17 December 2019, Tuesday

When the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement (under the pre-2015 statute) (Supreme Court)

Union of India v. Pradeep Vinod Construction Company , 2019 SCC Online SC 1467

Supreme Court of India, 3-judge bench, R. Banumathi, A.S. Bopanna and Hrishikesh Roy, JJ. decided on 14 November 2019

This matter concerned contract awarded by Railways in which a standard arbitration clause often found in Railways’ contracts gave their General Manager power to appoint the arbitral tribunal. Such a clause had already been considered by the Supreme Court in Union of India v. Parmar Construction Company, 2019 SCC OnLine SC 442.

The High Court in Parmar’s case, considering the provisions relating to neutrality of arbitrators introduced by the 2015 amendments to the Arbitration and Conciliation Act, 1996 (“ACA”), had appointed independent arbitrator(s). The Supreme Court set aside the High Court’s decision relying (among others) on Aravali Power Company Private Limited v. Era Infrastructure Engineering Limited (2017) 15 SCC 32; Adarsh Kumar Goel and U.U. Lalit, JJ.[1] It first ruled that the amended provisions did not apply, but also said that the court had the power to appoint someone other than the named arbitrator (“independent arbitrator”) if neutrality of the arbitrator was in doubt (which it found on facts was not the case). [1] Aravali had relied on Indian Oil Corporation Limited and others v. Raja Transport Pvt. Ltd., (2009) 8 SCC 520, R.V. Raveendran and D.K. Jain, JJ. Show More

In this case, when disputes arose, Pradeep Vinod invoked arbitration. While Railways claimed there was no arbitrable dispute[2] no appointment was made by the General Manager. Pradeep Vinod filed an application under Section 11 of the ACA. The Delhi High Court appointed an advocate as an arbitrator ruling that all issues (whether settlement was under duress or the dispute fell within excepted-matters) could be examined by the arbitrator. The Railways took the matter to the Supreme Court. [2] In one case because of the settlement, and in the other on the ground the issue fell under ‘excepted-matters’. Show More

Referring to Parmar, the court first held that pre-amended provisions applied since the request for appointment was made prior to the 2015 amendments (effective from 23 October 2015). It then cited to three other decisions in addition to Parmar, that is, Union of India v. M.P. Gupta (2004) 10 SCC 504, Union of India v. V.S. Engineering (P) Ltd. (2006) 13 SCC 240, Union of India v. Singh Builders Syndicate (2009) 4 SCC 523 and held that when the agreement specifically provides for appointment of named arbitrators, the appointment should be in terms of the agreement.

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