The principle enunciated by the Supreme Court in Perkins Eastman Architect DPC v. HSSC (India) Ltd., 2019 SCC OnLine SC 1517 was invoked in this case. In Perkins, taking forward the principle of TRF Limited v. Energo Engineering Limited, (2017) 8 SCC 377, the Supreme Court had ruled that a party (or any official of the party) or anyone having an interest in the dispute cannot unilaterally appoint a sole arbitrator.
See our update on Perkins here.
The arbitration clause in Lite Bite provided that any dispute “shall be finally decided by reference to arbitration by a Sole Arbitrator to be appointed by the tender approving authority as per AAI delegation of power in vogue”. Was this clause hit by the Perkins principle? Yes, it was, the court concluded.
A. The facts
Lite Bite nominated its sole arbitrator; AAI appointed another. Lite Bite rejected AAI’s appointment as statutorily impermissible. According to it, a sole arbitrator could be appointed only (i) by mutual consent of the parties or (ii) by an order of a High Court in a commercial arbitration petition.
Lite Bite then filed a petition under Section 11 of the Arbitration and Conciliation Act. 1996 (“ACA”) for the appointment. It argued that the choice by AAI of a person from a panel that it has itself drawn up, and to which Lite Bite never consented, violates Section 12(5) and the Seventh Schedule of the ACA. Further, the non obstante clause in Section 12 overrides any previous agreement permitting a unilateral appointment by one side.
B. The court’s decision
The court held that the clause was hit by the Perkins principle: – “I see no means to separate or distinguish the case at hand from Perkins Eastman at all. It is entirely within the frame of that decision.”
It rejected the argument that Perkins was per incuriam (as contrary to a previous two-judge bench decision in Voestalpine Schienen GmbH v. Delhi Metro Rail Corporation Ltd., (2017) 4 SCC 665.
The court examined the law and summarised the legal principles: –
Categories: Appointment of Arbitrators | Bias | Fairness | Fifth Schedule | Grounds for Challenge | Grounds of Challenge | Impartiality of Arbitrator | Independence and Impartiality of Arbitrator | Independence of Arbitrator | Neutrality of Arbitrator | Perkins | Section 12 (5) ACA | Section 12 ACA | Seventh Schedule | Sole Arbitrator | TRF | Unilateral Appointment of Arbitrator | Voestalpine