[Cites 6, Cited by 0]
Calcutta High Court
M/S Parnika Commercial And Estates (P) ... vs Union Of India on 5 February, 2026
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 5
ORDER SHEET
AP-COM/985/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
M/S PARNIKA COMMERCIAL AND ESTATES (P) LIMITED
VS
UNION OF INDIA, CENTRAL PUBLIC WORKS DEPARTMENT
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 5th February, 2026.
Appearance:
Mr. Bhupesh Narula, Sr. Adv.
Mr. Anurag Ekka, Adv.
Mr. Soumyajit Mishra, Adv.
...for the petitioner
Mr. Anuran Samanta, Adv.
Mr. Srikumar Chakraborty, Adv.
...for the UOI
The Court:
1. This is an application for appointment of an Arbitrator for settlement of
disputes which arose out of an agreement bearing no.13/CE/EE/KCD-
IV/2015-16.
2. The petitioner was allotted work for construction of an office building for
the Central Forensic Science Laboratory (CFSL) at Rajarhat, Kolkata.
The petitioner was the successful bidder. The letter of acceptance was
issued on May 21, 2015. The petitioner submitted the performance
2
guarantee on June 1, 2015. The work order was issued to the petitioner
on June 16, 2015. The stipulated date of the start of the contract was
June 4, 2015 and end date was December 3, 2016. However, the
petitioner contends that the actual date of completion was January 25,
2022. The contract value was approximately Rs.48,47,52,780/-. The
final bill raised by the petitioner was due for payment from October 24,
2022. The petitioner claims that the payments were not made. The
petitioner requested for release of the payments. It is contended that
the Chief Engineer of the respondent had held a meeting to resolve the
disputes. By a letter dated September 12, 2023, the claims and
demands of the petitioner were rejected.
3. By a letter dated November 20, 2023, the petitioner approached the
Chief Engineer seeking intervention of the Dispute Resolution
Committee (DRC) for resolution of the dispute between the petitioner
and the respondent. The DRC heard the petition, but the dispute
remained unresolved. The petitioner proposed the names of Arbitrators
from the empanelled list vide letter dated July 12, 2024 and requested
the respondent to choose from the list. The respondent ignored the list
and proposed another list of Arbitrators. Ultimately, the respondent by
a letter dated August 13, 2024, unilaterally appointed a sole Arbitrator
and referred the disputes to the said nominated arbitrator. The
petitioner filed an objection to the same. Ultimately, the arbitrator so
appointed by the respondent recused by a letter dated October 11,
2024. The petitioner once again requested for appointment of an
3
Arbitrator, but the respondent did not make any appointment. Instead,
the respondent cited Clause 25 of the General Clauses of Contract.
Upon recusal of the unilaterally appointed Arbitrator, the petitioner
requested the Chief Engineer to look into the matter and choose any of
the Arbitrators suggested by the petitioner as substantial time has been
lost in the process. The petitioner relies on letters dated October 11,
2024 and October 14, 2024 in this regard.
4. Learned advocate for the respondent submits that adhering to the
request of the petitioner, an Arbitrator was appointed by the
respondent. The petitioner did not cooperate with the Arbitrator, which
ultimately led to the recusal of the Arbitrator who was appointed by the
respondent. He further relies on the clause to substantiate that the
respondent should appoint the arbitrator, and the petitioner had agreed
to such procedure.
5. Having considered the rival contentions of the parties and the facts as
narrated hereinabove, it appears that there is subsisting dispute
between the parties and the parties are bound by the terms and
conditions of the General Conditions which provides a mechanism for
resolution of dispute arising out of the agreement by way of arbitration.
However, the provision of unilateral appointment of an Arbitrator is not
permissible in law. Reference is made in this regard to Perkins
Eastman Architects DPC and Another vs. HSCC (India) Ltd. ; 2019
SCC OnLine SC 1517; and Central Organisation for Railway
Electrification vs. ECI SPIC SMO MCML (JV) A joint Venture
4
Company reported in 2024 SCC OnLine SC 3219. Unilateral
appointment of an arbitrator by one of the parties from its own panel of
arbitrators or from its own employees is contrary to law.
