Institutional Arbitration Under SAROD Rules Does Not Violate Party Autonomy or Neutrality Requirements Under the Arbitration Act.

The petitioners, infrastructure development companies engaged in National Highway projects, filed a writ petition under Article 226 of the Constitution of India to quash the arbitration clause in tender documents issued by the Ministry of Road Transport & Highways and the National Highways Authority of India (NHAI)

The impugned clause mandates that disputes be settled under the Rules of the Society for Affordable Redressal of Disputes (SAROD), requiring parties to select arbitrators exclusively from a panel maintained by SAROD

The petitioners alleged that this framework curtails party autonomy and lacks neutrality, as the panel is allegedly under State control

1. Whether the arbitration mechanism under the SAROD Rules is perverse, unreasonable, or under the exclusive control of the State, thereby violating the principles of party autonomy

2. Whether an arbitral institution like SAROD constitutes an "instrumentality of the State" amenable to writ jurisdiction under Article 226

The Court primarily relied on the principles of party autonomy and neutrality in arbitrator appointments as discussed in Central Organisation for Railway Electrification (CORE) v. ECI-SPIC-SMO-MCML (2024), which prohibits one party from compelling another to choose from a restricted panel controlled solely by the former

It further applied the tests for "instrumentality of State" from Pradeep Kumar Biswas v. Indian Institute of Chemical Biology, as cited in the precedent Kamlesh Kumar v. SAROD (2024), to determine if a body performs governmental functions or is under pervasive State control

Finally, it followed Villupuram Highways Construction PVT Ltd v. NHAI (2025) regarding the validity of broad-based panels provided by independent arbitral institutions

The Court reasoned that unlike the restrictive panel system struck down in CORE, the SAROD framework is a balanced, multi-stakeholder mechanism

Citing Kamlesh Kumar and Villupuram Highways, the Court noted that SAROD’s Governing Body is counter-balanced with equal participation from a private entity, the National Highways Builders Federation (NHBF), and its panel is broad-based, featuring over 92 diverse experts including retired judges and bureaucrats

The Court found that NHAI does not exercise "deep and pervasive control" over SAROD

The Court found that the mechanism does not suffer from the "mischief" of a lopsided appointment process because the panel is curated by an independent body rather than a single contracting party

The Court emphasized that in writ jurisdiction, arbitral clauses should not be interfered with unless they are prima facie perverse or unreasonable, which the petitioners failed to prove

It reaffirmed that SAROD is not an instrumentality of the State for the purposes of writ jurisdiction and that its broad-based panel is legally valid

The Court answered the issues in the negative, found no justification for interference, and dismissed the petition