Supreme Court Bars Unilateral Arbitrator Appointments By PSUs

ENA Sectors 2024-11-11 18:12:02 New Delhi, Nov 11 (KNN) In a recent landmark ruling, the Supreme Court of India has prohibited Public Sector Undertakings (PSUs) from unilaterally appointing arbitrators in disputes with private contractors. The Constitution Bench, led by Chief Justice DY Chandrachud, held that while PSUs can maintain panels of potential arbitrators, they cannot compel private parties to select arbitrators exclusively fr0m these panels. The five-judge Constitution Bench delivered a majority judgment emphasising that the principle of equal treatment must apply throughout arbitration proceedings, including the appointment stage. The Court determined that unilateral appointment clauses in public-private contracts violate Article 14 of the Constitution, which guarantees equality before the law. The majority judgment established several key principles, including the prohibition of clauses that allow one party to unilaterally appoint a sole arbitrator, as such arrangements raise justifiable doubts about the arbitrator's independence and impartiality. The Court also ruled that in three-member arbitration panels, requiring the other party to select an arbitrator fr0m a curated panel violates the principle of equal participation. In a partial dissent, Justice Hrishikesh Roy emphasised party autonomy and held that unilateral appointments should not be invalidated automatically. Justice PS Narasimha, while agreeing with the majority, highlighted that courts must ensure arbitration agreements inspire confidence, noting that unilateral appointments may violate public policy. The ruling will apply prospectively to arbitrator appointments made after the judgment date, particularly affecting three-member tribunals. This decision resolves conflicting precedents fr0m previous cases, including TRF Ltd. v Energo Engineering Projects Ltd (2017) and Central Organisation For Railway Electrification v ECL-SPIC-SMO-MCML (JV) (2020), providing clarity on the appointment process in arbitration proceedings involving public sector entities. (KNN Bureau) 39877 https://knnindia.co.in/news/newsdetails/sectors/supreme-court-bars-unilateral-arbitrator-appointments-by-psus 2024-11-11 18:12:02 knnindia.co.in Supreme Court Bars Unilateral Arbitrator Appointments By PSUs