The Hon'ble Apex Court in Central Organization for Railway
Electrification (supra), held thus:-
"73. The 2015 amendment has introduced concrete standards of
impartiality and independence of arbitrators. One of the facets of
impartiality is procedural impartiality. Procedural impartiality
implies that the rules constitutive of the decision-making process
must favour neither party to the dispute or favour or inhibit both
parties equally.137 Further, a procedurally impartial adjudication
entails equal participation of parties in all aspects of adjudication for
the process to approach legitimacy.138 Participation in the
adjudicatory process is meaningless for a party against whom the
arbitrator is already prejudiced.139 Equal participation of parties in
the process of appointment of arbitrators ensures that both sides
have an equal say in the establishment of a genuinely independent
and impartial arbitral process.
74. Under Sections 12(1) and 12(5), the Arbitration Act recognises
certain mandatory standards of independent and impartial tribunals.
The parties have to challenge the independence or impartiality of the
arbitrator or arbitrators in terms of Section 12(3) before the same
arbitral tribunal under Section 13.140 If the tribunal rejects the
challenge, it has to continue with the arbitral proceedings and make
an award. Such an award can always be challenged under Section
34. However, considerable time and expenses are incurred by the
parties by the time the award is set aside by the courts. Equal
participation of parties at the stage of the appointment of arbitrators
can thus obviate later challenges to arbitrators.
75. Independence and impartiality of arbitral proceedings and
equality of parties are concomitant principles. The independence and
impartiality of arbitral proceedings can be effectively enforced only if
the parties can participate equally at all stages of an arbitral process.
Therefore, the principle of equal treatment of parties applies at all
stages of arbitral proceedings, including the stage of the appointment
of arbitrators.
***
124. The doctrine of bias as evolved in English and Indian law
emphasizes independence and impartiality in the process of
adjudication to inspire the confidence of the public in the
adjudicatory processes. Although Section 12 deals with the quality of
independence and impartiality inherent in the arbitrators, the
provision's emphasis is to ensure an independent and impartial
arbitral process."
In Perkins Eastman (supra), the Hon'ble Apex Court held thus :-
..."20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd.,
(2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] where the Managing
Director himself is named as an arbitrator with an additional power
to appoint any other person as an arbitrator. In the second category,
the Managing Director is not to act as an arbitrator himself but is
empowered or authorised to appoint any other person of his choice
or discretion as an arbitrator. If, in the first category of cases, the
Managing Director was found incompetent, it was because of the
interest that he would be said to be having in the outcome or result
of the dispute. The element of invalidity would thus be directly
relatable to and arise from the interest that he would be having in
such outcome or decision. If that be the test, similar invalidity would
always arise and spring even in the second category of cases. If the
interest that he has in the outcome of the dispute, is taken to be the
basis for the possibility of bias, it will always be present irrespective
of whether the matter stands under the first or second category of
cases. We are conscious that if such deduction is drawn from the
decision of this Court in TRF Ltd. [TRF Ltd. v. EnergoEngg. Projects
Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , all cases having
clauses similar to that with which we are presently concerned, a
party to the agreement would be disentitled to make any
appointment of an arbitrator on its own and it would always be
available to argue that a party or an official or an authority having
interest in the dispute would be disentitled to make appointment of
an arbitrator.
21. But, in our view that has to be the logical deduction from TRF
Ltd. [TRF Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 :
(2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court
was concerned with the issue, "whether the Managing Director, after
becoming ineligible by operation of law, is he still eligible to nominate
an arbitrator" The ineligibility referred to therein, was as a result of
operation of law, in that a person having an interest in the dispute or
in the outcome or decision thereof, must not only be ineligible to act
as an arbitrator but must also not be eligible to appoint anyone else
as an arbitrator and that such person cannot and should not have
any role in charting out any course to the dispute resolution by
having the power to appoint an arbitrator. The next sentences in the
paragraph, further show that cases where both the parties could
nominate respective arbitrators of their choice were found to be
completely a different situation. The reason is clear that whatever
advantage a party may derive by nominating an arbitrator of its
choice would get counter-balanced by equal power with the other
party.But, 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 (3 of
2016) and recognised by the decision of this Court in TRF Ltd. [TRF
Ltd. v. EnergoEngg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC
(Civ) 72]
...
24. In Voestalpine [VoestalpineSchienen GmbH v. DMRC, (2017) 4
SCC 665 : (2017) 2 SCC (Civ) 607] , this Court dealt with
independence and impartiality of the arbitrator as under : (SCC pp.
