The Delhi High Court in a recent judgment held that courts have now consistently proceeded to appoint an independent arbitrator in situations where the arbitration clause is in conflict with the amended Arbitration Act. However, the unilateral right of a party to appoint an arbitrator has not been done away with.
In the Kadimi International v Emaar MGF Land Ltd case, a petition under section 11 of the Arbitration and Conciliation Act, 1996, was filed by Kadimi before Delhi High Court challenging appointment of R S Baswana, District and Sessions Judge (retired) as the sole arbitrator, and for seeking appointment of an independent arbitrator, in terms of clause 35 of the Space Buyer Agreement. It was submitted that the conduct of Emaar in unilaterally appointing an arbitrator, despite Kadimi’s categorical objections in its letter, raises justifiable doubts over the neutrality, independence and impartiality of the arbitrator.
Kadimi contended before Delhi High Court that after an amendment to the Arbitration Act in 2015, certain persons connected with the disputing parties had been made ineligible, including the managing director, and since the director of a company cannot act as an arbitrator, any appointment made by the director would also be void.
The Delhi High Court observed that the arbitration clause of agreement did not name an arbitrator, and it merely conferred the right to appoint an arbitrator, Emaar. Thus a sole arbitrator shall be nominated by any one of the directors of the company. The court held that parliament had not taken away a contracting party’s right to make an appointment altogether, rather it only barred an ineligible person to be an arbitrator. The court held that if Kadimi had any grievance regarding the impartiality and independence of the arbitrator, it is free to take recourse to the specific provisions contained in the Arbitration Act that enable a party to challenge jurisdiction of the arbitrator, but the same cannot make an arbitrator ineligible at the threshold.
The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at [email protected]. Readers should not act on the basis of this information without seeking professional legal advice.