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The person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator : Delhi High Court

Arbitration and dispute resolution is an effective tool to work out the differences between parties amicably, however it shouldn’t be biased. This was held in the judgment passed by a single judge Hon’ble Mr. Justice Suresh Kumar Kait, in the matter Of Amazing India Contractors Private Limited V. Indian Railway Stations Development Corporation Limited. [ARB.P. 922/2021], dealt with an issue where the petitioner filed a petition seeking appointment of a Sole Arbitrator under the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996.

Petitioner, a private limited company is involved in the business of Facilities Management and Infrastructure Management Projects throughout India. Respondent is said to be a Special Purpose vehicle and a Joint Venture company of IRCON International Limited, a Government of India Undertaking, under the Ministry of Railways and Rail Land Development Authority.

According to petitioner, the respondent issued Notice Inviting Tender Parking issued by the Indian Railway Station Development Corporation for the project “Management of Parking Area at Bangalore Railway Station Along with Access Control for a period of 3 (Three) years” and petitioner submitted a bid. Respondent invited petitioner to attend negotiation meeting and after successful negotiations, respondent issued a Letter of Award in favour of petitioner for the said project, to which petitioner gave its Letter of Acceptance.

According to petitioner, acting in an arbitrary and fraudulent manner, the total security deposit and bank guarantee of Rs.86,88,750.00 along with unexpired period of license fee was forfeited by the respondent.

To resolve the aforesaid disputes, petitioner vide its legal notice called upon the respondent to appoint an Arbitrator, who vide communication informed the petitioner that due to Covid pandemic that the matter shall be looked into in due course of time. However, vide email, the Managing Director of the respondent informed the petitioner about appointment of Arbitrator.

Counsel for petitioner submitted that unilateral appointment of Arbitrator by the respondent is contrary to the law laid down by the Hon’ble Supreme Court in Perkins Eastman Architects DPC & Anr. Vs. HSCC (India) Ltd. 2019.

Counsel for respondent disputed the contentions raised in the present petition and submitted that, it was mutually agreed that the disputes shall be referred to the sole Arbitrator, who shall be appointed by Managing Director & CEO of IRSDC and thereby, the present petition seeking appointment of an Arbitrator is not maintainable.

After hearing both the parties The Hon’ble Delhi High Court allowed the petition and held that in cases where 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. Accordingly, Mr. Justice (Retd) I.S.Mehta, former Judge of Delhi High Court was appointed sole Arbitrator to adjudicate the dispute between the parties. The arbitration shall be conducted under the Delhi International Arbitration Centre (DIAC).

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Judgement reviewed by – Vaishnavi Raman

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