CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION versus M/S ECI SPIC SMO MCML (JV) A JOINT VENTURE COMPANY

Citation: [2024] 11 S.C.R. 2173 · Decided: 08-11-2024 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Reference answered

Cited by 2 judgment(s) · cites 98 · see the full citation network in Lexace

Judgment (excerpt)

[2024] 11 S.C.R. 2173 : 2024 INSC 857
Central Organisation for Railway Electrification 
v. 
M/s ECI SPIC SMO MCML (JV) A Joint Venture Company
(Civil Appeal No(s). 9486-9487 of 2019)
08 November 2024
[Dr Dhananjaya Y Chandrachud,* CJI, Hrishikesh Roy,* 
Pamidighantam Sri Narasimha,* J.B. Pardiwala and  
Manoj Misra, JJ.]
Issue for Consideration
a) Whether an appointment process which allows a party who has 
an interest in the dispute to unilaterally appoint a sole arbitrator, 
or curate a panel of arbitrators and mandate that the other party 
select their arbitrator from the panel is valid in law; b) Whether the 
principle of equal treatment of parties applies at the stage of the 
appointment of arbitrators; and c) Whether an appointment process 
in a public-private contract which allows a government entity to 
unilaterally appoint a sole arbitrator or majority of the arbitrators 
of the arbitral tribunal is violative of Article 14 of the Constitution.
Headnotes†
Arbitration and Conciliation Act, 1996 – Unilateral appointment 
clauses in a public-private contract:
Held: [Per Dhananjaya Y Chandrachud, CJI for himself and 
J.B. Pardiwala and Manoj Misra, JJ.] The possibility of bias is 
real in situations where an arbitration clause allows a government 
company to unilaterally appoint a sole arbitrator or control the 
majority of the arbitrators – Since the government has control 
over the arbitral tribunal, it can chart the course of the arbitration 
proceedings to the prejudice of the other party – Resultantly, 
unilateral appointment clauses fail to provide an effective substitute 
for judicial proceedings in India – Further, a unilateral appointment 
clause is inherently exclusionary and violates the principle of 
equal treatment of parties and procedural equality – Unilateral 
appointment clauses in a public-private contract fail to provide 
the minimum level of integrity required in authorities performing  
quasi-judicial functions such as arbitral tribunals – Therefore, a 
* Author
2174
[2024] 11 S.C.R.
Supreme Court Reports
unilateral appointment clause is against the principle of arbitration, 
that is, impartial resolution of disputes between parties – It also 
violates the nemo judex rule which constitutes the public policy of 
India in the context of arbitration – Therefore, unilateral appointment 
clauses in public-private contracts are violative of Article 14 of the 
Constitution for being arbitrary in addition to being violative of the 
equality principle under the Arbitration Act. [Paras 162, 163] –  
[Per Pamidighantam Sri Narasimha, J. (dissenting)] One 
cannot, as an advance ruling, give a declaration that all arbitration 
clauses enabling unilateral appointments are null and void at 
this stage – A priori declaration that arbitration agreements that 
prescribe unilateral appointment procedures are invalid can lead 
to many problems in the day-to-day working of arbitral remedies – 
Particularly for institutions involving multiple transactions such as 
insurance claims, credit card defaults, etc. involving large number 
of cases but each claim may be of small sum – Our declaration of 
law substantially covers domestic arbitration, it will not be confined 
to high and international commercial arbitration – There could 
also be situations where the unilateral constitution of the panel of 
arbitrators could have credible members with respect to which no 
one can have an objection – Rather than declaring that all such 
agreements are void, it would be better to strengthen the remedial 
mechanisms available under the Act. [Paras 54.4 and 54.5] – [Per 
Hrishikesh Roy, J. (dissenting)] All unilateral appointments must 
not be declared void by way of a declaration of this Court – The 
2015 Amendment in s.12(5) itself provides for a specific waiver 
i.e. (a) an express consent in writing and (b) the consent must be 
obtained after the dispute has arisen – Therefore, it is abundantly 
clear that an agreement between the parties (provided it satisfies 
the specific waiver requirements u/s.12(5)) can effectively cure 
any concerns about impartiality or independence in such cases – 
Adequate safeguards are provided within the Arbitration Act to 
ensure a level playing field – A search within the provisions of 
the Arbitration Act should first be made – The obligations of fair 
treatment should be grounded in the Arbitration Act rather than in 
the principles of Constitutional or administrative law – The choice 
of

Excerpt shown. Read the full judgment & AI analysis in Lexace.