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A single judge bench of the Delhi High Court recently opined that no party to an arbitral proceeding can be permitted to unilaterally appoint an Arbitrator, as the same would defeat the purpose of unbiased adjudication of dispute between the parties.

Justice Suresh Kumar Kait made this observation while relying on Supreme Court's dictum in Perkins Eastman Architects DPC & Anr. v. HSCC (India) Ltd. wherein it had categorically stated 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.”

A petition was filed by Sivanssh Infrastructure Development Pvt. Ltd. seeking appointment of Sole Arbitrator under the provisions of Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996.

Sivanssh had undertaken a construction project with the Army Welfare Housing Organization. for development of a Residential Complex of 220 dwelling units to be constructed in 5 Towers located at Sector-6A, Vrindavan Awas Yojna, Lucknow.

In view of the various delays and defaults on the part of the respondent, the contract completion was delayed and consequently, the petitioner had to seek extension of the project, and thus certain disputes arose between the parties with regard to handing over of the dwelling units, issuance of completion certificate, defects liability period, release of bank guarantees furnished by the petitioner etc.

The Petitioner invoked arbitration and suggested the names of three eminent persons for the Respondent to choose one person to act as the Sole Arbitrator for adjudicating the disputes between the parties.

Respondent instead of choosing one therefrom, called upon the Petitioner to choose from its own list of four people. After the petitioner conveyed its unacceptance to the respondent’s proposal, the respondent in complete neglect of petitioner’s letter unilaterally appointed S.S. Bansal, ADG (Arbitration Cell), Military Engineering Service (MES) as the Sole Arbitrator.

While issuing notice in the matter, the Court said,

"Pertinently, the arbitration agreement between the parties and invocation of arbitration are not disputed by the parties. However, unilateral appointment of Arbitrator by the respondent is rejected, as no party can be permitted to unilaterally appoint an Arbitrator, as the same would defeat the purpose of unbiased adjudication of dispute between the parties."

Justice Kait went on to allow the petition and appointed Justice (Retd.) B.D.Ahmed as the sole Arbitrator to adjudicate the dispute between the parties.

Cause Title: Sivanssh Infrastructure Development Pvt. Ltd. v Army Welfare Housing Organization