf of the Petitioner No.1.
After several communications, the Respondent terminated the letter of award and hence, the arbitration proceedings initiated between the parties.
The Respondent asked the Petitioner to choose its nominee arbitrator from the panel provided to the Petitioner, however, the Petitioner alleged that the same is contrary to the Section 12 read with Schedule V and Schedule VII of the A&C Act.
Contentions of the Petitioner:
It was argued that the panel offered by the Respondent was restrictive and violative of statutory framework on appointment of arbitrators.
Observations of the Court:
The Bench analysed the judicial precedents and opined that it is improper to appoint arbitrator without resorting to the procedure given in the General Conditions of the Contract.
The Bench clarified the two judgements on the issue of appointing arbitrators from the panel. It was ruled that Central Organization for Railway Electrification V. ECI SPIC SMO MCML (JV) 2020 14 SCC 712 (“CORE”) does not overrule Voestalpine or narrows it scope.
It was noted that the Respondent in the present case provided names of ten arbitrators and all were ex-employees of the Railways. Therefore, the panel was restrictive and not “broad-based”.
It was expounded that in case where appointment has to be from a panel, it is essential that the panel is broad based and as per the principles laid down in Voestalpine.
The Court noted that as per CORE, the right of one party to provide a panel of persons is counter balanced from the right of the other party to choose from such panel. However, in a situation where the party has the right to choose an arbitrator from a panel and remaining arbitrators are to be appointed by the other party, the same does not fall under the ambit of counter-balancing.
In the present case, the Respondent had the right to appoint 2/3 of the arbitrators, hence, the same was found to be impermissible in law.
The decision of the Court:
Based on the aforementioned reasons, the Delhi High Court accordingly allowed the present petition.
Case Title: Margo Networks Pvt. Ltd. & Anr. V. Railtel Corporation of India Ltd.
Coram: Hon’ble Justice Sachin Datta
Case No.: ARB.P. 400/2022
Advocates for Petitioners: Advs. Mr. Kunal Tandon, Mr. Shashank Shekhar, Ms. Aanchal Khanna
Advocates for Respondent: Advs. Mr. Chetan Sharma, Mr. Yamandeep Kumar, Ms. Sabah Iqbal Siddiqui, Mr. R.V. Prabhat, Mr. Vinay Yadav, Mr. Saurabh Tripathii
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