Employees can act as arbitrators

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The Supreme Court reversed a judgment passed by Delhi High Court, which set aside the appointment of the arbitrator and directed appellant Aravali Power Company to suggest names of three panel arbitrators from different departments to Era Infra Engineering in order to choose one of them as the arbitrator.

In Aravali Power Company v Era Infra Engineering, the chief executive officer of Aravali was nominated as the arbitrator. Era Infra later objected to the choice and questioned the arbitrator’s independence. It approached Delhi High court and sought termination of the current arbitrator’s mandate and the appointment of an independent arbitrator. However, Delhi High Court directed Aravali to submit a set of names for an arbitrator, which was challenged before the Supreme Court.

The Supreme Court overruled Delhi High Court’s order and observed that in cases governed by the Arbitration and Conciliation Act, 1996, as it stood before the 2015 amendment act came into force, merely the fact that the named arbitrator is an employee of one of the parties is not grounds to raise a presumption of bias or lack of independence.

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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.

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