687-88 & 690-91, paras 20 to 22 & 30)
"20. Independence and impartiality of the arbitrator are the
hallmarks of any arbitration proceedings. Rule against bias is one of
the fundamental principles of natural justice which applied to all
judicial and quasi-judicial proceedings. It is for this reason that
notwithstanding the fact that relationship between the parties to the
arbitration and the arbitrators themselves are contractual in nature
and the source of an arbitrator's appointment is deduced from the
agreement entered into between the parties, notwithstanding the
same non-independence and non-impartiality of such arbitrator
(though contractually agreed upon) would render him ineligible to
conduct the arbitration. The genesis behind this rational is that even
when an arbitrator is appointed in terms of contract and by the
parties to the contract, he is independent of the parties. Functions
and duties require him to rise above the partisan interest of the
parties and not to act in, or so as to further, the particular interest of
either parties. After all, the arbitrator has adjudicatory role to
perform and, therefore, he must be independent of parties as well as
impartial. The United Kingdom Supreme Court has beautifully
highlighted this aspect in Hashwani v. Jivraj [Hashwani v. Jivraj,
(2011) 1 WLR 1872 : 2011 UKSC 40] in the following words : (WLR p.
1889, para 45)
'45. ... the dominant purpose of appointing an arbitrator or
arbitrators is the impartial resolution of the dispute between the
parties in accordance with the terms of the agreement and, although
the contract between the parties and the arbitrators would be a
contract for the provision of personal services, they were not
personal services under the direction of the parties.'
21. Similarly, Cour de Cassation, France, in a judgment delivered in
1972 in Consorts Ury [Fouchard, Gaillard, Goldman on International
Commercial Arbitration, 562 [Emmanuel Gaillard & John Savage
(Eds.) 1999] {quoting Cour de cassation [Cass.] [Supreme Court for
judicial matters] Consorts Ury v. S.A. des Galeries Lafayette, Cass.2e
civ., 13-4-1972, JCP, Pt. II, No. 17189 (1972) (France)}.] , underlined
that:
'an independent mind is indispensable in the exercise of judicial
power, whatever the source of that power may be, and it is one of the
essential qualities of an arbitrator'.
22. Independence and impartiality are two different concepts. An
arbitrator may be independent and yet, lack impartiality, or vice
versa. Impartiality, as is well accepted, is a more subjective concept
as compared to independence. Independence, which is more an
objective concept, may, thus, be more straightforwardly ascertained
by the parties at the outset of the arbitration proceedings in light of
the circumstances disclosed by the arbitrator, while partiality will
more likely surface during the arbitration proceedings.
***
30. Time has come to send positive signals to the international
business community, in order to create healthy arbitration
environment and conducive arbitration culture in this country.
Further, as highlighted by the Law Commission also in its report,
duty becomes more onerous in government contracts, where one of
the parties to the dispute is the Government or public sector
undertaking itself and the authority to appoint the arbitrator rests
with it. In the instant case also, though choice is given by DMRC to
the opposite party but it is limited to choose an arbitrator from the
panel prepared by DMRC. It, therefore, becomes imperative to have a
much broadbased panel, so that there is no misapprehension that
principle of impartiality and independence would be discarded at any
stage of the proceedings, specially at the stage of constitution of the
Arbitral Tribunal. We, therefore, direct that DMRC shall prepare a
broadbased panel on the aforesaid lines, within a period of two
months from today..."
6. The petitioner appears to have complied with the pre-arbitration
mechanism. The application is allowed.
7. All questions with regard to arbitrability of the dispute, admissibility of
the claim, limitation etc. are kept open, to be decided by the learned
arbitrator, if raised.
8. Accordingly, the Court appoints Mr. Hon'ble Justice Ashim Kumar
Banerjee, Former Acting Chief Justice of the High Court at Calcutta, as
the Arbitrator, to arbitrate upon the disputes between the parties. This
appointment is subject to compliance of Section 12 of the Arbitration
and Conciliation Act, 1996. The learned Arbitrator shall fix his/her
own remuneration as per the Schedule of the Act.
9. AP-COM/985/2025 is, accordingly, disposed of.
(SHAMPA SARKAR, J.)
B.Pal
